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Financial Markets and Risk - Essay Example
Finance & Accounting
Pages 4 (1004 words)
A REPORT: FINANCIAL MARKETS AND RISKS Date Financial markets play an essential role in any given economy. It facilitates the flow of funds from savers to borrowers. This market reduces the cost of accessing funds by reducing transaction rates…
It will also mobilize and pool savings. Financial market also helps in diversification of trade and reduction of risk. (Campion 2010, pp.67-209) It is vivid to note that this market facilitates development of financial institutions and instruments that can manage risks. (Baumol 2011, pp.122-130) The system also provides financial regulation to ensure stability of financial institution in any given economy. It is also worth noting that financial system ensures that funds are channeled from households, firms, and governments that have surplus funds to those with deficits (The economist 2011, p.39) . Various products are always provided by retail banks and non-banking institutions, these products promote movement of funds in the market to create a balance. The depository institutions always take deposits and lend out funds in terms of loans. This aspect always creates financial assets and enhances liquidity in a given market. In spite of considerable innovation in the financial sector, the popularity of depository services always persists. In Europe, bank deposits remain to be the best-known long-term savings. About 74% of European households have bank deposits. Various types of bank deposits are always offered. First, the time deposits which are not always disposable immediately because they are always fixed. ...
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