Allocation of Capital in Domestic and International Markets

International trade finance
& investment
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Table of Contents
Executive Summary ........................................................................................................................3
1. Background of financial markets.................................................................................................4
2. Capital allocation within domestic economy...............................................................................5
3. Capital allocation within international markets...........................................................................6
3.1 Analysis of US Economy......................................................................................................6
4. Evaluation of an economy of choice............................................................................................7
5. Critical evaluation of challenges that the country faces due to Industrialisation and Trade
Policies.............................................................................................................................................8
6. Conclusion...................................................................................................................................9
7. Recommendations......................................................................................................................11
References......................................................................................................................................12
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Executive Summary
This report is based on allocation of funds in domestic and international markets. In this
project evaluation is completed on two type of markets which are domestic market i.e. UK
market and in International market i.e. US market and China market. United Kingdom market is
highly developed market whereas china market has close ended economy and mixed socialised
market economy. United Kingdom market is most globalised market which help various others
market in order to expand different type of business economies. Whereas china's market include
three main world's largest stock exchange market. When it comes to United State market, it is
comes to know that this is mixed and highly developed market. US market contain largest GDP
and net worth while comparing with world. This is most powerful economy in terms of
technological advancement across world. Whereas this project include, different standards set by
GATT. Furthermore the impact of world bank and different agreements between multinational
organisation. It include financial theories and concepts which are applying in real business
context. In last some suggestions are provided to maintain risk return relationship and options in
context of domestic and international markets.
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1. Background of financial markets
Financial markets are those marketplace where securities are traded. They are also known
as capital market as it primarily serves the purposes of raising money for businesses and
investors to enable them to grow their capital investment. It acts as an intermediary between the
two parties – investors and businesses and acts to facilitate streamlined fund mobilisation in
between them. Market run according to the agreed regulation system to allow smooth trading of
large amount of capital (Leamer and Stern, 2017). Markets also offers companies and investors
to offset their risk. Financial markets play a very important role in a nation's economy as they
accommodate direct flow of savings and investment in the economic cycle by creating a bridge
between the wealth of individual and the wealth of institutions for both short term and long term
financial needs of both the sides. It facilitate capital accumulation, allocation and distribution and
arranges for the free flow of money and production of goods and services in the economy. Below
mentioned are some types of financial markets:
 Stock market – This market trades in shares of the public companies. Companies list
their shares with a price on it, which is then purchased by investors. It further runs on the
free flow of demand and supply between the buyers and sellers. Investors and companies
earn with the increase in valuation of shares. For example, New York Stock Exchange,
London Stock Exchange, etc.
 Bond market – This markets offers bond securities such as treasury bonds, corporate
bonds, municipal bonds, etc. While shares represent capital, bond represents debt. Bonds
are issued by government and companies which are then purchased by investors. Bonds
are redeemed as per the pre-agreed conditions.
 Commodities market – This market offers natural resources as commodities like corn,
gold, oil, etc. It has been given position of separate market as trade of natural resources
is very volatile (Weber, Staub-Bisang and Alfen, 2016). Actually commodity is not
traded, only symbolically their prices are determined through demand and supply
exchanges between investors.
 Foreign exchange market – This market offers currencies such as Dollar, Pound, Euro,
etc. as securities. Various banks, foreign exchange brokers, investors, investment
management companies participate in this market to determine the prices of currencies.
It is a free market and runs according to forces of demand and supply.
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