INTRODUCTION
The Financial Market can be describe as an arrangement which brings
together buyer and seller who participate in the trade of Financial
Instruments.
Financial Instruments such as Equity, Bonds, Currencies, Derivatives etc.
Financial Market have specific location like Bombay Stock Exchange
(BSE), New York Stock Exchange (NYSE), NASDAQ or through telephone
etc.
The Law of determining price of Financial Instrument depends upon the
Demand and Supply in the market.
Financial Market acts as an intermediary between the savers and
investors by mobilizing funds between them.
DEFINATION
According to Brigham Eugene F, "The place
where people and organizations wanting to
borrow money are brought together with those
having surplus funds is called a Financial
Market.”
According to S.K. Copper, "Financial market
are the markets in which financial instruments
are traded."
TYPES OF FINANCIAL MARKETS
A] CAPITAL B] MONEY C] FOREIGN D] E] DERIVATIVE
MARKET MARKET EXCHANGE COMMODITY MARKET
MARKET MARKET
A. i) PRIMARY E. i) EXCHANGE TRADED
MARKET DERIVATRIVES
A. ii) SECONDARY E. ii) OVER THE
MARKET COUNTER DERIVATIVES
A] CAPITAL MARKET
Capital Markets refer to the places where savings
and investments are moved between suppliers of
capital and those who are in need of capital.
Capital Markets consist of the Primary Market,
where new securities are issued and sold, and the
Secondary Market, where already-issued securities
are traded between investors.
The most common Capital Markets are the Stock
Market and the Bond Market.
A. i) PRIMARY MARKET
The Primary Market Deals In New Issue Or
Securities.
It is also Known As New Issue Market .
Securities are directly issued by the Companies
in the Primary Market .
Primary motive is to raise fresh capital from the
Public.
A. ii) SECONDARY MARKET
Trading of already issued Securities Known as
Stock Market.
Secondary Market provides High Degree of
Transparency in trading of the Securities.
Secondary Market Facilitates the growth of
Primary Market.
B] MONEY MARKET
Money Market refers to a market of short term
financial assets that are close substitute for money.
It is a market of borrowing and lending of short
term funds having a Maturity period of one day to
one year.
Financial Instrument traded in the Money Market
are Commercial Papers, Treasury Bills, Banker's
Acceptances etc.
C] FOREIGN EXCHANGE MARKET
It is a market through which the currency of one country
is exchanged for that of another country.
The Rate of Exchange is determined by the Demand and
Supply.
Transaction of one currency is to be delivered for some
other currency.
Participants- Forex Dealers, Commercial Companies,
Central Banks, Investment Management Firms, Hedge
Funds, Retail Forex Dealers and Investors.
D] COMMODITY MARKET
A Commodity Market is a physical or virtual Marketplace for
buying, selling and trading of Raw or Primary Products.
There are currently about 50 major Commodity Markets
worldwide that facilitate trade in approximately 100 primary
commodities.
The Commodity Market is classified in two groups.
i. Hard Commodity - typically mined such as Gold, Oil,
Rubber, Iron Ore, etc.
ii. Soft Commodity - typically grown agricultural primary
products such as wheat, cotton, coffee, sugar, etc.
E] DERIVATIVES
It is the market for Derivatives.
Derivatives derives its price from fluctuations in
the underlying assets.
The most common underlying assets include
Stocks, Bonds, Commodities, Currencies, Interest
Rates, and Market Indexes.
There are mainly four types of derivative contracts
such as Futures, Forwards, Options & Swaps.
E. i) EXCHANGE TRADED DERIVATIVE
An Exchange Traded Derivative is a financial
contract that is listed and trades on a regulated
exchange.
Futures and Options are two of the most popular
exchange traded derivatives.
E. ii) OVER THE COUNTER (OTC)
DERIVATIVE
Over-the-counter (OTC) derivatives are
contracts that are traded (and privately
negotiated) directly between two parties,
without going through an exchange or other
intermediary.
Products such as swaps, forward rate
agreements, exotic options-and other exotic
derivatives are almost always traded in this
ways.
