MindMap Gallery Economics-Chapter 3 Financial Market Mind Map
About Economics - Chapter 3 Financial market mind map, including bond market, stock market, currency market, etc. It’s full of useful information, friends in need should quickly collect it!
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This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
Financial market
financial market concept
meaning:
Financial market is a system for trading currencies and financial assets and belongs to the factor market
The main function is to price financial assets, form a balanced asset price through the transaction of financial assets, and achieve effective allocation of social resources.
The purpose of financiers is to obtain low-cost monetary funds, and the purpose of investors is to obtain monetary gains
Function:
Gathering: gathering small amounts of funds to invest in reproduction
Allocation: resource allocation, wealth redistribution, risk redistribution
Adjustment: Based on the law of value and the law of supply and demand, a comprehensive objective adjustment process is formed through changes in supply and demand, price changes, and financing.
Reflect: reflect the national economic situation
Classification:
Maturity: money market (financial assets with a maturity of less than one year are the subject matter of transactions), capital market (a maturity of more than one year)
Transaction objects: foreign exchange market, derivatives market, insurance market, gold market
Transaction intermediary status: direct financial market (information intermediary, service intermediary), indirect financial market (funding intermediary, credit intermediary)
Transaction procedures/stages: issuance market (primary market/primary market), circulation market (secondary market/secondary market/transaction market)
Whether there is a fixed place for transactions: tangible market (stock exchange), intangible market
Native affiliation: traditional financial market, financial derivatives market
Geographical scope: domestic financial market, international financial market
Delivery time: spot market, futures market
Financial market transaction entities:
Enterprise (net financier):
In the financial market, it is both a supplier of funds (corporate provident funds, depreciation, undistributed earnings, corporate annuities, etc.)
They are also those in need of funds (to meet short-term liquidity needs and long-term investment needs)
Government (net financier):
The largest demander of funds in the financial market and the supplier of risk-free assets
Through the issuance of government bonds (the subject matter of the central bank's open market operations), we can make up for the fiscal deficit and meet the financial market's demand for safe financial assets.
Household sector (net investors):
The final consumer is the main provider of funds in the financial market.
Their savings are rarely invested directly but enter the financial market through the purchase of financial instruments.
Financial institutions (most active entities):
intermediary sector of financial markets
Mainly engaged in credit business (providing loans to other departments to obtain spread income) and brokerage business (managing the public's financial assets to obtain commission income)
Therefore, in essence, financial institutions are not providers of funds to the financial market
Central Bank:
It is both a government department and a banking institution. Provide government macro-control through indirect financial transaction business
It is not for the purpose of profit, but for the purpose of stabilizing economic fluctuations and maximizing social welfare.
In practice, the central bank cannot pursue maximizing returns from open market operations, but continued losses and profits are not conducive to financial market stability.
The difference between direct financing and indirect financing:
definition:
Direct financing is when companies issue stocks, bonds, etc. to borrow money from investors.
Indirect financing is when companies borrow money from banks
The entities that bear the risk of default are different:
Direct financing is borne by investors
Indirect financing is borne by bank shareholders
Different infectious abilities:
Indirect financing spreads among banks and enterprises, which may cause systemic financial risks
Direct financing spreads only among bond investors and may also pass losses on to banks
Different degrees of marketization:
Indirect financing is decided through negotiation between both parties, and there is no active secondary loan transaction market.
Direct financing has an active secondary securities trading market. The price is mainly determined by market supply and demand. It has strong liquidity and a high degree of marketization.
Monetary policy is different:
In countries where the indirect financing model is dominant, the central bank mainly adopts quantitative monetary policy for macro-control, and bank credit is the main transmission channel of monetary policy.
In countries with developed direct financing markets, price-based monetary policies that focus on regulating interest rates are more effective, and the investment portfolio of financial assets is the main transmission channel of monetary policy.
Money market (borrowing large bills back home)
The nature of financial instruments: maturity, profitability, risk (all inversely proportional to liquidity)
Main features:
Short term, strong liquidity, low risk, low return, sensitive to interest rates
Large transaction volume, high entry threshold, and quasi-currency nature
Financing purpose (institution or business):
Obtain liquidity (double meaning)
Base money (central bank liabilities) refers to commercial banks’ reserves at the central bank. Obtaining reserves is the main purpose of commercial banks’ financing in the money market.
Deposits of enterprises and individuals in commercial banks (commercial bank liabilities), enterprises issue bonds to obtain commercial bank deposits, and individuals purchase bonds to reduce bank deposits. Therefore, the liquidity of enterprises and individuals falls under the category of M2
Base interest rate (generally inter-bank lending rate):
The interest rate that provides the basic pricing standard for other financial transactions in the financial market only reflects the time cost of money and does not include the premium for default risk.
Market participants:
Legal person participant: policy bank. Commercial banks and their authorized branches and other financial institutions (in and out)
Illegal human participants: refers to various investment products (investors) established by financial institutions and other institutions as asset managers
Non-financial enterprises: large enterprises (financiers) that meet regulatory requirements
China interbank market
definition:
The various businesses of China’s money market are mainly concentrated in China’s inter-bank market
The Chinese inter-bank trading market consists of the China Foreign Exchange Trading Center and the National Interbank Funding Center.
RMB trading varieties (12):
Interbank lending:
Financial institutions networked with the National Interbank Lending Center conduct unsecured financing through the interbank center’s trading system.
There are 11 varieties according to time, the shortest is one day, the longest is one year, and inquiry transactions are adopted (OTC method)
The funds placed out are limited to idle funds after paying sufficient reserves, retaining sufficient reserves, and returning expired loans to the People's Bank of China.
It can only be used to make up for temporary capital turnover needs such as bill liquidation, payment first and collection later, and cannot be used for fixed capital loans, investments and capital replenishment.
Borrowed funds do not need to submit statutory deposit reserves
Non-financial institutions and individuals are strictly prohibited from participating in inter-bank lending activities
It is the main tool for the central bank to carry out macro-control
Bond transactions
feature:
Short-term loans with collateral
Use inquiry trading
Bond custody and settlement are conducted through the China National Debt Depository and Clearing Co., Ltd., and fund settlement is conducted through the large-value payment system of the People's Bank of China.
Positive repurchase: capital financier, sell first and then buy (bonds), tighten liquidity, tightening monetary policy
Reverse repurchase: financing sources, buying first and then selling, releasing liquidity, expansionary monetary policy
Pledged repo
The reverse repurchase party does not have the right to use the bonds, and neither party is allowed to use the bonds during the repurchase period.
The two parties agree that on a certain date in the future, the positive repurchase party will return funds to the reverse repurchase party based on the amount of funds calculated at the agreed repurchase interest rate.
buyout repo
The reverse repurchase party has the right to dispose of the bonds during the repurchase period
The two parties agree that on a certain date in the future, the positive repurchase party will buy back an equal amount of the same type of bonds from the reverse repurchase party at an agreed price.
Spot trading
Transactions in which both parties transfer bond ownership at an agreed price (inquiry transaction, quote request and click transaction)
Derivatives trading
bond lending
The bond lender uses a certain number of bonds as pledge, borrows the underlying bonds from the bond lender, and agrees to return the borrowed underlying bonds at a certain date in the future, and the bond lender returns the corresponding pledge.
bond forward trading
The two parties agree to buy or sell the underlying bond at an agreed price and quantity on a certain date in the future.
forward rate agreement
A financial contract in which the parties to the transaction agree to calculate interest at a fixed interest rate and a reference interest rate respectively on a certain nominal principal during the exchange period on a certain date in the future.
Use inquiry transactions and click achievements
The reference interest rate should be a market interest rate with a benchmark nature or the benchmark interest rate published by the People's Bank of China
RMB interest rate swap transactions
The parties to the transaction agree to calculate interest based on the agreed RMB principal and interest rate within a certain period in the future.
Adopt inquiry trading and click transaction
interbank certificate of deposit
Book-entry time deposit certificates issued by deposit-taking financial institutions in the national inter-bank market
loan transfer
The transaction in which the transferor transfers the bonds formed by the loan issued to the borrower to the transferee
Credit Risk Mitigation Certificate
A tradable valuable certificate created by an institution other than the underlying entity to provide credit risk protection for the certificate holder on the underlying debt.
Foreign exchange trading varieties (7)
RMB foreign exchange spot trading
RMB foreign exchange transactions where both parties to the transaction are delivered on or within the second business day after the transaction date
RMB foreign exchange forward transactions
RMB foreign exchange transactions with delivery on a certain date agreed in the future
RMB foreign exchange swaps
The parties to the transaction agreed to conduct two domestic and foreign currency exchanges in opposite directions on two different value dates one after the other.
RMB foreign exchange currency swap transaction
Exchange an agreed amount of principal in two currencies within an agreed period and exchange interest in two currencies on a regular basis
RMB to foreign exchange options trading
The right to buy or sell a certain amount of foreign exchange assets at an agreed exchange rate on a certain future trading day.
Delivery methods include full delivery and differential delivery
Foreign currency pair trading
Foreign exchange-to-foreign exchange transactions that do not involve RMB
Foreign currency interest rate market products: foreign currency lending, foreign currency repurchase, foreign currency interbank deposits, foreign currency interest rate swaps
Bond Market
Overview:
The capital market is a market for medium- and long-term investment and financing transactions of more than one year.
The purpose of long-term financing is to carry out investment activities with a longer period and has the nature of capital investment
Bonds and stocks have the characteristics of high degree of marketization, good transparency and strong liquidity.
Bond market definition:
The bond market is the market where bonds are issued and traded
Bonds are debt certificates issued by the issuer to investors, promising to pay interest at a certain interest rate and repay the principal according to agreed conditions.
Bonds are direct financing instruments, usually issued publicly to investors in the market
Borrowers in the bond market are mainly: government departments, non-financial corporate sectors, and financial institutions sectors
The identities of investors are complex, mainly various financial institutions or funds
Bond issuance market:
Issuer:
government. Businesses and Financial Institutions
Issue size and issue price:
Determined based on market currency supply and demand and the credit rating of the bond
Specific issuance business:
Underwriter:
Securities business institutions that comply with laws and regulations and are allowed to sign securities underwriting agreements with securities issuers to assist in the public issuance of securities and obtain corresponding underwriting fees.
Mainly undertaken by securities companies, commercial banks have also begun to enter this field
The specific functions are: consulting [providing legal and regulatory consultation, securities type pricing, etc. to the issuer], distribution [assisting the issuance of securities] and protection [having certain guarantee and recognition obligations for the underwritten securities]
Distribution method:
Public offering (the issuer issues bonds to an unspecified majority of investors. The issuance scale is large, agency ratings must be obtained, financial information must be disclosed to the market, and regulatory approval is required)
Private placement (issuance of bonds to a small number of specific investors. Targeted issuance and targeted disclosure of financial information, institutions generally have strong securities analysis capabilities)
Specifically, one-time registration, multiple issuance and rolling issuance models can be implemented.
Issue price:
Fixed income sales method (applicable to long-term treasury bonds), competitive bidding method (public bidding, applicable to short- and medium-term government bonds), continuous distribution method (setting up special counters in the market, applicable to non-transferable bonds), direct sales method (applicable to non-transferable bonds) Treasury bonds issued by countries with relatively stable market interest rates)
Auction method: (bidding)
British auction, Dutch auction, American auction
Auction subject matter:
Price auction (the face price and coupon rate are fixed, and the bidding price is proposed based on the expected changes in market interest rates)
Yield auction (bonds are sold at a fixed price and bids are placed on the bond interest rate)
Fee auction (the issuance price and interest rate are determined, and subscribers can only request fees)
Payment auction (auction is conducted based on the length and order of payment periods of treasury bond subscribers)
Usually requires third-party agencies such as accounting firms and credit rating agencies to provide services
Bond circulation market:
In reality, most credit bonds are not actively traded and are usually held to maturity by investors. The most actively traded are interest rate bonds (i.e., treasury bonds).
The role of bond interest rates:
Accurately reflects market liquidity supply and demand conditions and interest rate levels, and can provide a benchmark for pricing other financial assets.
The central bank uses the term structure relationship between short-term interest rates and long-term interest rates to implement monetary policy operations by affecting the shape of the yield curve.
means of transaction:
Cash coupon buyout:
Bond transactions without a repurchase process are an investment behavior for the private sector. For the central bank, the operation of buying out treasury bonds from commercial banks is a business of increasing base currency and is used to inject base currency.
repurchase transaction
Futures trading:
A trading method in which the buying and selling price is determined in advance through an organized trading venue and delivered within a specific time in the future.
stock market
The market for stock issuance and trading, in which both institutional and individual investors can participate, is the most active and widely influential financial market.
Stock issuance market:
Public offering:
The issuer entrusts a financial intermediary to issue shares to the public
Issuers must disclose detailed information about their operations and financial status to the market by issuing prospectuses and other means. (1. Raise a large amount of funds in a short period of time. 2. You can apply for listing on the exchange, which is conducive to enhancing stock liquidity and improving the credibility of the issuer)
Underwriting options include agency sales (no issuance risk, low commission) and underwriting (underwriter bears issuance risk, high commission)
Private Placement: (Directed Issuance)
An issuer sells securities directly to specific investors. Generally, a small number of investors who have close relationships with the issuer or manager are targeted.
Distribution method:
Par issuance, premium issuance (market price issuance and mid-price issuance) and discount issuance
my country's Securities Law stipulates that Chinese companies are not allowed to issue shares at a price lower than the par value of the shares.
Stock trading market:
Provide stock holders with the opportunity to cash out at any time and provide investment opportunities for new investors
On-exchange market:
A market for centralized trading of stocks organized by a stock exchange.
Stock exchanges are divided into membership systems and corporate systems.
The membership system is a non-profit legal person established in the form of a membership association. Only brokers (who engage in buying and selling on behalf of clients and collect commissions) and traders (who directly engage in securities buying and selling, and whose income comes from the bid-ask spread) who have obtained exchange membership can conduct transactions on the exchange. The highest authority is the General Assembly.
The corporate system is a corporate legal person established with the purpose of profit and joint investment by various investors. It bears guarantee responsibility for securities transactions within the Exchange. Implement a model that separates operators and participants. The highest authority is the shareholders' meeting.
OTC market:
Securities trading markets other than exchanges. (Over-the-counter or over-the-counter market)
Unorganized, non-centralized and fixed trading place
The trading objects are mainly unlisted securities
You can entrust a securities firm as an agent, or you can trade directly with the securities firm. The transaction price of securities is generally determined by negotiation between the two parties.
The basic procedures for buying and selling stocks include three steps: account opening (securities account and capital account), entrustment, and delivery, using the method of bidding.
The stock price index is compiled using statistical index methods and reflects the overall price of the stock market (comprehensive index) or an indicator of changes and trends in a certain type of stock price (category index/component index).
Financial tool
bill:
definition:
A kind of negotiable security with circulation function.
Bill behavior refers to the laws and regulations that can create a relationship between creditor's rights and debts, and there are six types: bill issuance, acceptance, guarantee, acceptance, and guaranteed payment.
A credit note issued by the drawer that unconditionally agrees or requires others to pay a certain amount to the holder.
feature:
Completely valuable: the rights of the instrument are inseparable from the instrument. Possession of the instrument means possession of the value of the instrument.
Essential securities: the format is specified by law
No-cause securities: When the holder exercises his rights, he does not need to explain the reason for obtaining the note.
Negotiable securities: If a bill cannot be circulated, it cannot become a bill.
Wenyi Securities: The rights and obligations on the bill must be based on the written records on the bill.
type:
Promissory note:
A bill issued by the drawer, promising to unconditionally pay a certain amount to the payee or holder upon presentation.
Chinese law only allows banks to issue promissory notes and requires banks to have reliable sources of funds to pay the amount of the promissory note.
draft:
A bill issued by the drawer entrusting the payee to unconditionally pay a determined amount to the payee or holder at sight or on a specified date.
A bill of exchange must be accepted by the payer before it can be circulated and transferred. Acceptance refers to the act of the payee of a bill of exchange promising to pay the remittance amount on the due date of the bill of exchange.
Depending on the acceptor, it can be divided into commercial acceptance bill and bank acceptance bill. Depending on the payment time, it can be divided into sight draft and usance draft.
Cheque:
A bill issued by the drawer, entrusting a bank or other financial institution to handle check deposit business to unconditionally pay a determined amount to the payee or holder when the bill is presented.
In our country, there are only demand checks.
Real bills:
A certificate issued when deferred payment in a commodity transaction proves the relationship between creditor's rights and debts, and has a real background in commodity transactions.
Financial instruments:
Unsecured short-term debt instruments issued by financial institutions such as financial companies or large companies with high credit to raise short-term funds.
bond
concept:
Definition: Securities in which the issuer promises to repay principal and interest on a specified date in accordance with legal procedures.
type:
Maturity: short-term (within 1 year), medium-term (2 to 10 years), long-term bonds (more than 10 years)
Interest payment method:
The method of paying interest on a bond directly affects the price and yield of the bond, and is an important indicator that investors in the financial market pay attention to.
Zero-coupon bonds: bonds issued at a discount, without coupons, and with a one-time payment of principal and interest at face value on the maturity date. They are long-term bonds with a maturity of more than one year.
Discount bonds: bonds issued at a discount below their face value and repaid in one lump sum at their face value upon maturity. They are short-term bonds with a maturity of less than one year.
Fixed-rate interest-bearing bonds: The coupon rate, interest payment frequency, interest payment date and other factors are marked when the bond is issued. Interest is paid regularly according to the agreed interest rate, and the last interest and principal are repaid on the maturity date.
Floating rate interest-bearing bonds: A certain money market interest rate is used as the bond's benchmark interest rate, plus the bond's basic spread (which the issuer can determine through bidding or book-building) as the coupon rate. The benchmark interest rate follows the market during the bond period, but the bond The basic interest rate remains unchanged
Interest-bearing principal-paying bonds: Bonds with a coupon rate indicated at the time of issuance, no interest will be paid before the due date, and all interest will be accumulated until the due date and repaid together with the principal.
Government Bonds: Bonds with a government as the issuer
Treasury bonds: (risk-free assets) debt certificates issued by the central government, specifically issued by the Ministry of Finance. They are sovereign bonds and have the highest credit rating.
Book-entry treasury bonds:
Issued and traded on the interbank market
Investors: Mainly financial institutions, a small number are issued and traded over the counter of exchanges and commercial banks
Issuance through bidding by the China Government Bond Clearing Corporation and under the general custody of the China Government Bond Clearing Corporation
Savings Bonds:
Meet the savings needs of some individual investors
Issued over the counter of commercial banks
Divided into certificate-type treasury bonds and electronic treasury bonds
Electronic savings treasury bonds are under the general custody of CCDC
Local government bonds:
Issued through bidding or underwriting by CCDC
Trade over the counter on the interbank market, stock exchanges and commercial banks
In total custody at CCDC
General bonds:
Bonds issued by provincial governments for non-revenue public welfare projects, with an agreement that the principal and interest will be repaid mainly with general public budget revenue within a certain period of time.
Revenues are included in public budget management, and expenditures and repayments are uniformly arranged by local finance
It is mainly used to make up for the fiscal deficit, and the source of repayment is fiscal revenue.
Special bonds:
Government bonds issued by provincial governments for public welfare projects with certain returns, with the agreement that the principal and interest will be repaid within a certain period of time with government funds or special revenue corresponding to the public welfare projects.
Revenue is incorporated into government fund management, usually with specific purposes
The source of repayment is project income or special income
Central Bank Notes:
Short-term debt certificates issued to commercial banks with the central bank as the debtor
The purpose is to limit the credit creation ability of commercial banks to achieve the purpose of reducing money market liquidity.
Government-backed institutions are usually institutions controlled by the government or providing credit guarantees
Government agency-backed bonds are bonds with government-backed agencies as the issuing body.
Government agencies support the issuance of bonds, which will help expand corporate financing channels, increase innovative varieties in the bond market, and meet the investment needs of medium and long-term investors.
Financial bonds:
Financial bonds are a type of securities issued by commercial banks and other financial institutions in order to adjust their liability structure and absorb relatively stable long-term funding sources.
Issuing financial bonds to raise funds is more stable and proactive than taking deposits
Financial bonds are issued through CCDC, traded in the inter-bank bond market, and held in custody at CCDC
Policy financial bonds:
The issuing entities are development financial institutions and policy banks (in my country, they are the China Development Bank, the Export-Import Bank of China and the Agricultural Development Bank of China)
Financial institution bonds:
The issuer of commercial bank bonds is a commercial bank legal person established in China.
The issuer of non-bank financial bonds is a non-bank financial institution legal person established in China.
Subordinated bonds: refers to a form of debt that has a higher order of repayment to creditors than the company's equity but lower than the company's general debt.
Regulators allow commercial banks to issue subordinated bonds and hybrid capital bonds as a supplementary source of capital
Hybrid capital instruments can and must be used to share a bank's losses without having to cease trading
Subordinated bonds can only be used to pay off the bank's losses when the bank is bankrupt and liquidated, and cannot be used to make up for the bank's daily operating losses.
Subordinated bonds only provide banks with a buffer period to improve their operating conditions and adjust their asset structure.
Credit bonds:
Credit bonds are bonds issued by entities other than the government and have agreed upon a certain cash flow for repayment of principal and interest.
Credit bonds have higher yields and higher credit risk
Corporate bonds:
Corporate bonds refer to securities issued by enterprises with legal person status in China in accordance with legal procedures and with an agreement to repay principal and interest within a certain period of time.
In my country, it refers to bonds approved by the National Development and Reform Commission and issued by institutions affiliated with central government departments, wholly state-owned enterprises or state-controlled enterprises.
Corporate bonds:
Corporate bonds refer to securities issued by a company in accordance with legal procedures and agree to repay principal and interest within a certain period of time.
When some companies issue bonds, they agree that investors can convert the bonds into shares within a certain period of time in accordance with agreed conditions. Such bonds are called convertible corporate bonds.
High Yield Bonds:
Used to solve the problem of bankrupt companies having difficulty obtaining financing from commercial banks
Meet the investment needs of investors in the market after the subprime mortgage crisis
Facilitating rapid post-crisis recovery for U.S. businesses
Corporate short-term financing bonds:
Corporate unsecured financing bonds approved by the People's Bank of China and issued within 365 days
The issuance targets are institutional investors in the national inter-bank market and can be used for daily production and operations.
Asset-backed securities:
A bond whose repayment source is the cash flows generated by the pool of assets that back the security.
Including financial asset-backed securities and corporate asset-backed securities.
The principal payment time of asset-backed securities is unpredictable, and the debtor and the debtor of the underlying assets are often not the same economic entity.
Asset securitization: Assets that lack liquidity but have predictable income are sold to obtain financing by issuing securities in the capital market to maximize the liquidity of the assets.
Our country also has a small number of foreign currency bonds and STR bonds (Special Drawing Rights denominated bonds)
stock
Stocks are equity certificates issued by a joint stock company to investors to prove their ownership in order to raise capital.
Common stock:
Shareholders of common shares are the most basic shareholders of a joint-stock company
The rights owned by shareholders include: company decision-making rights, profit distribution rights, preemptive stock options, and remaining asset distribution rights.
While enjoying rights, you must also bear the company's operating losses.
When a company undergoes financial liquidation, common stockholders end up receiving the remaining property.
Preferred shares:
Preferred shares are shares that give investors certain priority rights when a company raises capital.
Priority rights mainly include: fixed dividends, which do not fluctuate with the company's performance and can receive dividends before ordinary shareholders.
When a company undergoes financial liquidation, preference shareholders have the right to claim the company's remaining property before common shareholders.
However, they generally do not participate in the company's dividend distribution, and shareholders do not have voting rights and cannot participate in the company's operation and management.
Junk stocks:
Stocks rated as non-investment grade (BB or below)
Companies with operating problems, newly listed high-tech companies, or stocks issued by companies with too much financial leverage
Domestic junk stocks mainly include the following three parts:
ST stocks: stocks that have suffered losses for two consecutive years or whose net asset value is less than 1 yuan.
*ST stocks: stocks that have suffered losses for three consecutive years.
Exclude the first two categories of stocks with performance below 0.10 yuan.
Blue chip stocks:
It refers to the stocks of companies with excellent performance and relatively stable returns.
Blue chip stocks:
Refers to long-term stable growth, large-scale, traditional industrial stocks and financial stocks.