It is quite common to come across the term financial market when we watch the news or read a newspaper. It is usually related to the stock market, but this is a very restricted view.
In reality, this environment is full of financial products and institutions that offer them. Mastering its concepts is the best way to understand the operations and have technical knowledge, which will allow you to develop more appropriate financial management.
What is the financial market?
This environment is formed by financial institutions that act south korea whatsapp data as economic agents. Those who need resources are called borrowers, while those who have money to lend are known as lenders, savers or investors.
Financial operations are remunerated through interest rates, a percentage that includes the investor's income and the cost that must be paid by borrowers.
In this scenario, institutions act as a bridge between borrowers and lenders. For this reason, they are called financial intermediaries. This is the case of stockbrokers and banks, for example.
What are the subdivisions of the financial market?
The financial market has several subdivisions. They are interrelated and interact in practice. Here's how it works:
Money market
This modality involves very short and short-term operations , that is, 1 year or less. This characteristic ensures greater agility in controlling the economy's liquidity and the basic interest rate. It works with highly liquid assets.
This is also the market that allows financial intermediaries to meet their cash demands. Therefore, the main participants are:
Central Bank (Bacen);
institutions that collect demand deposits;
institutions authorized to issue or purchase interbank deposits.
The securities issued are categorized as public (for example, Tesouro Selic or Tesouro IPCA+) and private (such as the Bank Deposit Certificate – CDB and the Interbank Deposit Certificate – CDI).
The main operations carried out are the purchase and sale of National Treasury bonds in order to control inflation and balance national finances. In the case of low inflation, the Central Bank sells bonds to reduce the currency in circulation.
If the situation is one of deflation, the process is reversed. The Central Bank buys the bonds and increases the amount of currency in circulation to stimulate consumption and investment.
Credit market
Short- and medium-term financing operations are the focus of this environment. The focus is on permanent assets and working capital of enterprises. It is mainly formed by financial companies and commercial banks.
The main operations carried out in this market are:
Bank credit market
Financial institutions operate in this environment. Their organization considers the following elements:
individuals: overdraft, personal credit, credit card and payroll loan;
legal entities: products for financing turnover and for cash discounts and advances;
Direct Consumer Credit (CDC): automotive, home appliances, sound and image, bed, table, clothing and bath, among other segments.