Financial market and it's components.

Functions of financial system financial market refers

to a broad term that encompasses various institutions, The instruments, and systems that
facilitate the exchange of financial assets and securities. It serves as a platform where
individuals, businesses, and governments can raise capital, invest, trade, and manage
financial risks. The financial market has several components, which can be categorized as
follows: 1. Capital Market: This includes the buying and selling of long-term financial
instruments, such as stocks, bonds, and other securities. The capital market can be further
divided into primary and secondary markets. The primary market is where new securities are
issued and sold for the first time, while the secondary market involves the trading of
previously issued securities. 2. Money Market: The money market deals with short-term
borrowing and lending of funds. It focuses on low-risk, highly liquid instruments with
maturities typically less than one year, such as Treasury bills, certificates of deposit (CDs),
commercial paper, and repurchase agreements. 3. Derivatives Market: The derivatives
market involves the trading of financial contracts whose value derives from an underlying
asset or benchmark. Derivatives can include options, futures, swaps, and forward contracts.
They are used for hedging, speculation, and arbitrage. 4. Foreign Exchange Market: This
market facilitates the buying and selling of different currencies. It provides a mechanism for
participants to exchange one currency for another, allowing international trade and
investment. 5. Commodity Market: Commodity markets involve the trading of physical goods,
such as agricultural products (e.g., wheat, corn), energy resources (e.g., oil, natural gas),
metals (e.g., gold, silver), and other raw materials. Commodity markets enable producers,
consumers, and investors to manage price risks associated with these goods. The financial
system plays a crucial role in an economy by performing se