The document provides an overview of financial markets, explaining their mechanisms, purposes, and types, including capital, commodity, and foreign exchange markets. It highlights the importance of intermediaries like banks in raising capital and facilitating transactions between borrowers and lenders. Financial markets enhance business liquidity, improve international trade, and are essential for economic stability.

1. FINANCIAL
MARKET
OVERVIEW
Ruben Fuentes
B.S, M.S,MBA.

2. What is Financial Market :
• Mechanism that allows people to
buy and sell financial securities
(such as stocks and bonds) and
items of value at low
transaction cost.
• Markets work by placing many
interested buyers and sellers in
one “place”, thus making easier
for them to find each other.

3. PURPOSE OF FINANCIAL
MARKETS:
Financial Markets facilitate :
• The raising of capital.
• The transfer of risk.
• International trade.

4. HOW FINANCIAL MARKET
WORKS :
BORROWER- Issues a receipt to Lender
promising to payback the capital.
RECEIPTS- Securities which may be freely
bought or sold.
LENDER- Will expect some compensation
in form of interest or dividends, in
return.

5. TYPES OF FINANCIAL
MARKETS :
1.Capital Markets
• Stock Markets - Which provide
financing through the issuance
of shares or common stock ,and
enable subsequent trading.
• Bond Markets – Which provide
Financing through the issuance
of bonds , enable subsequent
trading.

6. TYPES OF FM CONTD….
• COMMODITY MARKETS – which
facilitate the trading of commodities.
• MONEY MARKETS – which provide
short term debt financing and
investment.
• DERIVATIVE MARKETS – which provide
instruments for the management of
financial risk
• INSURANCE MARKETS – which
facilitate redistribution of various
risks.
• FOREIGN EXCHANGE MARKETS - which
facilitate the trading of foreign
exchange.

7. RAISING CAPITAL
• Without financial Markets,
borrowers would have
difficulty finding buyers
themselves.
• Here the intermediaries such as
BANKS come in picture.
• Banks take money from those
who have money to save.
• They can then lend this money to
those who seek to borrow.
• Banks popularly lend money in
form of LOANS and MORTGAGES.

8. RELATIONSHIP
Relationship between lenders and borrowers
LENDERS INTERMED. FINANCIAL
MARKETS
BORROWER
• Individuals
• Companies
• Banks
• Insurance
companies
• Pension
funds
• Mutual
funds
• Stock
Exchange
• Money
Market
• Bond Market
• Foreign
Market
• Individuals
• Companies
• Central
Govt.
•Municipalitis
• Public
corporations

9. LENDERS
• INDIVIDUALS
Many individuals are not aware that
they are lenders, but almost everyone
lends money in some way.
A person lends money when he :
1. Puts money in a savings account at a
bank.
2. Contributes to a pension plan.
3. Pays premiums to an insurance
company.
4. Invests in government bonds.
5. Invests in company shares.

10. LENDERS
• COMPANIES
Companies usually tend to be
borrowers of capital . But when
they have surplus cash that is
not needed for a short period of
time, they may seek to make money
from their cash surplus by
lending it, by
Investing in bonds and stocks

11. BORROWERS
• Individuals – e.g. bank loans,
mortgages.
• Companies – for short term or long
term cash flows or future business
expansion.
• Governments – for spending
requirements, or on behalf of
nationalized industries, municipalities
or other public sector bodies.
• Public Corporations – e.g. postal
services, railway companies and utility
companies.

12. FINANCIAL MARKET
EFFICIENCY :
• Allocative Efficiency:
A market is allocatively efficient if
channels fund to those firms and
organisations with most promising real
investment opportunities.
• Operational Efficiency:
Carries its operations as low a cost as
possible.
• Information Processing Efficiency:
Any new relevant information is
quickly and accurately impounded in
prices.

13. CONCLUSION
Thus Financial market :
• Acts as a backbone of financial
structure of any country.
• Acts as an interface between
prospective buyers and sellers.
• Improves overall business
liquidity.
• Helps in raising capital and
improving international trade.

14. THANK
YOU…….