INTERNATIONAL FINANCIAL MARKETS

International Financial Markets

International Financial Markets

Introduction

A financial market is a place where financial instruments such as securities, bonds, stocks etc. are traded at a lower cost through demand and supply. The purpose of the financial market is to raise capital for the individuals, corporations, businesses, trading international currencies, obtaining the price, injecting the liquidity into the market of money and moving up the risk in the derivatives market. There are two types of financial markets one is capital market and the other are money market. Treasury notes, corporate bonds and stocks are the instruments which are traded in the capital market to raise capital for the long term finance while treasury bills, commercial papers are the traded in the money market for the short term finance. All financial instruments which are traded in the capital market are having more than 1 year of maturity, and those securities which are traded in the money market are having less than or equal to 1 year of maturity time period.

Background

Past study shows that there is a major global financial crisis of 2007 to 2009 after the great depression of 1929 to 1932. Initially the global crisis starts from the small segment of the lending market in the United States, and then it spread gradually across all the economies and other economic sectors. As a result, it has affected financial and equity markets. Due to which many sharper financial markets have been crashed than the United States. There is a truly remarkable in the global reach of the financial crisis from2007 to 2009. The financial crisis is not accidentally spread into the economies and countries. Only those countries experienced the crisis more whose economies were having bad institutions, weak economic fundamentals and ineffective policies. U.S and domestic markets were severally affected by the global financial crisis. From 2007 to 2009, it shows that the presence of the monetary policies and macroeconomic policies were protecting equity and financial markets to some extent in the form of debt and deposit. (Bekaert et al. 2011)

Source: http://www.Sfu.ca

Types of Capital Market

Furthermore, the capital market is divided into two categories. One is the primary market and the other is a secondary market. The primary markets, where newly stocks are traded such as Initial Public Offering (IPO) are newly issued by the company and the secondary market, where existing shares of the company, are exchanged from one shareholder to the other. Due to which financial market attracts the investors which are provided to the companies and businesses for achieving the growth. Financial markets play a vital role for those who seek to borrow funds. For example, if there were no banks, the borrowers would have faced difficulty to borrow funds. Therefore, banks works as intermediaries or a third party, a depositor deposits the money into the bank and bank lends to individuals or the borrowers for the purpose of earning through the interest on those funds. Those lending funds are traditionally known as a mortgages or ...