Reporters:

Jimmy Q. Arroyo Jr. Evangeline Al Urao

FINANCIAL MARKET
Definition:
A market in which people and entities can deal and trade financial

securities (like stocks and bonds), commodities (like precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect supply and demand. buyers and sellers of a certain good or service and transactions between them.

In economics, a market typically means the aggregate of possible

market economy is an economy which relies primarily on

interactions between buyers and sellers to allocate resources.

(in contrast to a command economy or a non-market economy such as a gift economy).

FINANCIAL MARKET
"Market" is also used for exchanges - organizations that facilitate the

trade in financial securities (e.g., a stock or commodity exchange). This may be a physical location (like the NYSE, BSE, NSE) or an electronic system (like NASDAQ).
Much trading of stocks takes place on an exchange; while others may

agree to sell stock from one to the other without using an exchange. although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges.

Trading of currencies and bonds is largely on a bilateral basis,

Financial markets can be domestic or international.

FINANCIAL MARKET
Function:

Financial markets facilitate: The raising of capital (in the capital markets) The transfer of risk (in the derivatives markets) Price discovery Global transactions with integration of financial markets The transfer of liquidity (in the money markets) International trade (in the currency markets)
used to match those who want capital, to those who have it!

FINANCIAL MARKET
Mechanics:

Markets are both general markets (where many commodities are

traded) and specialized markets (only one commodity is traded).

It works by placing many interested buyers and sellers, including

households, firms, and government agencies, in one "place", making it easier for them to find each other.
back the capital. These receipts are securities which may be freely bought or sold. In return, the lender will expect some compensation in the form of interest or dividends from the borrower.

Typically a borrower issues a receipt to the lender promising to pay

Types of Financial Market

"financial markets" typically refers to the markets used to raise

finance: Capital markets, for long term finance, and Money markets, for short term finance.

also as a catch-all term for all the markets in the financial sector, as;

Capital markets

common stock, and the subsequent trading thereof. Bond markets, provide financing through the issuance of bonds, and the subsequent trading thereof.
Money markets, which provide short term debt financing and

Stock markets, provide financing through issuance of shares or

investment.

Types of Financial Market

Capital markets, may also be divided into: primary markets - where newly formed (issued) securities are bought or sold, such as during
initial public offerings - the transactions exist between issuers and investors

secondary markets - allow investors to buy and sell existing securities

- transactions exist among investors - Liquidity is a crucial aspect of securities traded in secondary markets.

this refers to the ease which it can be sold without a loss of value. - Securities with an active secondary market mean that there are many buyers and sellers at a given point in time. Investors benefit from liquid securities because they can sell their assets whenever they want - an illiquid security may force the seller to get rid of their asset at a large discount

Types of Financial Market

stocks

Types of Financial Market

Money markets

Types of Financial Market

Commodity Markets

Types of Financial Market

Derivatives Markets
During the 1980s and 1990s, a major growth sector in financial markets is

the trade in so called derivative products, or derivatives for short. 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. It is also called financial economics. Derivative products or instruments help the issuers to gain an unusual profit from issuing the instruments. For using the help of these products a contract has to be made. Derivative contracts are mainly 3 types: 1. Future Contracts 2. Forward Contracts 3. Option Contracts. The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets.

Types of Financial Market

Derivatives Markets
The market can be divided into two, that for exchange-traded derivatives

and that for over-the-counter derivatives. The legal nature of these products is very different as well as the way they are traded, though many market participants are active in both. The derivative markets have been accused lately for their alleged role in the financial crisis of 2007-2010. The leveraged operations are said to have generated an irrational appeal for risk taking, and the lack of clearing obligations also appeared as very damaging for the balance of the market. The G-20s proposals for financial markets reform all stress these points, and suggest:

higher capital standards stronger risk management international surveillance of financial firms' operations dynamic capital rules.

Types of Financial Market

Futures Markets
A futures exchange or futures market is a central financial exchange

where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of contracts fall into the category of derivatives. Such instruments are priced according to the movement of the underlying asset (stock, physical commodity, index, etc.). The aforementioned category is named "derivatives" because the value of these instruments is derived from another asset class.

Types of Financial Market

Commodity Markets

Types of Financial Market

Foreign Exchange Markets

Seemingly, the most obvious buyers and sellers of currency

are importers and exporters of goods. While this may have been true in the distant past, when international trade created the demand for currency markets, importers and exporters now represent only 1/32 of foreign exchange dealing, according to the Bank for International Settlements. The picture of foreign currency transactions today shows:

Banks/Institutions Speculators Government spending (for example, military bases abroad) Importers/Exporters Tourists

Types of Financial Market

Foreign Exchange Markets
The foreign exchange market (forex, FX, or currency market) is a form

of exchange for the global decentralized trading of international currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. EBS and Reuters' dealing 3000 are two main interbank FX trading platforms. The foreign exchange market determines the relative values of different currencies. The foreign exchange market assists international trade and investment by enabling currency conversion. In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying some quantity of another currency.

Types of Financial Market

Foreign Exchange Markets
The foreign exchange market is unique because of the following

characteristics: 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; and the use of leverage to enhance profit and loss margins and with respect to account size. Foreign exchange is an over-the-counter market where brokers/dealers negotiate directly with one another, so there is no central exchange or clearing house.

Types of Financial Market

Types of Financial Market

Commodity Markets

Types of Financial Market

Commodity Markets

RAISING CAPITAL
VANGIES TOPICS
Raising capital

Relationship bet. Lenders & borrowers

Analysis of financial markets Financial market terminologies

Role Of Financial System And The Economy

A dynamic financial market is an important requisite for the

accelerated development of an economy.

A financial market helps the economy in the following manner:

Saving mobilization: Obtaining funds from savers or surplus units such as individuals, business firms, public sector units, central or state govts., etc. Investment: F/M play a crucial role in arranging to invest funds thus collected in those units which are in need of the same. National Growth: contribute to a nations growth by ensuring unfettered flow of surplus funds to deficit units. Flow of funds for productive purposes Entrepreneurship

growth: contribute to the development of the entrepreneurial claw by making available the necessary financial resources. Industrial development: The different components of financial markets help an accelerated growth of industrial and economic development of a country, thus contributing to raising the standard of living and the society of well-being.

Functions Of Financial Markets

1. Intermediary Functions
Transfer of Resources: facilitate the transfer of real economic

resources from lenders to ultimate borrowers.

Enhancing income: allow lenders to earn interest or dividend on

their surplus invisible funds, thus contributing enhancement of the individual and the national income.

to

the

Productive usage: allow for the productive use of the funds

borrowed. The enhancing the income and the gross national production. savings flow to aid capital formation of a country.

Capital Formation: provide a channel through which new

Functions Of Financial Markets

1. Intermediary Functions (cont.)
Price determination: determine the price of the traded financial

assets through interaction of buyers and sellers. Provide for the allocation of funds in the economy based on the demand and supply through the mechanism called price discovery process. asset by an investor so as to offer the benefit of marketability and liquidity of such assets. market result in the generation and the consequent dissemination of information to the various segments of the market. So as to reduce the cost of transaction of financial assets.

Sale Mechanism: provide a mechanism for selling of a financial

Information: The activities of the participants in the financial

Functions Of Financial Markets

2.

Financial Functions
Providing the borrower with funds so as to enable them to carry

out their investment plans.

Providing the lenders with earning assets so as to enable them to

earn wealth by deploying the assets in production debentures. funds.

Providing liquidity in the market so as to facilitate trading of

Constituents Of Financial Markets

Based on market levels
Primary market: a market for new issues or new financial claims.

deals with those securities issued to the public for the first time. Secondary market: a market for secondary sale of securities which have already passed through the primary market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities.
Based on security types Money market: a market for dealing financial assets and securities with a maturity period of up to one year (i.e., purely short term funds) Capital market: A market for financial assets with long or indefinite maturity. deals with long term securities having maturity period of above one year. Capital market further divided into: (a) industrial securities market (b) Govt. securities market and (c) long term loans market.

Constituents Of Financial Markets

Equity markets: A market where ownership of securities are issued

and subscribed. An example of a secondary equity market for shares is the Bombay stock exchange. Debt market: The market where funds are borrowed and lent. Arrangements are made such that borrowers agree to pay the lender the original amount of loan plus some specified amount of interest.
Derivative markets: Financial service market: A market that comprises participants such

as commercial banks that provide various financial services like ATM. Credit cards. Credit rating, stock broking etc. Individuals and firms use financial services markets to purchase services that enhance the working of debt and equity markets.

Constituents Of Financial Markets

Depository markets: A market consist of depository institutions that

accept deposit from individuals and firms and uses these funds to participate in the debt market, by giving loans or purchasing other debt instruments such as treasure bills. functions in financial markets ranging from financial intermediary to selling, insurance etc. The various constituency in non-depositary markets are mutual funds, insurance companies, pension funds, brokerage firms etc.

Non-Depository market: Non-depository market carry out various

Thank you all . . .

Jim, Al & Vangie