Financial market

A financial market is a market in which individuals 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, including products of precious metals or agricultural goods.

There are two general markets (where many commodities are traded) and specialized markets (where only one product is marketed). Markets work by placing many buyers and sellers, including households, businesses and government agencies in a "place", 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, unlike either a command economy to a market economy or off as a gift economy.

In finance, financial markets facilitate:

•       The raising of capital (financial markets)

•       The transfer of risk (in the derivatives markets)

•       price discovery

•       Transactions with global integration of financial markets

•       The transfer of liquidity (money markets)

•       International trade (in the currency markets)                                                                                                                                                                                                            - And are used to match those who want capital to those who have.

Typically a borrower issues a receipt to the lender promising to repay the principal. These receipts are securities that can be freely bought or sold. In return for lending money to the borrower, the lender expects compensation in the form of interest or dividends. The return on investment is a necessary part of the market to ensure that funds are available to them.