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1. What are the characteristics of financial assets that have highly developed secondary markets? 2. What...

1. What are the characteristics of financial assets that have highly developed secondary markets?

2. What is the difference between the secondary market in mortgages and the secondary market in mortgage-backed securities?

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Answer #1

1. Financial assets in the developed world are more complex and there are many options available for investors. The financial assets include equity and derivative instruments and a fully developed bond market. In developing nations, since most of the assets held by individuals are in form of property and other hard assets, the financial assets are not that well developed. A developing nation may have a stock market in the weak form and will not have a fully developed bond market.

2. A secondary market in mortgages is where the home loans and their servicing rights and bought and sold between lenders and investors.

In mortgage backed security, several primary mortgages which are sold in the secondary marked are pooled into large mortgage back investor units and are sold to investors once again.

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