Maturity transformation and SML: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
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Borrowers and depositors generally have differing preferences about the maturity of their obligations and investments.
Security Market Line.


Borrowers normally prefer to borrow longer-term, for example to fund long-term investment in productive assets.
The Security Market Line is a graphical presentation of the Capital asset pricing model formula.
 
Investors generally prefer shorter-term, more liquid assets.
 
 
Maturity transformation is the essential economic function of banks and other intermediaries, which enables both borrowers and investors to meet their differing needs for maturities.
 
For this to work, there needs to be a very high degree of market confidence in the bank, especially on the part of its depositors.




== See also ==
== See also ==
* [[Bank]]
*[[Capital asset pricing model]]
* [[Interest rate transformation]]
*[[Capital Market Line]]
* [[Leverage]]
*[[Security Market Line]]
* [[Liquidity preference]]
* [[Maturity]]
* [[Maturity mismatch]]
* [[Prudential Regulation Authority]]
* [[Riding the yield curve]]
* [[Run]]
* [[Shadow banking]]

Revision as of 09:11, 5 June 2018

Security Market Line.

The Security Market Line is a graphical presentation of the Capital asset pricing model formula.


See also