Financial Market – Its Meaning and Types

Financial Market represents the link between borrowers and savers. It is a marketplace where trading or exchanging various financial instruments such as stocks, bonds, currencies, and assets are current or non-current assets involved.

Meaning of Financial Market:

It refers to that market that deals with the creation and exchange of financial assets. This market focuses on the appropriate utilization of individual savings to produce a profit by investing it in an accurate place.

Secondly, this market readily available all the time for both the borrowers and the investors. Financial markets and Banks are competitors for each other. The households with surplus money may keep in banks and may buy securities from the capital market. Create an open and regulated system for companies for buying a large amount of capital is another function of the Financial Market.

Types of Financial Markets:

The types of F.M. are as follows:

  • OTC (Over the Counter)Market – They manage public stock exchange, which is not listed on the American Stock Exchange, and New York Stock Exchange. It includes dealing with small companies that can be traded cheaply and have less regulation.
  • Bond Market – In this,  Bonds are issued by states, municipalities, corporations, and federal governments across the world.
  • Money Markets – In this market, short-term funds are used for up to one year.
  • Derivatives Market –They trade securities that determine their value from their primary asset. The derivative contract value is regulated by the market price of the primary item — the derivatives market securities, including futures, options, contracts-for-difference, forward contracts, and swaps.
  • Forex Market – It is a financial market where investors trade in currencies. In the entire world, this is the most liquid financial market.

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