The Role of Financial Markets
EPF 6
What is a Financial Market?
Financial markets can be found in almost every nation in the world. Some are very small, with only a few participants, while others trade trillions of dollars daily. One of the larger financial markets is the New York Stock Exchange (NYSE).
Types of Markets
Capital- A market where individuals and institutions trade financial securities. Institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds.
Bond- A bond is where an investor loans money to an entity and is paid back over time at a fixed interest rate. The main types of bonds are corporate, municipal, and U.S. Treasury bonds.
Money- This market is used for borrowing and lending in the short term. It can range from a couple days to just under a year. The money that is borrowed or lend has a high liquidity and very short maturities.
Cash or Spot- This is a sophisticated market with a chance of a big gain or a big loss. In this market, goods are sold for cash and are delivered immediately. Prices are settled in cash "on the spot" at current market prices