Financial Markets and Decisions Flashcards
What is a financial asset?
A tangible liquid asset that derives value because of a contractual claim of what it represents. They do not necessarily have physical worth.
What are examples of financial instruments?
Shares: ordinary and preference
Bonds
-Government: gilts, treasury bills
-Corporate:
bonds: debentures and loan stock
bills: bills of exchange and commercial
paperWhat are financial markets?
Markets for trading typically long-term financial securities. It is a way of providing cash for companies needing long term finance. Investors can also buy/ sell securities.
What are the types of financial markets?
Primary Markets
Secondary Markets
Over the Counter Markets
What are primary markets?
NEW securities are issued on exchange. In this market firms sell new stocks and bonds to the public for the first time. It is also the market where governments or public sector institutions receive cash through bond offerings.
What are secondary markets?
Where investors purchase and sell securities or assets from other investors. In this market we are dealing with EXISTING securities. It increases liquidity of securities.
What is the Over the Counter market?
The OTC market is a type of secondary market, where trading occurs through dealer networks.
What are financial intermediaries?
It is an entity that acts as the middleman between two parties in a financial transaction.
Function of financial intermediaries
- Raise money from investors through taking deposits and sell policies
- Provide finance to companies through investing in financial assets
- Financial institutions: banks and insurance companies
- Investment funds: mutual funds, hedge funds, pension funds.
What are capital markets?
They are markets for buying and selling equity and debt. Capital markets channel savings and investment between suppliers and capital.
