INTRODUCTION TO FINANCIAL MARKETS

Definition

• A financial market is a mechanism that allows people to buy and sell fungible items at lower transaction costs and at prices that follow the efficient market hypothesis
• Fungible items can include financial securities, commodities, other (eg. Carbon credits); as well as derivatives of these
• Market can be defined more strictly as an exchange. Exchange can be physical location (NYSE) or electronic system (NASDAQ); also bilateral (M&A or PE transaction)

Objectives of financial markets

1. Raising of capital (capital markets)
2. Transfer of risk (derivatives market)
3. International trade (currency markets)

Different kinds of financial markets

1. Capital markets

• Stock markets
• Bond markets

1. Commodity markets
2. Money markets
3. Derivatives markets
4. Futures markets
5. Foreign exchange markets
6. Insurance markets 

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