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The Role of Financial Institutions in Financial Markets Paper

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The Role of Financial Institutions in Financial Markets Paper

In the contemporary business environment, there is cut-throat competition between companies for achieving excellence and long-term profitability. Most of these companies are dependent on various financial institutions for fund management. The given paper is a descriptive analysis of the role of financial institutions in financial markets. In addition to this, the paper also talks about how these institutions interact with each other.
Financial market is a system that provides a common platform to people for the purpose of buying and selling financial securities, commodities, and other fungible items. In addition to that, the financial market also helps in risk mitigation and international trade. An efficient financial market facilitates these transactions at low cost and effective hypothesis (Amadeo, 2010). Financial markets can be grouped as: * Capital market, Stock and Bond markets. * Commodity markets. * Money markets, for short and long term financing. * Derivative markets, provides tool for managing financial risks. * Insurance markets; and * Foreign exchange markets.
On the other side of things, financial institutions in simple words can be defined as an institution that provides various financial services to its customers. These institutions act as financial intermediaries between individual customers, organizations, and government (InvestorWords.com, 2010). Financial intuitions can be grouped under three heads, namely: 1. Depositories, these institutions accepts, store, and manage deposits and loans. Example, banks, credit unions, companies giving mortgage loans, and credit trusts and unions. 2. Insurance and pension funds providers, these companies provides numerous insurance schemes and fund management programs. 3. Individuals like brokers, underwriters,…...

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