A 'Financial system' is a system that allows the exchange of

funds between financial market participants such as lenders,

investors, and borrowers. Financial systems operate at national
and global levels. Wikipedia

The global financial system has seven basic economic

functions.

Saving Function
The global system of financial market and institution provide a
channel for public's saving ,the investors,household,financial
institution can save their surplus in Stock,Bond or other
financial instruments.

Wealth Function
The current built-up of the flow saving fund in Financial
asset(Stock,Bond etc.) ,we refer to as wealth. these financial
asset is being traded in Capital Market and Money
market,which is a good way to store wealth as it carry less risk
of loss than the real asset( Vehicle,building) that's subject to
depreciation.

Liquidity Function
The global financial system provide liquidity(easily convert to
cash).because every time investors,household,financial
institution need cash,they can sell their financial asset such as
Stock or bond etc. immediately in the Financial market ,and
there will be other investors, household are ready to buy, so it
provide liquidity to the market.

Credit Function
the Global financial system provide the credit function which
provide the loan for investment spending to state government
and consumption spending for customer who need credit to
buy home,groceries,or for the business to construct new
building.

Payment Function
The Global financial system provide a way for making payment
for purchasing of goods and services Certain financial asset
such as currency, demand deposits, and interest-bearing
checking accounts still serve as a popular medium of exchange
in making payments all over the globe.

Risk Protection Function

The Global financial system provide individual with risk
protection by using insurance policy,Derivative
instruments(Options contract,Forwards contracts..)

Policy Function
The financial markets have been the principal channel which
government has carried out its policy of attempting to stabilize
the economy and avoid inflation.
Types of Financial Markets Within the Global Financial System
The money market is for short-term (one year or less) loans,
while the capital market finances long-term investments by
businesses, governments, and households. In particular,
governments borrow from commercial banks in the money
market,
while in the capital market, insurance companies, mutual
funds, security dealers, and pension funds supply the funds for
businesses.
The money market may be subdivided into Treasury bills,
certificates of deposit (CDs), bankers’ acceptances, commercial
paper, federal funds and Eurocurrencies.
The capital market may be subdivided into mortgage loans, tax-
exempt (municipal) bonds, consumer loans, Eurobonds and
Euronotes, corporate stock, and corporate notes and bonds.

In open markets , financial instruments are sold to the highest

bidder, and they can be traded as often as is desirable before
they mature.
In negotiated markets , the instruments are sold to one or a
few buyers under private contract Financial capital is raised
when new securities are sold in the primary markets . Security
trading in the secondary markets then provides liquidity for the
investors. </li></ul>
In the spot market , assets are traded for immediate delivery
(usually within one or two business days).
futures or forward market is designed to trade contracts calling
for the future delivery of financial instruments.
Options markets enable contracts that grant the right to buy or
sell certain securities at specific prices within a certain time to
be traded.
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