Marl Patrick A.

Bolo
ABM 12-1
ROLES OF FINANCIAL MARKETS

What is a Financial Market?

A financial market is a forum that facilitates financial transactions through sales and
transfer of financial securities. According to the site of Investopedia a financial market is
a marketplace where trading securities including equities, bonds, currencies, and
derivatives occur. (Chris Gan, 2010)

Role of Financial Markets

According to the book of Frederic S. MIshkin the Economics of Money, Banking, and
Financial Markets, The main functions of financial markets are borrowing and lending,
determining the prices, capital formation, and generating income from interests.

Types of Financial Markets

1. Capital market

-According to Vytautas Magnus University, Capital markets are the markets for
intermediate- or long-term debt and corporate stocks. It is a market for
intermediate or long term debt. It provides a link between the savings/investors and
the businesses.

Two types of Capital Market

Primary Market

- According to the book Financial Markets and Institutions, Primary markets deals
with the issue of new securities, which means it raises new capital for companies
starting new projects or enterprises looking to expand their company. The
company raise funds through shares, loans, and deposits.

Secondary Market
Marl Patrick A. Bolo
ABM 12-1
- According also to the book Financial Markets and Institutions, In secondary
markets trading securities is already existing. In secondary markets securities
like shares, stocks, bonds, and etc. are bought and sold by the investors.
Secondary market is more commonly known as stock market or stock exchange.

- According to Imarticus Learning, stock market allows the investors to buy and
sell shares in companies. They provide companies access to capitals and
investors can have a small percentage of ownership in the company.

- Bond Markets is a debt investment in which an investor loan money to an

entity, which borrows funds for a specific period of time. Bonds or debt are
used by companies or government to finance a project or activities.

2. Money Market

- Facilitate the transfer of short-term funds from agents with excess funds
(corporations, financial institutions, individuals, government) to those market
participants who lack funds for short-term needs. (Vytautas Magnus
University, Vytautas Magnus University, 2010). According also to
Investopedia, he intention of the money market is for short-term borrowing
and lending of securities with a maturity typically less than one year.

3. FOREX Market or Foreign Exchange Market

- Foreign exchange or currency trading, forex is one of the most traded

markets in the world. In forex trading, traders hope to generate a profit by
speculating on the value of one currency compared to another. (Forex.com)
Marl Patrick A. Bolo
ABM 12-1
References:

https://www.investopedia.com/terms/f/financial-market.asp

https://www.bcci.bg/projects/latvia/pdf/7_Financial_markets.pdf?
fbclid=IwAR2xBjdUlqDyg6m13tNiWpjWM5yFygElCe2aQkzyiela1b_nEgd7thyxXpA

https://www.investopedia.com/walkthrough/corporate-finance/1/financial-markets.aspx?
fbclid=IwAR1epONQp-5XPYj0X4nSKAaNozDUd1l4oCIv3g9f9CwwCxd0xR-6HWexfb4

https://spu.fem.uniag.sk/cvicenia/kf/cierna/Financial%20management/financial_markets.pdf?
fbclid=IwAR0LwL0NShnHI691fyfKMlt7mU58-NpLbiWRYmg56FlzgcgyV0bakl-xjpw

http://www2.econ.iastate.edu/tesfatsi/finintro.htm, Frederic S. Mishkin, The Economics of Money,

Banking, and Financial Markets, Seventh Edition, Addison-Wesley, Boston, MA, latest edition.

https://imarticus.org/financial-markets-roles/

https://www.forex.com/pdf/lets-get-to-know-forex.pdf

https://www.fimm.com.my/pdf/seminar%20slides/role%20and%20function%20of%20financial
%20markets_v1_cg.pdf?fbclid=IwAR18_4NisjuHeP-dBVhB9xN2mblHVC-
1zOl2f3Ib3ruZoRM7N5F5eX9oKio

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%2Ffiles%2FFinancial_Markets_and_Development.pdf%3Ffbclid
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https://www.toppr.com/guides/business-studies/financial-markets/capital-market/

http://cec.nic.in/wpresources/module/Commerce/III_Year/213/e-con%201%20transcript.pdf