Financial markets exist to facilitate the transfers of savings from savers to investors. In an economic system, there are two sectors, namely household and business. Financial markets, at their core, act as an intermediary between the savers and the investors. Basically, there are three types of markets, namely money markets, credit markets, and capital markets. Money markets are short-term markets where money is lent to companies or banks to do interbank lending. Foreign exchange or FX is another category of money markets where currencies are traded. Credit markets consist mostly of retail banks where they borrow money from central banks and loan it to companies or households in the form of mortgages or loans.
Capital markets facilitate the buying and selling of financial instruments, mainly stocks and bonds. Capital markets can be divided into two types, primary and secondary markets. Stocks are issued directly by the companies to investors in primary markets...