Microsoft PowerPoint - PoF.ppt

Players in financial markets: FIƒ 9

... matching borrowers and lenders / investors

ƒ

Ex-post

information asymmetry

between potential lenders and a risk

neutral entrepreneur and

costly monitoring

Ä

FI (

commercial

banks

) are optimal (least costly alternative) given a “high” number of

lenders (see Diamond (1984))

ƒ

Other FI

ƒ

Investment banks:

help companies to obtain funding directly from

lenders

ƒ

Brokers:

match investors wishing to trade with each other

ƒ

Market makers:

have the commitment to buy and sell from or to

investors

Introduction to financial markets