Paper Topic:

Global Financial Market

Title

Discuss the reasons why bonds are held by variety of financial institutions such as pension fund , insurance companies and banks

Summary

The Life insurance companies play an important role both in the corporate bond market and the financial system as a large holder of Bonds . They were the fourth largest category of financial intermediary that is accounting for nearly 12 percent of U .S . financial intermediary assets . Insurance Financial companies receive premiums in return for protection of risk of death . Mortality rates are predictable so that the timing and

size of payouts for these companies are also predictable enough . US bonds needs instead to be understood in the wider context of a dollar zone composed of Asian economies determined to keep their currencies linked to the dollar

Nasim Chowdhury

Why Bonds Are Held By Variety Of Financial Institutions Such As Pension Fund , Insurance Companies And Banks

Introduction

In economics organisations that facilitate the trade of financial products such as stocks , bonds and warrants is called Financial market Financial marke has the types as Capital Market , Stock Market , Bond Market , Commodity markets , Money markets , Derivatives markets , Futures markets , Insurance markets and Foreign exchange markets . Factors that influence the financial market are as forces of supply and demand and allocation resources over the time through a price mechanism such as interest rate

In the era of Globalization financial markets have inter linkages among countries . Movements in the world 's major markets often have such large effects on other financial markets , These cross-market linkages have changed over time . The factor model by which a country 's market returns is determined by global , cross-country factors , sectarian , and country 's specific effects In global financial market Stock and Bond are determined by the both cross-country and sectarian factors . U .S . factor has recently gained significance when Japanese and U .K . factors have lost importance

All of we know that over the long run nothing beats the stock market This is the reason why anyone would invest in bonds ? Though they pale in comparison , which would be equities in the long run . The bonds have several traits that stocks simply can 't match . To discuss why Bonds Are Held By Variety Of Financial Institutions Such As Pension Fund Insurance Companies And Banks

Contractual Savings Institutions

The institutions those who do not accept deposits , but acquire their liabilities on a regular basis through contractual payments in return for obligations that are fairly predictable as much more so than the withdrawals of depositors . In relation to depository institutions , their assets are more long-term and less liquid

The Life insurance companies receive premiums in return for protection of risk of death . Mortality rates are predictable so that the timing and size of payouts for these companies are also predictable enough . Life insurance companies also sell a variety of investment products as well as annuities and guaranteed investments contracts (GICs . Life insurance companies are the biggest buyer of corporate bonds , and invest heavily in mortgages as well . They hold...

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