The Financial Market is a place where people buy and sell financial securities, derivatives, and raw materials. These products are collectively known as commodities. Stocks, bonds, and raw materials are examples of financial instruments traded in the financial market. In addition to these assets, the financial market also trades raw materials and precious metals.
Financial markets are a global network that allows people to exchange different types of assets. This enables them to exchange these assets at lower transaction costs. These markets also benefit from a diverse pool of issuers, which makes it possible to trade a wide range of financial assets with high liquidity. Lastly, an efficient clearing and settlement system helps reduce the cost of a financial transaction.
Financial markets are needed to facilitate complex financial transactions. They enable lenders and borrowers to meet. They also allow existing financial commitments to be sold to other parties. A prime example of a financial market is the stock market, where companies can sell their shares to investors. By selling these shares, they can raise money. Lenders, on the other hand, provide temporary loans to other people. The goal of the lender is to get the principal amount back plus a profit.
While companies are the primary lenders in the financial market, banks and other non-depository organizations also lend money. They can use these funds to fund various operations. They may spend their money on advertising, hiring new employees, and researching new products.
