Financial markets enable trading of financial securities such as bonds, equities, derivatives and currencies. There are broadly three types of markets: money markets, credit markets, and capital markets:
- Money markets: These 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: These 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: These 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, whereas in secondary...