Financial market - Financial definition
Concise definition of the term financial market
A financial market is a marketplace where buyers and sellers trade financial assets such as stocks, bonds, currencies, and derivatives. It facilitates the allocation of resources and the setting of prices for these assets through supply and demand dynamics.
Comprehensive definition of the term financial market
Financial markets play a crucial role in the economy by enabling the efficient transfer of funds from savers to borrowers, thus supporting investment and economic growth. They encompass various types of markets, including capital markets for long-term securities, money markets for short-term instruments, and foreign exchange markets for currency trading.
For example, stock exchanges like the New York Stock Exchange (NYSE) and bond markets where governments and corporations issue debt are integral components of the financial market. Additionally, practices such as market-making, arbitrage, and hedging are common, helping to enhance liquidity, manage risk, and ensure price stability.