Financial Market And Financial Institutions

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“It is a safe bet that change in financial market and financial institution will mark the discipline of finance over the foreseeable future and will produce new kind of institutions, markets and securities. (Fabozzi, 2002) Financial market and financial institution are playing more and more important roles in modern financial system. In general, a financial market is a mechanism for trading financial assets and securities in financial system. Financial assets are exchanged in financial markets. Financial intermediaries are institutions that channel funds from savers and depositors with cash surplus to people or organisations with cash shortage. The function of financial market and its classification, the effect of financial institutions, the role of financial intermediary and its category and government supervision in financial market and institutions are the four major parts in this essay.

Generally speaking, financial market can be classified by several methods. The type of financial claim is the first way to categorize it. In this principle, financial market is divided into two parts: debt markets and equity markets. Another way is by the maturity of claim. Capital market and money markets are the two major sectors of financial market in this method. Specifically, capital market is used to secure long-term (excess one year) financial assets. It includes stock market, residential and commercial mortgages, corporate bond market, local and state government bonds and
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