A Framework for Financial Market Development
International Monetary Fund, Jul 1, 2009 - Business & Economics - 58 pages
The paper proposes a framework for examining the process of financial market development. The framework, consistent with the functional view of financial system design, is anchored in studying the incentives facing the key players in financial markets-borrowers, lenders, liquidity providers, and regulators-whose actions determine whether and how markets develop. While different financial instruments embody different concessions by borrowers and lenders, the framework emphasizes the two main compromises: the tradeoffs between maturity and collateral, and between seniority and control. The framework is used to analyze the sequencing of financial market development.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Other editions - View all
accumulate addition asset-backed securities attractive B-shares bond market borrowers and lenders capital markets cash ﬂows collateral commercial paper constraints contracts control rights corporate costs counterparty countries covered bonds create credit risk creditworthiness dealers debt default derivative trades derivatives market developed financial markets dividend economic enforcement equity markets example exchange family firms financial instruments financial market development financial system ﬂexibility framework funds government securities hence incentives increase inﬂuence information asymmetries infrastructure institutions intermediaries introduced investment investors issuance issue lending liquidity providers longer maturities maturity-collateral mechanisms money market mortgage nascent markets novation OTC derivatives payments Pecking Order theory pool potential borrowers preferred shares primary dealer profits regulatory relatively repayment repo market repo transaction repurchase agreements require revenue risk gap risk-free role rules secondary market sector securities markets securitized seniority sequencing settlement risk SROs strategy structured product tradeoffs underlying security unsecured yield curve