A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods.
There are both general markets (where many commodities
are traded) and specialized markets (where only one commodity is traded).
Markets work by placing many interested buyers and sellers, including
households, firms, and government agencies, in one "place", thus
making it easier for them to find each other. An economy which relies primarily
on interactions between buyers and sellers to allocate resources is known as a market
economy in contrast either to a command
economy or to a non-market economy such as a gift
economy.
In
finance,
financial markets facilitate:
- The raising of capital (in the capital
markets)
- The transfer of risk
(in the derivatives markets)
- Price discovery
- Global transactions
with integration of financial markets
- The transfer of liquidity
(in the money markets)
A
financial market helps the economy in the following manner.
Saving
mobilization, Investment, National
Growth, Entrepreneurship growth, Industrial development.