2. Content !
1.1 Explain financial
market environment
1.2 Explain roles of
Central Bank
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3. 1.1 Financial Market Environment
Let’s start with the first set of slides
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4. Financial Market
DEFINITION
A financial market is a market in which people trade financial securities and
derivatives at low transaction costs. Some of the securities include stocks and bonds,
and precious metals.
Financial markets also refers to any marketplace where the trading of securities
occurs, including the stock market, bond market, forex market, and derivatives
market, among others.
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5. Features of Financial Market
✔ Capital / Fixed Income Market
✔ Money Market
✔ Foreign Exchange
✔ Derivative market
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6. Capital Markets
✔ A capital market is a financial market in which long-term debt
or equity-backed securities are bought and sold.
✔ Capital market consist of:
○ Stock market : Issuance of shares or common stock
○ Bond market : Issuance of bonds
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7. Money Markets
✔ The money market refers to trading in very short-term debt
investments.
✔ Deals in short-term loans : For a period of less than or equal to 365 days.
✔ Money market consist of:
○ Deposits
○ Bankers acceptance
○ Commercial paper
○ Treasury bills
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8. Foreign Exchange
✔ A market whereby sellers and buyers transact in foreign
currencies for an exchange of a specific amount of one currency
for another currency at an agreed rate and to be delivered at a
certain agreed date.
✔ Traded foreign currencies : US Dollar, Euro, Japanese Yen etc.
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9. Derivative Market
✔ A derivative is a security with a price that is dependent upon or derived from one or
more underlying assets.
✔ The derivative itself is a contract between two or more parties based upon the asset.
Its value is determined by fluctuations in the underlying asset.
✔ The most common underlying assets include stocks, bonds, commodities, currencies,
interest rates and market indexes
✔ Market that traded financial instruments such as financial futures, options, interest
rates and currency.
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10. Main Participant in Global Financial Market
✔ Participant comprises of commercial banks, non-bank financial
institutions, corporations, individuals, central banks and brokers.
✔ 3 financial zones : Asian, European and North American
✔ London is the main financial centre followed by New York and Tokyo
✔ The market takes place in dealing rooms of commercial banks,
financial institutions, corporations, government and related bodies,
central banks and international money brokers
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