Economics: Primary and Secondary Markets

Vocabulary terms covering primary and secondary financial markets, including specific types of financial assets and market functions.

Derivatives

Financial contracts set between $2$ or more businesses that protect the value of a product based on an underlying asset, such as Qantas signing a contract for $50\text{ million}$ worth of jet fuel in $2008$ to stay safe from price fluctuations.

Equity

A company listing on the ASX for the first time offering shares, which represent part ownership of the company and result in the business directly receiving the money.

Bonds

Loans issued by an entity such as a business or government that represent debt and include interest.

Primary Market

A market where assets are sold for the first time and the money goes directly to the company or government.

Secondary Markets

Transactions involving assets that have already been issued, such as a shareholder selling their shares to another individual.

Functions of Secondary Markets

Provides liquidity, encourages investing, and determines prices.