1. Introduction to
Financial Markets

2. What is a Financial Market?
Any type of financial transaction
that you can think of that helps
businesses grow and investors
make money.

3. Different Terms for Financial
Markets
• Capital markets,
• Wall Street,
• Stock Market, or
• just the “Market”

4. Types of Financial Markets:
• Capital Market--consists of a primary market and a
secondary market:
• Primary (Bond) Market—newly issued bonds and
stocks are exchanged; and in
• Secondary (Stock) Market—buying and selling of
already existing bonds and stocks take place.
• Bond Market—provides financing by bond issuance
and bond trading
• Stock Market—provides financing by shares or stock
issuance and by share trading.
• Facilitates raising of capital.

5. Types of Financial Markets:
• Money Market—facilitates short term debt financing
and capital (i.e. treasury bills, certificates of deposit)
• Derivatives Market—provides instruments which
help in controlling financial risk.
• Foreign Exchange Market—facilitates the foreign
exchange trading.
• Insurance Market—helps in relocation of various
risks.
• Commodity Market—organizes trading of
commodities.

6. Contribution of Financial Markets:
• They are essential for fund raising
• Borrowers can find suitable lenders
• Banks work as intermediaries—they use the money,
which is saved and deposited by a group of people; for
giving loans to another group of people who need it
• Banks provide financing in the form of loans and
mortgages
• More complicated transactions of the financial market
take place in stock exchange—where a company can
buy others’ company’s shares or can sell own shares to
raise funds
.

7. Basis of Financial Market:
• Borrowers—of the financial market can be
individual persons, private companies, public
corporations, government and other local authorities
like municipalities.
• Individual persons generally take short term or
long term mortgage loans from banks to buy
property.
• Private companies take short term or long term
loans for expansion of business or for
improvement of the business infrastructure.

8. Basis of Financial Market:
• Lenders—are actually the investors. Their invested
money is used to finance the requirements of
borrowers.
• Types of Investments:
• Depositing money in savings bank account
• Paying premiums to insurance companies
• Investing in shares of different companies
• Investing government bonds
• Investing in pension funds and mutual funds