Unit 1: Financial markets

• Financial market

  Any exchange that facilitates the trading of financial instruments
• Role of financial markets

  Facilitate saving, lend to businesses and individuals, allocate funds, facilitate the exchange of goods, provide a market for equities, and provide formal markets in commodities and currencies.
• How do financial markets facilitate saving?

  By offering a safe place where money can be stored
• How do financial markets lend?

  They act as an intermediary between savers and borrowers
• How do financial markets allocate funds?

  By determining where the rate of return is highest
• How do financial markets provide a market for equities?

  By allowing businesses to increase fresh equity
• How do financial markets provide a forward market for currencies and commodities?

  By allowing agents to insure against price volatility
• Insure definition

  Protect
• Fresh equity definition

  Opportunity for investors to buy shares in a company at a discount