Maturity transformation is the practice by financial institutions of borrowing money on shorter timeframes than they lend money out. 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.
Brad DeLong
See also
*Asset–liability mismatch
In finance, an asset–liability mismatch occurs when the financial terms of an institution's assets and liabilities do not correspond. Several types of mismatches are possible.
For example, a bank that chose to borrow entirely in US dollars and ...
* Fractional reserve banking
References
Banking terms
Monetary policy
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