What is a Financial Market ?

A market is a place where two parties are involved in transaction of goods and services in exchange of money. The two parties involved are:

  • Buyer
  • Seller

In a market the buyer and seller comes on a common platform, where buyer purchases goods and services from the seller in exchange of money.

What is a Financial Market ?

A place where individuals are involved in any kind of financial transaction refers to financial market. Financial market is a platform where buyers and sellers are involved in sale and purchase of financial products like shares, mutual funds, bonds and so on.

Let us go through the various types of financial market:

Capital Market

A market where individuals invest for a longer duration i.e. more than a year is called as capital market. In a capital market various financial institutions raise money from individuals and invest it for a longer period.

Capital Market is further divided into:

  1. Primary Market: Primary Market is a form of capital market where various companies issue new stock, shares and bonds to investors in the form of IPO’s (Initial Public Offering). Primary Market is a form of market where stocks and securities are issued for the first time by organizations.

  2. Secondary Market: Secondary market is a form of capital market where stocks and securities which have been previously issued are bought and sold.

Types of Capital Market

  1. Stock Markets: Stock Market is a type of Capital market which deals with the issuance and trading of shares and stocks at a certain price.

  2. Bond Markets: Bond Market is a form of capital market where buyers and sellers are involved in the trading of bonds.

  3. Commodity Market: A market which facilitates the sale and purchase of raw goods is called a commodity market.

    Commodity market like any other market includes a buyer and a seller. In such a market buyer purchases raw products like rice, wheat, grain, cattle and so on from the seller at a mutually agreed rate.

  4. Money Market: As the name suggests, money market involves individuals who deal with the lending and borrowing of money for a short time frame.

  5. Derivatives Market: The market which deals with the trading of contracts which are derived from any other asset is called as derivative market.

  6. Future Market: Future market is a type of financial market which deals with the trading of financial instruments at a specific rate where in the delivery takes place in future.

  7. Insurance Market: Insurance market deals with the trading of insurance products. Insurance companies pay a certain amount to the immediate family members of owner of the policy in case of his untimely death.

  8. Foreign Exchange Market: Foreign exchange market is a globally operating market dealing in the sale and purchase of foreign currencies.

  9. Private Market: Private market is a form of market where transaction of financial products takes place between two parties directly.

  10. Mortgage Market: A type of market where various financial organizations are involved in providing loans to individuals on various residential and commercial properties for a specific duration is called a mortgage market. The payment is made to the individual concerned on submitting certain necessary documents and fulfilling certain basic criteria.

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