FINANCIAL MARKETS

COURSE
INTRODUCTION
This course explores the function, pricing and
institutional structures of financial markets. This intent is
to understand the differences between the instruments and

1
institutions that operate in today’s financial markets. This
evaluate empirical evidence of market performance, and
contrast it with theories of market performance.

OVERVIEW OF FINANCIAL
MARKETS
Financial markets are an important components of a country’s financial system.
It is the infrastructure that connects lender and borrower. Individuals who have a surplus
money invest in securities and entities which require capital issues securities. This

2
investors a return on the security while the entity gets capital for growing of expanding
business. The financial market create an alternative for the individual who has a higher
risk appetite and wants to earn higher returns. They perform important functions of
efficient payment mechanism, providing information about companies, enhancing
liquidity of financial claims and an efficient source for capital generation and investment.

OVERVIEW OF FINANCIAL
INSTITUTIONS

3
Financial institutions are any
establishments that make these markets function
efficiently. They attempt to understand working of
Banking Industry, the Federal Reserve and the
behaviour of financial intermediaries.

It provide a foundation for the further

study of finance, as well as essential
component of managerial education
about the world of business operates.

STRUCTURE OF THE FEDERAL RESERVE

SYSTEM

4 Organization of the Federal

Reserve System

Board of Governors of the

Federal Reserve System 5
6 Federal Open Market
Committee

Function Performed by
Federal Reserve Banks 7
8
Balance Sheet of the Federal
Reserve
 Financial Markets

4
Money Markets are markets that trade
debt securities with maturities less than one
year. It transfer funds exist from individuals,
corporation and government units with short- MORTGAGE
term excess funds. The need of money market MARKETS
arises because the immediate cash do not
necessarily coincide with their receipts of cash.

1
Mortgages are loans to individuals or

1
business to purchase land or other real assets.
Major Categories of

5
MONEY 
mortgages
Home Mortgages

MARKETS 

Commercial Mortgages
Multifamily Dwellings
 Farms

5 5
Other Types of Mortgages
 Jumbo Mortgages

1
 Treasury Bills Interest Rates  Subprime Mortgages
  Option Arms
 Federal Funds Fixed-Rate Mortgage
 Adjustable-Rate  Second Mortgages
 Repurchase  Home Equity Loan
Mortgage
Agreements  Discount Points  Reverse-Annuity
 Commercial

2 6
Paper
 Negotiable
Certificates of STOCK

5
Deposit
MARKETS

5
 Bankers’
Acceptance

1 7 6
Bond Markets Stock Markets are markets
are markets in that allow supplier of funds to
which bonds are
issued and
BOND efficiently and cheaply get
equity funds to public

3
traded. MARKETS corporation.

Common Stock is the fundamental

5
ownership claim in public or Private
Corporation.

1
 Treasury Notes and

1
Bonds Characteristics
 Municipal Bonds  Discretionary Dividend
Payments
 Corporate Bonds
 Residual Claim Status
  Limited Liability
 Bearer Bonds Debenture
 Voting Rights
 Registered  Subordinate
Primary Stock Markets
Bonds Debenture

5
 Net Proceeds

5
 Term Bonds  Convertible  Gross Proceeds Secondar Stock


1
Underwrite Spread Markets
 Bonds

5
Serial Bonds  Syndicate  Market Order
 Mortgage Bonds  Stock  Originating Houses  Limit Order
Warrants  IPO
 Equipment Trust  Seasoned Offering
 Order Book
Certificates  Callable  Pre-emptive Rights
Bonds

5
s

CONCLUSION

I therefore conclude that, financial

market have a particular that makes them

1 unique and institutions and procedures that

facilitate transactions in all types of financial
securities.
STOCK
MARKETS

The Federal Reserve System structure is

the central bank of the United States and it

2 promote the effective operation of the US

economy and more generally the pubic
interest.

STOCK
MARKETS

The money market maintains a balance

between the supply and demand for the monetary

3
transactions done in the market within a period of
6 months to one year while capital market
facilitates the movement of capital to be used
more profitability and productively to boost

2 national income.

STOCK
MARKETS
STOCK
MARKETS

The stock market is to provide long-

4 term growth potential while the role of the

bond market is to provide income stream.

The financial market plays an

important role in facilitating the smooth
operation of capitalist economies by
5 allocating resources and creating liquidity for
business and entrepreneurs.