This session covers Lecture 10: Dealers and Liquid Security Markets This lecture is all about dealers. It emphasizes the concept of "market liquidity" as distinct from "funding liquidity" and introduces the Treynor model of the economics of the dealer function. We're starting by looking at security dealers, but we'll be using this model for the …

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This session covers Reading 5: Three chapters from A Market Theory of Money by John Hicks (1989) In these three chapters, Hicks starts with the idea that the primary function of money is to serve as a "standard of value" for the market. From there, he argues that the institution of banking as market making …

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This session covers Lecture 11: Banks and the Market for Liquidity This lecture generalizes the Treynor model from security dealers to money dealers and explores the question of why it's profitable for banks to run the payment system at par when prices can't adjust and there's no bid/ask spread. We also talk about how the …

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