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FINANCIAL MARKETS AND INSTITUTIONS
FINANCIAL MARKETS
A financial market is a market in which people trade financial securities, commodities and other fungible items of value
at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds and
commodities include precious metals or agricultural products.
Money Market
The money market is a segment of the financial market in which financial instruments with high liquidity and very
short maturities are traded. The money market is used by participants as a means for borrowing and lending in the
short term, from several days to just under a year.
Investment in money market is done throughout money market instruments. Money market instrument meets short
term necessities of the borrowers and provides liquidity to the lenders. Money Market Instruments are as follows :
1)Treasury Bills 2)Repurchase Agreements 3)Commercial Papers 4)Certificate of Deposit 5)Banker’s Acceptance
Capital Markets
A capital market is one in which individuals and institutions trade financial securities. Organizations and institutions
in the public and private sectors also often sell securities on the capital markets in order to raise funds. Capital Market
can be divided into Bond Market and Stock Market. In Bond Market, buying and selling of newly issued and existing
bonds takes place. In Stock Market, exchange of newly issued and existing shares or stocks is carried out.
Derivatives market
The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options,
which are derived from other forms of assets. The market can be divided into two, that for exchange-traded
derivatives and that for over-the-counter derivatives.
Types of Derivative Instruments:
1) Forward Contracts 2) Future Contracts 3) Options Contracts 4) Swaps
1. Mobilization of Savings : Capital market is an important source for mobilizing idle savings from the
economy. It mobilizes funds from people for further investments in the productive channels of an economy.
2. Capital Formation : Capital market helps in capital formation. Capital formation is net addition to the
existing stock of capital in the economy.
3. Provision of Investment Avenue : Capital market raises resources for longer periods of time. Thus it
provides an investment avenue for people who wish to invest resources for a long period of time.
4. Speed up Economic Growth and Development : Capital market enhances production and productivity in
the national economy by generation of employment and development of infrastructure.
5. Service Provision : As an important financial set up capital market provides various types of services. It
includes long term and medium term loans to industry, underwriting services, consultancy services, export
finance, etc. These services help the manufacturing sector in a large spectrum.
1.Allows
transfers of
funds from
person or
business
without
investment
opportunitie
s to one who
has them
2.Improves
economic
efficiency
Function of Financial Markets
A financial institution is an establishment that conducts financial transactions such as investments, loans and
deposits.Almost everyone deals with financial institutions on a regular basis. Everything from depositing money to
taking out loans and exchanging currencies must be done through financial institutions.
 Banking: creators and purveyors of credit.
Types
Commercial Banks
Cooperative Banks
 Non-banking: purveyors of credit
Types
Developmental financial institutions
Mutual funds
Insurance companies
NBFCs
Types of Financial Institutions
NAME : Sunil Kumar

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Financial markets and institutions

  • 1. FINANCIAL MARKETS AND INSTITUTIONS
  • 2.
  • 3. FINANCIAL MARKETS A financial market is a market in which people trade financial securities, commodities and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds and commodities include precious metals or agricultural products.
  • 4. Money Market The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Investment in money market is done throughout money market instruments. Money market instrument meets short term necessities of the borrowers and provides liquidity to the lenders. Money Market Instruments are as follows : 1)Treasury Bills 2)Repurchase Agreements 3)Commercial Papers 4)Certificate of Deposit 5)Banker’s Acceptance Capital Markets A capital market is one in which individuals and institutions trade financial securities. Organizations and institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Capital Market can be divided into Bond Market and Stock Market. In Bond Market, buying and selling of newly issued and existing bonds takes place. In Stock Market, exchange of newly issued and existing shares or stocks is carried out. Derivatives market The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. The market can be divided into two, that for exchange-traded derivatives and that for over-the-counter derivatives. Types of Derivative Instruments: 1) Forward Contracts 2) Future Contracts 3) Options Contracts 4) Swaps
  • 5. 1. Mobilization of Savings : Capital market is an important source for mobilizing idle savings from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. 2. Capital Formation : Capital market helps in capital formation. Capital formation is net addition to the existing stock of capital in the economy. 3. Provision of Investment Avenue : Capital market raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. 4. Speed up Economic Growth and Development : Capital market enhances production and productivity in the national economy by generation of employment and development of infrastructure. 5. Service Provision : As an important financial set up capital market provides various types of services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum.
  • 6. 1.Allows transfers of funds from person or business without investment opportunitie s to one who has them 2.Improves economic efficiency Function of Financial Markets
  • 7. A financial institution is an establishment that conducts financial transactions such as investments, loans and deposits.Almost everyone deals with financial institutions on a regular basis. Everything from depositing money to taking out loans and exchanging currencies must be done through financial institutions.  Banking: creators and purveyors of credit. Types Commercial Banks Cooperative Banks  Non-banking: purveyors of credit Types Developmental financial institutions Mutual funds Insurance companies NBFCs Types of Financial Institutions
  • 8.
  • 9. NAME : Sunil Kumar