1. The Role of Financial Markets

What are financial markets

Financial markets match buyers and sellers to set a price for financial assets

What are the financial assets that are exchanged

Shares / Stocks

Bonds

Currency /Foreign Exchange

What is shares/stocks

A share of a company i.e owning part of a business.

What is bonds

bonds are basically IOUs that allow companies or governments to borrow money from investors

What is Currency / Foreign exchange

People can exchange one currency for another in foreigh exchange markets where foreign exchange is traded.

What is the main purpose of financial markets

To ensure money flows to where it is needed the most

How does financial markets help individuals

Financial markets give opportunity to invest money into shares to build up money for future.

How does financial markets help businesses

Financial markets provide finance for companies so they can hire, invest and grow.

what is the role of financial markets

- Provide savers with a return on their investment

- provide short, medium, long-term sources of finance for business and governments

- To use markets forces to set interest rates and exchange rates

-To allow govts to implement monetary policy

-To allow the development of more ocmplex financial products

What is a forward market

A market in which participants agree to trade some commodity, security or foreign exchange at a fixed price for future delivery

Advantages of forward market

Protects seller and buyer

privdes security

easier for firms to manage supply

disadvantages of forward market

Doesn't profit maximise

Suppliers can lose out on profit

Complicated

longer time frame