Chapter 1 Money 2 Learning Objectives 2 Key Topics 2 Section 1.1 What Is Money 2 1.1.1 History of Money 2 1.1.2 Meaning of Money 4 Section 1.2 Functions of Money 5 1.2.1 Medium of Exchange 5 1.2.2 Unit of Account 5 1.2.3 Store of Value 6 1.2.4 Standard of Deferred Payment 7 Section 1.3 The Forms of Money 7 1.3.1 Commodity Money 8 1.3.2 Paper Money 8 1.3.3 Checks 10 1.3.4 Electronic or Digital Money 11 Section 1.4 Measuring Money 13 1.4.1 Theoretical and Empirical Definition of Money 13 1.4.2 The Federal Reserve’s Monetary Aggregates 14 1.4.3 Money Supply 14 Section 1.5 Monetary Policy 16 Notes 17 Exercises 18
Chapter 2 Financial Markets 21 Learning Objectives 21 Key Topics 21 Section 2.1 What Is Financial Market 21 2.1.1 Definition of Financial Market 21 2.1.2 Constituents of Financial Market 22 Section 2.2 Functions of Financial Markets 23 2.2.1 Intermediary Functions 23 2.2.2 Financial Functions 24 Section 2.3 Currency (Money) Markets 24 2.3.1 Participants 25 2.3.2 Functions of the Money Market 25 2.3.3 Common Money Market Instruments 26 Section 2.4 Capital Markets 27 2.4.1 Deeply View on Capital Market 28 2.4.2 Examples of Capital Market Transactions 29 2.4.3 Raising Capitals 30 Section 2.5 Derivative Products Markets 32 2.5.1 Future Contracts 32 2.5.2 Forward Contracts 33 2.5.3 Optional Contracts 34 Notes 35 Exercises 36
Chapter 3 Politics and Economics 39 Learning Objectives 39 Key Topics 39 Section 3.1 Macroeconomics & Politics 39 3.1.1 Games Between Policy Makers and Voters 40 3.1.2 Games Between Policy Makers 42 Section 3.2 An General Perspective on the Political Economy of Big Change 43 3.2.1 The Social-Political Context and Co-Evolution 43 3.2.2 Embeddedness 44 3.2.3 The Dilemma of Knowledge as a Product and a Resource 44 3.2.4 The Global Perspective on the Evolution 44 3.2.5 Evolutionary Social-Economic Intricacy 45 3.2.6 The Initiation of Self Re-Enforcing Growth 46 Section 3.3 Explosive Changes of Evolution and Communitarian Collective Ownership 46 3.3.1 The Fall-Variety Constraining Order 47 3.3.2 Self Organization and Economics 47 3.3.3 Communitarian Collective Ownership and Strategic Networks 48 Notes 50 Exercises 51
Part Two Banking Industry in China
Chapter 4 Central Bank—PBC 55 Learning Objectives 55 Key Topics 55 Section 4.1 The Reform of PBC 55 4.1.1 Definition of Central Bank 56 4.1.2 Transformation of PBC 56 4.1.3 Reform the Current Financial Structure 57 Section 4.2 The Functions of PBC 59 4.2.1 The Reason for Transformation 59 4.2.2 The Biggest Change of the Functions of PBC 60 4.2.3 The Main Functions of PBC 61 Section 4.3 The Instruments of Central Bank 64 4.3.1 Open Market Operation 65 4.3.2 Reserve Requirements 67 4.3.3 Rediscount 69 Notes 69 Exercises 70
Chapter 5 Commercial Banks 73 Learning Objectives 73 Key Topics 73 Section 5.1 Introduction 73 Section 5.2 What Is a Bank 75 5.2.1 Definition and Development of a Commercial Bank 75 5.2.2 How a Commercial Bank Makes and Creates Money 76 5.2.3 The Role of the Banking Sector in China 77 5.2.4 Vigorous Development of the Banking Sector 78 5.2.5 Increased Openness of the Banking Sector 79 Section 5.3 Intermediary Services 79 5.3.1 Settlement-payments and Funds Transfer 80 5.3.2 Plastic Money 80 5.3.3 International Settlement 82 Section 5.4 Loans 82 5.4.1 Definition and Categories of Loans 82 5.4.2 The Credit Process 83 5.4.3 Post-disbursement Management 85 5.4.4 Compound Interest vs. Simple Interest 87 Section 5.5 Banking on the Internet 87 5.5.1 Backgrounds 87 5.5.2 Advantages and Disadvantages of Online Banking 88 5.5.3 The Future Prospects of Online Banking 89 Notes 90 Exercises 91
Chapter 6 Supervision of Banking 93 Learning Objectives 93 Key Topics 93 Section 6.1 Importance and Objectives of Banking Supervision 93 6.1.1 The Role of Banks and Importance of Banking Supervision 93 6.1.2 Objectives of Banking Supervision 94 6.1.3 Preconditions for Effective Banking Supervision 95 Section 6.2 Licensing Process 96 6.2.1 Phases of the Process 96 6.2.2 Factors Evaluated by the Chartering Authorities 96 6.2.3 Basel Committee’s Requirements on Bank Licensing 97 Section 6.3 Arrangements for Ongoing Banking Supervision 97 6.3.1 Risks in Banking 97 6.3.2 Key Prudential Issues 99 6.3.3 Off-site Surveillance 104 6.3.4 On-site Examinations 104 Section 6.4 Dealing with Weak Banks 105 6.4.1 Symptoms and Cause of Bank Problems 105 6.4.2 Principles for Dealing with Weak Banks 106 6.4.3 Corrective Actions 106 6.4.4 Resolution Issues and Exit 107 6.4.5 Closure of the Bank: Depositor Pay-off 108 Notes 109 Exercises 110
Part Three Financial Instruments and Foreign Exchange
Chapter 7 Securities 114 Learning Objectives 114 Key Topics 114 Section 7.1 Stock 114 7.1.1 History 115 7.1.2 Shares 115 7.1.3 Types of Stock 116 7.1.4 Shareholder 116 7.1.5 Stock Market 117 7.1.6 Stock Trade 119 7.1.7 Stock Index 120 7.1.8 Stock Derivatives 121 7.1.9 Stock Price Determination and Fluctuations 121 Section 7.2 Bond 122 7.2.1 Issuance of Bond 123 7.2.2 Main Features of Bond 124 7.2.3 The Kinds of Bond 125 7.2.4 Bond Market 126 7.2.5 Bond Market Participants 127 7.2.6 Investing Risk in Bonds 128 Section 7.3 Fund 129 7.3.1 What Is Fund 129 7.3.2 Fund Constitution 129 7.3.3 Unit or Share Class 131 7.3.4 Investment Aims 131 7.3.5 Types of Risk 132 7.3.6 Kinds of Fund 132 Notes 136 Exercises 137
Chapter 10 To Understand Insurance 176 Learning Objectives 176 Key Topics 176 Section 10.1 What Is Insurance 176 10.1.1 Modern Insurance 177 10.1.2 Societal Effects 177 Section 10.2 Insurance Policy 178 10.2.1 General Features 178 10.2.2 Parts of an Insurance Contract 179 10.2.3 Industry Standard Forms 180 Section 10.3 Most Important Principles of Insurance 180 Section 10.4 Insurance Market 183 10.4.1 Insurance Companies 183 10.4.2 Reinsurance Companies 184 10.4.3 Insurance Intermediaries 184 Section 10.5 Insurance Business 185 10.5.1 Product Development 185 10.5.2 Distribution Channels 186 10.5.3 Underwriting 187 10.5.4 Loss Settlement 188 10.5.5 Reserve 189 10.5.6 Investment 190 Notes 190 Exercises 192
Chapter 11 Types of Insurance 194 Learning Objectives 194 Key Topics 194 Section 11.1 Personal Insurance 194 11.1.1 What Is Life Insurance 194 11.1.2 Health Insurance 196 11.1.3 Accident Insurance 197 Section 11.2 Property Insurance 198 11.2.1 History 198 11.2.2 Types of Coverage 199 11.2.3 Specific Types 199 11.2.4 US Property Insurance Claims 200 Section 11.3 Liability Insurance 201 11.3.1 What Is Liability Insurance 201 11.3.2 Types of Liability Insurance 202 11.3.3 Insurable Risks 203 Section 11.4 Reinsurance 203 11.4.1 Definition 203 11.4.2 Methods of Reinsuring 204 11.4.3 Forms of Reinsurance 204 Notes 206 Exercises 207
Part Five Banking Letters
Chapter 12 The Exercise of Banking Letters 210 Learning Objectives 210 Key Topics 210 Section 12.1 What Is a Banking Letter? 210 Section 12.2 Basic Principles of Banking Letter Writing 212 Section 12.3 The Format of Banking Letter 214 12.3.1 Standard Parts 214 12.3.2 Optional Parts 217 12.3.3 Letter Style 219 12.3.4 Envelope Addressing 222 Section 12.4 Main Types of Banking Letters 224 12.4.1 Letters Concerning Banks Relationship 224 12.4.2 Letters Concerning Bank Accounts and Bank Accounting 226 12.4.3 Letters Concerning Ba
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