Money Market

The Make Up of the Money Market

The country's economic center is Wall Street. Every day billions of dollars and shares, changes hands (on paper) from person to person, company to company and even person to company. These trades are made via four market areas within Wall Street. The four main components of Wall Street are stock markets, the futures markets, the bonds markets and the option markets.

The money markets are essentially the term used to describe the 'money industry'. The financial market is the parameters in which business and individuals can facilitate the raising of funds or the investment of assets, depending on their needs. In two words, financial markets are all about wealth creation.

Financial markets have a degree of risk attached and are negotiated generally by those who have experience in the buying and selling of stocks, shares and currencies - usually brokerage firms. However in recent years the financial markets have been inundated with individuals who are keen to start or indeed build their asset portfolio - they are now known as the 'mum and dad investors'. This influx of money market popularity has been aided by the increase in online trading facilities which allows home traders to communicate their requirements and arrangements via their PC direct to the brokerage firm.

For the purposes of the definition the financial market can be divided into different categories:

Stock markets, which facilitate the buying and selling of stocks and shares. A share of stock is actually a portion of ownership in a given company although only a few stockholders actually own a large enough stake in a company to play a major role in the decision-making.

Bond markets, which provides financing through the buying and selling of bonds and debentures. Companies sell bonds to borrow cash so if you buy a bond, then you are essentially holding a company's debt for them. The company that sells the bond to you agrees to pay you a certain amount of interest for a specific period of time in exchange for the use of your money.

Money markets, which provides short term debt financing and investment.

Derivatives markets, which provides instruments for handling of financial risks.

Futures markets, which provide standardized contracts for trading assets at some forward date. This essentially means establishing a financial contract in which you try to predict the future value of a commodity that must be delivered at a specific time in the future.

Insurance markets, which facilitates the handling of various commercial risks and opportunities and rises and falls according to how well the insurance industry is fairing at any given point.

Foreign exchange markets which deal with international currencies.