Contents – What is a market? – Key components of a financial market – Market participants and their goals – Market instruments
What is a market? which of the following is a market ? fruit and vegetable market auction house second-hand car dealer dating agency speed-dating café
What is a market? Ways of defining a market: –by observation: it looks and smells like one, so it must be one –by function: 1.brings demand and supply together 2.achieves equilibrium pricing –by product: what’s traded must be homogeneous
What is a market? observationfunction 1function 2product fruit and veg. market auction house second-hand car dealer dating agency speed-dating café
What is a market? observationfunction 1function 2product fruit and veg. market yes noyes/no auction houseyes noyes/no second-hand car dealer Yesyesnoyes/no dating agencyNoyesnoYes speed-dating café noyesnoyes
市场的定义 狭义： 买卖双方进行商品交换的场所 广义：为了买与卖某些商品而与其他厂商， 个人相联系的一群厂商和个人
金 融金 融 所谓金融，顾名思义就是指资金的融通或者说 资本的借贷。
金融市场 金融市场是指资金供应者和资金需求者双 方通过信用工具进行交易而融通资金的市 场融通资金 广而言之，是实现货币借贷和资金融通、 办理各种票据和有价证券交易活动的市场资金融通 比较完善的金融市场定义是：金融市场是 交易金融资产并确定金融资产价格的一种 机制
Components of a financial market – Participants: Buy side: buyers of liquidity services Sell side: sellers of liquidity services Trade facilitators: provide infrastructure Regulators/government: policing the system – Instruments: what is traded – Market structure: rules: trading, execution systems of execution & information
The players : Buy side Trader TypeGeneric ExamplesWhy they tradeTypical Instruments InvestorsIndividualsTo move wealth from the present to the future Stocks Bonds Pension funds Insurance Companies Mututal funds BorrowersHomeownersTo move wealth from future to present Mortgages Corporations HedgersFarmersTo reduce business riskFutures Forwards Swaps Miners Shippers Financial institutions Asset exchangersInternational firmsTo acquire an asset that they value more than the asset they tender Currencies Commodities Manufacturers GamblersIndividualsTo entertain themselvesVarious
Trading institutions: main participants Sell sideTrade Facilitators Buy side Market-makersExchangesEnd investors BrokersClearing agentsFund managers Broker-dealersSettlement agentsBorrowers SpecialistsCustodiansHhedgers Traders/arbitrage urs legislature (courts) regulators Legislature (courts) Regulators
Trading institutions and participants Main participants’ motivations One motiveAnother motiveConflicts? legislature/regulator investor protection market efficiency tax revenues sell-side trading profit/commissions serve clients fund managers optimise clients’ risk/reward make money themselves end investors optimise risk/reward enjoy life
Trading instruments – Real versus financial assets Real: an asset only (two exceptions – Gold, SDRs) Examples: commodities/real estate – Financial: Examples: stocks, bonds, spot currencies – Derivatives: Examples: futures, options, swaps – Insurance: insurance policies