Types of Financial Markets Flashcards
(14 cards)
What are the three types of financial markets?
- Money markets
- Capital Markets
- Currency Markets.
What is the money market?
Where financial assets have to be payed back in the date of a year or less.
Example of money markets assets
- Corporate bonds
- Interbank lending.
What is the capital market?
Where financial assets that have a payback date of greater than a year (less liquid thank money markets).
What type of capital market assets are there?
Debt capital and equity capital.
What is debt capital? Example?
- Any financial asset that pays back in interest rates (is a form of borrowing for issuer)
- Bonds.
What is equity capital? Example?
- They have stake or share of the business and dividends on profit made
- Shares.
What are the two types of capital markets?
Primary and secondary.
what is the primary market?
The new issue market, where brand new bonds will be issues through example an investment bank.
What is the secondary market?
Where new bonds and shares can be bought again through investment banks e.g.
What are the two types of currency markets?
Spot market and futures market.
What is the spots market?
The purchase of assets with the current exchange rate, having It delivered it to you now.
What is the futures markets?
The purchase of assets in the current market, but is delivered to you in sometime in the future?
Why do people in engage in the futures market?
- if your an importer worried about a future weak exchange rate as it’d be a higher cost for you.
- Speculator who buys asset when currency will be stronger in 6 months time and sell it, making you a larger profit.
