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imported>Doug Williamson |
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. |
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| 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. |
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| Investors generally prefer shorter-term, more liquid assets.
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| 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.
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| 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.
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| == See also == | | == See also == |
| * [[Bank]] | | *[[Capital asset pricing model]] |
| * [[Interest rate transformation]] | | *[[Capital Market Line]] |
| * [[Leverage]] | | *[[Security Market Line]] |
| * [[Liquidity preference]]
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| * [[Maturity]]
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| * [[Maturity mismatch]]
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| * [[Prudential Regulation Authority]]
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| * [[Riding the yield curve]]
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| * [[Run]]
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| * [[Shadow banking]]
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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