chapter 1 Financial market

Chapter 1 : Financial market 1.1 Formation of financial market 1.2 Functions of financial market 1.3 Classification of financial markets 1.4 The Financial Market’s Commodities 1.5 Partic

Chapter 1

Financial market

Chapter 1 : Financial market

1.1 Formation of financial market

1.2 Functions of financial market

1.3 Classification of financial markets

1.4 The Financial Market’s Commodities

1.5 Participants in financial markets

1.1 Formation of financial

market

1.1.1 The objective indispensability of the

process of regulating capital

1.1.2 Formation base of financial market

1.1.3 Nature of financial market

1.1.1 The objective

indispensability of the process

of regulating capital.

• Reproduction process requires a lot of

capital

• Investors look for the way to make their

capital gain profit

=>Regulating capital from surplus to

inadequate places

1.1.2 Formation of financial

market

• Forms of connecting Demand - Supply

– Direct borrowing and lending

– Via financial intermediaries

– Issuing securities

Forming financial market: the place in

which trading of financial assets between buyers and sellers occurs

1.2 Functions of financial

market

assets based on market mechanism

of financial assets

research and circulation

1.3 Classification of financial

market

• Based on the turnover term

• Based on the specialization of market

• Based on the turnover process of financial instruments

1.3.1 Based on the turnover term

Financial market consists of money market and capital market

Money market

Capital market

Foreign Exchange market

Short-term capital market

Inter-bank Market Mortgage

market Leasing

market

Stock market

Stock exchange

OTC Market

Money market

• Concept of Money market

– A market in which short-term money is traded (including short-term valued papers under a year) in the economy

• Components of Money market:

– Inter-bank market

– Foreign exchange market

Capital market

• Concept of capital market:

– is the place for transactions of long-term

capital instruments

• Components of capital market:

– Mortgage market

– Leasing market

– Securities market

1.3.2 Based on the specialization of the

market

• Debt instrument market

• Equity/capital instrument market

• Derivatives market

1.3.3 Based on the turnover process of

financial instruments

• Primary market

• Secondary market

1.4 The Financial Market’s

Commodities

• Bill of Credit

• Inter-bank Loan

• Debenture

• Negotiable Certificate of Deposit (NCD)

• Banker's acceptance

• Bond

• Stock

1.5 Participants in financial markets

• Deposit-taking institutions:

– Commercial banks

– Savings and loan associations

Quiz for chapter 1

2-What is the difference between:

• Primary and secondary market

• Capital market and Money market

• Debt market and equity market

3- You can buy stocks and bonds directly, or put your money in securities investment

Quiz for chapter 1

4- What are the key differences between a bank, a mutual fund and an insurance

company?

6- What are the functions of financial

market? Describe them

7- Why is liquidity important to investors?