Financial market


concept of financial market:

A business is a part of an economic system that consist of to man sectors - households which save funds and business firm which invest these fund. A finance market help to link the saver and the investor by mobilizing funds between them. In doing so it performance that is know as an  allocative function. It allocation or direct fund available for investment into there must productive investment opportunity. when the allocative function is performed well to consequences follow:

1. the rate of return offered households would be higher.

2. scarce recourses are allocative to those firms which have the higher productivity for the economy

function of financial market:

Financial market play an important role in the allocation of scarce resources in an economy by performing the  following for important function.

1. mobilization of saving channeling them into the most productive use:

Financial market facilitates the transfer of saving for saver to investor. It gives savers the choice of different investment and thus help to channelise surplus fund into the must productive use. 

2. facilitating price discovery:

You all know that the force of demand and supply help to establish a price for a commodity or services in the market. In financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them help to establish a price for financial assets which id being traded in that particular market.

3. providing liquidity to financial market:

Financial market facilities easy purchase and sale of financial assets. In doing so they provide liquidity to financial assets. So that they can be easily converted into cash whenever required. Holder of assets can readily sale their financial assets through the mechanism of the financial market.

4. Reducing the coat of transection:

Financial market provide valuable information about securities being traded in the market. It help to save time, effort and money that both buyers and sellers of a financial assets would have to otherwise spends to try and find each other. The financial market if thus, a common platform where buyer and sellers can meet for fulfillment the there individual need. financial market are classified on the basis of the maturity of financial instruments traded in them. instruments with a maturity of less. than one year are traded in the money market. Instruments lingers maternity are traded in capital market. 


classification of financial market