Financial Management

Types of Markets

1. Spot Market – a market where the transaction occurs on the spot.

2. Futures Market – a market where a contract is made today for a transaction in the future.
3. Money Market - a market where a money market instrument is traded.
4. Capital Market – a market where capital market instrument is traded.
5. Primary Market - where securities are issued for the first time in order to raise funds.
6. Secondary Market – where existing securities are traded.
7. Private Market – restricted to qualified participants.
8. Public Market – open to all participants.
9. Real Market – market for real assets. Physical Asset Market.
10. Financial Asset Market – a market where financial instruments/securities are traded.

Financial Instruments

Money Market Instruments

1. Treasury Bills – issued by the Bureau of Treasury to raise funds and sold at a discount. Risk Free.
- The market for treasury bill is deep = liquid.
- Buyer – Competitive Bidders
- Non-Competitive Bidders
- Book Entry Securities – Securities that does not have physical document.

2. Central Government Deposits – A deposit at the Central Bank.

- Risk Free.
- A deposit of a commercial bank at BSP for the purpose of satisfying
minimum reserved requirements.
- Total Reserves – Minimum Reserves = Excess Reserves

3. REPO – Repurchase Agreement – sale of securities with an immediate agreement to buy them
back on a specific future date at a slightly higher price.
- Overnight Loan
- Secured Loan
- Low Risk
- Collateralized Loan

4. Commercial Paper – A security that is issued by corporations or financial institutions

- Short Term and sold at a discount
- Direct Placement – it is the sale of securities without the help financial
intermediaries.
- Back up line of credit
5. Negotiable Certificate of Deposit – a deposit at a depository institution usually a commercial
bank and can be actually bought and sold.
- Large in Denomination – size of the face value
- Typical buyer is institutional investor
- Typical seller is commercial bank
- Term Security – a security that matures a particular term.
- Bearer Instrument

6. Bankers’ Acceptance – the acceptance of responsibility to pay in case of default

- Very low risk.
- Guaranteed by the bank.