Capital markets: long-term corporate debt and equity than are long term more than
one year maturity period. Besides the function of providing funds to industry, capital
markets also provide managers with information. Without this information, it would be
very difficult to determine the firm’s opportunity cost of capital or to assess the firm’s
financial performance.Capital markets provide liquidity for investors. Because individual stockholders can
always recover retained earnings by selling shares, they are willing to invest in
companies that retain earnings rather than paying out earnings as dividends. Well-
functioning capital markets allow the firm to serve all its stockholders simply by
maximizing value.New York Stock Exchange, American stock exchange, in addition , securities are traded
through the thousands of brokers and dealers on the Over-the- counter markets, a term
used to denote all buying and selling activities in securities that do not take place on an
organized stock exchange.Mortgage markets - Players: lending institutions & mortgage brokers
Consumer credit markets
Venture/"Vulture" Capital (VC) market for start up companies
Seed money & managerial advice are given
Equity capital, not debt
Derivatives Markets - claims on financial assets (e.g., Options, forwards, Futures,
Swaps)
Financial Asset Markets - claims on real assets
Spot Market - for immediate delivery (actually1 -5 days)Forward Markets / Futures Markets – (future delivery) Thus, futures and forward
contracts can be used to reduce risk associates with unforeseen events by looking into
an agreement today for the future delivery of a specific asset at a specific time, place,
quantity and quality.o Trends in financial markets
a) Globalization - closely linked (“integrated”) international markets