Understanding Financial Markets

Financial markets are venues where traders buy and sell assets like stocks, bonds, and commodities. They comprise exchanges or over-the-counter markets, where prices reflect supply and demand dynamics.

Primary markets handle new security issues, while secondary markets trade existing securities. Financial markets serve liquidity, price discovery, and risk management functions, crucial for economic stability.

Intermediaries connect savers and borrowers, facilitating funds flow. They include banks, insurance companies, pension funds, and investment firms, optimizing capital allocation by assessing risks and returns.

By pooling resources and diversifying risks, financial intermediaries increase investment efficiency, support economic growth, and assist in risk management for both individual and institutional participants.

Regulations ensure financial market integrity and stability. They protect investors, maintain fair practices, and foster confidence, mitigating systemic risks and financial crises potential.

Technology revolutionized financial markets with high-frequency trading, blockchain, and fintech innovations. These advances improve accessibility, transaction speed, and lower costs, reshaping market dynamics.

Modern financial markets are interconnected, meaning a disturbance in one market can ripple globally. The 2008 crisis exemplified this, as mortgage defaults in the U.S. affected international economies.