THE MARKET

PARTICIPANTS
PRESENTED BY:
JENNY ROSS REVILLA
JAYBIEN MAPUSTI
MARKGIL OPAO
LEI ASHLEY OSICOS
KATHLYN JAMBALOS
FRITZ MEDALLON
The players or participants in a financial market
The Players - Entities in the financial market can both raise funds
(debt or equity) by issuing financial obligations, and invest in financial
assets. These entities are called players in the financial market

Categories of players (by sector) in the financial markets:

Households
consists of individuals or groups of individuals as consumers and as
entrepreneurs producing market goods and non-financial and financial
services (market producers) provided that the production of goods and
services is not by separate entities treated as quasicorporations.
Governments
Government raises funds by issuance of securities referred to as
Treasury Securities
They are also investors in securities
Government are sponsors of defined benefit pension funds for
employees (SSS and GSIS)

Nonfinancial corporations - classifies as financial and non-

financial corporations. Includes depository institutions, insurance
companies and investment banks

Depository institutions - include commercial banks, savings

and loan associations, savings banks and credit unions
Insurance companies - include life insurance companies and property and
casualty insurance companies
Asset management firms - manage the funds of individuals, businesses
and government.
Their primary compensation is the fees that they earn. The fee is linked to
the amount of assets managed and/or the performance of the portfolio
managed
Asset managers are referred to by various names such as money managers
portfolio manager and fund managers
Investment banks
Two general functions:
-Assists in obtaining funds for corporations and government sectors
-Act as brokers or dealers in the buying and selling of securities for
investors
They can be a subsidiary of a commercial bank or an insurance company
Nonprofit organizations - are foundations or endowments
not motivated by profit or any monetary gain but have as
their primary objective financially supporting and/or
actively engaging in activities that will benefit some
specific public or private interest.

Foreign investors - include individuals, nonfinancial

business, financial entities, central governments and
supranational not domiciled to the country where financial
assets are offered
Services of financial institutions
Financial business, more popularly referred to as financial institutions, are
not only critical for the efficient operation of the world capital markets
Financial Institutions operates the financial market, and they provide one
or more of the following services
1. Transform financial assets acquired through the market and constitute
them into a different, and more widely preferable type of asset which
becomes their liability – performed by financial intermediaries.
2. Exchange financial assets on behalf of customers.
3. Exchange financial assets for their own account.
4. Assist in the creation of financial assets for their customers and then sell
those financial assets to other market participants.
5. Provide investment advice to other market participants.
6. Manage the portfolios of other market participants
Role of financial intermediaries - Financial intermediaries are the
most important type of financial institutions which include depository
institutions, insurance companies, pension funds and investment
companies.
Maturity Intermediation – an investment term that describes a
bank’s long-term lending on funds borrowed for a short-term
investment.
Risk Reduction via Diversification – transforming more risky
assets into less risky ones (allows cost effective diversification)
Reducing the Cost of Contracting and Information Processing
Providing a Payment Mechanism – presence of checks, credit
cards, debit cards and e-transfers of funds provided by financial
intermediaries
Asset/Liability management for financial institutions
Type I Liabilities
With Type I liabilities both the amount and timing of the liabilities are known with
certainty, such as when a financial institution knows that it must pay P 50,000 in
6 months time. For example: depository institutions know the amount that they
are committed to pay (principal plus interest) on the maturity date of a fixed rate
deposit, assuming that the depositor does not withdraw funds prior to the maturity
date

Type II Liabilities
With Type II liabilities the amount of the cash outlay is known, but the timing of
the cash outlay is uncertain. The most obvious example of a Type II liability is a
life insurance policy. The most basic of the many types of life insurance policy
provides that, for an annual premium, a life insurance company agrees to make a
specified dollar payment to policy beneficiaries upon death of the insured
Type III Liabilities
With this type of liability, the timing of the cash outlay is known but the
amount is uncertain, such as when a financial institution has issued an
obligation in which the interest rate adjusts periodically based on some
interest rate benchmark. Depository institutions, for example, issue
liabilities called certificates of deposit with a stated maturity. The
interest rate paid need not be fixed over the life of the deposit but may
fluctuate. If a depository institution issues a 3- year floating rate
certificate of deposit that adjusts every 3 months and the interest rate
pai is the 3-month Treasury bill rate plus one percentage point, the
depository institution knows its liability must be paid off in 3 years, but
the dollar amount of the liability is not known. It will depend on 3-
month Treasury bill rates over the 3 years
Type IV Liabilities
Numerous insurance products and pension obligations
involve uncertainty as to both the amount and the
timing of the cash outlay. Probably the most obvious
examples are automobile and home insurance policies
issued by property and casualty insurance. When, and
if a payment will be made to the policyholder is
uncertain. Whenever damage is done to an insured
asset, the amount of the payment that must be made is
uncertain
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