Financial market
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Financial markets channel savings into investment opportunities. They include money markets for short-term debt up to one year and capital markets for long-term debt and equity securities. Financial markets mobilize savings, facilitate price discovery, provide liquidity, and reduce transaction costs. The money market instruments include treasury bills and commercial paper. The capital market has a primary market for new security issues and a secondary market for existing securities trading between investors.
Financial market
- 1. FINANCIAL MARKET By Ms Monika Mishra Lecturer SITAL,KHORDHA,ODISHA
- 2. Financial Market • Financial Markets are the institutional arrangements by which savings generated in the economy are channelised into avenues of investment by industry, business and the government. • It is a market for the creation and exchange of financial assets. • Financial Intermediation = process of allocating funds from saving surplus units (E.g. households) to saving deficit units (e.g. industries, government etc).
- 3. Functions of Financial Market • 1.Mobilization of savings and channelising them into the most productive uses: • 2. Facilitate Price Discovery: • 3. Provide liquidity to financial assets: • 4. Reduce the cost of transactions:
- 4. Types of Financial Markets
- 5. Money Market • Market for financial securities with maturity period of less than one year. • Market for low risk, unsecured and short term debt instruments that are highly liquid are traded everyday. • Helps to: • o raise short term funds • o Temporary deployment of funds
- 6. The main instruments of money market are
- 7. Capital Market • Facilities and institutional arrangements through which long term securities are raised and invested- both debt and equity. • A capital market is a financial market in which long-term debt or equity- backed securities are bought and sold. • Examples of highly organized capital markets are the New York Stock Exchange, American Stock Exchange, London Stock Exchange, and NASDAQ
- 9. The capital market can be divided into two parts: •1. Primary Market •2. Secondary Market
- 10. Primary Market • New issues markets • Transfers investible funds from savers to entrepreneurs. • Funds used for setting up new projects, expansion, diversification, modernization of existing projects, mergers and take overs etc.
- 11. Secondary Market • 1.Refers to a market where existing securities are bought and sold. • 2.The company is not involved in the transaction at all. It is between two investors. • Features of Secondary market are: • 1) Creates liquidity • 2) Fixed location • 3) Comes after primary market • 4) Encourages new investment