unit 1- Financial System and Financial Markets

Financial market: The environment where units with fund deficit meet with units with fund surplus
and where fund transfer takes place.

Financial system: Systems consisting of those who supply and demand funds, financial entities that
mediate and provide fund flows, and legal and administrative regulations.

Direct investment: Establishing production facilities in foreign countries alone or with partners by
spreading beyond the borders of the country

Portfolio investment: Investment by foreigners in securities (hot money)

Efficient market: Markets in which buyers and sellers do not have a single influence on the market.

Money market: These are the markets where short-term fund supply and demand meet.

Basic instruments of the money market: Treasury bills, financial bills, bank bills, asset-backed
securities, money, deposits, certificates of deposit, repo, bank acceptances, euro dollar

Features of the money market: The liquidity of financial instruments is higher than the capital
market, maturity is shorter, risk is lower, returns are lower, money markets are the most developed
and effective markets.

Capital market: These are the markets where medium and long-term fund supply and demand meet.

Basic instruments of the capital market: Shares, government bonds, profit and loss sharing
certificates, income sharing certificates, mortgage debt and revenue bonds.

Necessary conditions for the development of the capital market: There are many public joint stock
companies, intermediary institutions are developed, the level of savings in the economy increases,
there are adequate legal regulations, businesses need long-term funds, there is a suitable
environment for investment, there are people or institutions that will conduct investment analysis.
having a stable economy
Liquidity: Liquidity can also be expressed as the ability to be converted into money. The faster
financial assets can be converted into money without significant loss of value, the higher their
liquidity will be.

Organized Markets: Access to information by investors is easy and low-cost, buyers and sellers do not
have the power to influence the market on their own, the prices of financial assets are determined
accurately, securities of companies listed on the stock exchange are bought and sold within the
framework of certain rules.

Unorganized markets: Prices of financial assets are determined by bargaining, the possibility of
deception is high, interbank markets, free gold market and free foreign exchange market are
unorganized markets, many financial institutions carry out fund transfers by communicating with
each other via telephone, telex, fax and computers.

Primary market: Markets where financial assets are sold to buyers for the first time.

Secondary market: These are the markets where previously bought and sold financial assets are
traded again.

Spot market: Markets where payment and delivery are made immediately or within 2 business days.

Forward markets: These are markets where payment and delivery are made at a future date and the
price is determined today.

Financial assets: Financial instruments are assets that those who offer funds to financial markets
receive from those who request funds in return for the funds they offer.

Hybrid financial assets: Bonds convertible into preferred stock

Risk: Measurable volatility in the return of a financial asset.

Divisibility: It is a feature related to the minimum amount of financial assets that can be converted
into money.

Intermediary Institutions: Intermediary institutions are institutions that are allowed to operate in
financial markets to act as intermediaries in both primary and secondary markets.
Direct financing: It is the exchange of financial assets without any intermediaries.

Indirect financing: Exchange of financial assets through intermediaries

Broker: Institutions that compare those who offer funds with those who demand them in return for a
commission. Brokers do not carry out transactions on their own behalf.

Dealer: Intermediary institutions that carry out transactions on behalf of others and on their own
behalf.

Investment Banks: Institutions that provide consultancy and intermediary services in the securities
issuance of businesses that do not accept deposits or provide loans.