FINANCIAL MARKETS, INSTRUMENTS and RELATIONSHIP TO FINANCIAL INSTITUTION MANAGEMENT

Reported By: Sharmaine Rondina Arantza Pauline Caingles

WHAT IS FINANCIAL MARKETS?

"Financial Markets are generally known as a market where financial securities or/and assets are bought and sold by the buyers and sellers respectively."

Instruments of Financial Markets:

Financial instruments are those securities or items that are being sold in the financial markets.

Treasury Bills (T-Bills) Commercial Papers Certificate of Deposits Repurchase Agreements Call Loans Shares Debentures Mortgages

FINANCIAL MARKETS
Money Markets Capital Markets Mortgage Markets Future Markets Options Markets

WHAT ARE THE MAJOR SUBTYPES OF FINANCIAL MARKETS?

MONEY MARKETS CAPITAL MARKETS

The money market is where short-term funds are raised through the buying and selling of short term debt securities such as commercial papers.

Instruments of Money Market:

Commercial Papers Treasury Bills Certificate of Deposit Call Loans Repurchase Agreement (REPO)

Functions of the money market

Transfer of large sums of money Transfer from parties with surplus funds to parties with a deficit Allow governments to raise funds Help to implement monetary policy Determine short-term interest rates

Uses of Money Market:

A money market provides the lenders a well organized place for dealings in monetary assets and satisfying the short-term requirements of borrowers as well. A short-term money market provides a medium for the redistribution of loan able funds among banks. The money market provides a mean of meeting short-term financing requirements for the government also. Specialized credit institutions also lend a portion of their surplus funds as call-loans.

The capital market is where long-term funds are raised through the bond market, which deals with long-term debt securities such as bonds, the stock market which deals with equity securities
or stocks.

What are the advantages of the stock market?

Most accessible market Ready market Liquidity of the market Operates in full public view

Instruments of Capital Market:

Shares/Stocks Debentures Bonds Mortgages Treasury Notes

Uses and Importance of Capital Markets:

The existence of an organized capital market is absolutely necessary to encourage and mobilize savings and to introduce profitable avenues of investment so that capital formation can be promoted to country. Businesses often raise their fixed capital from capital market through issue of shares. The government and local authorities also borrow long term finance from capital market. Issuance of bonds and debentures are an integral part of monetary policy of any economy which is carried effectively through capital markets.

What are the primary and secondary markets?

 Primary market In the primary market, new shares are issued and sold to the investing public for the first time. Secondary market The secondary market is where securities can be bought and sold after they have been issued to the public in the primary market.

WHAT IS FUTURE MARKETS?

FUTURE 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.

Instruments of Capital Market:

Derivatives

 WHAT IS OPTION MARKETS?

OPTION MARKET
The exchange where most of the buying and selling of options contracts take place is called the options market. The most common way of trading options is through standardized options contracts. These are listed in various futures and options exchanges. The listing of the contracts and their respective prices is done using ticker symbols

WHAT IS A MORTGAGE?

A mortgage is a method of using property as security for the performance of an obligation, usually the payment of a debt. Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately.

WHAT ARE THE 2 TYPES OF MORTGAGE MARKET?

2 TYPES OF MORTGAGE MARKETS

PRIMARY MORTGAGE MARKETS SECONDARY MORTGAGE MARKETS

PRIMARY MORTGAGE MARKETS

The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market.

SECONDARY MORTGAGE MARKETS

The secondary mortgage market is the market for the sale of securities or bonds collateralized by the value of mortgage loans. The mortgage lender, commercial banks, or specialized firm will group together many loans and sell grouped loans as securities called collateralized mortgage obligations (CMOs). The risk of the individual loans is reduced by that aggregation process.

REFERRENCES:
http://hunbbel-meer.hubpages.com/hub/Financial-Markets-All-youneed-to-know http://www.investopedia.com/terms/b/bondmarket.asp#ixzz2CTfcTk Df http://fglinc.tripod.com/knowfinmkt.htm http://www.economywatch.com/options-and-futures/optionsmarket.html http://en.wikipedia.org/wiki/Money_market http://www.investopedia.com/terms/p/primary_mortgage_market.asp #ixzz2CNqLJ4yV http://en.wikipedia.org/wiki/Secondary_mortgage_market http://www.slideshare.net/lerogers/mortgage-market-presentation-pt1-amp-2