Professional Documents
Culture Documents
of the
Financial
System
Function of Financial Markets
• Money Markets: Deals in short-term debt instruments (less than one year)
Treasury Bills
Commercial Papers
Repurchase agreements (Repos)
Federal Funds
• Capital Markets: Deals in long-term debt instruments (more than one year)
Stocks
Mortgages
Corporate Bonds
Bank commercial loans
Function of Financial Intermediaries
We now turn our attention to the top part of the Figure
– Indirect finance (most important source of finance)
Financial intermediary
(such as a bank) plays as
the middleman: