Financial market means it allows people to buy and sell financial securities such as stocks, bonds and also commodities like precious metals or agriculture goods.
The financial market is divided into two different categories:
- Money Market
- Capital Market
Money Market, wherein short-term monetary assets are bought and sold and this money market operates by the Financial institutions and financial instruments only.
Financial Institutions include RBI, Commercial Banks, Cooperative Banks in the organised sector and Indigenous Banks, Money lenders, Chit funds, etc in the unorganised sector.
Financial Instruments are the bills, treasary bills, promissory notes, hundies, certificate of deposits, etc.
Money Market it refers to the market for short-term requirement and deployment of funds.
Call money Money lent for one day.
Notice Money money lent for a period exceeding one day.
Term Money money lend for 15 days or more in inter bank market.
Held till Maturity Securities which are not meant for sale and shall be kept till maturity.
Yield to Maturity Expected rate of return on an existing security purchased from the market.
Coupon Rate Specified interest rate on a fixed Maturity security fixed at the time of issue.
Treasary Operations Trading in Government securities in the market. An investor bank can purchase these securities in the primary market. Trading takes place in the secondary market.
Gilt Edged Securities Government security that is a claim on the government and is a secure financial instrument which guarantees certainly of both capital and interest. These securities are free of default risk or credit risk, which leads to low market risk and high liquidity.
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