Question

what is financial market
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Answer 1

Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources, in the country's economy.It acts as an intermediary between the savers and investors by mobilising funds between them.

The functions of the financial market are explained with the help of points below:

• It facilitates mobilisation of savings and puts it to the most productive uses.
• It helps in determining the price of the securities. The frequent interaction between investors helps in fixing the price of securities, on the basis of their demand and supply in the market.
• It provides liquidity to tradable assets, by facilitating the exchange, as the investors can readily sell their securities and convert assets into cash.
• It saves the time, money and efforts of the parties, as they don’t have to waste resources to find probable buyers or sellers of securities. Further, it reduces cost by providing valuable information, regarding the securities traded in the financial market.

Answer 2

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A financial market is a market in which people trade financial securities and derivatives at low transaction costs.

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