Meaning: A financial market is a market for the creation and exchange of financial assets like equity shares , debentures, bonds, treasury bills, commercial papers etc. The financial market helps to link the savers and the between them. Financial markets influence both the quality and the pace economic development through mobilization of savings and their channelisation to productive uses. It is market for creation and exchange of financial asset.
When the allocation of the funds is done performed well the it has two consequences
i)The rate of return offered to household would be higher
ii) scarce resources are allocated to those firms which have the highest productivity for the economy
Functions of Financial market
1)Mobilization of savings and channeling then into the most productive uses :
A financial market offers mobility to the savings of the public. it helps them to invest their savings in various financial assets or instruments and earn income and capital appreciation .Thus, financial markets mobilize the savings of people and channelize them into the most productive uses.
2)Facilitate Price Discovery : A financial market includes both the suppliers funds and investors of funds. The demand and supply of funds determine the price of various financial instruments .
3)Provide liquidity to the financial assets:
Financial markets act as a medium to buy and sell the financial assets , thereby providing liquidity to them. The investors can invest their savings in the long term investments which could be easily sold in the market, whenever desired .
4) Reduce the cost of the transaction : Financial market is a common platform for the sale and purchase of the securities . In addition to the sale and purchase it also provides a lot of information about the securities being traded . It helps in saving the time , effort and money of the investors.
Financial markets are of two types
A Money Markets B....