Structure of Financial Market
Structure of Financial Market
Financial markets are categorized as under:
- Debt and equity markets.
- Primary Markets and secondary markets.
- Exchange markets and over-the-counter market. (OTC)
- Forward contracts and future markets.
Debt and Equity Markets
Debt instruments such as issuing bonds. These may be short term (Maturity less than one year), long-term (maturity ten year or longer) and intermediate term (maturity between one and ten years). Second method of raising funds is by issuing equities
Primary Market and Secondary Markets
Primary Market is a financial market in which new issues of a security such as Bonds or stocks are sold to initial buyers whereas in secondary Markets there is further sale of already issued securities.
Exchange and Over-the-Counter Markets
Secondary Markets can be organized in the following ways:
Through organizing/establishing Stock Exchange through Over-the-Counter (OTC) markets, (Dealers in these markets are in computer contact and know the prices set by one another, OTC markets are very competitive.
Money Market and Capital Market
Money Market is a financial market which deals in short term debt instruments. Capital market deals in long term debt instruments
Forward Contracts and Futures Market
Under Forward Contract, buyers and/sellers agree to trade certain quantity of commodity for a specific price at a specified date in future, contracts are formally made in commodities exchange markets.
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