Future of Finance.wmv

The video explores the evolution of financial systems in response to crises, focusing on asset management and shadow banking. It highlights the shift from traditional asset management to new practices involving risk exposure and derivatives. The interaction between shadow banks and asset managers is discussed, emphasizing the role of global banks and derivative dealers in managing risks and liquidity. The inability to see direct exposures leads to liquidity problems, underscoring the complexity of modern financial systems.

What is a key difference between old-style and new-style asset management?

• Old-style involves direct holding of risky bonds, while new-style uses money substitutes.

• Old-style and new-style asset management are essentially the same.

• Old-style focuses on derivative exposures, while new-style avoids them.

• Old-style uses money substitutes, while new-style involves direct holding of risky bonds.

How do shadow banks and asset managers operate in parallel?

• By avoiding any form of derivative exposure.

• By directly exchanging risky bonds.

• By focusing solely on retail money markets.

• By mirroring each other's activities in risk hedging and funding.

What role do global banks play in the interactions between asset managers and shadow banks?

• They act as intermediaries handling funding and derivative exposures.

• They facilitate direct business transactions between the two.

• They provide retail banking services to both parties.

• They eliminate the need for derivative dealers.

Why do liquidity problems arise in the system described?

• Due to excessive transparency in the system.

• Due to the inability to see direct linkages and exposures between parties.

• Because of the direct visibility of exposures between asset managers and shadow banks.

• Because global banks refuse to handle funding.

What is the main challenge in the indirect interactions between asset managers and shadow banks?

• The over-reliance on retail money markets.

• The inability to see direct exposures and linkages.

• The absence of global banks.

• The lack of derivative dealers.