Meaning and Definition of Financial Market

Meaning and Definition of Financial Market

A market wherein financial instruments such as financial claims, assets and securities are traded is known as a ‘financial market’.

In another words, financial markets may be channels through which flow loanable funds directed from a supplier who has an excess of assets toward a demander who experiences a deficit of funds

According to Brigham, Eugene F, “The place where people and organizations wanting to borrow money are brought together with those having surplus funds is called a financial market.”

A financial market, unlike the other markets, is more of an intangible concept and basically refers to a market place where buyers and sellers usually participate in an exchange of assets such as equities, bonds, derivatives and currencies.

Financial Market is a market for creation and exchange of financial assets from household savers to business firms or financial institutions as in the following picture.

A financial market is an institution or arrangement that facilitates the exchange of financial instruments such as equity shares, preference shares, debentures, deposits and loans, corporate stocks and bonds, government bonds, and more exotic instruments such as options and futures contracts.

Financial market transactions may take place either at a specific place or location, e.g. stock exchange, or through other mechanisms such as telephone, telex, or other electronic media.