Login with Facebook

Everything you need to know about the capital market

The capital market ensures the meeting between economic agents who have surplus resources and economic agents who have financing needs i.e., companies, the state, or local authorities. Since 1980, with deregulation and de-compartmentalization, new sections of the capital markets have appeared and outperformed traditional markets in terms of transaction volume. The capital market includes a long term market and a short term market.

Long-term capital markets:

1-The financial market:

A -Definition:

The financial market is the market where long-term securities are issued and traded, the maturity of which is generally greater than seven years.

B- Its compartments:

The financial market is based on the activity of two sections. A primary market which is essentially a borrowers market

C- The role of this market:

- The financial market allows a direct meeting between agents with excess funding and those with funding gaps.

- The negotiability of the securities presents itself for the holder a considerable advantage because it allows him in principle to be able to face a need for financing to come by selling the title.

In addition, as the price of the negotiable security varies from day to day on the secondary market, the latter allows the development of speculation, which consists of trying to take advantage of the difference between the current price of the security and its price.

D- Actors and securities involved in the financial market:

Financial market players:

Any agent wishing to either obtain capital to set up a business or finance a productive investment by issuing securities intervenes on the financial market and the main issuers of securities are:

- Production companies.

- The public treasury.

- The local collectives.

- Financial institutions, including banks.

The agents who finance the issuers of the securities are the capital providers, so there are three categories of providers:

- The savers 

- The investors 

- The risk-takers

- The categories of securities involved in the financial market:

The main securities involved in the financial market are stocks and bonds.

The action:

The action is transferable security, which has a double nature. It consists of a title attesting that its holder participates financially in the constitution of the capital of the company.

The holder of the share is called (the shareholder), who receives an income called (dividend).

It also constitutes, for its holder, a right in the company which is exercised in two ways:

Dividend right:

Constitutes the shareholder's compensation in return for the risk linked to the operation of the business. It is a right to profit, which is proportional to the ownership of the capital. For example, a 10% stake in the capital of a company gives the right to claim 10% of the amount of the profit, if it exists.

- Right to vote: look at the end.

The bond:

Negotiable debt securities (TCN) representing a fraction of an interest loan

Bonds are, therefore, financial products issued by companies or public authorities when a loan is paid for with interest.

E- The functions of the financial markets:

-The latter is essential to an economy because they organize the meeting between those who have funds (savers) and those who seek them (companies).

By draining the available savings that its holders wish to value the stock market (which is a commission responsible for managing and organizing the financial markets) makes it possible to issue credit and capital for companies seeking to develop and invest.

 -The second main function of the financial markets is to allow listed companies to modify their financial structures, i.e., to transform the distribution of their capital between the various shareholders.

2-Derivative markets:

A - Definition:

in the mid-1970s, the USA began to deregulate its stock market system, which subsequently spread to other stock markets during the 1980s.

The objective was to increase the mobility of capital. So we saw a de-compartmentalization of the markets. This means removing regulatory barriers between the various national financial systems and opening up markets to the rest of the world.

- New financial instruments derived from assets have appeared.

There are two types of derivatives markets:

- The organized market (stock market futures market):

Derivative transactions are organized and registered with the stock exchange. For example, when an operator buys a contract from an operator B, the transaction is actually divided in two. A buys on the stock exchange, B returns on the stock exchange (clearing house).

So we say that the stock market is the buyer of all sellers and the seller of all buyers.

- The over-the-counter market:

This is the market on which the transaction is concluded directly between the seller and the buyer, and these are generally risky operations since they are not the subject of any control.

B - Derivative products:

Derivatives tend to grow in number and in sophistication; they are mainly used to hedge against interest rate risks:

- Futures contracts (future):

Commitment to buy or sell a product at a future date at a price agreed in advance, contras may relate to an interest rate, securities, currency, or raw material.

- Option contracts:

Right but not obligation to sell or buy a given quantity of an asset at a fixed price subject to the payment of a premium.

Options allow you to protect yourself against unfavorable changes in assets while retaining the possibility of benefiting from favorable developments.

- Swap contracts:

Cross-exchange of interest rates (variable-rate against fixed rate) or currencies by which two agents exchange the elements of their debts; this in order to hedge against the risks of fluctuation of an asset or to obtain better financial conditions.

3-The mortgage market (real estate):


the financing of housing by banks poses the problem of their refinancing when most of them have only long-term resources.

In order to ensure a balance between financing and refinancing, there is the mortgage market, that is to say, to reduce and lengthen the duration of the cost of mortgage loans to individuals.

B - The participants:

- Lending organizations for mortgage loans.

- The mortgage refinancing fund.

C -The functioning of the market:

Lending institutions issue mortgage notes corresponding to loans granted to individuals, guaranteed by hypotheses and respecting the ordinary rules of the mortgage market, which they can refinance at any time from the mortgage refinancing fund (CRM).

The mortgage refinancing fund is owned by 18 credit institutions, with mortgage notes to its assets; it continuously issues compulsory securities listed on the stock market and with a very long lifespan (10 to 20 years).

Section 3: Short-term capital markets:

4-The money market:

A- Definition:

It is a short-term capital market; it is most often a central money market.

The money market is, therefore, the main place where the banks which make money can obtain the necessary supplies to deal with the leaks which arise from this function of money creation.

That is to say; it is the place of interventions of the central bank on bank liquidity. It is also a short-term liquidity market for all bank credit institutions; it is open to non-financial agents who wish to either lend or borrow liquidity.

B- Its sections:

We can distinguish two types of money markets:

b-1- the money market in the strict sense (interbank market):

it is the market where lenders and borrowers of bank liquidity meet, in other words, it is the supply and demand of the central bank money.

- The players in the interbank market:

These are banking institutions, credit institutions, and other institutions such as the central bank, the public treasury, the deposit funds.

- Among its organizations, there are those who play the role of lenders and those who are borrowers.

 -There are other intermediaries who operate this market and who are:

- Interbank market agents (AMI):

These are the intermediaries between lenders and borrowers on the market. They are remunerated by a commission paid to them by the borrower; their function is to transmit information and put in contact the lenders and the borrowers.

- The main operators of the interbank market (OPM):

These operators are specialized in treasurer operations and intervene either to lend to others for the same maturity [interest rate is low] or else for a different maturity [the interest rate increases].

- Treasury banks (BT): or the rediscount house

They are specialized in treasury operationscapital market, and intervene either for a loan to others for the mm maturity "interest rate is low" or for a differing maturity "interest rate increases."

Author: Vicki Lezama


Need a custom

We will write it for you.
Order now

Free Essay Examples

Free essays:

An insight into the error-correction models
All you need to know about management discipline?
A historical overview of Financial Crises
All you need to know about reaction kinetics?
Basics the Game Theory in Cryptoeconomics
Business innovation ideas for making money
Biosensors for cancer diagnosis
Business Analysis: Pricing strategies and Demand Curve
Contracting with Moral Hazard and Adverse Selection
Conflict management in an organization
Can social media help overcome the problem of illiteracy?
Cultural heritage of indigenous people.
Digital Illiteracy
Determinants of business cycles fluctuations
Determinants of Unemployment and Inflation
Different tissues of the body
Economic Analysis of Market Structure
Expected Utility
Everything you need to know about workplace diversity
Efficiency and Market Equilibrium
Factors Affecting Purchasing Behavior
Financial Statement Analysis
Factors Influencing Interest and Exchange Rates
Fiscal and Monetary Policies in Response to 2008/2009
Game theory in microeconomics
Globalization: definition, causes, social impact and risks
Gene expression: what it is and why it is important
Global environmental issues
How to conduct economic research?
How to define the Enterprise Value
How cancer is developed - Cancer biology
How can financial illiteracy harm you?
Illiteracy in the USA
Importance and seven principles of quality management
Intermediaries and Government in Financial Crisis
Introduction to Econometric Application
Journalism: What is News?
Journalism: Broadcast media and Television Presenters
Journalism: Sources of News
Journalism and Law
Key Determinants of National Income
Key Factors That Affect Pricing Decisions
Kinetic models in biology and Related fields
Know about the different forms of traditional African dances
Latest technology trends
Latest dance trends
Methods of labeling of nucleic acid that enable their detection
Macroeconomics: International Economic Issues
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Organizational motivation and its effects
Overcoming Hiring Challenges for Nonprofit Organization
Protection of cultural heritage in times of war and peace.
Principles of Corporate Governance.
Risk Sharing in Insurance and Asset Markets
Risk and the value of information
Reverse discrimination.
Role of media in wartime.
Segregation in the US.
Stages of the Consumer Decision-Making Process
Structure and function of blood vessels
Skills in Journalism: Effective Interview
Theories of Public Policy
The Economics of Uncertainty – Introduction
The different medical imaging techniques
Tips for labeling medical devices- Medical Entrepreneurship
Understanding Auctions and Auction Theory: Part 2
Understanding Auctions and Auction Theory: Part 1
Use of Machine Learning in Econometrics
Understanding Public Policy
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What is Immune System and Immunotherapy?
What are the methods of valuation of companies?
4 Facts about Origin of Mathematics!
5 techniques to create an animation
10 emerging technologies according to World Economic Forum
10 strategies to maximize corporate profits
3d Model Of Building
6 Medical Technologies that revolutionized the healthcare in 2020
All you need to know about the ACA Code of ethics
Architecture and Democracy: An Introduction
Architecture and Democracy: Democratic Values
Architecture and Democracy: Democratic Procedures
All You Need to Know About a Synthesis Essay
An essential guide to understanding Film Theory
Application of Artificial Intelligence in Cyber Security
Applications of electrical engineering
Augmented reality: what it is, how it works, examples
Advantages And Disadvantages Of Social Networking
All you need to know about Cryptography
Applications of astrophysical science
All you need to know about architecture engineering
Applications of geological engineering
Artificial intelligence and medicine: an increasingly close relationship
An insight into Computational Biology
ACA code of conduct
A Rose for Emily
Applications of Mathematics in daily life
Architecture mistakes to avoid
All you need to know about Toxicology
All you need to know about Holistic Medicine
All you need to know about linguistics
An introduction to Linguistics and its subfields
All you need to know about Anxiety disorder
All you need to know about Drones
A Brief Insight into Political Science
Assumptions related to feminism
All you need to know about Byzantine emperors
All you need to know about labour economics
An insight into xenobots -the first-ever robots
An ultimate guide about Biomaterials
A Comprehensive Introduction to the Mona Lisa
Analysis methods of Transport through biological membranes
An ultimate guide about biochemical reactions
Analysis of brain signals
Artificial Gene Synthesis
Application to synthetic biology of CAD methods
All you need to know about metabolic pathways
Applications of BIOMEMS
All you need to know about the epidemiology
Asian vs. western leadership styles
All you need to know about Smart prosthesis
Analysis of Economy: Output of Goods and Services (GNP), and GDP on Economic success
A Guide to Pricing Strategies
An Overview Of Economic Studies
Analysis of Fiscal and Monetary Policies
Analysis of Business Cycles
Analysis of Consumption and Investment
A Look into Regression Analysis
Analysis of Household's Consumption and Savings Behavior
All you need to know about Capital Budgeting
All you need to know about risk management
Art looted in wartime.
Appropriate use of Data in Economics
All you need to know about reaction kinetics?
A historical overview of Financial Crises
All you need to know about management discipline?
An insight into the error-correction models
How to Write a Personal Essay
Housing Needs in America
How to Write a Description Essay
How to Create an Excellent Scholarship Essay?
How to write a cause and effect essay
How to Hire the Best Essay Writing Service Provider?
How to Write a College Application Essay?
How to get the most out of your English lectures
How to write Expository Essay
How to succeed in your psychology class?
How to Write an Academic Essay in the Shortest Time?
History of Journalism
How Different Sectors are Using Artificial intelligence (AI)
How to write an informative essay
How to deliver persuasive essays?
How to Give a Convincing Presentation
How to write an essay on leadership?
Historical Art Still Around Today
Humanoid robot: what it is, how it works and price
History of Chemistry
Healthcare Advanced Computer Power: Robotics, Medical Imaging, and More
Healthcare AI: Game Changers for Medical Decision-Making and Remote Patient Monitoring
How to understand different types of English
How to Cope with Chronic Pain
How African American choreographers and dancers have influenced American dance
How mobile robot can do in logistics or in production
How To Become a Successful Entrepreneur
History of the Philosophy of Feminism
How is the climate changing?
How to Track Your Content Marketing ROI
How to Gun control In the USA?
Historical and contemporary role of labour in the modern world
How breast cancers are classified?
How the cells of our body communicate?
How the Lymphatic System Works?
How Digestive System Works
How to complete your capstone projects effectively?
How to write a research project
Healthcare technologies that help patients with better self-management
How to choose the topic of the senior capstone project
How to make your business survive at economic crisis
How can immigrants blend in the American society?
How does the economics of war affect society?
Hate speech on social media.
How to Build an Economic Model
How to start a healthcare startup?
How can financial illiteracy harm you?
How cancer is developed - Cancer biology
How to define the Enterprise Value
How to conduct economic research?
Introduction to Urban Studies
Importance of dance in education
InMoov: how to build an open source humanoid robot
Importance of KYC verification to making the Blockchain secure
Importance of Rhythm
Importance of dance student evaluation
I/O control methods -types and explanations
Identity theft: what to do?
Introduction to Utilitarianism
Importance of 3d Modelling in Architecture
Importance of online journalism
Image processing in medical diagnosis
Introduction to USA Politics
Introduction to Comparative Politics
International Relations as a Major in Political Science
Importance of modern trade policy
Introduction to Journalism
Introduction to Writing a TV Script
Introduction of Microfabrication techniques
Introduction to Microeconomics
Interaction of Consumer and Firm Choices in Markets
Importance of corporate sustainability
Issues in International Monetary Macroeconomics
Introduction to Statistics and Data for Economics
Introduction to Data and Probability for Economics
Introduction to the Game Theory
Introduction to Econometrics
Introduction to Economic Information
Introduction to Market Equilibrium
Introduction to Economic Models and Application
Introduction to Empirical Research
Introduction to Econometric Data
Importance of Critical Thinking, Principles, and Goals
Introduction to Identification and Causal inferences
Introduction to Econometric Application
Intermediaries and Government in Financial Crisis
Importance and seven principles of quality management
Illiteracy in the USA
The Looming Energy Crisis in America
Top benefits of performance-based engineering
The More Languages You Know, The More Times You Are a Man
Things to consider while writing an Argumentative Essay
Top Ways to Improve Your Academic Writing Skills
Tips to Excel in Creative Writing
The origins of films in the early 19th century
Top career options in Architecture
The Elevator Pitch
Top finance trends 2020
The basic Structure and functionality of robots
The Way to Success
The election system of the President in the United States of America
Two-party System in United States of America
Top trends in urban design
The history and theory of African American filmmaking
Top benefits of creative writing
Tinnitus Guide: Common Symptoms and Treatment Options
The language of dance
The digital image processing management
Top famous politicians of the World
Top methods of political science!
The history of the feminist movement
The blood flow in cardiovascular system - Biofluid Mechanics
The best of Leonardo Da Vinci
The Structure and Function of Macromolecules
The structure of cell: a research on the bricks of the human body!
Tissue and organ construction: Adhesion and recognition between cells
The kinetics of the transformation processes
The Modeling of Biological Systems
Tips for writing a great thesis statement
The Defense mechanisms against infections
The impact of the technological innovations in medicine
Top journalism trends to know about
The relation between mass media & politics
Theranostics: Diagnosis and Care through Nanoparticles
The practical Applications of X-rays
The applications of Ultrasound in medicine
Transfer mechanisms of genetic information in Bacteria
The regulation of cellular metabolism in the diagnosis
The Principles of MRI Contrast agents
The technical basis of optical coherence imaging
The New Media: Emerging Trends
The Structure of Interest Rates and the Yield Curve
Technological perspectives and reflections of neural engineering
Types of bioreactors and their applications
The Role of Government Policy in Improving Economic Outcomes
Types of corporate responsibility
The Role of IMF in International Monetary Macroeconomics
Tools for investment decision making
The concept of Organizational Culture and its applications
The Conduct of Monetary and Fiscal Policy
The Basics of Financial Accelerator Models
Tips for labeling medical devices- Medical Entrepreneurship
The different medical imaging techniques
The Economics of Uncertainty – Introduction
Theories of Public Policy
What is a Definition Essay?
What are diagnostic essays?
What is the relation between art structural engineering?
What is a Narrative Essay
What are robotics and intelligence systems?
What are the benefits of studying health sciences?
What is artificial intelligence and why it matters?
What is comparative Literature?
Why study neuroscience
What is Wi-Fi and how does it works
What is French history famous for?
What are Humanistic Studies?
What is covered in Biophysics?
What is modern journalism?
What is Virtualization? Benefits & Applications
What are modern public relations?
What is plasma physics?
What is teacher preparation?
What is rapid prototyping for 3D printing?
What is contemporary European Politics?
Why should you learn American Ballet?
What is engineering physics?
What is the purpose of African American Literature?
Ways to learn the Rhythm
What is digital art used for?
What are Enzymes and how do they work
Who is the father of political science?
Why Study Political Science - Job?
What is the Philosophy of Feminism?
What is a quantum computer?
Ways B2B Startups Streamline Their Conversion Strategies
Why do biomedical signals need processing?
What are the long term effects of climate change?
Why study labour relations
What is Holoprosencephaly?
What is antisocial disorder?
What are the important principles of evolution?
What is the cytoplasm and its function?
What is biopolymers?
What Makes a Good Leader
Women empowerment in modern generation
What is the history of political thought?
What is Gene recombination
What is synthetic biology
What is business cost analysis?
What is Inflation
What are the consequences of unemployment?
What is lithotripsy and its types?
What is transition elastography?
What is the purpose of deep brain stimulation?
What is a Brain-Computer Interface (BCI)
What is neuroethics?
What is Market and Supply and Demand
What is optogenetics?
What are the techniques to record brain activity?
What happens if the interest rate increases?
What is immunotherapy?
What is the economic role of the financial market?
What are the factors behind illegal immigration?
What is the lymphocyte activation?
What is financial market and its types?
What is the structure of financial markets?
What are the methods of measuring business performance?
What is the Credit market?
What is business ethics and code of ethics
What are the Causes of financial instability?
What is MBA with Concentrations
What is regenerative medicine?
What is Population ecology?
What is Microfinance: evolution, and practices?
What is biotechnology and its applications?
What are Workplace diversity and its benefits?
What is the difference between a leader and a manager?
What Is Branding and best branding Business strategies?
Why are microelectronics important?
What are biologic drugs.
What is the Foreign Exchange market?
What is the role of scientific research in times of crisis?
What are the risks of international trade?
What is financial management?
What is gene therapy?
What is education economics?
What is regression analysis, and why should you use it?
What Is Technology Marketing And How Should It Work?
What is Management Accounting
What are the methods of valuation of companies?
What is Immune System and Immunotherapy?