Financial Markets

The financial market is an organ of financial system. The financial system is and important element of a modern economy. The resources are exchanged through the financial system. It helps in the payment of goods, services and productive inputs. Similarly, it makes easier to manage funds efficients and use them.

The financial system consists of financial institutions, financial market and financial instruments. Financial institution denotes commercial banks, saving and loan association, insurance company, central bank etc. These institutions create financial instruments and make economic transactions.Financial market denotes the place or mechanism where financial instruments are traded. Financial instruments between concerned parties. The financial instruments other than money included in the financial system are stocks, bonds etc.

Both saving and investment are compulsory for economic growth. The financial system converts savings into investment. It makes the saving investment process convenient through financial intermediary. The financial intermediaries receive financial liability or primary security from the fund deficit persons, and issue their own financial liabilities or indirect securities for those desiring to invest saved funds.