Introduction to Financial Markets - Essay Example

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Introduction to Financial Markets

From this discussion it is clear that by differentiating the functions of the financial markets, it is important to mention both, diverse financial institutions that operate in such markets as well as the diverse ways in which these souks are structured. This is referring to the financial institutions otherwise referred to as the major players in the financial markets. This paper highlights that brokers are often considered as commissioned mediators of a buyer or seller who aids transaction by identifying a seller or buyer to achieve the desired transaction. A broker does not have a say in the assets she or he just trades. In other words, the broker does not reserve records in these assets. The benefits or wages of brokers are established by the commissions that they charge to consumers of their services such as the sellers, the buyers, or sometimes both. For instance, brokers include stockbrokers and real estate brokers. The next institution is the dealers. Like brokers, they facilitate business by matching purchasers with assets from sellers; they do not connect in asset conversion. Unlike brokers, however, dealers can maintain records of the assets that they have traded such bought or sold. Such activities often allow them to, the dealer to vend out of the catalogue rather than constantly having to identify sellers to match each tender to purchase. The difference between the price a dealer provides to sell and the price at which he offers to purchase a product is referred to as bid price. ...Show more

Summary

The essay is developed from the Financial Markets Theory that avails classical asset pricing hypothesis, a hypothesis composed of objectives such as portfolio choices, basic asset pricing theorem, risk management, portfolio limit, information in financial markets and no risk neutral assessment…
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Introduction to Financial Markets essay example
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