Assignment #1. Pittsburgh Campus. Jingyi Guo. 1.Financial

Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.

Banks are institutions in which people put their money for safekeeping, to save, to use to pay their bills, or to earn interest on. Banks are allowed to use that money to make loans and earn interest for the bank's’ owners. Different types of banks offer different types of services. For example, commercial banks originally just served businesses, and savings banks and credit unions were used by individuals, especially those who couldn’t qualify for loans at regular banks. This is no longer the case. Although commercial banks and thrift institutions used to serve different purposes, today they all offer many of the same types of services including bank accounts, loans, credit, certificates of deposits (CDs), and much more.

Meanwhile, sellers of Treasury securities use repos to borrow securities they do not own, or in other words to cover

Commercial banking provides consumers and potential customers with various financial services, such as deposits and loans, in a means of ensuring social stability, economic stability, and sustainable growth of the economy. Commercial banks offer a large range of investment products. While these products are not only for the use of personal accounts, they are also put to great use within organizations. Savings accounts, certificates of deposit, business loans, auto loans and mortgages are all examples of products that are offered in commercial banking. Due to the fact that certificates of deposit, saving and checking accounts are secured by the Federal Deposit Insurance Corporation (FDIC) in the United States, customers and consumers are

Some of these securities include debt securities, equity securities, common stock, and preferred stock. Lastly, financial markets provide the money needed by individuals and companies and establish the link between corporations and investors according to (Titman, Keown, & Martin, 2011).

The liquidity position of a company can be evaluated using several ratios which evaluate short-term assets and liabilities and a firm’s ability to settle short-term debts (Gibson, 2011). These ratios can provide insight into a firm’s ability to repay its debts in the short term (Gibson, 2011). In turn they suggest a firm’s capacity for debt-satisfying capabilities into the future (Gibson, 2011). This paper will use financial statement data as cited in Gibson (2011) from 3M Company (3M) to better understand liquidity measures to evaluate a firm’s total liquidity position. The following paper will focus on various liquidity calculations, their meaning, and their interpretation relative to 3M. Finally, an overall view of 3M’s liquidity

Banks and financial institutions aggregate and compile similar loans such as mortgages and place them into a fund. These loans will subsequently be issued as securities, such as mortgaged-back securities, that are tied to the fund’s assets to investors, which can also be known as collateralized debt obligations (CDO) (Choudhry and Baig, 2013). CDO, which initially began with corporate forms of debts, were highly favoured by banks as the process of securitisation and selling on would allow more capital to be freed up to facilitate more future lending (Lanchester, 2010). Securitisation first emerged during the 1980s as investment banks attempt to turn the loans on their books into bonds and sell the bonds into the institutional investor market. The process usually involves the setting up of a new company, known as Special Purpose Vehicle (SPV), by the bank, which will be typically based in a tax haven, and the bank will subsequently sell its loans to the SPV. The SPV then repackages the loans into interest-bearing tradable securities and issue it to investors. Revenues received will be later on passed through to the bank as the purchase price for the loans. The interest the bank receives on these loans it passes back to the SPV to pay the investors (Choudhry and Baig, 2013). Earliest securitisations take form in mortgaged-back securities with the idea that the last thing people

A: Most investments in the economy would fail to take place if there were no financial institutions because many independent investors do not like to take large amounts of risk. By utilizing financial intermediaries, which are “organizations that receive funds from savers and channel them to investors,” people are given peace of mind in knowing that their source of money/investing is more stable and accounted for. Those who apply this principle also value the liquidity, or convertibility, that financial institutions provide in the case of emergency or cold feet.

n types of market are: physical asset vs financial assets, spot vs future markets, primary vs secondary market money vs capital markets

The collapse of the subprime mortgage market causing a global financial crisis (GFC) in 2007, has given the concept of securitisation a bad name. Securitisation is the process of conversion of receivables and cash flow generated from a collection or pool of financial assets into the marketable securities. Any asset that generates a cash flow can be securitised, which are then sold to capital market investors. Asset securitisation is the process whereby interests in loans and receivables are packaged and sold in the form of an asset-backed security (ABS). An ABS is the bond or notes backed by some financial assets. These assets consist of receivables such as residential and commercial mortgage loans, automobile loans, and credit card financing. Mortgage-backed securities (MBS) are bonds that are backed by pools of mortgage loans. Examples include mortgage papers, house papers, and land and property papers. Thus in-turn, reflective of the underlying assets in the security are these two terms. Additionally, securitisation is a method of financing assets, to serve as the main source of payment to investors, it usually depends on cash flow generated from principle and interest repayments.

Over the years, both lenders and borrowers have endeavoured towards the possibilities of fundamentally disrupting and disintermediating existential financial links, distancing themselves from the financial main, and building new financial operators.

Due to the characteristics of banking industry, there is a high flexibility for management in these two liabilities. It is noticeable that deposits and borrowing accounted for about 97% of total liabilities on the balance sheet. Occupying 69% of total deposits, managers pay more attention to Retail Banking Services because of itsattractiveness to customers compared to other types of deposits.

Liquidity risk refers to the bank’s ability to meet maturing obligations as deposits come due and quick processing the assets into cash with minimum loss or being able to get enough funds when necessary and processing profitable securities trading by using available funds (Gup, 2007, p19). The reasons for liquidity risk occurs can be concluded in two aspects, which are asset side and liability side. On the asset side, the loan commitments

According to the provisions of the US Securities and Exchange Commission, A short sale is the sale of a stock that an investor does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the investor. It is usually performed to profit from an expected decline in the price of a financial instrument. Typically, the short-seller will borrow the securities to be sold, and later repurchase identical securities for return to the lender. Short selling can be divided into two types: "covered" short selling where the seller has made arrangements to borrow the securities before the sale and "naked" short selling where the seller has not borrowed the securities when the short sale occurs.

Financial intermediaries provide a number of functions. The first of which is known as size transformation. A financial intermediary is able to borrow to an economic agent with a deficit of funds the amount they require without the need to find a lender that is willing to invest the exact amount required by the borrower. Without financial intermediaries, it would be extremely difficult for a borrower to raise capital as lenders would have to pool their funds together in order to lend the borrower the amount they require. Another function of financial intermediaries is maturity transformation. Economic agents with surplus funds usually prefer investing their money in short-term projects, whereas borrowers require more long-term financing. Financial intermediaries offer an optimal solution, without which borrowers and lenders would be in disagreement over the terms of the transfer of funds. Financial intermediaries also provide risk transformation. Economic agents with surplus funds are usually very risk conscious when it comes to investment, but borrowers however may require the finance for a more risky project, that may be more profitable. Financial intermediaries are willing to take risks that borrowers usually would not. However, there is usually a compensation agreement so as to avoid