Financial Markets and Institutions

Class 4 – Reflection Paper

Anindita Saha, Roll: 002, BBA-28
February 14, 2022

Marketable securities are those that are tradable in the secondary market, i.e., securities that
have active secondary markets.
Economy has both real asset market as well as financial asset market. Both the markets
usually correlate with each other, and excessive growth in the financial market that cannot be
traced back to growth in the real asset market is often a signal of financial market crash.
Capital market includes both market for equity and debt-based financial assets, with primary
and secondary markets being present for both cases.
Margin loans allow investors to borrow from debtors and invest that amount in different
financial securities. These usually magnify the effect of any profit or loss made through the
said investment.
An increase in money supply in the economy causes high liquidity to exist for banks. Banks
invest their excess funds in the capital market (often equity market), which causes the
demand of capital market securities to go up and thus, capital market booms.