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    Module 1

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    Ghillian Mae Guiang
    This document provides an introduction and overview of financial markets and institutions. It discusses why financial markets are important for allocating capital and promoting economic growth. It defines key concepts such as primary versus secondary markets, money versus capital markets, and depository versus non-depository financial institutions. It also briefly outlines major financial market segments including foreign exchange, derivatives, and globalization trends. The overall goal is to introduce students to the main components and functions of financial systems.

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    Module 1

    Uploaded by

    Ghillian Mae Guiang
    83 views12 pages
    This document provides an introduction and overview of financial markets and institutions. It discusses why financial markets are important for allocating capital and promoting economic growth. It defines key concepts such as primary versus secondary markets, money versus capital markets, and depository versus non-depository financial institutions. It also briefly outlines major financial market segments including foreign exchange, derivatives, and globalization trends. The overall goal is to introduce students to the main components and functions of financial systems.

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    This document provides an introduction and overview of financial markets and institutions. It discusses why financial markets are important for allocating capital and promoting economic growth. It defines key concepts such as primary versus secondary markets, money versus capital markets, and depository versus non-depository financial institutions. It also briefly outlines major financial market segments including foreign exchange, derivatives, and globalization trends. The overall goal is to introduce students to the main components and functions of financial systems.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    83 views12 pages

    Module 1

    Uploaded by

    Ghillian Mae Guiang
    This document provides an introduction and overview of financial markets and institutions. It discusses why financial markets are important for allocating capital and promoting economic growth. It defines key concepts such as primary versus secondary markets, money versus capital markets, and depository versus non-depository financial institutions. It also briefly outlines major financial market segments including foreign exchange, derivatives, and globalization trends. The overall goal is to introduce students to the main components and functions of financial systems.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    Introduction to

    Financial Markets
    Module 1
    Study Objectives
    To discuss the following:
    1. Why Study Financial Markets and Institutions 
    2. Overview of Financial Markets 
    3. Primary Markets versus Secondary Markets 
    4. Money Markets versus Capital Markets 
    5. Foreign Exchange Markets 
    6. Derivative Security Markets 
    7. Financial Market Regulation 
    8. Overview of Financial Institutions 
    9. Globalization of Financial Markets and Institutions 
    Why Study Financial Markets?
     Markets and institutions are primary
    channels to allocate capital in our
    society.
    • Proper capital allocation leads to
    growth in:
     Societal wealth
     Income
     Economic opportunity
    Financial Markets

     Financial markets can be distinguished


    along two dimensions:
    • primary versus secondary markets.
    • money versus capital markets.
    Primary Vs. Secondary Markets

    Primary markets.
    • Markets in which users of funds (e.g., corporations)
    raise funds by issuing new financial instruments
    (e.g., stocks and bonds).
    Secondary markets.
    • Markets where existing financial instruments are
    traded among investors (e.g., exchange traded:
    NYSE and over-the-counter: NASDAQ).
    Money Vs. Capital Markets
    Money markets
    • Markets that trade debt securities with
    maturities of one year or less (e.g., CDs and
    U.S. Treasury bills).
    • little or no risk of capital loss, but low return.

    Capital markets
    • Markets that trade debt (bonds) and
    equity (stock) instruments with
    maturities of more than one year.
    • substantial risk of capital loss, but higher
    promised return.
    Foreign Exchange (F X) Markets
    FX markets
    • trading one currency for another (e.g.,
    dollar for yen).

    Spot FX
    • the immediate exchange of
    currencies at current exchange
    rates.

    Forward FX
    • the exchange of currencies in the
    future on a specific date and at a pre-
    specified exchange rate.
    Financial Market Regulator
    The Securities Exchange Act of 1934.
    • Securities and Exchange Commission (S E C)
    is the main regulator of securities
    markets.

    • FIs are heavily regulated to protect


    society at large from market failures.
    Financial Institutions (F I s)

    Financial Institutions.
    • Institutions through which suppliers channel money to
    users of funds.

    Financial Institutions are distinguished by:


    • Whether they accept insured deposits.
    • Depository versus non-depository financial
    institutions.
    • Whether they receive contractual
    payments from customers.
    Depository versus Non-Depository F I s

    Depository institutions:
    • Commercial banks, savings associations,
    savings banks, credit unions.

    Non-depository institutions.
    • Contractual:
    • insurance companies, pension funds,
    • Non-contractual:
    • securities firms and investment banks, mutual funds.
    Globalization of Financial
    Markets and Institutions

    • The pool of savings from foreign investors is increasing


    and investors look to diversify globally now more than
    ever before.
    • Information on foreign markets and investments is
    becoming readily accessible and deregulation across the
    globe is allowing even greater access to foreign
    markets.
    • Global capital flows are larger than ever.
    -END-

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