Money and Banking FN 450/ BBA(H) Lecturer: Ms.

Shaista Rasheed

Chapter # 1: Financial Markets & Institutions

Learning objectives
To understand the functions performed and roles played by the system of financial markets and financial institutions in the global economy and in our daily lives. To discover how important the financial system is to increase our standard of living, generating new jobs and building our savings to meet tomorrows financial needs.

Introduction to financial markets

What is global financial system?
The

collection of markets, institutions, laws, regulations, and techniques Through which bonds, stocks and securities are traded Interest rates are determined, and financial services are provided and delivered around the world

Financial institutions

Providing services Acting as financial intermediaries

Types of markets
Factor markets

Product markets

Financial market

Financial markets and financial system (channels for saving and investment)
Saving
Households savings Business sectors Governments

savings

savings

Investment
Household s

investment investment investment

Business firms Government s

Function and role of global financial system

is to move scarce loanable funds from those who save to those who borrow to buy goods and services and to make investments in new equipment and facilities so that the global economy can grow and increase the standard of living enjoyed by its citizens.

Types of financial markets within the global financial system

Money market versus capital market Open market versus negotiated markets Primary market versus secondary market Spot versus futures, forward, and option markets

Economic Functions performed by the Global Financial System and the Financial markets

Savings Function Wealth Function Liquidity Function Credit Function Payments Function Risk Protection Function Policy Function

Financial markets in Pakistan

The financial institutions in Pakistan can be essentially classified into two broad categories Banking companies and Non - bank financial institutions