Question

explain the following terms ; financial markets,financial crisis,financial panic,primary markets and secondary market?

Answer 1

Financial markets: A financial market is an organized institutional structure or mechanism where financial assets and instruments are created and exchanged. Financial instruments that are traded in a financial market includes equities, bonds, currencies, and derivatives. Examples include New York Stock Exchange (NYSE).

Financial crisis: It is a situation where there is a drastic and significant decline in the nominal value of financial instruments and assets causing panic in the market. In such a situation there is a massive sell-off of assets by the investors as they try to minimize their losses.

Financial panic: It is a situation where suddenly investors' confidence goes down, and they try to sell-off their assets. Such a situation usually arises when there is widespread failure of banks due to rising non-performing assets of the banks. However, unlike the financial crisis financial panic are easier to handle as they are just the beginning of the crisis and can be tackled through appropriate policy measures.

Primary markets: It is the market where new securities are sold. In other words, it is the market where buyers or investors purchase securities directly from the issuing companies.

Secondary market: Secondary markets deal with the sale and purchase of previously issued securities, bonds, options, and futures.