Financial Markets Overview

Study Notes

A system that enables the buying and selling of financial assets, such as stocks, bonds, and currencies
Facilitates the flow of capital between savers and borrowers
Provides a platform for investors to trade securities and manage risk

Money Markets: Short-term debt securities with maturities less than one year (e.g., commercial paper, treasury bills)
Capital Markets: Long-term debt and equity securities (e.g., stocks, bonds, mortgages)
Forex Markets: Global market for exchanging one country's currency for another
Derivatives Markets: Contracts that derive value from underlying assets (e.g., options, futures, swaps)

Price Discovery: Determining the prices of securities based on supply and demand
Risk Management: Allowing participants to manage risk through hedging and diversification
Capital Allocation: Channeling funds to their most productive uses
Liquidity Provision: Enabling buyers and sellers to easily enter and exit trades

Investors: Individuals, institutions, and governments that buy and sell securities
Intermediaries: Banks, brokerages, and other financial institutions that facilitate trades
Regulators: Government agencies that oversee and regulate financial markets
Issuers: Companies, governments, and other entities that issue securities

Efficient Allocation of Resources: Channeling capital to its most productive uses
Risk Management: Enabling participants to manage risk through diversification and hedging
Economic Growth: Facilitating economic growth by providing access to capital
Price Discovery: Providing transparent and accurate prices for securities

Facilitate the flow of capital between savers and borrowers, enabling the buying and selling of financial assets like stocks, bonds, and currencies
Provide a platform for investors to trade securities and manage risk

Money Markets: Short-term debt securities with maturities less than one year, including commercial paper and treasury bills
Capital Markets: Long-term debt and equity securities, including stocks, bonds, and mortgages
Forex Markets: Global market for exchanging one country's currency for another
Derivatives Markets: Contracts that derive value from underlying assets, such as options, futures, and swaps

Price Discovery: Determine prices of securities based on supply and demand, providing transparent and accurate prices
Risk Management: Allow participants to manage risk through hedging and diversification
Capital Allocation: Channel funds to their most productive uses, promoting economic growth
Liquidity Provision: Enable buyers and sellers to easily enter and exit trades, facilitating market efficiency

Investors: Individuals, institutions, and governments that buy and sell securities to achieve their financial goals
Intermediaries: Banks, brokerages, and other financial institutions that facilitate trades and provide financial services
Regulators: Government agencies that oversee and regulate financial markets to ensure stability and integrity
Issuers: Companies, governments, and other entities that issue securities to raise capital

Efficient Allocation of Resources: Channel capital to its most productive uses, promoting economic growth
Risk Management: Enable participants to manage risk through diversification and hedging, reducing uncertainty
Economic Growth: Facilitate economic growth by providing access to capital, promoting investment and innovation
Price Discovery: Provide transparent and accurate prices for securities, enabling informed investment decisions