👍 What is a financial market?
The financial market is a place where financial transactions are organized between a supplier and a consumer of funds.
In addition, a means of mediating the supply and demand of money in the financial market is called a financial asset or financial instrument.
Financial transactions involve direct financing (stocks, bonds) and indirect financing (deposits, loans), in which funds are transferred through financial intermediaries such as banks, in which the consumer delivers securities issued in his or her name to the supplier and directly raises funds. It is divided into.
The existence of financial markets has the following effects on the country.
Efficient allocation of resources: Resolving deficits and improving productivity by transferring surplus funds from households to companies
Increasing consumer utility: Enhancement of utility by allowing households, who are consumers, to choose a consumption time that suits their preferences
Diversification of risk: Expanding market participation by allowing investors to pass on their risk to other market participants with high risk preference
Liquidity provision: Reduced borrowing costs for fund users (company) with high currency
Reduction of information collection cost: The borrower's credit is easily reflected in the price, reducing the cost of collecting price information
Market discipline: To improve the health of borrowers, use market signals to perform monitoring functions
👍 Classification by financial market type
👊 Short-term financial market vs capital market
Short-term loans/long-term bonds/equity without maturity of one year or longer are classified as capital markets if they are within one year of maturity.
The short-term financial market is used by financial companies, companies, and individuals to adjust the temporary imbalance in the supply and demand of funds.
Capital markets are used by businesses, financial institutions, and governments to raise long-term funds.
👊 Debt market (bond market) vs stock market
The debt certificate market is a market that regularly pays a certain amount of interest until maturity and trades bonds that are obligated to repay principal and interest.
The stock market is a market in which stocks are not obligated to repay principal and interest, but have the right to claim dividends for corporate net profit.
👊 Issue market vs distribution market
The issuance market is a market for newly issuing short-term financial products, bonds, and stocks.
The distribution market refers to the market in which already issued short and long-term financial products are traded.
👊 Exchange market vs OTC market
An exchange market is an organized market in which buy/sell orders for a specific financial instrument are processed according to the standardized rules of the exchange, referred to as "in the market" trading.
Nasdaq is a representative exchange transaction.
The over-the-counter market is a market that is traded at a place other than an exchange, and is divided into direct trading or a store market of dealers/brokers.
Most of the bonds, derivatives, calls, etc. fall under the OTC market.