Chapter 2

• Financial Markets


  structure through which funds flow
• two types of market

  1. primary market
  2. secondary market
• Primary Market


  New issuances
• Secondary Market


  Previously issued financial instrument
• 3 markets

  1. money market
  2. capital market
  3. derivatives market
• money market

  1. treasury bills
  2. commercial paper
  3. certificate of deposit
  4. banker's acceptance
• capital market

  1. long term debt securities
  2. equity securities
• long term debt securities (maturity more than 1 yr)

  • government debt securities
  • bonds (private)
• equity security (without maturity)

  • ordinary stocks
  • preferred shares
• derivatives market

  • future
  • forward
  • option
  • swap
• forward

  • at end of contract
  • no (customized)
• future

  • initial deposit + net cash settlement
  • yes (trading)
  • no