The cash market explained
Fsp Invest, 13 Dec. 2013
Tags: cash market, financial market, capital market, equity market, bond market, how the cash market works
There are a few types of financial markets. But the one you’re most likely to hear about on a day-to-day basis is the cash market. If you buy bonds or shares, you need to know how this market works. We’ve outlined it for you today.
How the cash market works
A market is a ‘cash market’ if transactions will result in physical flows of cash.
Examples of cash markets include the foreign exchange, money, bond and equity markets. Derivative markets are also cash markets.
The commodity market (on which you trade things like oil, gold, sugar and other physical goods) is also a cash market. But unlike the other cash markets we just mentioned, the commodity market is not a financial market.
The most important cash markets for you to know about
The most commonly traded financial instruments on cash markets are shares and bonds.
Together shares and bonds make up the ‘capital market’.
The capital market is the market in which companies try to raise money to buy assets or for expanding their projects.
So when you’re buying shares or bonds, you’re participating in this market.
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