![]() In the United States, the supply of publicly traded U.S. The major government securities markets in the United States, Europe, and Japan are presently undergoing major structural changes. Accordingly, government securities can be seen as possibly providing public-good benefits-beyond those associated with fiscal policies-by playing a role in financial efficiency and perhaps also in financial stability by facilitating private risk management. For example, these securities markets have provided banks, and financial institutions more generally, with the opportunity to use credit-risk-free government securities to manage their considerable interest rate risks. In Europe (especially in pre-euro Europe) and in Japan, where private debt securities markets are still relatively small, government securities markets also have played important roles in facilitating effective banking. Many of these benefits can be seen most clearly in the United States, where large, deep, and liquid private securities markets exist. ![]() In particular, they have facilitated the pricing and management of financial risks associated with private financial contracts. Partly because of their unique characteristics, especially their minimal credit risk, government securities and the deep, liquid markets in which they are traded have come to play important, if not critical, roles in facilitating aspects of private finance.
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