Financial markets

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A very Brief Presentation, covering almost all aspects of "Financial Markets"

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Financial markets

  1. 1. GROUP MEMBERS
  2. 2. AGENDA
  3. 3. FINANCIAL MARKET
  4. 4. FUNCTIONS OF FINANCIAL MARKETS
  5. 5. FLOW OF FUNDS
  6. 6. FLOW OF FUNDS 1. Direct Transfer • Business sells its assets directly to investors
  7. 7. CONT’D 2. Indirect Transfer through Investment Bankers  Investment banker acts as middleman and facilitates issuance of securities by reselling the securities to savers
  8. 8. CONT’D 3. Indirect Transfer through financial intermediary  Bank or mutual fund obtains funds from savers and uses the money to lend or purchase securities
  9. 9. FINANCIAL ASSETS
  10. 10. CLASSIFICATION OF FINANCIAL ASSETS Equity Debt hybrid
  11. 11. EQUITY  Represents the portion of ownership in the assets of company.  Equity is the residual(at last) interest (dividend) in the assets of the entity after deducting all the liabilities.  Examples: Ordinary Share Capital, Retained Earnings
  12. 12. DEBT  When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors.  For example : Bonds
  13. 13. DEBT CONT.… oTypes of Bonds 1. Corporate Bonds 2. Municipal Bonds 3. Treasury Bonds
  14. 14. HYBRID  An investment product that combines the attributes of an equity security with a debt security.  Examples of hybrid instruments are preferred stocks.  Also called Hybrid Financing Instruments
  15. 15. HYBRID CONT.… oPreferred Shares have two types; 1) Redeemable Preferred Shares • No voting rights, have maturity (just like bonds),fix dividends 2) Irredeemable Preferred Shares • Have voting rights, no maturity, fixed dividends
  16. 16. CLASSIFICATION OF FINANCIAL MARKETS Maturity Claim Issue Structure
  17. 17. MATURITY Money Market:  Financial assets with maturity one or less then one year. Capital Market:  Financial assets with maturity more then one year.
  18. 18. CLAIM Debt Market  Financial assets with fixed claim Equity Market  Financial assets having residual claim
  19. 19. ISSUE Primary Market  Financial markets in which financial assets first time offer for sale. Secondary Market  Financial markets in which share are offer for sale ones they are issued.
  20. 20. STRUCTURE Exchange Market:  Financial markets that operates from a central location. Over The Counter Market:  Financial markets which does not operates from a specific central locations, transactions are made via telephones, computers etc.
  21. 21. FINANCIAL INTERMEDIARIES
  22. 22. TYPES OF FINANCIAL INTERMEDIARIES Depositary Institutions:  Accepts deposits from individuals and institution and make loans. Contractual Savings Institutions:  Acquire funds at periodic intervals on a contractual basis. Investment Intermediaries:  Raise funds by issuing shares, bonds and others financial instruments.
  23. 23. DEPOSITARY INSTITUTIONS Commercial Banks:  Raise funds by issuing checkable deposits, saving deposits and time deposits then make commercial, consumer and mortgage loans. Savings And Loan Associations  Obtain funds from deposits and make mortgage loans for residential housings. Credit Unions:  Created for and by its members who are depositors, borrowers, & shareholders.
  24. 24. CONTRACTUAL SAVINGS INSTITUTIONS Life Insurance Companies:  Share financial risk of untimely death of policyholder against premiums and invest funds in bonds, shares and mortgage. Fire And Casualty Insurance Companies:  Insure against loss by fire, theft and accidents, risk of loss funds, liquid investment. Pension And Government Retirement Funds:  Funds acquired by contribution of employers and employees, invest in stocks & bonds.
  25. 25. INVESTMENT INTERMEDIARIES Finance Companies:  Raise funds by selling commercial papers, shares, bonds and lend funds to consumers. Mutual Funds:  Acquire funds from selling shares and use to purchase diversified portfolios of stocks and bonds. Money Market Mutual Funds:  Acquire funds by issuing shares and invest in money market. Investment Banks:  Helps corporation to issue securities, advices, underwrites.

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