Financial Markets And Its Types
The financial market is the place where the traders trade their securities like stocks in a very low transaction cost. The traders will either buy or sell their trades in the market based on the supply and demand and the changes in prices. The traders should think wisely and buy the trades when there is a deflation in the prices and sell the traders when the prices get inflated. The traders should always look at the changes of prices in the market very keenly so that they can earn profits easily, else they will be in a situation to lose the money what they have in hand.
There are many types of financial markets and the list is given below. We can talk about it in this article briefly.
- Capital market
- Money market
- Derivatives market
- Foreign exchange markets
- Spot market
- Interbank lending market
- Commodity market
- Futures market
The most important market used by the traders is the capital market. It is further divided into two categories and they are as follows.
- Primary markets
- Secondary markets
Functions of financial markets:
The financial markets have many functions to do so that eh traders can yield some profitable return. Let us take a look at those functions.
- Intermediary functions:
The main function is the transfer of resources that is the financial markets will allow transferring the resources from the lender to the borrowers.
- Sale functions:
It provides the selling mechanism to the investors so that they can acquire all the benefits of the assets.
The financial markets allow the borrowers to use the funds for the product usage so that they can yield more profits.
- Capital market:
This market is especially for the assets which have a long-term maturity that is at least more than a year. It is further classified into three types.
- Industrial security market
- Government securities market
- Long-term loans market
- Money market:
It is for the assets which have a maturity period of less than one year. We can also say it is for the short-term assets.
- Depository market:
This market will accept the funds which are deposited by the individuals and the deposited amount will be used for providing loans and all.
- Financial service market:
The financial services include providing credit cards and automated teller machine (ATM) to the individuals.
- Derivative market:
In this market, the financial instruments will be derived and used for trading with the commodities and stocks.