2.4.1 Yr2 The structure of financial markets and financial assets

Money Market

Market providing short term finance to individuals, firms and governments, typically lasting from 24 hours to 12 months.

Capital Market

Market that provides medium to long-term finance through the issuance of securities such as shares and corporate bonds.

Foreign Exchange Market

Market where different currencies are bought and sold, facilitating international trade and investment.

Debt

Money that must be paid back with interest; includes loans and overdrafts.

Equity

Investment in a company that provides the investor with ownership stakes and a share of future profits.

Liquidity

Ease and speed with which an asset can be converted into cash.

Coupon

The guaranteed interest payment to the bondholder, expressed as a percentage of the bond's face value.

Maturity

The date on which the borrower is obligated to repay the lender.

Yield

The income return on an investment, expressed as a percentage of the current market price of the bond.

Inverse Relationship

A situation where an increase in one variable leads to a decrease in another, such as bond prices and interest rates.

Narrow Money

The most basic measure of the money supply, including only cash and operational deposits.

Broad Money

Includes all narrow money plus deposits in savings accounts and other less liquid assets.

Medium of Exchange

Function of money that allows it to facilitate transactions between buyers and sellers.

Store of Value

Function of money that allows individuals to transfer spending to future time periods.

Unit of Account

Function of money that provides a standard measure of value for pricing goods and services.

Standard for Deferred Payment

Allows individuals to pay for goods and services at a later date.

Scarcity

The limited supply of money which helps maintain its value.

Durability

Characteristic of money that allows it to withstand repeated use.

Portability

Characteristic that allows money to be easily transported.

Divisibility

Characteristic that allows money to be divided into smaller units.

Acceptability

Characteristic that ensures money is widely accepted as a means of payment.

Security

Characteristic that ensures money is difficult to counterfeit.

Siberian Tea Bricks

Used as money in Siberia until World War II.

Bitcoin

A digital currency whose first transaction was the purchase of pizza for 10,000 Bitcoins.

Interest Rate

The percentage charged on a loan or paid on deposits, influencing borrowing and investing.

Principal

The original sum of money borrowed or invested, excluding interest.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower.

Stock Market

A collection of markets where shares of publicly held companies are issued and traded.

Derivatives

Financial contracts whose value depends on the price of an underlying asset.

Hedge Funds

Investment funds that employ various strategies to earn active return for their investors.

Mutual Funds

Investment programs funded by shareholders that trade in diversified holdings.

Forex Trading

The act of buying and selling currencies in the foreign exchange market.

Asset

Any resource owned by an individual or entity that is expected to provide future economic benefit.

Liability

A financial obligation or debt that an individual or company owes to another party.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.