Functions of Financial Markets
Borrowing and lending:
Financial markets provide funds to investors by lending money at an interest rate known as the cost of borrowing.
Sets or defines fixed or volatile prices for each type of instrument in the market.
Information collection and analysis:
Important information used by market participants to value or estimate prices of a certain instrument.
Financial markets eliminate a type of risk known as systematic risk through investment diversification.
The ability to quickly and directly convert securities into cash without value losses during a transaction.
A markets ability to reflect public information on a certain instrument.
Major Market Participants
Responsible for mediating between a buyer and a seller of products, services, or securities.
Smoothes the process of matching the buyer with the seller.
Involved in the selling of newly issued securities.
Mediators between investors and firms when trading securities.