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Definition

The term Financial markets can be a cause of much confusion.

Financial markets could mean:

1. organizations that facilitate the trade in financial products. i.e. Stock exchanges facilitate the trade in stocks, bonds and warrants.

2. the coming together of buyers and sellers to trade financial products. i.e. stocks and shares are traded between buyers and sellers in a number of ways including: the use of stock exchanges; directly between buyers and sellers etc.

In academia, students of finance will use both meanings but students of economics will only use the second meaning.

Financial markets can be domestic or they can be international.

Types of financial markets

The financial markets can be divided into different subtypes:
Capital markets which consist of:
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of Bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial risk.
Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.

The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities.

Raising capital
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