What are the 5 Roles of Financial Markets?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
The 5 roles of financial markets are to ensure low transaction and information costs, to provide liquidity by providing a mechanism for the investor to sell financial assets, to provide certainty in the trading of financial assets, and to provide a facility for interaction between investors and borrowers. A financial market is a market where individuals can exchange financial derivatives and securities for little to no cost.
Table of content
5 Roles of Financial Markets
Stocks, bonds, raw materials, and precious metals, which are referred to as commodities on the financial markets, are some of the securities. They also provide price information resulting from the interaction between buyers and sellers in the market as they trade financial assets.
Financial markets provide a framework where different participants, such as investors and creditors, are treated fairly and equitably, regardless of the size of their businesses. or other factors.
Functions of Financial Markets
The financial industry also provides various employment opportunities, which helps reduce the unemployment rate in the country. Like other financial markets, the real estate market is a financial market because funds are provided for purchasing and selling physical real estate.
- The financial market plays a vital role in the economy of any country.
- It provides a framework that allows various participants, such as investors and creditors, companies and traders, to trade fairly, regardless of the size of their business or other factors.
Summary:
What are the 5 Roles of Financial Markets?
The five functions of financial markets are to guarantee low transaction and information costs, to provide liquidity by giving investors a way to sell financial assets, to ensure trading in financial assets is done with certainty, and to give investors and borrowers a place to interact.
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