There are several different types of financial markets. Financial markets are tools that allow people to buy and sell securities or commodities and other financial tools. Investors typically trade and sell the various forms of financial instruments through what is called the stock market. They also have the ability to trade between buyers and sellers. The trading can be done both domestically or internationally according to fair market pricing.
Capital markets are different types of financial markets that deal with the trade of certain types of bonds and stocks. Capital markets can either relate to newly issued bonds and stocks. Or it may handle trades of pre-existing bonds and stocks. This market is typically referred to as either the bond or stock market. The bond market oversees financing regarding the issuance of various types of bonds. And the stock market does the same but for stock issues.
Other vital markets include money markets. Money markets are components of the financial markets. This type of market concerns itself with short-term borrowing and lending practices of securities with a maturation date of one year or less. Various instruments are traded in money markets such as treasury bills, commercial paper, certificates of deposit and several other financial instruments. Money markets essentially facilitate short term debt and capital financing.
There are many other types of financial markets such as; derivatives, foreign exchange, insurance and commodity markets. The purpose of all financial markets is to provide some form of fund raising. It is through these various financial markets that those in need of borrowing funds can find those that are willing to lend funds. These types of financial transaction take place in stock exchange. It is in stock exchange where investors can buy and sell shares of stock from other companies.
The entire foundation of the various types of financial markets is based on a system to borrowing and lending. Those seeking funding can be individuals, corporations, the government and other institutions. There are many reasons these various types of borrowers seek funding. When companies sell shares of their stock, they may be in need of additional capital to meet their expansion needs. Various government entities utilize municipal bonds to raise funds for various projects including improving city infrastructure. There are many reasons for funding across all the different forms of borrowers.
Lenders in the Financial Market are actually the investors. Investors will purchase various forms of financial products which will end up converting into capital for the borrower. There are many different ways these transactions occur. One typical way is when a company issues shares of stock from their company. This is a quick way for companies that are valued in the market place, to make quick cash.
The different types of financial markets are in existence for the purpose of raising capital. As with any institution, there are advantages and disadvantages inherent in the system. It is important to be well informed about the various financial tools before you employ them for your use.