Financial Market

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Definition of 'Financial Market'

A financial market is a marketplace where financial assets are bought and sold. It is a broad term that refers to any platform or system where buyers and sellers come together to trade financial assets such as stocks, bonds, currencies, commodities, and derivatives.

Financial markets are crucial to the functioning of a modern economy, as they allow individuals, businesses, and governments to raise capital, manage risks, and invest in various assets. They play a key role in determining the price of financial assets and in providing liquidity to investors.

Financial markets can be classified into two main categories: primary markets and secondary markets. Primary markets are where new financial assets are created and sold for the first time, such as initial public offerings (IPOs) of stocks or bond issuances. Secondary markets are where existing financial assets are bought and sold, such as stock exchanges or over-the-counter markets.

Financial markets can also be classified by the type of asset being traded. For example, a stock market is a financial market where shares of publicly traded companies are bought and sold, while a bond market is a financial market where debt securities are bought and sold.

Overall, financial markets play a vital role in the global economy, providing a means for investors to allocate capital and manage risk.

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