The Financial Market In Economy

The role of the financial market is a place to expand their business and gain more money for buyers and investors. It is a method to bring people together to raise money when necessary. To be clear of the concept on this topic, go through the following article. We will explain the topic in more detail. We will start by explaining what financial marketing is, its types and its functions. We will also discuss its classification.

What Is Financial Marketing?

So What Is Financial Marketing? A place where financial transactions are taking place between the buyer and an investor is known as a financial market and this process is known as financial marketing. Financial marketing is a business to ensure the economy of a country by trading goods in exchange for lower prices. For a well-functioned economy, the financial market is extremely important as it helps in resource distribution and creates fluidity for business.

This answers the fundamental question of “What Is Financial Marketing?”

TYPES OF FINANCIAL MARKET

Following are the various types of financial markets:

1. The Stock Market – A stock market is the assembling of buyers and sellers who trade stocks in exchange for securities. Stock is also traded privately by investors with a strategy in their minds.
2. The Bond Market- A bond market is basically when an organization needs a high loan. When the stock prices become higher, the bond prices become lower. There are different types of bonds such as treasury bonds, corporate bonds and municipal bonds.
3. The Commodities Market- When buying, selling and trading natural and raw products are done it is known as the commodity market. Primary products are used in this market. It is of two types: – hard and soft commodities. Hard commodities refer to natural resources whereas soft commodities refer to agricultural products.
4. Derivatives- It is the trading between two parties who lend the finance in terms of an asset or better known as security. Experienced and knowledgeable investors and hedge funds invest in derivatives for profits.

Functions Of Financial Market

Following are the functions of financial market:

1. Price Determination– the commodities that have been traded or have been trading get the prices from market forces which are demand and supply. The communication between the investor and the industries that are demanding them and market factors define the prices.
2. Liquidity- When the investors have the choice of selling financial instruments at their fair values at any time is known as liquidity. The investors can sell the security at any time and convert it into currency, which is known as liquidity.
3. Risk Sharing– When the person who is undertaking the investment is different from the person who has invested funds is known as risk-sharing.
4. Fund Mobilization- It refers to the capital which is to be needed to start the project after you have the investment.

Classification Of Financial Market

1. BY NATURE OF CLAIM– The claim the investors have on the assets in which they invested. There are two types: –

• Debt Market– In this, the financial markets offer debt claims on the trading of instruments that are bonds and debentures.

• Equity Market- When investors become partial owners of the organizations it is known as equity trading. These investors can buy and sell the shares in return for money. 

1. By Maturity Of Claim- Time plays a crucial role in trading according to the time for which it is invested. The claim which is for a longer period has a higher risk than the one for a shorter period. These are of two types: –

• Money Market- In this investors usually invest for a short period.

• Capital Market – In this investors usually invest for a longer period.

• Bt Timing Of Delivery- This refers to when the transactions of investments are taking place. These are of two types: –

• Cash Market- This transaction takes place immediately between buyer and seller.

• Future Market- This transaction takes place later on between buyer and seller.

• By Organizational Structure– In this transaction, investments are based on the structure. These are of two types: –

• Exchange Traded Market- In this a transaction does not take place directly with the buyer and seller and an intermediate is needed for transactions. Customized products are not traded in this market.

• Over The Counter Market- In these transactions take place directly with the buyer and seller. Customized products are traded in this market

Conclusion

A financial market is a place where the trading of securities is done between the buyer and the seller. It is of different types such as stock market, bond market, commodity market, derivatives. Its functions are the trading of investment between a buyer and a seller. It is based on 4 different classifications that are by nature maturity of claim, the timing of delivery and organizational structure.