Define: auction markets, over-the-counter markets, capital and derivative markets. See this article about Southwest's use of the derivative market to protect itself from risk.

Why do firms use derivative markets?

Why are money market assets typically more liquid than capital market assets? Does the relative illiquidity of capital market assets have any consequences for the banking system?

What factors explain the need for financial markets? (We discussed four today.) Who is more likely to use a stock broker (ceteris paribus): an active college professor in Alabama or a retired college professor in Florida? Why?

What are the benefits to savers and borrowers if financial markets communicate all available information about financial instruments via their prices?

Here is an interesting recent story about moral hazard. How does U.S. foreign aid promote moral hazard? What are some ways that ailing countries can be helped without creating it? Also, here is the story about the doctor's strike in Israel and its effect on death rates. How can a doctor's strike promote moral hazard?

Here is Sam Peltzman on seat belts and moral hazard. Don Cherry noted that when hockey players were forced to wear face masks, there was a higher incidence of high sticking and slashing calls. Explain how possible moral hazard problems can result from (i) financial regulation, (ii) general insurance, and (iii) deposit insurance.