1. What is financial market?

Financial markets refer broadly to any marketplace where the trading of securities occurs,
including the stock market, bond market, forex market, and derivatives market, among others. Financial
markets are vital to the smooth operation of capitalist economies. (Investopedia)

2. Is financial market the same with capital market?

Financial markets, from the name itself, are a type of marketplace that provides an avenue for
the sale and purchase of assets such as bonds, stocks, foreign exchange, and derivatives. Often, they
are called by different names, including “Wall Street” and “capital market,” but all of them still mean one
and the same thing. Simply put, businesses and investors can go to financial markets to raise money
to grow their business and to make more money, respectively. (Corporate Financial Institute)

3. What are the various classification of financial assets?

A financial asset is a liquid asset that gets its value from a contractual right or ownership claim.
Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets. Unlike
land, property, commodities, or other tangible physical assets, financial assets do not necessarily have
inherent physical worth or even a physical form. Rather, their value reflects factors of supply and
demand in the marketplace in which they trade, as well as the degree of risk they carry.
• Cash
• Equity instruments of an entity—for example a share certificate
• A contractual right to receive a financial asset from another entity—known as a receivable
• The contractual right to exchange financial assets or liabilities with another entity under favorable
conditions
• A contract that will settle in an entity's own equity instruments
• Stocks are financial assets with no set ending or expiration date. An investor buying stocks
becomes part-owner of a company and shares in its profits and losses. Stocks may be held
indefinitely or sold to other investors.
• Bonds are one way that companies or governments finance short-term projects. The bondholder
is the lender, and the bonds state how much money is owed, the interest rate being paid, and
the bond's maturity date.
• A certificate of deposit (CD) allows an investor to deposit an amount of money at a bank for a
specified period with a guaranteed interest rate. A CD pays monthly interest and can typically
be held between three months to five years depending on the contract.
(Investopedia)

4. What are the different types of financial markets?

Stock Market
Perhaps the most ubiquitous of financial markets are stock markets. These are venues
where companies list their shares and they are bought and sold by traders and investors. Stock
markets, or equities markets, are used by companies to raise capital via an initial public offering
(IPO), with shares subsequently traded among various buyers and sellers in what is known as
a secondary market.

Stocks may be traded on listed exchanges, such as the New York Stock Exchange
(NYSE) or Nasdaq, or else over-the-counter (OTC). Most trading in stocks is done via regulated
exchanges, and these play an important role in the economy as both a gauge of the overall
health in the economy as well as providing capital gains and dividend income to investors,
including those with retirement accounts such as IRAs and 401(k) plans.

Typical participants in a stock market include (both retail and institutional) investors and
traders, as well as market makers (MMs) and specialists who maintain liquidity and provide two-
sided markets. Brokers are third parties that facilitate trades between buyers and sellers but who
do not take an actual position in a stock.

Over-the-Counter Markets
An over-the-counter (OTC) market is a decentralized market—meaning it does not have
physical locations, and trading is conducted electronically—in which market participants trade
securities directly between two parties without a broker. While OTC markets may handle trading
in certain stocks (e.g., smaller or riskier companies that do not meet the listing criteria of
exchanges), most stock trading is done via exchanges. Certain derivatives markets, however,
are exclusively OTC, and so make up an important segment of the financial markets. Broadly
speaking, OTC markets and the transactions that occur on them are far less regulated, less
liquid, and more opaque.

Bond Markets
A bond is a security in which an investor loans money for a defined period at a pre-
established interest rate. You may think of a bond as an agreement between the lender and
borrower that contains the details of the loan and its payments. Bonds are issued by corporations
as well as by municipalities, states, and sovereign governments to finance projects and
operations. The bond market sells securities such as notes and bills issued by the United States
Treasury, for example. The bond market also is called the debt, credit, or fixed-income market.

Money Markets
Typically the money markets trade in products with highly liquid short-term maturities (of
less than one year) and are characterized by a high degree of safety and a relatively low return
in interest. At the wholesale level, the money markets involve large-volume trades between
institutions and traders. At the retail level, they include money market mutual funds bought by
individual investors and money market accounts opened by bank customers. Individuals may
also invest in the money markets by buying short-term certificates of deposit (CDs), municipal
notes, or U.S. Treasury bills, among other examples.

Derivatives Markets
A derivative is a contract between two or more parties whose value is based on an
agreed-upon underlying financial asset (like a security) or set of assets (like an index).
Derivatives are secondary securities whose value is solely derived from the value of the primary
security that they are linked to. In and of itself a derivative is worthless. Rather than trading
stocks directly, a derivatives market trades in futures and options contracts, and other advanced
financial products, that derive their value from underlying instruments like bonds, commodities,
currencies, interest rates, market indexes, and stocks.

Futures markets are where futures contracts are listed and traded. Unlike forwards, which trade
OTC, futures markets utilize standardized contract specifications, are well-regulated, and
utilize clearinghouses to settle and confirm trades. Options markets, such as the Chicago Board
Options Exchange (CBOE), similarly list and regulate options contracts. Both futures and options
exchanges may list contracts on various asset classes, such as equities, fixed-income securities,
commodities, and so on.

Forex Market
The forex (foreign exchange) market is the market in which participants can buy, sell,
hedge, and speculate on the exchange rates between currency pairs. The forex market is the
most liquid market in the world, as cash is the most liquid of assets. The currency market handles
more than $5 trillion in daily transactions, which is more than the futures and equity markets
combined. As with the OTC markets, the forex market is also decentralized and consists of a
 global network of computers and brokers from around the world. The forex market is made up
of banks, commercial companies, central banks, investment management firms, hedge funds,
and retail forex brokers and investors.

Commodities Markets
Commodities markets are venues where producers and consumers meet to exchange
physical commodities such as agricultural products (e.g., corn, livestock, soybeans), energy
products (oil, gas, carbon credits), precious metals (gold, silver, platinum), or "soft"
commodities (such as cotton, coffee, and sugar). These are known as spot commodity markets,
where physical goods are exchanged for money.

The bulk of trading in these commodities, however, takes place on derivatives markets
that utilize spot commodities as the underlying assets. Forwards, futures, and options on
commodities are exchanged both OTC and on listed exchanges around the world such as
the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE).

Cryptocurrency Markets
The past several years have seen the introduction and rise of cryptocurrencies such
as Bitcoin and Ethereum, decentralized digital assets that are based on blockchain technology.
Today, hundreds of cryptocurrency tokens are available and trade globally across a patchwork
of independent online crypto exchanges. These exchanges host digital wallets for traders to
swap one cryptocurrency for another, or for fiat monies such as dollars or euros.

Because the majority of crypto exchanges are centralized platforms, users are
susceptible to hacks or fraud. Decentralized exchanges are also available that operate without
any central authority. These exchanges allow direct peer-to-peer (P2P) trading of digital
currencies without the need for an actual exchange authority to facilitate the transactions.
Futures and options trading are also available on major cryptocurrencies.
(Investopedia)

5. What are the differences between equity market and bond market?
One major difference between the bond and equity markets is that the equity market has
central places or exchanges where stocks are bought and sold.
The other key difference between the equity and bond market is the risk involved in
investing in each. When it comes to equities, investors may be exposed to risks such as country
or geopolitical risk (based on where a company does business or is based), currency risk,
liquidity risk, or even interest rate risks, which can affect a company's debt, the cash it has on
hand, and its bottom line.

Bonds, on the other hand, are more susceptible to risks such as inflation and interest
rates. When interest rates rise, bond prices tend to fall. If interest rates are high and you need
to sell your bond before it matures, you may end up getting less than the purchase price. If you
buy a bond from a company that isn't financially sound, you're opening yourself up to credit risk.
In a case like this, the bond issuer isn't able to make the interest payments, leaving itself open
to default.

Equity market performance can broadly be gauged using indexes such as the S&P 500
or Dow Jones Industrial Average. Similarly, bond indices like the Barclays Capital Aggregate
Bond Index can help investors track the performance of bond portfolios.
(Investopedia)
6. What are the differences between primary market and secondary market?
Primary Market
When a company publicly sells new stocks and bonds for the first time, it does so in the
primary capital market. This market is also called the new issues market. In many cases, the
new issue takes the form of an initial public offering (IPO). When investors purchase securities
on the primary capital market, the company that offers the securities hires an underwriting firm
to review it and create a prospectus outlining the price and other details of the securities to be
issued.
All issues on the primary market are subject to strict regulation. Companies must file
statements with the Securities and Exchange Commission (SEC) and other securities agencies
and must wait until their filings are approved before they can go public.

Companies that issue securities through the primary capital market may hire investment
bankers to obtain commitments from large institutional investors to purchase the securities when
first offered. Small investors are often unable to buy securities at this point because the company
and its investment bankers want to sell all of the available securities in a short period of time to
meet the required volume, and they must focus on marketing the sale to large investors who can
buy more securities at once. Marketing the sale to investors can often include a roadshow or dog
and pony show, in which investment bankers and the company's leadership travel to meet with
potential investors and convince them of the value of the security being issued.

Prices are often volatile in the primary market because demand is often hard to predict
when a security is first issued. That's why a lot of IPOs are set at low prices.

A company can raise more equity in the primary market after entering the secondary
market through a rights offering. The company will offer prorated rights based on shares
investors already own. Another option is a private placement, where a company may sell directly
to a large investor, such as a hedge fund or a bank. In this case, the shares are not made public.

Secondary Markets
The secondary market is where securities are traded after the company has sold its
offering on the primary market. It is also referred to as the stock market. The New York Stock
Exchange (NYSE), London Stock Exchange, and Nasdaq are secondary markets.

Small investors have a much better chance of trading securities on the secondary market
since they are excluded from IPOs. Anyone can purchase securities on the secondary market
as long as they are willing to pay the asking price per share.

A broker typically purchases the securities on behalf of an investor in the secondary

market. Unlike the primary market, where prices are set before an IPO takes place, prices on
the secondary market fluctuate with demand. Investors will also have to pay a commission to
the broker for carrying out the trade.

The volume of securities traded varies from day to day, as supply and demand for the
security fluctuates. This also has a big effect on the security's price.

Because the initial offering is complete, the issuing company is no longer a party to any
sale between two investors, except in the case of a company stock buyback. For example, after
Apple's Dec. 12, 1980, IPO on the primary market, individual investors have been able to
purchase Apple stock on the secondary market.1 Because Apple is no longer involved in the
issue of its stock, investors will, essentially, deal with one another when they trade shares in the
company.
 The secondary market has two different categories: the auction and the dealer markets.
The auction market is home to the open outcry system where buyers and sellers congregate in
one location and announce the prices at which they are willing to buy and sell their securities.
The NYSE is one such example. In dealer markets, though, people trade through electronic
networks. Most small investors trade through dealer markets.

7. What is over the counter market?

Sometimes you'll hear a dealer market referred to as an over-the-counter (OTC) market.
The term originally meant a relatively unorganized system where trading did not occur at a
physical place, as we described above, but rather through dealer networks. The term was most
likely derived from the off-Wall Street trading that boomed during the great bull market of the
1920s, in which shares were sold "over-the-counter" in stock shops. In other words, the stocks
were not listed on a stock exchange, they were "unlisted."

Over time, however, the meaning of OTC began to change. The Nasdaq was created in
1971 by the National Association of Securities Dealers (NASD) to bring liquidity to the companies
that were trading through dealer networks.3 At the time, few regulations were placed on shares
trading over-the-counter, something the NASD sought to improve. As the Nasdaq has evolved
over time to become a major exchange, the meaning of over-the-counter has become fuzzier.

Nowadays, the term "over-the-counter" generally refers to stocks that are not trading on
a stock exchange such as the Nasdaq, NYSE, or American Stock Exchange (AMEX). This
means that the stock trades either on the over-the-counter bulletin board (OTCBB) or the pink
sheets. Neither of these networks is an exchange; in fact, they describe themselves as providers
of pricing information for securities. OTCBB and pink sheet companies have far fewer
regulations to comply with than those that trade shares on a stock exchange. Most securities
that trade this way are penny stocks or are from very small companies.

For these reasons, while the Nasdaq is still considered a dealer market and, technically,
an OTC, today's Nasdaq is also a stock exchange and, therefore, it is inaccurate to say that it
trades in unlisted securities.
(Investopedia)

8. What are the difference between equity instruments with debt instruments?
Meaning
Equity instruments allow a company to raise money without incurring debt, and they have
used the holders to give money in exchange for a portion of the company. It funds raised by the
company by issuing shares knows as Equity. While Debt instruments are assets that require a
fixed payment to the holder, they are mortgages and government bonds. It funds owed by the
company towards another party knows as Debt.

Nature
Equity instruments are the nature of return Variable and irregular, In contrast to the return
on equity calls a dividend which is an appropriation of profit. While Debt instruments are the
nature of return Fixed and regular, and Return on debt knows as interest which is a charge
against profit.

Legal
Equity investments offer an ownership position in the company. Owning a stock makes
the investor an owner of the organization. The percentage of ownership depends on the number
of shares owned as compared with the total number of shares issued by the corporation. Also,
 the number of fund shares is its own funds. While Debt instruments, whatever they may call, are
corporate borrowing. Instead of procuring a straight commercial bank loan, the organization
“borrows” from a variety of investors. This is why debt instruments, such as bonds, come with a
stated interest rate, as a loan would. Also, the number of fund shares is the borrow funds.

Types
Equity instruments are the types of investment in Shares and Stocks. While Debt
instruments are the types of investment in Term loans, Debentures, Bonds, etc.

Goals and Risks

Depending on your investment goals, these differences may strongly influence your
preferences. All investments come with risk. However, debt instruments offer less risk than
equity investments. Your investing targets may favor equity investments if you’re seeking striking
growth or profit potential. Conversely, you might focus on debt instruments when you prefer
consistent income and less risk. Tailor your investment actions to match your objectives and risk
tolerance.
Equity instruments are the types of investment in the long term, so that high risk. While
Debt instruments are the types of investment in the comparatively short term, so that low and
less risk.
(Investopedia)

9. Research on market institutions in the financial markets.

In today's financial services marketplace, a financial institution exists to provide a wide
variety of deposit, lending, and investment products to individuals, businesses, or both. While
some financial institutions focus on providing services and accounts for the general public,
others are more likely to serve only certain consumers with more specialized offerings. To know
which financial institution is most appropriate for serving a specific need, it is important to
understand the difference between the types of institutions and the purposes they serve.

Central Banks
Central banks are the financial institutions responsible for the oversight and management
of all other banks. In the United States, the central bank is the Federal Reserve Bank, which is
responsible for conducting monetary policy and supervision and regulation of financial
institutions.

Individual consumers do not have direct contact with a central bank; instead, large
financial institutions work directly with the Federal Reserve Bank to provide products and
services to the general public.

Retail and Commercial Banks

Traditionally, retail banks offered products to individual consumers while commercial
banks worked directly with businesses. Currently, the majority of large banks offer deposit
accounts, lending, and limited financial advice to both demographics.
Products offered at retail and commercial banks include checking and savings accounts,
certificates of deposit (CDs), personal and mortgage loans, credit cards, and business banking
accounts.

Internet Banks
A newer entrant to the financial institution market is internet banks, which work similarly
to retail banks. Internet banks offer the same products and services as conventional banks, but
they do so through online platforms instead of brick and mortar locations.
 Under internet banks, there are two categories: digital banks and neo-banks. Digital
banks are online-only platforms affiliated with traditional banks. However, neobanks are pure
digital native banks with no affiliation to any bank but themselves.

Credit Unions
Credit unions serve a specific demographic per their field of membership, such as
teachers or members of the military. While the products offered resemble retail bank offerings,
credit unions are owned by their members and operate for their benefit.

Savings and Loan Associations

Financial institutions that are 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.

Investment Banks and Companies

Investment banks do not take deposits; instead, they help individuals, businesses and
governments raise capital through the issuance of securities. Investment companies,
traditionally known as mutual fund companies, pool funds from individuals and institutional
investors to provide them access to the broader securities market. Robo-advisors are the new
breed of such companies, enabled by mobile technology to support investment services more
cost-effectively and provide broader access to investing by the public.

Brokerage Firms
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.

Insurance Companies
Financial institutions that help individuals transfer the 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.

Mortgage Companies
Financial institutions that originate or fund mortgage loans are mortgage companies.
While most mortgage companies serve the individual consumer market, some specialize in
lending options for commercial real estate only.

10. Research on the regulatory framework for financial markets?

o General Banking Law
o Republic Act 8799
o Financial Market Regulation and Intermediation Program