Financial services and capital market courses are becoming increasingly in demand on a daily basis, as financial markets are one of the most significant components of any country's overall economic structure. It is a meeting place between suppliers and demand in this business, just like any other market, where people seeking investment meet those seeking funding.
However, this isn't its sole distinguishing feature. Financial markets aid in price creation, guarantee the liquidity needed by the system and, in general, allow economic actors to access the financial resources they need to finance their activity.
What are financial markets?
A financial market is a real or virtual location where investors may buy and sell financial assets. Its goal is to convert household and other investors' funds into company investments or public finance in the most effective and transparent manner feasible.
The financial market activity took place on distinct exchanges where buy and sell orders were made until recently. However, thanks to the convergence of new technologies, it is now simple to function in the markets via telematics platforms, particularly via mobile devices or one's own computer.
There are two major financial markets:
- The primary market, also known as the issuance market, is where traded securities are first issued. Government bonds and corporate bonds, for example, are issued in this market.
- The secondary market, also known as the trading market, is where primary market assets are purchased and sold. The stock exchange is the most well-known secondary market, where certain assets, such as business shares, fixed income instruments, derivatives, and other derivatives, are exchanged in real-time.
What financial markets are for?
Financial markets work in the same way that any other market does. They are attended by both savers and savers-to-be, and the price is fixed as a consequence of supply and demand convergence.
Markets provide at least four purposes:
- To bring together those who want to sell something and others who want to purchase it.
- Appropriately establish pricing for the asset-based on supply and demand.
- To supply financial assets with liquidity.
- Decrease maturities and intermediation costs, allowing assets to circulate more freely.
- Favor effective resource allocation to decrease intermediation costs and maturities since this is the best avenue for quick communication between bidders and sellers.
Characteristics of financial markets
What breeds success in financial services and capital markets are the common defining characteristics that have the financial markets:
- Transparency: Financial market assets are transparent in the sense that any investor may simply and rapidly access all of the information they want.
- Market breadth: the bigger the number of assets exchanged on a financial market, as well as the number of investors that visit it, the greater the market's width.
- Accessibility: There are no restrictions on who may acquire or sell assets.
- Market depth: the more buy and sell orders that are transacted, the deeper the market.
- Flexibility: If market players can respond swiftly to purchase and sell orders, the market is flexible.
- There are no transaction fees, like taxes, interest rate fluctuations, or inflation.
Volatility in financial markets
As previously stated, financial markets enable the development of prices that are determined by supply and demand. Asset prices typically fluctuate based on investors' expectations of future returns, making them cheaper or more costly in the future.
Volatility is a fundamental feature of financial markets that has existed at all periods and in all historical contexts and is in some ways a gauge of their risk. The more the financial asset's volatility, the higher the latent loss, but also the higher the gain.
Any civilized country has a sufficiently developed financial system, where markets play an essential role in guaranteeing the flow of resources between suppliers and demanders. At Imarticus we offer great capital market training courses that fall within our advanced management program in financial services and capital markets. Visit our page today to start your career and be part of the development of the financial system of our society.