Financial Markets and Financial Instruments in Nepal

6667 Words Mar 22nd, 2012 27 Pages
Financial Market and Financial Instruments

Market is simply defined as an area for potential exchanges. Thus market is a group of buyers and sellers interested in negotiating the terms of purchase or sales of goods and services.
Similarly, financial market is that market is traded- loaned or borrowed-in-terms of different financial assets or instruments stocks and bonds are traded. "Securities" means shares, stock, bond, debenture, debenture stock issued by a corporate body or a certificate to unit saving scheme or group saving scheme issued by any corporate body in accordance with the prevailing laws or negotiable certificate of deposit or treasury bill issued by Nepal Government and it includes the securities issued under full guarantee
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Real assets can be tangible or intangible. Plants, machinery, office, factory, furniture and building, precious metals are examples of tangible assets while technical knowhow; technological collaborations, patents and copyrights are intangible assets. Generally, real asset posses productive capacity and are less liquid in comparison to financial assets. The capital formation is the direct outcomes of this productive investment.
Financial Assets or Instruments are cash, evidence of an ownership interest in an entity, or a contractual right to receive, or deliver, cash or another financial instrument.
Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:
Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities which are readily transferable and other cash instruments such as loans and deposits where both borrower and lender have to agree on a transfer.
Derivatives instruments are financial instruments which derive their value from the value and characteristics of one or more underlying assets.
“Financial Assets or Instruments are pieces of paper representing an indirect claim to real assets held by someone else. These pieces of paper represent debt or equity commitments in the form of IOUs (written document providing

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