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    Notes On The Overview of Financial Markets

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    jeanne
    The document provides an overview of financial markets by discussing different types of markets including primary vs secondary markets, money markets vs capital markets, and derivative vs exchange vs over-the-counter (OTC) markets. Primary markets facilitate the initial sale of securities from issuers to investors, while secondary markets allow existing securities to be resold among investors. Money markets deal in short-term debt instruments for cash management, whereas capital markets trade long-term debt and equity used to finance capital expenditures. Derivative markets trade financial products derived from underlying assets, exchanges provide organized trading of securities, and OTC transactions occur directly between parties without a central exchange.

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    Notes On The Overview of Financial Markets

    Uploaded by

    jeanne
    138 views2 pages
    The document provides an overview of financial markets by discussing different types of markets including primary vs secondary markets, money markets vs capital markets, and derivative vs exchange vs over-the-counter (OTC) markets. Primary markets facilitate the initial sale of securities from issuers to investors, while secondary markets allow existing securities to be resold among investors. Money markets deal in short-term debt instruments for cash management, whereas capital markets trade long-term debt and equity used to finance capital expenditures. Derivative markets trade financial products derived from underlying assets, exchanges provide organized trading of securities, and OTC transactions occur directly between parties without a central exchange.

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    NOTES ON THE OVERVIEW OF FINANCIAL MARKETS

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    The document provides an overview of financial markets by discussing different types of markets including primary vs secondary markets, money markets vs capital markets, and derivative vs exchange vs over-the-counter (OTC) markets. Primary markets facilitate the initial sale of securities from issuers to investors, while secondary markets allow existing securities to be resold among investors. Money markets deal in short-term debt instruments for cash management, whereas capital markets trade long-term debt and equity used to finance capital expenditures. Derivative markets trade financial products derived from underlying assets, exchanges provide organized trading of securities, and OTC transactions occur directly between parties without a central exchange.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    138 views2 pages

    Notes On The Overview of Financial Markets

    Uploaded by

    jeanne
    The document provides an overview of financial markets by discussing different types of markets including primary vs secondary markets, money markets vs capital markets, and derivative vs exchange vs over-the-counter (OTC) markets. Primary markets facilitate the initial sale of securities from issuers to investors, while secondary markets allow existing securities to be resold among investors. Money markets deal in short-term debt instruments for cash management, whereas capital markets trade long-term debt and equity used to finance capital expenditures. Derivative markets trade financial products derived from underlying assets, exchanges provide organized trading of securities, and OTC transactions occur directly between parties without a central exchange.

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    SUMMARY ON THE OVERVIEW OF FINANCIAL MARKETS

    Financial Markets - Provides the avenue for financial management decisions of deficit units and investment
    management decisions of surplus units.

     DIFFERENT TYPES:
    1. PRIMARY MARKET VS SECONDARY MARKET

    1.1 Primary Market 1.2 Secondary Market


    - is a financial market where securities are - is a financial market in which securities that
    INITIALLY issued. have PREVIOUSLY been issued can be
    resold.
    - is a financial market in which new issues of
    security are sold to INITIAL buyers.

    - It is where new funds are raised. - No new funds are raised.

    - A place where the investors’ trade with fellow


    investors.

    - Gives us information on the liquidity of the


    securities and also provides us with
    information on the pricing of the said
    securities.
    Notes to Remember on Primary Market:
    - The one who sells financial instruments either debts or equity securities are called ISSUER.
    - Initial public offering (IPO) denotes the first time that a previously private company offers its
    equity shares to the general public. 
    - During the IPO period, the issuing company is the only seller. When investors purchase shares
    through an IPO, they purchase shares directly from the issuing company and the funds raised are
    part of the issuing company’s capital or equity.

    Notes to Remember on Secondary Market:


    - Liquid securities normally have secondary market.
    - We will know if they’re liquid when they can be sold quickly for a fair value.
    - An example of secondary market is stock exchange– where investors are buying and selling (trading)
    stocks with fellow investors.

    2. MONEY MARKET VS CAPITAL MARKET


    2.1 Money Market 2.2 Capital Market
    - A financial market where money market - A financial market where capital market
    securities are traded securities are traded.
    These are short-term debt securities. These are long-term debt and equity securities.
    Has a maturity of 1 year or less. Raise funds for the purchase of capital assets.
    Has a high level of liquidity.

    Examples: Includes:
    - Treasury bills, - Bonds
    - Commercial Papers, - Shares of stock
    - Negotiable certificate of deposits - Mortgages – are long term debts created to
    finance the purchase of real estate.
    Can either be:
    1. Residential – for real estate purchase for
    individual households.
    2. Commercial – for purchase of commercial
    purposes / those of business use.
    3. Subprime – offered to borrowers who have
    been assessed to have no
    sufficient income or cannot make
    a down payment.
    – Exhibits a higher risk of default.
    3. DERIVATIVE VS EXCHANGE VS OTC MARKETS

    3.1 Derivative Market 3.2 Exchange Market 3.3 OTC Market


    - Financial market where - Secondary markets in which - A decentralized market in
    derivatives are traded buyers and sellers, including which market participants
    a financial instrument whose their agents and brokers, of trade stocks, commodities,
    value is derived from the value securities meet in one currencies or other
    of another financial central location to conduct instruments directly between
    instrument. trades. two parties and without a
    Common example: central exchange or broker.
    Convertible bond
    - Are NOT ORGANIZED and
     Bonds which can be
    converted into sales at the
    - Are ORGANIZED and LESS REGULATED
    option of the bond holder. REGULATED markets to
     The value of the bond trade particular financial
    depends on the value of exchange Example:
    the shares. Example: - Foreign Exchange Market
    - Stock Exchange  It is an OTC global
     It is an organized market market place that
    governed by regulations determines the exchange
    that facilitate the trading rate for currencies around
    of stocks the world.
     It has no centralized
    location.
     Considered as the largest
    and most liquid
    Types of Transaction:
    1. Spot FX
    - An immediate exchange
    of currencies at the
    current exchange rate.
    2. Forward FX
    - The exchange of
    currencies at a specified
    date in the future and at a
    specified exchange rate.

    Potot, Jeanne Marie P. | 2019010599

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