Professional Documents
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• Osama tariq.
• Sajawal.
• Adnan Shahzad.
• Shaikh Ahmed Ali.
FINANCIAL MARKETS
• A financial market is a market in which people and entities can trade financial
securities, commodities, and other fungible items of value at low transaction costs
and at prices that reflect supply and demand. Securities include stocks and bonds,
and commodities include precious metals or agricultural goods.
FINANCIAL MARKETS FACILITATE
• TRANSFER OF RISK: In the financial markets, stock prices, bond prices, currency rates,
interest rates and dividends go up and down, creating risk. Derivative products are
financial products which are used to control risk or paradoxically exploit risk.
FINANCIAL MARKETS
• CAPITAL MARKETS:
• A Capital Market is a market for securities (debt or equity), where business enterprises
(companies) and governments can raise long-term funds.
• The capital market includes the stock market (equity securities) and the bond market
(debt). Money markets and capital markets are parts of financial markets.
• Capital markets may be classified as primary markets and secondary markets. In primary
markets, new stock or bond issues are sold to investors via a mechanism known as
underwriting. In the secondary markets, existing securities are sold and bought among
investors or traders, usually on a securities exchange, over-the-counter, or elsewhere
FINANCIAL MARKETS
• CURRENCY MARKETS:.
• The foreign exchange market is unique because of
• its huge trading volume representing the largest asset class in the world leading to high
liquidity;
• its geographical dispersion;
• its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT
on Sunday until 22:00 GMT Friday;
• the variety of factors that affect exchange rates;
• the low margins of relative profit compared with other markets of fixed income.
FINANCIAL MARKETS
• MONEY MARKETS:
• As money became a commodity, the money market became a component of the financial
markets for assets involved in short-term borrowing, lending, buying and selling with
original maturities of one year or less.
• Trading in the money markets is done over the counter, is wholesale. Various instruments
like Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of
deposit, bills of exchange, repurchase agreements, federal funds, and short-lived
mortgage- and asset-backed securities do exist. It provides liquidity funding for the global
financial system.
• The instruments bear differing maturities, currencies, credit risks, and structure.
FINANCIAL MARKETS
• Functions of the Money Market:
• transfer of large sums of money
• transfer from parties with surplus funds to parties with a deficit
• allow governments to raise funds
• help to implement monetary policy
• determine short-term interest rates
CAPITAL MARKET
CAPITAL MARKET
The market where investment instruments like bonds,
equities and mortgages are traded is known as the
capital market.
The primal role of this market is to make investment
from investors who have surplus funds to the ones
who are running a deficit.
The capital market offers both long term and overnight
funds.
THE DIFFERENT TYPES OF FINANCIAL
MARKETS ARE:
It is that market in which shares,debentures and other securities are sold for the first
time for collecting long-term capital.
This market is concerned with new issues. Therefore, the primary market is also called
NEW ISSUE MARKET.
In this market, the flow of funds is from savers to borrowers (industries), hence, it helps
directly in the capital formation of the country.
The money collected from this market is generally used by the companies to
modernize the plant, machinery and buildings, for extending business, and for setting
up new business unit.
Features of Primary Market.
It Is Related With New Issues
It Has No Particular Place
It Has Various Methods Of Float Capital: Following are the methods of raising
capital in the primary market:
i) Public Issue
ii) Offer For Sale
iii) Private Placement
iv) Right Issue
v) Electronic-Initial Public Offer
It comes before Secondary Market
Secondary Market
The secondary market is that market in which the buying and selling of the
previously issued securities is done.
The transactions of the secondary market are generally done through the
medium of stock exchange.
The chief purpose of the secondary market is to create liquidity in securities.
If an individual has bought some security and he now wants to sell it, he can
do so through the medium of stock exchan. ge to sell or purchase through the
medium of stock exchange requires the services of the broker presently, their
are 24 stock exchange in India .
Features of Secondary Market
It Creates Liquidity
Summary
1! What is Money Market?
As per RBI definitions “ A market for short terms financial assets that are
close substitute for
money, facilitates the exchange of money in
primary and secondary market”.
The money market is a mechanism that deals with the lending and
borrowing of short term funds (less than one year).
It deals with financial assets having a maturity period less than one
year only.
In Money Market transaction can not take place formal like stock
exchange, only through oral communication, relevant document and
written communication transaction can be done.
Continued……..
Transaction have to be conducted without the help of brokers.
Acceptance market
They were
• Treasury bills
Commercial papers.
Certificate of deposit.
Inter-bank participation certificates.
Repo instrument
Banker's Acceptance
Repurchase agreement
Money Market mutual fund
Treasury Bills (T-Bills)
(T-bills) are the most marketable money market security.
T-bills are purchased for a price that is less than their par (face)
value; when they mature, the government pays the holder the full
par value.
Like most time deposit, funds can not withdrawn before maturity
without paying a penalty.
CD’s have specific maturity date, interest rate and it can be issued in
any denomination.
The main advantage of CD is their safety.
The short term maturity and government backing usually mean that
Repos provide lenders with extreamly low risk.