FINANCIAL MARKETS

Business firms, individuals, and

government units often need to raise
capital.
On the other hand, the incomes of some
individuals and firms are greater than their
current expenditures, so they have funds
available to invest.
People and organizations needing money
are brought together with those having
surplus funds in the FINANCIAL MARKETS.
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 PHYSICAL ASSET MARKETS

• Tangible or real asset markets

are those for such products as
wheat, autos, real estate,
computers and machinery.
• Financial asset markets deal
with stocks, bonds, notes, and
mortgages etc.
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 SPOT MARKETS AND FUTURE
MARKETS
• Refer to whether the assets are
being bought or sold for on the
spot delivery (literally, within
few days) or for delivery at
some future date, such as six
months or a year into the
future.
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 MONEY MARTKETS

• Money markets are the markets

for short-term, highly liquid
debt securities. New York and
London money markets have
long been the world’s largest.

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 CAPITAL MARKETS
• Capital markets are the markets
for long-term debt and
corporate stocks. The Stock
Exchanges are examples of
capital markets.

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• Short-term generally means
one year or less
• Intermediate term means one to
ten years
• Long-term means more than
ten years

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 MORTGAGE MARKETS

• Deals with loans on residential,

commercial, and industrial real
estate while consumer credit
markets involve loans on autos
and appliances etc.

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 PRIMARY & SECONDARY
MARKETS

• Primary markets are markets in

which corporations raise new
capital.
• Secondary markets are markets in
which existing, already outstand,
securities are traded among
investors. The Karachi Stock
Exchange is a secondary market.
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 PRIVATE MARKETS

• Where transactions are worked

out between two parties, are
differentiated from stock
exchange markets.

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 FINANCIAL INSTITUTIONS

• Transfers of capital between

savers and those who need
capital take place in the three
different ways.

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DIRECT TRANSFERS OF MONEY
AND SECURITIES

• A business sells its stock or

bonds directly to savers,
without going through any type
of financial institution.

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INDIRECT TRANSFER THROUGH
AN INVESTMENT BANKING
HOUSE

• The company sells its stocks or

bonds to the investment bank,
which in turn sells these same
securities to savers.

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INDIRECT TRANSFER THROUGH
A FINANCIAL INTERMEDIARY
• Transfers can also be made
through a financial intermediary
such as a bank or mutual fund.
Here the intermediary obtains
funds from savers, issuing its own
securities in exchange, and it then
uses the money to purchase and
then hold a business’s securities.
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• For example, a saver might give
money to a bank, receiving from it
a certificate of deposit, and then
the bank might lend the money to a
small business in the form of a
mortgage loan.

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