In economics Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic, a financial market is a mechanism that allows people to easily buy and sell (trade Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders instead generally negotiate) financial securities A securtiy is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities ; equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security is called the issuer. A country's regulatory (such as stocks and bonds), commodities A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and (such as precious metals or agricultural goods), and other fungible Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil, wheat, orange juice, precious metals, and currencies items of value at low transaction costs In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange . For example, most people, when buying or selling a stock, must pay a commission to their broker; that commission is a transaction cost of doing the stock deal. Or consider buying a banana from a store; to purchase the banana, your costs and at prices that reflect the efficient-market hypothesis In finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient", or that prices on traded assets (e.g., stocks, bonds, or property) already reflect all known information, and instantly change to reflect new information. Therefore, according to theory, it is impossible to consistently outperform.
Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid.
Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy A market economy is an economy based on the division of labor in which the prices of goods and services are determined in a free price system set by supply and demand in contrast either to a command economy A planned economy or directed economy is an economic system in which the state or workers' councils manage the economy. It is an economic system in which the central government makes all decisions on the production and consumption of goods and services. Its most extensive form is referred to as a command economy, centrally planned economy, or or to a non-market economy such as a gift economy In the social sciences, a gift economy is a society where valuable goods and services are regularly given without any explicit agreement for immediate or future rewards (i.e. no formal quid pro quo exists). Ideally, simultaneous or recurring giving serves to circulate and redistribute valuables within the community. The organization of a gift.
- The raising of capital In economics, capital or capital goods or real capital refers to factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital. In finance and accounting, capital generally refers to financial wealth, especially that (in the capital markets The capital market is the market for securities, where companies and governments can raise longterm funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission , oversee the capital markets in);
- The transfer of risk Risk is a concept that denotes the precise probability of specific eventualities. Technically, the notion of risk is independent from the notion of value and, as such, eventualities may have both beneficial and adverse consequences. However, in general usage the convention is to focus only on potential negative impact to some characteristic of (in the derivatives markets The derivatives markets are the financial markets for derivatives. The market can be divided into two, that for exchange traded derivatives and that for over-the-counter derivatives. The legal nature of these products is very different as well as the way they are traded, though many market participants are active in both);
- International trade International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product . While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on (in the currency markets The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars)
– and are used to match those who want capital to those who have it.
Typically a borrower issues a receipt A receipt is a written acknowledgement that a specified article or sum of money has been received as an exchange for goods or services. The receipt acts as the title to the property obtained in the exchange to the lender promising to pay back the capital. These receipts are securities A securtiy is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities ; equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security is called the issuer. A country's regulatory which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is or dividends Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be paid to the shareholders as a dividend. Many corporations retain a.
In mathematical finance Mathematical finance comprises the branches of applied mathematics concerned with the financial markets, the concept of a financial market is defined in terms of a continuous-time Brownian motion stochastic process The Brownian Motion models for financial markets are based on the work of Robert C. Merton and Paul Samuelson, as extensions to the one-period market models of Harold Markowitz and William Sharpe, and are concerned with defining the concepts of financial assets and markets, portfolios, gains and wealth in terms of continuous-time stochastic.
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Q. Can anyone briefly just explain how the components of each market are correlated?? example i think when stocks go up bonds go down? and when the dollar goes up oil goes down. and when stocks go down gold goes up.
Asked by lafunkmob - Mon Sep 29 15:29:12 2008 - - 2 Answers - 0 Comments
A. Stocks and bonds, as you say inverse. Gold goes up when economy/currency in turmoil. Currency goes up and down according to confidence of investors in that currency.Oil supply and demand (market up lot's of growth and the opposite like now). Bit simple but that's a guide.
Answered by raysor - Mon Sep 29 15:42:54 2008
