Market:

A market is any place where the sellers of a particular good or service can meet with the buyers
of that goods and service where there is a possible for a transaction to occur. The buyers must
have something they can present in substitute for there to be a possible transaction.

Financial Market:
A market for the exchange of capital and credit, including the money markets and the capital
markets. A financial market is a market in which financial assets are traded.

A financial market is a market in which people and entities can trade financial securities,
commodities, and other fungible items of value at low transaction costs and at prices that reveal
supply and demand. Securities include stocks and bonds, and commodities include precious
metals or agricultural goods.

International Financial Markets:

The International Financial Markets are financial markets where individuals buy and sell foreign
assets such as stock, Bonds, currencies etc.

International financial markets are international in scope of financial fund trading activities.
International generalized international financial market includes 'all international financial assets
transaction and its supply demand relations, including both the international financial market, the
international capital market.

Types of International Financial Markets:

International financial markets are as follow:

i. Foreign Exchange Market

ii. International Money Market
iii. International Credit Market
iv. International Bond Market
v. International Stock Markets

I. Foreign Exchange Market:

The foreign exchange market allows currencies to be exchanged in order to facilitate
international trade or financial transactions. The foreign exchange market (forex, FX, or currency
market) is a form of exchange for the global decentralized trading of international currencies.

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Financial centers around the world function as anchors of trading between a wide range of
different types of buyers and sellers around the clock.

 Types of Foreign Exchange Transactions:

 Spot Market
 Inter-bank Market
 Forward Market
 Currency Futures
 Options Market

 Spot Market: A foreign exchange spot market is a market for trading one currency
against another in such a way that the delivery takes place within 2 days of the execution
of the trade. It usually takes two days to transfer cash from one bank to the other.

 Inter Bank Market: The interbank market is the top-level foreign exchange market
where banks exchange different currencies. The banks can either deal with one another
directly, or through electronic brokering platforms.

 Forward Market: The forward exchange market is a market for contracts that ensure the
future delivery of a foreign currency at a specified exchange rate. The price of a forward
contract is known as the forward rate.

 Currency Futures: A currency future, also FX future or foreign exchange future, is a

futures contract to exchange one currency for another at a specified date in the future at a
price (exchange rate) that is fixed on the purchase date.

 Options Market: A foreign-exchange option (commonly shortened to just FX option or

currency option) is a derivative financial instrument that gives the owner the right but not
the obligation to exchange money denominated in one currency into another currency at a
pre-agreed exchange rate on a specified date.

II. International Money Market:

The international money market is the market that handles the international currency transactions
between the various central banks of the nations. The international money market is governed by
the international monetary transactions between various nations currency. The international
money market mainly handles the currency trading between the countries.

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  Components of International Money Market:

 European Money Market

 Asian Money Market

 European Money Market: U.S. dollar deposits placed in banks in Europe and other
continents are called Eurodollars. In the 1960s and70s, the Eurodollar market, or what is
now referred to as the EUROCURRENCY MARKET grew to accommodate increasing
international business and to bypass stricter U.S. regulations on banks in the U.S. The
Eurocurrency market is made up of several large banks called EURO banks that accept
deposits and provide loans in various currencies.

 Asian Money Market: Like the European money market, Asian money market
originated as a market involving mostly dollar dominated deposits. Hence it was
originally known as Asian Dollar Market. The market emerged to accommodate the need
of businesses that were using the U.S dollar as medium of exchange for international
trade

III. International Credit Market:

Loans of one year or longer extended by banks to MNC or government agencies in Europe are
commonly called Euro credits loans. These loans are provided in the so called Euro credit
market. Floating rates are commonly used, since the bank’s asset and liability maturities may not
match Euro-banks accept short-term deposits but sometimes provide longer term loans.

IV. International Bond Market:

A bond issued in a country or currency other than that of the investor or broker.

 Types of International Bonds:

There are two types of international bonds:
 Foreign bond: Bonds denominated in the currency of the country where they are placed
but issued by borrowers foreign to the country are called foreign bond or parallel bonds.

 Euro Bonds: Bonds that are sold in countries other than the country represented by the
currency denominating them are called Eurobonds.

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  Euro Bond Market:
Eurobonds are underwritten by a multi-national syndicate of investment banks and
simultaneously placed in many countries through second-stage, and in many cases, third-stage,
underwriters. Eurobonds are usually issued in bearer form, pay annual coupons, and may be
convertible, may have variable rates, and typically have few protective covenants.

V. International Stock Markets:

In addition to issuing stock locally, MNCs can also obtain funds by issuing stock in international
markets .This will enhance the firms’ image and name recognition, and diversify the shareholder
base. The stocks may also be more easily digested. Note that market competition should increase
the efficiency of new issues.