ALGARME, FRANZ KAYL V.

CRISTUTA, ARRIANE AYESSA A.

FINANCIAL MARKET
- where people and companies come to buy and sell assets like shares, bonds
(debt), commodities and other products.
- type of marketplace that provides an avenue for the sale and purchase of assets
such as bonds, stocks, foreign exchange, and derivatives.
- businesses and investors can go to financial markets to raise money to grow their
business and to make more money, respectively.
- market where buyers and sellers trade commodities, financial securities, foreign
exchange, and other freely exchangeable items (fungible items) and derivatives of
value at low transaction costs and at prices that are determined by market forces
- where traders buy and sell assets. These include stocks, bonds, derivatives,
foreign exchange, and commodities.
- where companies reduce risks and investors make money.
- marketplace, where creation and trading of financial assets, such as shares,
debentures, bonds, derivatives, currencies, etc. take place.
- acts as an intermediary between the savers and investors by mobilizing funds
between them.
- aggregate of possible buyers and sellers of financial securities, commodities, and
other fungible items, as well as the transactions between them.
- arena in which prices form to enable the exchange of financial assets to be
executed.
- Alternatively put, financial markets are places where the savings from several
sources are mobilized towards those who need funds. They are intermediaries
which direct money from savers or lenders to sellers or borrowers.

MONEY MARKET
- where large-scale, short-term debts are arranged
- organized exchange market where participants can lend and borrow short-term,
high-quality debt securities with average maturities of one year or less.
- enables governments, banks, and other large institutions to sell short-term
securities to fund their short-term cash flow needs.
- Some of the instruments traded in the money market include Treasury bills,
certificates of deposit, commercial paper, federal funds, bills of exchange, and
short-term mortgage-backed securities and asset-backed securities.
- The money market contributes to the economic stability and development of a
country by providing short-term liquidity to governments, commercial banks, and
other large organizations.
- section of the financial market where financial instruments with high liquidity and
short-term maturities are traded.
- buying and selling of securities of short-term maturities, of one year or less, such
as treasury bills and commercial papers.
- Over-the-counter trading is done in the money market and it is a wholesale
process. It is used by the participants as a way of borrowing and lending for the
short term.
- Money market consists of negotiable instruments such as treasury bills,
commercial papers. and certificates of deposit.
- Money market is considered a safe place to invest due to the high liquidity of
securities.
- Money market gives lesser return to investors but also lesser risk
- trading in very short-term debt investments.
- characterized by a high degree of safety and relatively low rates of return.
CAPITAL MARKET
STOCK MARKET
- series of exchanges where successful corporations go to raise large amounts of
cash to expand.
- The investors profit when companies increase their earnings.
- collection of markets and exchanges where regular activities of buying, selling, and
issuance of shares of publicly-held companies take place.
- a similar designated market for trading various kinds of securities in a controlled,
secure and managed environment.
- brings together hundreds of thousands of market participants who wish to buy and
sell shares
- One of the primary benefits of investing in the stock market is the chance to grow
your money. Over time, the stock market tends to rise in value, though the prices
of individual stocks rise and fall daily. Investments in stable companies that are
able to grow tend to make profits for investors.
- Minority Ownership, when you put your money in a reputed company’s stocks, you
become a part-owner of the company, irrespective of however smaller your share
may be. Minority ownership gives you the right to vote and voice your opinions at
the corporate level
DISADVANTAGES
- Volatile Investments
- Investment is subjected to many risks since the market is volatile. The shares of a
company go up and come down so many times in just a single day. These price
fluctuations are unpredictable most of the times and the investor sometimes have
to face severe loss due to such uncertainty.
BOND MARKET
- When organizations need to obtain very large loans, they go to the bond market
- When stock prices go up, bond prices go down.
- trades and issues of debt securities.
o Governments typically issue bonds in order to raise capital to pay down
debts or fund infrastructural improvements.
o Publicly-traded companies issue bonds when they need to finance business
expansion projects or maintain ongoing operations.
- marketplace where investors buy debt securities that are brought to the market by
either governmental entities or publicly-traded corporations.
- where investors go to trade (buy and sell) debt securities, prominently bonds,
which may be issued by corporations or governments.
- The biggest advantage of investing in the bond market is security. Bonds are
generally a less risky option than investing in stocks.
DISADVANTAGES:
- Although bonds provide diversification, holding too much of your portfolio in this
type of investment might be too conservative an approach. The trade-off you get
with the stability of bonds is you will likely receive lower returns overall, historically,
than stocks. Hence, the percentage of bonds in your investment strategy depends
on how much growth potential you’re seeking over time.

FOREIGN EXCHANGE MARKET

- decentralized global market in which currencies are bought and sold.
- This market affects exchange rates and, thus, the value of the dollar and other
currencies
- an over-the-counter (OTC) global marketplace that determines the exchange rate
for currencies around the world
- Participants are able to buy, sell, exchange, and speculate on currencies.
 - Foreign exchange markets are made up of banks, forex dealers, commercial
companies, central banks, investment management firms, hedge funds, retail forex
dealers, and investors.
- largest financial market in the world and comprises a global network of financial
centers that transact 24 hours a day, closing only on the weekends.
- Currencies are always traded in pairs, so the "value" of one of the currencies in
that pair is relative to the value of the other.
- global online network where traders buy and sell currencies.
- has no physical location and operates 24 hours a day from 5 p.m.
- It sets the exchange rates for currencies with floating rates.

COMMODITY MARKET - (e.g FUTURES INVESTMENT)

- physical or virtual marketplace for buying, selling, and trading raw or primary
products.
- Commodities are split into two types: hard and soft commodities.
o Hard commodities are typically natural resources that must be mined or
extracted—such as gold, rubber, and oil
o soft commodities are agricultural products or livestock—such as corn,
wheat, coffee, sugar, soybeans, and pork.
- where traders and investors buy and sell natural resources or commodities such
as corn, oil, meat, and gold.
- A specific market is created for such resources because their price is unpredictable
- There is a commodities futures market wherein the price of items that are to be
delivered at a given future time is already identified and sealed today.
- What Is a Commodity Investing?
- Commodity trading links different cultures and people together. From spices and
silks in the early days to the exchanges where these assets are now traded,
commodities are still a popular investment vehicle.
- Investors hoping to get into the commodity market, there are several different ways
to do so. Commodity-hungry investors can consider investing directly in the
physical commodity, or indirectly by purchasing shares in commodity companies,
mutual funds, or exchange traded funds (ETFs).
Benefits
- they tend to protect investors against the effects of inflation. Generally, demand
for commodities tends to be high during periods of high inflation, which pushes up
prices. It's also a good bet against the U.S. dollar, so when the greenback declines,
commodity prices rise.
- potential to maximize returns with commodity investing.
Risks
- tend to be much more volatile than other kinds of investments—especially funds
that track a single commodity or a specific sector of the economy.
- Investors who trade futures should remember that it involves speculation. Futures
contracts involve tracking an underlying commodity or index. This could have an
impact on the performance of the contract and, thus, give the investor a negative
(or positive) difference. Futures also come with their own set of unique risks that
must be managed independent of the underlying commodity.

DERIVATIVES MARKET
- Such a market involves derivatives or contracts whose value is based on the
market value of the asset being traded.
- financial market for financial instruments such as underlying assets and financial
derivatives.
 - Derivatives are also traded in stock exchanges. Derivatives are a type of security,
whose value is derived from an underlying asset.
o These underlying assets can be stocks, bonds, commodities or currency.
- financial marketplace for financial instruments like future contracts or options which
are borrowed from other asset forms.
- provide for price discovery and risk transfer for securities, commodities, and
currencies.

INSURANCE MARKET
- simply the "buying and selling of insurance."
- Consumers or groups buy insurance for risk management from insurers offering
coverage for specific risks.
- Individual consumers purchase insurance coverage to protect against risk.
- Common insurance market products including homeowner's, auto, life and health
insurance.
- The insurance sector is made up of companies that offer risk management in the
form of insurance contracts
- The basic concept of insurance is that one party, the insurer, will guarantee
payment for an uncertain future event. Meanwhile, another party, the insured or
the policyholder, pays a smaller premium to the insurer in exchange for that
protection on that uncertain future occurrence.
- provide many products with different levels of complexity that were designed for
different groups of people and businesses and other organizations.

WHAT AFFECTS THE MARKET?

NEWS
- Many market participants keep tabs on news in real-time; bad news affecting a
company or a country will drive prices down, for example. Even political news can
have a wide-reaching effect on markets
- Negative news will normally cause people to sell stocks.
- Positive news will normally cause individuals to buy stocks.
CENTRAL BANK POLICY
- Central banks make decisions such as setting interest rates, and these can have
a profound effect on the flow of money around the world, and will have a big impact
on markets
- A key role of central banks is to conduct monetary policy to achieve price stability
(low and stable inflation) and to help manage economic fluctuations.
COMPANY RESULTS
- Companies listed on stock exchanges will release regular results which will
encourage investors to buy or sell their shares
GOVERNMENT DATA
- Government data is a critical resource that can be used to improve operations,
drive innovation, deliver better services to citizens and improve civic democracy.

MARKET PARTICIPANTS
INSTITUTIONAL INVESTORS
- Pension funds, asset managers and mutual fund providers participate in financial
markets to make profits for themselves and their customers
- company or organization that invests money on behalf of other people.
- Mutual funds, pensions, and insurance companies are examples.
 - buys, sells, and manages stocks, bonds, and other investment securities on behalf
of its clients, customers, members, or shareholders.
- do not use their own money, but rather invest other people's money on their behalf.
BANKS
- Banks act like brokers for other companies, like fund managers. They used to do
plenty of trading themselves, but new regulations mean they have less scope to
trade their own book.
- licensed to receive deposits and make loans.
- may also provide financial services such as wealth management, currency
exchange, and safe deposit boxes.
BROKERS
- Specialists placing trades for their clients
- individual or firm that acts as an intermediary between an investor and a securities
exchange.
- provide that service and are compensated in various ways, either through
commissions, fees or through being paid by the exchange itself.
- regulated professional who buys and sells financial instruments on the behalf of a
client and charges a fee for doing so.
RETAIL INVESTORS
- Everyday investors can participate in financial markets through investing in funds,
buying shares, or actively trading the markets through spread bets and CFDs
- individual or non-professional investor who buys and sells securities through
brokerage firms or savings accounts like 401(k)s.
- investing for themselves, often in brokerage or retirement accounts.

HOW ARE FINANCIAL MARKET TRADED?

ON-EXCHANGE
- In the past, these were actual buildings where brokers met to buy and sale shares
in companies, or other assets, like corn or livestock
- Now most trading on exchanges takes place online, with orders being placed from
all over the world
- Trading on exchange means that contracts are standardised with a clear guidance
on the quality, quantity and when you will receive the goods.
- refers to the formally established stock exchange wherein securities are traded
and they have a defined set of rules for the participants.
- When the trading is performed through the exchange, it is under the supervision
of the exchange and so it ensures that all the rules and regulations are duly
complied with.
OVER-THE-COUNTER
- This is where two parties agree to buy/sell to each other directly, without trading
on an exchange.
- decentralized market in which market participants trade stocks, commodities,
currencies, or other instruments directly between two parties and without a central
exchange or broker.
- do not have physical locations; instead, trading is conducted electronically
- trading of securities between two counterparties executed outside of formal
exchanges and without the supervision of an exchange regulator
- dealer oriented market of securities, which is a decentralized and unorganized
market where trading happens by way of phone, emails, etc

FUNCTIONS OF FINANCIAL MARKET

1. mobilizes savings
- a financial market helps in connecting those with money with those who require
money.
 - puts it to the most productive uses
2. facilitating price discovery
- The frequent interaction between investors helps in fixing the price of securities,
on the basis of their demand and supply in the market.
- Demand and supply of an asset in a financial market help to determine their price
- The interaction between the investors and the industries and other market forces
helps to determine the price.
3. providing liquidity to financial assets
- The investors can readily sell their securities and convert assets into cash.
- Assets that buyers and sellers trade in the financial market have high liquidity. It
means that investors can easily sell those assets and convert them into cash
whenever they want.
4. reducing cost of transactions
- don’t have to waste resources to find probable buyers or sellers of securities.
Further, it reduces cost by providing valuable information, regarding the securities
traded in the financial market.
FINANCIAL INSTITUTIONS
- exists to provide a wide variety of deposit, lending and investment products to
individuals, businesses or both
- company engaged in the business of dealing with financial and monetary
transactions such as deposits, loans, investments, and currency exchange.
- companies in the financial sector that provide a broad range of business and
services, including banking, insurance, and investment management.
- Governments of the country consider it essential to oversee and to regulate these
institutions as they play an integral part in the economy of the country.
- describes an establishment that completes and facilitates monetary transactions,
such as loans, mortgages, and deposits
- place where consumers can effectively manage earnings and develop financial
footing.

TYPES OF FINANCIAL INSTITUTION:

CENTRAL BANKS
- responsible for the oversight and management of all other banks
- responsible for conducting monetary policy and supervision and regulation of
financial institutions
- given privileged control over the production and distribution of money and credit
for a nation or a group of nations
- usually responsible for the formulation of monetary policy and the regulation of
member banks.
- inherently non-market-based or even anti-competitive institutions.
o Although some are nationalized, many central banks are not government
agencies, and so are often touted as being politically independent.
o even if a central bank is not legally owned by the government, its privileges
are established and protected by law.

RETAIL AND COMMERCIAL BANKS

- retail banks offered products to individual consumers
- division of a bank that deals directly with retail customers.
- bring in customer deposits that largely enable banks to make loans to their retail
and business customers.
- provides financial services to the general public
- allows consumers to manage their money by giving them access to basic banking
services, credit, and financial advice.
- Commercial banks worked directly with businesses.
 - make loans that enable businesses to grow and hire people, contributing to the
expansion of the economy
- accepts deposits, offers checking account services, makes business, personal,
and mortgage loans, and offers basic financial products like certificates of deposit
(CDs) and savings accounts to individuals and small businesses.
- where most people do their banking, as opposed to an investment bank.
- accept deposits from the public and offer security to their customers.
- due to commercial banks, it is no longer required to keep huge large currency on
hand.
- Using commercial bank facilities, transactions can be done through checks or
credit/debit cards

INTERNET BANKS
- which work similarly to retail banks.
- offer the same products and services as conventional banks, but they do so
through online platforms instead of brick and mortar locations.
- lacks any physical branch locations and exists only on the internet.
- accessed via web browsers and mobile apps, providing customers with banking
services from any place with access to the internet.
- The biggest strength of an internet bank is also its greatest weakness: If internet
access is spotty or lacking, customers cannot access their accounts.
- In addition, there are security issues to keep in mind.
- Accessing one’s internet bank account via an unfamiliar or unsecured public Wi-Fi
hotspot carries a certain level of risk, and there is the ever-present threat of
hackers taking down an internet bank’s website.
- offer you access to your account online, and the ability to transfer money or
perform other tasks with a few clicks of your cursor or taps on your phone screen.

CREDIT UNIONS
- serve a specific demographic per their field of membership, such as teachers or
members of the military.
- While products offered resemble retail bank offerings, credit unions are owned by
their members and operate for their benefit.
- type of financial cooperative that provides traditional banking services.
- Ranging in size from small, volunteer-only operations to large entities with
thousands of participants spanning the country, credit unions can be formed by
large corporations, organizations, and other entities for their employees and
members.
- created, owned, and operated by their participants. As such, they are not-for-profit
enterprises that enjoy tax-exempt status.
- The members of the credit union pool their deposits and provide loans and other
financial services to each other.

SAVINGS AND LOAN ASSOCIATIONS

- mutually held and provide no more than 20% of total lending to businesses fall
under the category of savings and loan associations.
- Individual consumers use savings and loan associations for deposit accounts,
personal loans, and mortgage lending.
- makes loans for the purchase of private housing, home improvements, and new
construction.
- Formerly cooperative institutions in which savers were shareholders in the
association and received dividends in proportion to the organization’s profits
- similar to a bank that specializes in helping people get residential mortgages.
INVESTMENT BANKS AND COMPANIES
- Investment banks help individuals, businesses and governments raise capital
through the issuance of securities.
- acts as an intermediary in large and complex financial transactions.
- also has a role as a broker or financial adviser for large institutional clients such as
pension funds.
- Investment companies, more commonly known as mutual fund companies, pool
funds from individual and institutional investors to provide them access to the
broader securities market.
- corporation or trust engaged in the business of investing the pooled capital of
investors in financial securities.
- both privately and publicly owned, that manage, sell and market funds to the public.
- The main business of an investment company is to hold and manage securities for
investment purposes, but they typically offer investors a variety of funds and
investment services, which include portfolio management, recordkeeping,
custodial, legal, accounting and tax management services.

BROKERAGE FIRMS
- assist individuals and institutions in buying and selling securities among available
investors
- Customers of brokerage firms can place trades of stocks, bonds, mutual funds,
exchange-traded funds (ETFs), and some alternative investments
- main duty is to act as a middleman that connects buyers and sellers to facilitate a
transaction
- typically receive compensation by means of commissions or fees that are charged
once the transaction has successfully completed
- help you buy and sell securities.
- act as the middle man between the buyer and the seller.
- Depending on the brokerage firm type you choose, you can either make your buys
and sales via telephone, internet, or smartphone
- generally charge per buy or sell order with assisted telephone orders being more
expensive

INSURANCE COMPANIES
- help individuals transfer risk of loss are known as insurance companies.
- Individuals and businesses use insurance companies to protect against financial
loss due to death, disability, accidents, property damage, and other misfortunes.
- which may be for-profit, non-profit or government-owned, that sells the promise to
pay for certain expenses in exchange for a regular fee, called a premium.
- The insurance company covers its expenses and/or makes a profit by spreading
the risk of any one client over the pool of premiums from many clients.
- issue insurance policies to cover a variety of contingencies (fire, flooding,
breakage, theft, death, etc.), involving potential financial loss to policy holders or
their dependants in return for regular payments of a premium
- operates by pooling risk among a large number of policy holders; premiums are
based on the probability of a particular event occurring and the average financial
loss associated with each.

MORTGAGE COMPANIES
- originate or fund mortgage loans
- While most mortgage companies serve the individual consumer market, some
specialize in lending options for commercial real estate only
- firm engaged in the business of originating and/or funding mortgages for residential
or commercial property.
- often just the originator of a loan; it markets itself to potential borrowers and seeks
funding from one of several client financial institutions that provide the capital for
the mortgage itself