Chapter 1 - Market organization and structure. This chapter introduces how the financial system operates and explains how well-functioning financial systems lead to wealthy economies. Financial analysts need to understand how the financial system works because their analyses often lead to trading decisions. | Chapter 1 Market Organization and Structure Presenter Venue Date This chapter introduces how the financial system operates and explains how well-functioning financial systems lead to wealthy economies. Financial analysts need to understand how the financial system works because their analyses often lead to trading decisions. DISCLAIMER: Candidates should understand this presentation is NOT a substitute for a thorough understanding of the CFA Program curriculum. This presentation is NOT necessarily a reflection of all of the knowledge and skills needed for candidates to successfully complete questions regarding this topic area on the CFA exam. 1 What Are the Main Functions of the Financial System? LOS: Explain and illustrate the main functions of the financial system. Pages 3-8 Saving involves moving money from the present to the future (foregoing current consumption). The financial system facilitates savings when institutions create investment vehicles, such as bank deposits, notes, . | Chapter 1 Market Organization and Structure Presenter Venue Date This chapter introduces how the financial system operates and explains how well-functioning financial systems lead to wealthy economies. Financial analysts need to understand how the financial system works because their analyses often lead to trading decisions. DISCLAIMER: Candidates should understand this presentation is NOT a substitute for a thorough understanding of the CFA Program curriculum. This presentation is NOT necessarily a reflection of all of the knowledge and skills needed for candidates to successfully complete questions regarding this topic area on the CFA exam. 1 What Are the Main Functions of the Financial System? LOS: Explain and illustrate the main functions of the financial system. Pages 3-8 Saving involves moving money from the present to the future (foregoing current consumption). The financial system facilitates savings when institutions create investment vehicles, such as bank deposits, notes, stocks, and mutual funds, that investors can acquire and sell without paying substantial transaction costs. The financial system facilitates borrowing by lenders aggregating from savers the funds that borrowers require. Borrowing is also facilitated via the collection, analysis, and dissemination of credit information. The financial system assists in issuing and valuing securities and provides the necessary information for financial reporting. The financial system facilitates risk management when liquid markets exist in which risk managers can trade instruments that are correlated (or inversely correlated) with the risks that concern them without incurring substantial transaction costs. The financial system facilitates spot market exchanges when liquid markets exist in which people can arrange and settle trades without substantial transaction costs. The financial system facilitates information-motivated trading when liquid markets allow active managers to trade without significant .
