The Financial Market means any marketplace where sellers and buyers participate in the trade of assets such as currencies, bonds, equities and derivatives. It is define by having transparent pricing, costs and fees, market forces and basic regulations on trading. Some of financial markets only allow participants that meet certain criteria such as amount of money held, knowledge of the markets, the investor’s location. Most of financial markets have period of demand for securities and heavy trading. In these periods, prices may rise above historical norms. The downturns may cause process to fall past levels of intrinsic value, based on low levels of demand.
In finance, financial markets facilitate:-
The raising of capital (in the capital markets)
The transfer of risk (in the derivatives markets)
The transfer of liquidity (in the money markets)
International trade (in the currency markets)
Types of financial market
The financial markets can be divided into different subtypes:
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial risk.
Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.