Financial Markets: Provide a link between saving and investment, and between the present and the future. (Business owners need outside capital for investments)
Financial market typically takes its name from the borrower’s side of the market: the government bond market, the municipal bond market, the mortgage market, the corporate bond market, the stock market, the commodity market, the foreign exchange market, the futures market, and so on.
Within financial markets, there are two basic types of financial instruments: debt and equity. Debt instruments are loans with a promise to repay the funds with interest, whereas equity securities are shares of stock in a company.
Financial markets are often divided into money markets, which concentrate on short-term debt instruments, and capital markets, which trade in long-term debt (bonds) and equity instruments (stocks).
