Financial Markets

Financial markets can be referred to as a set up where various types of financial instruments can be traded.

Major financial instruments that are traded include securities such as bonds and stocks. Financial markets are under a constant process of innovation and improved liquidity of this market has let it evolve significantly.

Variations in financial markets

Financial markets operate with several other submarkets. Together with these submarkets, a financial market is a single operating organization that controls supply and demand of money in an economy. Major types of financial markets can be summarized as follows:

• Capital markets: these markets are core markets of the financial market, which again includes two other types of markets stock market and bond market. A stock market is a place where issuance of shares or common stock is possible and the bond market, as the name suggests is a market where bonds are traded.
• Money market: though different from the capital market, but operates in the same fashion as the capital market. These markets provide short term debt financing and investment services.
• Derivatives markets: often only investing in the right financial instrument is not always the right step, managing financial risk is also necessary. Derivatives market provides such tools that are required to avert any kind of financial risk.
• Futures markets: investment in future is also an intelligent step to survive any kind of financial crisis. Futures market trades financial instruments at a standardized future date.
• Insurance markets provide an opportunity for the relocation of various financial risks.
• Foreign exchange markets: these markets aids in the operation of foreign exchange trades.

Effect of globalization on financial markets

Financial markets have started to globalize operations since the mid-1980s. Capital flows between industrial countries have increased tremendously in recent years. Capital inflows were marked with high growth rates, but there are certain instances also where growth rate has collapsed beyond imagination. As a result, a debate arises as to what effect does globalization of financial market has on financial set up of any nation’s economy.

Financial markets have definitely aided in increasing the level of capital through capital markets. Without financial markets, it wouldn’t be possible to hunt investors and globalize financial market has provided access to lenders and borrowers on a global basis.

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