Money market is a financial market which deals with lending and borrowing short-term debt instruments which have maturity for less than or equal one year. The lenders are central bank, commercial banks, finance companies and insurance companies. The borrowers are traders, manufacturers, merchants, brokers and government. Generally, money markets exist to
Distinguish between money market and capital market. A financial market is a market that involved buyers and sellers to trade in financial assests such as bonds, stocks, currencies and so on. Different financial markets serve different types of customers or different parts of the country. There are many components to a financial market, two of the most commonly used are money markets and capital markets. Money markets are the financial markets in which funds are borrowed or loaned for short periods.
Financial market plays a key and great role in the economy of any nation. It contributes in the economic development of country by encouraging capital formation and uplifting economic situation. Financial markets can be defined as the centers or arrangements that provide facilities for buying and selling of financial services. Security market is found within financial market and it is the place where people buy and sell financial instruments which is composed of debt and equity market, money and capital market, primary and secondary market, call and continuous market, spot and derivative market, organized stock exchange and OTC market, open and negotiated market and third and fourth market (Thapa, 2011). Capital market is the market for long term loans and equity capital.
• Capital Market which consists of: 1. Stock Markets, which provide financing through the issue of shares or common stock, and enable the subsequent trading thereof. 2. Bond Markets, which provide financing through the issue of bonds, and enable the subsequent trading thereof. • Commodity Markets, which facilitate the trading of commodities.
Introduction “Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.” (Times, n.d.) As it describe capital market is the market which trade with the medium-long-term financing, the trade usually use the securities such as bonds,stock etc. The actor of the capital market are the companies but the intitution also use the capital market, such as the government. How does the capital market work ? The capital market consist with the two markets, the primary market and secondary market.
The stock market is a common feature of a modern economy and is expected to promote economic growth and development of an economy. It is also a sign of the stock market as a specific stock. It provides gesture to the investors about their future moves. As financial domain is the most important one of an economy, so the stock market performance works as an indicator of the overall health of the economy. Gurley and Shaw (1955) are among the leading to study the relationship between financial markets and real sector activity.
Though the market is not entirely free, it is occasionally limited by government intervention. This, however, is normally to promote competition or encourage or dampen demand. In theory, a market economy’s base is on the cornerstones of the principles of supply and demand. In this way, the market is meant to respond to changes in demand for particular goods and services.
Explain why some financial institutions prefer to provide credit in financial markets outside their own country. Many financial institutions want to explore the financial markets outside their country to increase their presence on a much broader market. Also, doing so provides the institutions with better financial security. For example, if their country is experiencing an economic meltdown then the institution would not be greatly affected by such turbulence. Moreover, the financial institutions could earn higher return if dealing with markets that have high interest rates and a steady economy.
At the same time, money market behaves as a main allocation of capital. It is known as an efficient distribution of liquidity with every financial institution. Besides, money market also is a hedging of short-term risks that incurred. Credit evaluation process and the payments system where the trades are settled in a large value are play a vital role in money market. Hence, the customers of Alliance Bank will advantage from the mixed experience and commitment
As the financial institutions play such an important role in the economy that they are also called financial intermediaries. As the financial institutions play such an important role in the economy that they are also called financial intermediaries. Banks are the financial intermediaries that accept deposits and make loans. These are the Commercial Banks, Savings and Loan Associations, Mutual Savings banks and credit unions. Insurance Companies, Finance Companies, Pension funds, mutual funds and investment banks are also formed from the growth of banks.