Financial Markets | Three Main Types of Market 'File Away' Activity (2024)

Read the introductory content and then try this interactive 'File Away' activity on the three main types of financial market.

PRE-ACTIVITY READING

There are three main types of financial markets for you to understand: money markets, capital markets, and foreign exchange (FOREX) markets.

Money markets

Markets that provide short-term financing (borrowing and lending) for households and individuals. This form of financing tends to have maturity dates (deadline for repayment) of up to one year.

Examples:

  • Inter-bank lending: when banks lend to each other for a short period (overnight to a week) to balance their books as some may lack liquidity at the end of a trading day. Global banks lend to each other based on the London Interbank Offered Rate (LIBOR) which is the benchmark interest rate for such loans.
  • Treasury Bills: the UK government issues Treasury Bills to borrow for short periods to finance its budget deficits. These bills tend to have a maturity of 1, 3 or 6 months.

Capital markets

Markets that provide medium to longer term financing for businesses and governments (maturity dates over one year). Bonds and shares are issued in primary capital markets and the existing assets are then traded on secondary markets.

Examples:

  • EPIC Games, the makers of Fortnite, raised $1.53 billion in funding by issuing shares to venture capital firms in August 2020 (equity financing)
  • The UK Government issues medium- to long-term bonds, such as 10-year or 20-year bonds, to finance government spending.

Foreign exchange (FOREX) markets

Markets where currencies are traded. Currencies can either be traded now in spot markets or on an agreed future date at an agreed price in forward markets. There is a high level of speculation in FOREX markets – this is where investors try to make money from changes in currency prices.

Test your knowledge with this 'File Away' activity below. Good luck!

Financial Markets | Three Main Types of Market 'File Away' Activity (2024)

FAQs

Financial Markets | Three Main Types of Market 'File Away' Activity? ›

The types of markets for financial capital are the loans markets, bond markets, and stock markets. The firms can speculate in these markets for raising funds for fulfilling their capital requirements. Loan markets help the firms to get loans at an interest rate with a maturity period.

What are the 3 main types of market in the financial market? ›

The types of markets for financial capital are the loans markets, bond markets, and stock markets. The firms can speculate in these markets for raising funds for fulfilling their capital requirements. Loan markets help the firms to get loans at an interest rate with a maturity period.

What are the three main functions of financial markets? ›

The primary functions of financial markets are to control the money supply, regulate interest rates, and ensure the stability of the banking system.

What are the three types of major financial markets today? ›

There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.

What are the three markets in the economy? ›

Key Takeaways
  • The credit market brings together the suppliers of credit (households) with those who are demanding credit (other households, firms, and the government). ...
  • The labor market is where labor services are traded. ...
  • The foreign exchange market brings together demanders and suppliers of foreign currency.

What are the 3 major markets? ›

In the United States, the three leading stock indexes are the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite.

What are the three major markets? ›

The New York Stock Exchange (NYSE), the Nasdaq Stock Market, and the Chicago Stock Exchange are the three largest stock exchanges in the United States.

What are the 3 major types of financial? ›

The finance field includes three main subcategories: personal finance, corporate finance, and public (government) finance.

What are the three main functions of markets? ›

The following are the functions of a financial market.
  • i) Transfer of Savings and Alternatives for Investment.
  • ii) Establishes the Price.
  • iii) Facilitates Liquidity.
  • iv) Reduced Cost of Transaction.

What are the 3 major functions of finance? ›

The three basic functions of a finance manager are as follows:
  • Investment decisions.
  • Financial decisions.
  • Dividend decisions.

What are the top 3 financial markets in the world? ›

What are the largest stock exchanges in the world?
  • What is a stock exchange? A stock exchange is a marketplace for the buying and selling of shares, bonds and securities. ...
  • New York Stock Exchange. ...
  • NASDAQ. ...
  • Tokyo Stock Exchange. ...
  • Shanghai Stock Exchange. ...
  • Hong Kong Stock Exchange. ...
  • London Stock Exchange. ...
  • Euronext Stock Exchange.

What are the 3 kinds most common securities traded in the financial markets? ›

There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity.

What are the three main roles of financial markets quizlet? ›

The three main economic functions of the financial market are: price valuation, liquidity, reduction in transaction cost.

What are the three main types of markets for financial capital? ›

There are three main types of financial markets for you to understand: money markets, capital markets, and foreign exchange (FOREX) markets. Markets that provide short-term financing (borrowing and lending) for households and individuals.

What are 3 examples of market economies? ›

What is an example of a market economy? Market economies depend on the forces of demand and supply to determine prices and shape market activities. Examples of market economies include the US, Japan, and the UK, characterized by limited government involvement.

What are the three basic market structures in economics? ›

The four popular types of market structures include perfect competition, oligopoly market, monopoly market, and monopolistic competition. Market structures show the relations between sellers and other sellers, sellers to buyers, or more.

What are the three types of money market? ›

U.S. Securities and Exchange Commission (SEC) regulations define 3 categories of money market funds based on investments of the fund—government, prime, and municipal. SEC rules further classify prime and municipal funds as either retail or institutional based on investors in the fund.

What are the 4 basic market types? ›

Economic market structures can be grouped into four categories: perfect competition, monopolistic competition, oligopoly, and monopoly.

What are the primary types of markets? ›

The four popular types of market structures include perfect competition, oligopoly market, monopoly market, and monopolistic competition. Market structures show the relations between sellers and other sellers, sellers to buyers, or more.

What are the basic financial markets? ›

Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives. Financial markets facilitate the interaction between those who need capital with those who have capital to invest.

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