Friday, 7 October 2011
Monday, 2 May 2011
Six Main Purpose of the Financial System
1) To save money for the future
2) To borrow money for current use
3) To raise equity capital
4) To manage risks
5) To exchange assets for immediate and future deliveries
6) To trade on information
(Reference: Equity and Fixed Income, 2011, CFA Institude)
2) To borrow money for current use
3) To raise equity capital
4) To manage risks
5) To exchange assets for immediate and future deliveries
6) To trade on information
(Reference: Equity and Fixed Income, 2011, CFA Institude)
Importance of Secondary Markets to Primary Markets
Corporations and governments can raise money in the primary markets as lower cost when their securities will trade in liquid secondary markets. In a liquid market, traders can buy or sell with low transaction costs and small price concesions when they want to trade. Buyers value liquidity because they may need to sell their securities to meet liquidity needs. Investors thus will pay more for securities that they can easily sell than for those that they cannot easily sell. Higher prices translate into lower costs of capital for the issuers. ( Equity and Fixed Income, 2011, CFA Institute)
Subscribe to:
Posts (Atom)