Chicago Research Paper

Introduction

The Capital Market is a place where transactions are carried out free titles that are listed as stocks, bonds, debt securities, certificates of currency, etc. The stock market makes possible the existence of a secondary market, as investors flock to it by providing their capital to purchase securities issued by companies and private or public sector. This market, where securities are traded between public and private natural or legal persons, is of paramount importance for a country's economic development as a source of funding to which one can go to public entities and private resources required to undertake new projects or to restructure their liabilities and to be more efficient and competitive. Capital market also known as "long-term financial market", "long-term capital market.” Capital market transactions on the object are more than one year long-term securities. Because in the long-term financial activities, involving long-term funds, risk of large investment, long-term stable income, like capital investment, it is known as the capital market.

The capital market provides a mechanism for saving and investment that serves as support for productive activities. In the capital market authorities or suppliers deficit obtain funds at a lower cost than in the banking system and adequate conditions for their needs and situation of the country. Also, investors can achieve higher returns for their money.

Capital markets involve two types of people: those who look for capital, and the people who provide capital. People looking for capital, their usual business and government; to provide capital are those, who are hoped to lend or purchase of assets of people and thus earn profit through it.

Long-term capital, including the company's partial ownership such as stocks, long-term bonds, long-term corporate bonds, more than one year negotiable certificates of deposit , real estate mortgage loans and financial derivatives , also including collective investment funds and other long-term loans, but does not include commodity futures. Capital market is a market, rather than refer to a physical location. It refers to all transactions in the market related to people, institutions, and relations between them.

Financial derivatives

In recent years the importance of derivatives has grown into the world of finance and, in fact, much of the expansion of financial markets since the '80s can be attributed directly to the development of derivatives industry. In this regard, the derivatives markets are the lifeblood of many financial innovations. Derivatives is an agreement ( contract ) providing, in accordance with its terms for the parties to a contract of rights and / or performance of the obligations associated with changes in the prices of the underlying asset , which is the basis of the financial instrument , and leading to a positive or negative financial result for each party. Within the equity markets are a type of derivative called financial assets (or instruments), whose main quality is that their market value is based on the price of another asset. i.e. agreement between the parties on transactions that define the rights and obligations of the parties with ...