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    Introduction To Financial Market

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    princessjaminelizardo9
    Brief Introduction to Financial Market

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    Introduction To Financial Market

    Uploaded by

    princessjaminelizardo9
    10 views2 pages
    Brief Introduction to Financial Market

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    Introduction to Financial Market

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    © © All Rights Reserved

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    Brief Introduction to Financial Market

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    10 views2 pages

    Introduction To Financial Market

    Uploaded by

    princessjaminelizardo9
    Brief Introduction to Financial Market

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Introduction to Financial Market how it will occur

    Nature and Importance of Financial System Special type of financial entity that acts as the third party to
    facilitate the borrowing activities between borrowers and
    Finance lenders.

    - Represents the money management of a company; Financial Instruments


    - The process of acquiring needed funds
    - is the application of economic principles to decision - what will be used
    making that involves the allocation of money under - Medium of exchange of contractual obligation which
    conditions of uncertainty. It is how funds are obtained can be traded (tangible of intangible). Can be:
    and then how this will be invested to make money a. cash or
    b. derivative
    Functions in a Financial Management
    The derivative itself is a contract between two or
    Accounting –the goal of employees is to maximize profit for more parties, and the derivative derives its price from
    their benefits, driven my rewards and promotions fluctuations in the underlying asset.

    Finance – the goal is to maximize wealth of the owners. The The most common underlying assets for derivatives
    OWNERS ultimate goal is to maximize wealth. are stocks, bonds, commodities, currencies, interest
    rates, and market indexes. These assets are commonly
    Sources of Wealth
    purchased through brokerages.
     Capital assets which may be money to earn interest
     Capital assets which can be land or building to earn
    rent
     Labor/profession in order to earn wages/salaries/fees

    Flow of Funds

    Direct financing – where borrowers/spenders deals directly


    from lenders thru financial instruments or securities.

    Indirect financing – where borrowers and lenders transact


    thru intermediaries.

    Regulatory Control Environment

    - controller of trading activities


    - Involves different businesses and financial risks
    - Regulated by the central bank

    Money Creation – the value created

    Price Discovery

    - how much is created


    - It is the process of determining or valuing the
    Elements of Financial System financial instrument in the market. The price is driven
    by risks, high risk high return, low risk low return.
    Lenders and Borrowers
    Types of Financial Market
    The players
    Money Market
    Financial Intermediaries
    - this is the sector of the financial market where
    financial instruments that will mature or be redeemed
    in one year or less from issuance date are traded.
    - Why do companies deal with money market?

    Capital Market

    - This is the sector in the financial market where


    financial instruments issued by government and
    corporations that will mature beyond one year from
    issuance date are traded.
    - There are two types: (1) equity or (2) debt

    Types of Financial Market: Base on Market Type

    Primary Market
    This is the financial market wherein fund demanders
    like
    corporation or government agencies raise funds through
    new issuances of financial instruments (bonds or stocks).
    Why?
    - normally to finance new projects or expansions.
    How?
    - Coursed thru investment banks as intermediary.
    Who?
    - Borrowers are fund demanders and lenders are fund
    providers.

    Four Types of Issue Methods

    1. Public offering – the issuer offers for subscription or


    sale to general public
    2. Private placement -the issuer looks for single investor
    to purchase the whole securities issuance than to
    general public.
    3. Auction – this is another offering to general public on
    treasury bills, bonds and other securities issued by the
    govt.
    4. Tap issue – this happens when issuer is open to
    receive bids for their securities at all times. Issuers
    maintain the right to accept or reject the bid prices.

    Secondary Market

    This is where securities issued in the primary market are


    subsequently traded (resold and repurchased – second
    hand).

    Who are the players?

    1. Securities brokers are facilitators


    2. Sellers are demanders and buyers are funds providers

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