Financial markets are diverse in nature – there are a plethora of markets which come under the category of financial markets. Most of us aren’t aware and have our knowledge limited to that of stocks and shares. But there’s more to the world of financial markets. This post delves into the types of financial markets and the relevant details which you should know. Read on:
The most significant part of financial markets and The most known one – the stock market. The ownership of a given company is divided into smaller, easily buyable by public parts – each of this part is known as a share. The public can buy these shares if listed at a given price – the market forces then determine the prices of these shares, which tend to fluctuate every single day.
The financial market is not restricted only to shares – we have commodities too. These commodities markets have been created, especially for the trading of grains and other commodities derived from nature. The main objective behind the commodities market is to fix a price for these commodities – their prices fluctuate way too much, which makes it difficult for merchants to carry out the transactions. However, with the commodities market, the prices of these products are capped a day in advance, making it easier for wholesale transactions. Buying and selling of natural based commodities at a whole different level take place in the commodities market.
In the derivative market, the value of the contract is dependent, or ‘derived’ from an underlying asset. Futures contracts, forward contracts, and options come under the derivatives market. The underlying assets in the derivatives market vary – from stocks to commodities, to assets and even mortgages.
Foreign exchange market:
The foreign exchange market is the most happening of all. It remains active because of the innumerable transactions that take place across the world. Also known to be one of the most liquid markets of all, the foreign exchange market includes all the currencies of different countries of the world. The rates of these currencies fluctuate and are influenced by a whole lot of other national as well as international aspects.
For those in urgent, immediate need of money can borrow their required amounts from other traders from the money market. These instruments of money exchanges are short term instruments which were introduced to ensure ease of transaction and also to ensure easy facilitation of credit to traders.