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Financial Intermediaries and The Euro Markets - Essay Example
Finance & Accounting
Pages 10 (2510 words)
Running head: LIQUIDITY AND EUROMARKETS Financial Intermediaries and The Euro Markets University: Date Due: QN 1) Introduction The regulation of the financial global market is a problem as there are risks involved in the foreign currency…
Thus the need for financial intermediaries to act as the middlemen in this transactions is important. Therefore for investors to get profit and the lenders to be able to give away money to borrowers the need for financial markets are vital (Howells & Bain 2007). Financial Intermediation and Liquidity Financial intermediaries can be defined as an institution that acts as the middlemen between the investors and the firms. These financial institutions include chartered banks, insurance companies, investment dealers, mutual funds, and pension funds. Liquidity has been the basis of these kind of transactions between the parties either the borrowers or the investors. It can be defined as the ease with which a given asset can be changed into cash or by getting access to credit. Thus the main concept of liquidity is to obtain cash. Liquidity is often determined by two factors that measure how easy it is to change it into cash or make it possible for borrowers to obtain the cash. The policy interest rates and the structure of the interest rates paid by the borrowers are often the indicators of liquidity. These rates often influence one either to be motivated to borrow or leave the money with the banks. Most of the world banks are involved in market liquidity which is the rate at which a borrower is able to quickly buy or sell the financial assets at a given time without changing the market price (Francis 2008). ...
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