The financial market is a mechanism that allows people to easily sell and buy securities (stocks and bonds), goods (precious metals and agricultural products) and other interchangeable items at a fairly low operating cost and at prices that reflect the hypothesis of an effective market.
Over the past few centuries, the world financial markets have changed a lot, and are in the stage of constant change, development and growth. The financial market of Ukraine is just beginning to develop, and the boom of the Ukrainian financial market is expected in the next 5-10 years .
Types of financial markets
- securities market
- stock market (trade in shares of open joint-stock companies OJSC)
- bond market (trade in promissory notes, bonds)
- commodity market (trade in commodities such as wheat, gold, etc.)
- money market (short-term loans and investments)
- futures market (standard forward and futures contracts)
- insurance market (risk management)
- foreign exchange market (FOREX; foreign currency trading)
- real estate market (trade in land, houses, offices, living areas, etc.)
There are 2 more common type of financial markets :
- general (it is traded with different goods and securities)
- specialized (it is traded with only one kind of commodity or type of securities)
The role of the financial market
The essence and the main role of the financial market is to unite all the sellers so that they are le GKO available to potential buyers . Thus, if the economy relies primarily on the relationship between buyers and sellers in the allocation of resources, then this economy can be called a market economy. (Recall that Ukraine was internationally recognized as a market economy in December 2005.)
Financial markets are conducive to:
- accumulating and increasing capital
- transmission and risk management (hedging)
- to international trade ( in the foreign exchange market)
The financial market also serves to unite those who seek capital and those who have it.
Often, the borrower (the one who takes the capital) issues to the creditor (the one who gives the capital) a receipt or bill promising to repay capital. These bills are called securities which can be freely sold and bought. For the fact that the creditor has given the borrower a loan, he naturally expects some compensation, which is usually paid in the form of interest or dividends.