Financial Systems: Principles and Organisation

Financial Systems: Principles and Organisation

Financial Systems: Principles and Organisation

Financial Systems: Principles and Organisation

Excerpt

This book surveys financial system activity at both the theoretical and the practical levels. Using a transactions economics theory of how financing arrangements are governed, the book explains how market-oriented financial systems are organised and how that organisation evolves. At the theoretical level, the book argues that financial system organisation results principally from the ways that financings of different types are structured: informed choices among governance methods can be used to explain financial system organisation.

At the practical level, the book applies its theory to describe the workings of typical financial systems. This discussion is relevant to the professional practice of finance, because it explains how financial deals are structured and shows how these structural choices affect the well-being of the financial firm. More broadly, the book helps financial executives and students of finance to understand why typical financial systems exhibit their contemporary organisational forms, why that organisation is currently changing so rapidly, and how those changes present the professional with opportunities for profit.

There are several excellent books giving specialised accounts of financial markets or financial intermediaries, but currently there are no other books which examine financial systems with a view to analysing the relations between different kinds of financial activities. This book addresses such questions as: why are some financial arrangements made in markets while others are made with intermediaries? Why did swaps evolve from specialised arrangements into a standardised market transaction?

The book is intended as a capstone survey, and is aimed at students who are already familiar with the basic ideas of financial theory and financial practice. The book is intended to help finance students use theory to analyse financial system activity. For example, it shows students the basic ideas underlying the design and valuation of risk management instruments, and it shows students why some financial deals are structured as market transactions while others must be arranged in negotiations with one or more financial intermediaries. It explains how securitisation has evolved, and shows why securitisation does not, as is sometimes conjectured, indicate the demise of banking activity.

Whether the students are undergraduate or graduate, whether they are in economics or in business, is not as important as is familiarity with the theories

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