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Maturity transformation

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This is an old revision of this page, as edited by 2601:cb:8100:6470:b148:8c58:d3bf:bd6d (talk) at 01:53, 24 June 2015 (Corrected content. Maturity transformation isn't the domain of fractional reserve banks, nor is it inherently destabilizing.). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

Maturity transformation is the practice by financial institutions of borrowing money on shorter timeframes than they lend money out.[1][2] Financial markets also have the effect of maturity transformation whereby investors such as shareholders and bondholders can sell their shares and bonds in the secondary market (i.e. the larger part of the stock market) at any time without affecting the company that issued the shares or bonds. Thus the company can be a long-term borrower from a market of short-term lenders. The short-term lenders are simply buying and selling the ownership of the shares or bonds on the stock market. The company keeps a register of owners and changes the name whenever there is a sale.[3]

See also

References

  1. ^ "Maturity Transformation: 2012 Financial Markets Conference". www.frbatlanta.org. Federal Reserve Bank of Atlanta. Retrieved 8 July 2014.
  2. ^ Paligorova, Teodora; Santos, João (March 2014). "Rollover Risk and the Maturity Transformation Function of Banks". Bank of Canada Working Paper 2014–8. {{cite journal}}: |access-date= requires |url= (help)
  3. ^ Maturity Transformation, Brad DeLong


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