Background of Financial Market

Added on - Dec 2020

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ASSIGNMENT
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Background of Financial market.................................................................................................1
Capital allocation with domestic economy.................................................................................2
Capital allocation with international markets.............................................................................3
Evaluation of emerging economy of your choice.......................................................................4
Critical evaluation of challenges that country faces due to industrialisation and trade policies.7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
INTRODUCTION
International investment decisions have been based on analysing various economic, political
and social factors relevant with the country. In the present report there will be analysis over the
domestics’ market as UK as well as Emerging market as India. Moreover, in respect with such
analysis there will be use of various techniques and methods which will be indicative and helps
in terms of meeting requirement of international investment decisions. there will be analysis over
the economic scenario of UK and India with the purpose of making investment in the nation.
Background of Financial market
Financial market is considered as broad term which describes about marketplace where
various securities are traded such as equities, currencies, derivatives and bonds occur. It is place
where individuals are engaged with type of financial transaction where sellers and buyers are
involved in purchase and sale of financial products as shares, mutual funds and so on. The prices
offinancialmarketmightnotindicatetrueintrinsicvalueofstockbecauseofvarious
macroeconomic forces such as taxes. Aggregately, securities prices are heavily reliant on
informational transparency for purpose of ensuring efficiency along with appropriate prices set
through market. It could be classified with nature of claim, maturity of claim, timing of delivery
and organizational structure. On basis of nature of claim it is categorised as debt and equity
market as debt market where fixed claims along with debt instruments like bonds or debentures
which are purchased and sold among investors. In the similar aspect, equity market where
investors directly deal with equity instruments as it is market for purpose of residual claims
(Matvos, Seru and Silva, 2018).
The maturity through claim it is classified in money and capital market as in money
market is with monetary assets along with commercial paper, treasury bills, certificate of
deposits etc. which will directly mature in a year which will be traded. This is market for funds
of short term as no market exist physically as transactions will be performed with virtual
network. The capital market where medium and long term financial assets are traded as it is also
categorised in two types such as primary and secondary market. On basis of timing of delivery, it
has cash and future market as in cash where transactions along sellers and buyers are directly
settled in real time. In future market is one with delivery along with settlement of commodities
would be undertaking for future specified date. With context of organizational structure, it is of
exchange traded and over the counter market as in exchange is financial market where
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organization is centralised with procedure in standardised aspect. Further the over the counter
market, it is through decentralised business entity which will be having procedures in customised
aspect (Fischer and Krauss, 2018).
The most important role is of financial market is for mobilising its savings and puts with
various productive application. This will help for identifying securities price and presence of
frequent interaction among investors which will directly fix securities price with context of
demand and supply in market. This will be giving liquidity for tradable assets as it will facilitate
exchange as investors could sell securities and transforms assets to cash. Henceforth, it saves
money, efforts and times as they will not waste resources for extracting probable sellers and
buyers of securities as this will be decreasing cost by giving valuable information related to
securities traded in financial market. The financial market might not have presence of physical
location such as exchange of asset among parties which could take place over phone and internet
as well (Lumsdaine and Potter van Loon, 2018).
Capital allocation with domestic economy
The function of capital allocation is of asset managers as it is significant facilitator of UK
company funding which will contribute to growth for long term productivity. It capability is
broad as this will extend for multiple asset classes and structure of funding along with supplies
funds over the whole economic cycle. The capital allocation will attain success as it will
facilitate potential for holdings of long term and it will allow for involvement of long term with
organizations. The asset managers will be holding equity of UK for average of six years as it will
be longer than its own clients which will hold investment in its pooled funds. The role of asset
managersinengagementandstewardshiphasbeenraisedwithreflectionoflongterm
relationship which could facilitate supply of innovative finance. It had shown long term
relationship which will facilitate significance of issue of shares (Epstein, 2018).
There is observance of lens of equity dominated cycle as in recent year its function as
debt managers which are very important with reference to alteration in landscape of capital
markets as it will help business entity for maintaining access to new capital and for decreasing
cost of capital through switching via bank as it will lend to cheaper financing of bond.
Furthermore, the financing channels will be diversified as investment in debt will extend market
of public corporate debt with alternative form of debt finance and via varietal of infrastructure
projects as it will consider social housing as well (Groh and et.al., 2018).
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