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Assignment on

Functions of Financial Market

Submitted on

Meherun Nesa

Assistant Professor

Green Business School

Presented by

Name ID

Md. Seik Sozib 193006053

S A M Mahfuzul 193006050
Hoque
Khandaker Saabiq 201006015

Rasel Ali 193006013

Aongkon Kadir 193006005

Submitted On: 15 August 2022

Green University of Bangladesh

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Letter of Transmittal

August 14, 2022

Meherun Nesa
Assistant Professor,
Green Business School
Green University of Bangladesh
Dear Meherun Nesa

As agreed on August 14 contracts, we are submitting the attached report entitled `` Function of
Financial Market``

This report examines the functions of financial markets. In this report we mention advantages
of functions of financial market, how it affects the whole community. We also discussed the
types of financial market. Under the types of financial market we have discussed the concept of
bond market, what is stock market,the concept of primary market and secondary market and
what are the money and capital markets.

We also discussed the concept of price determination, funds Mobilization, liquidity, risk sharing,
easy Access, deduction in transaction costs and provision of the information and aapital
formation

We hope you find this report satisfactory.

Sincerely yours,

Md. Seik Sozib . ID : 193006053

S A M Mahfuzul Hoque. ID : 193006050
Rasel Ali. ID : 193006013
Khandaker Saabiq. ID : 201006015
Aongkon Kadir. ID: 193006005

Green Business School

Green University of Bangladesh
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Acknowledgment

First of all, we would like to thank our regarded Meherun Nesa mam for conducting the course
on Money and Banking. The course given the most recent information abilities which is able
give us with future proficient involvement. Her by and large exertion made me get ready for the
course appropriately. Her information on this specific side gave me sound thoughts on cash and
managing an account in detail. It would be very outlandish without her endeavors given to me.
The generally address and information that she has given us not as it were permitted us to
memorize but moreover given numerous valuable sources on how to relate to the working
environment.
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Table of contents

Sl. Topics Page

1. Types of financial market 05

2. Functions of financial market 06-07

3. Advantages of functions of financial market 08

4. Segment of financial market 9-10

5. References 11
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Types of financial market

When a company or individual wants to receive money, there are two ways to receive it. Debt
and Stock Market

Bond market:
Bonds are traded on the debt market. This is a written contract or mortgage. A secure financial
market is bonds government bond issuance. The interest rate by coupon rate is provided here.
Bonds are purchased by those with available funds. Corporate bond issuance is overly risky if
the issue of government bonds carries no risk. To raise capital and finance development
projects, governments issue bonds.
Bonds two kinds: short-term, less than a year, promises
Long-term warranties of at least ten years

Stock market:
The stock market is made of stocks. The stock market is what it is. Here, equity is offered to
raise money. This is accomplished by investing in a corporate ownership stake. In this case,
market conditions determine how much the market share is worth. The bond market is more
secure than this. You take ownership of the company when you buy shares. They did not spare
any market share for anyone in order to increase the capital organization.

Primary market:
The freshly issued security in the financial market is known as market.

Secondary market:
A previously issued financial market security is traded on the secondary market.

Money and Capital Markets:

The capital showcase offers long-term obligation securities with a advertise development of
one year or more, whereas the cash showcase solely offers short-term obligation securities
with a advertise development of less than one year.
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Functions of financial market

1 – Price Determination:
Prices for the various financial instruments traded between buyers and sellers in financial
markets are set by financial markets. Market factors dictate the price at which a financial item
is exchanged on financial markets. H. Demand and supply.
Therefore, the financial markets serve as the marketplace for pricing both freshly issued
financial assets and the shares of those assets.

2 – Funds Mobilization:
Participants in the financial markets decide not only the price at which financial instruments are
traded, but also the required return on the capital that investors have invested. The investor's
expected return dictates the searcher's motive.
According to this function of the financial markets alone, money that is accessible from lenders
or investors of money is distributed to people who need it or who raise it by issuing financial
instruments on the financial markets. Here I am. Therefore, financial markets can aid in
releasing investors' savings.

3 – Liquidity
Investors have the option to sell financial assets at the current market fair value at any moment
during market hours thanks to the liquidity feature of financial markets.
If the financial markets' liquidity function is absent. An investor is compelled to keep a financial
security or instrument in their possession until either the asset may be sold in the market or the
security's issuer is legally required to make a payment. H. At the time when debt securities
mature or, in the case of equity securities, at the time that the entity is voluntarily or
involuntarily liquidated.
Investors can readily sell their securities and turn them into cash on the financial markets,
hence providing liquidity.

4 – Risk sharing
The monetary showcase performs the work of risk-sharing as the individual who is undertaking
the ventures is distinctive from the people who are contributing their support in those
investments.
With the assistance of the money related showcase, the chance is exchanged from the
individual who embraces the ventures to those who give the stores for making those
investments.

5 – Easy Access
The businesses require the financial specialists to raise reserves, and the financial specialists
require the businesses to contribute their cash and gain the returns from them. So the
monetary showcase stage gives the potential buyer and dealer effortlessly, which makes a
difference them spare their time and cash in finding the potential buyer and dealer.
6 – Reduction in Transaction Costs and Provision of the Information
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Different kinds of information are needed by traders when they trade securities. Time and
money are expended in the same amounts during procurement.
However, without having to spend any money, financial markets can assist in giving traders a
wealth of information. Financial markets lower transaction costs in this way.

7 – Capital Formation
Budgetary markets give the channel through which the modern investors’ investment funds
stream within the country, which helps within the country’s capital formation.
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Advantages of functions of financial market

Investors and companies that operate in the financial markets can benefit from a variety of
ways from the way the financial markets work.

The following are some of the benefits:

1. Contribute to the development of a transparent, regulated framework for enterprises to

raise sizable amounts of capital from the market.

2. Serves as a conduit for the savings of potential investors to enter the economy. As a
result, the nation's capital is created. Traders can save time, effort, and money by not
having to spend resources looking for buyers or sellers of securities.

3. Offers a venue where buyers and sellers can interact and exchange assets. The dynamics
of the market determine trading prices. The market's supply and demand. As a result, it
influences a security's price.

4. Assists in mobilizing investors' savings by allowing them to allocate their funds to the
most profitable uses. Platforms for the financial markets provide potential buyers and
sellers of assets to traders that make finding potential buyers and sellers faster and less
expensive.

5. Trading able assets benefit from the liquidity that investors may quickly generate on
financial markets by selling securities and turning them into cash.
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The financial markets' main objective is to turn lucrative fund units into deficit units. In
economics, there are surplus units (lenders and savers) and deficit units (borrowers - spending).
Connecting lenders and borrowers is difficult without a financial market.
Lenders (family business, non-government)
Borrowers (Government Non-Resident Entities)

Segment of financial market

Financial Intermediary
A third party who offers a setting for parties to execute financial transactions is known as a
financial intermediary. The fundamental process of financial intermediation is demonstrated by
the example of a bank that receives deposits from consumers and loans money to customers
who are in need.
Banks, insurance businesses, stock exchanges, investment fund companies, etc. are some
examples of financial intermediaries.

Role of Financial Intermediary

Monetary mediators fundamentally work by connecting companies to overflow and shortfall
reserves. They encourage the stream of cash within the economy and bolster financial
development. The complexity of the intermediary's part shifts depending on the sort of benefit
or item that the mediator offers. They take the frame of channel advances, contracts, venture
vehicles, renting, protections, etc.
Direct finance:
When you apply for a car loan directly with a lender, this is often referred to as a direct loan. B.
A financial organization or bank. Before visiting the dealer during this instance, you're aware of
how much you can pay. Direct investment. Purchasing stocks or bonds directly from the issuing
corporation, or borrowing money from a lover to donate. Through financial markets, where
lenders (investors) lend their savings on to borrowers, these direct financial arrangements are
created. Direct finance is significantly influenced by brokers, dealers, and investment banks.

If you would like to transfer, selling the financial instrument, also referred to as a straight loan,
is required. as an example , Square Pharmaceuticals releases fresh stock or bonds purchasable .

Advantages:
The key benefits for the Coordinate Fund are its adaptability and customization. You can submit
as many grant applications as you like, submit them before or after shopping, and maintain
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complete control over the procedure by corresponding with your bank directly.

Disadvantages:
Changing cash management will require more time. Additionally, you should pick the best
decision for your needs by asking a few questions while submitting a standard application.

Indirect finance:
When a business receives money from a 3rd party, this happens . B. it's a bank and doesn't take
out loans from investors directly. Interest is paid by the corporation to 3rd parties, who then
pay interest to depositors or investors. Your financial intermediary has sent you this.
institutions like banks, insurance companies, etc.
Let's say I am a lender and I put money in a bank, and therefore the bank lends money to
various companies and companies. Financing of this type called indirect financing.

Advantages:
Working with a group can speed up the circuitous financing prepare whether or not it may
include more accomplices than working specifically with the bank. A merchant or loan specialist
might handle credits a few times per day whereas whereas at the same time looking for for
other loaning prospects.

Disadvantages:
Consider whether the trade-offs are worthwhile before investing more money in the time-
consuming fundraising process for ease and speed.
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References