Financial markets and institutions Essay Example | Topics and Well Written Essays - 1500 words

Financial markets and institutions - Essay Example Any commodity market might be considered to be financial market if trader’s intention is not the immediate consumption of the commodity but as a means of delaying or accelerating consumption over time. Markets work by placing many interested sellers in one place, thus making them easier to find for potential buyers. An economy which relies primarily on connections between buyers and sellers to allot capital is known as a market economy. Financial markets are affected by forces of supply and demand, and allot capital over time through a price device such as the interest rate. Financial market could mean: organizations that facilitate the transaction in financial products, (for example, Stock exchanges facilitate the trade in stocks, bonds and warrants) and the coming together of buyers and sellers to trade financial products such as stocks and shares including: the use of stock exchanges; directly between buyers and sellers. There are different types of financial markets: capital market which provide finance through issuance of shares and bonds, commodity market which facilitate the trading of commodities, money market which arrange short term debt financing and investment, derivatives markets that provide instruments for the management of financial risk, insurance markets, which facilitate to cover of various risks and foreign exchange market which facilitate the trading of foreign exchange (Wikipedia, 2006). When looking at a financial institution it might seem to be a mediator between investors and customers. A financial institution might be considered as an agent that provides financial services for its customers. Financial institutions generally fall under financial rule from a government authority. The types of financial institutions include banks, building societies, credit unions, stock brokerages, and similar businesses. Financial institutions give service