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CHAPTER 1 OVERVIEW OF FINANCIAL MARKETS & INSTITUTIONS - Coggle…
CHAPTER 1
OVERVIEW OF FINANCIAL MARKETS & INSTITUTIONS
What is Market?
market: venue where goods & services exchanged
financial market: is a place where the borrowing and lending transactions occurred
Other Markets
Foreign Exchange Market
Trade currency for immediate delivery (spot) or for some future delivery
Derivatives Market
Highly leveraged financial securities linked to the underlying security
Capital Allocation Process
Type 1
:
no money & ideas
(Providing labor, consuming products)
Type 2
:
have money, but no ideas
(Investors)
Type 3
:
no money, have ideas
(Conduct business from Type 2 money)
Type 4
:
have both money & ideas
(Self-funded)
Primary Market
VS
Secondary Market
Primary Market
new issues of securities
used by corporations & governments to issue new stocks & bonds
Secondary Market
the trading of previously issued securities
Provide liquidity and diversification benefits for investors
Secondary Market for Equities
Broker Market
the buyer and seller are brought together on a “securities exchange” to trade securities.
Dealer Market
the buyer and seller have their orders executed by securities dealers that make markets in the given security.
Money Market VS Capital Market
Money markets
trade debt securities or instruments with maturities of one year or less
Capital Market
trade stocks and long- term debt with maturities greater than one year
IPO
(Initial Public Offering)
a stock issued by the company to the public for the first time to raise capital