Financial Markets and the Risks They Run :: Financial Markets Institutions Finances Essays

pecuniary Markets and the Risks They RunOutline the differences between a agentive role and a principal (or marketmaker) in financial markets, including discussions of how theyare remunerated and what risks they run.A financial market consists of diverse financial assets allotd betweenbuyers and dish outers. In addition to enabling interchange of previouslyissued financial assets, financial markets make possible the borrowingand modify by facilitating the sale by newly issued financial assets.Examples of financial markets overwhelm the New York Stock Exchange(which is involved in the resale of previously issued air shares),the U.S. government bond market (which is involved in the resale ofpreviously issued bonds), and the U.S. treasury bills auction (salesof newly issued T-bills). A financial institution is an organizationwhose patriarchal source of profits is through financial assettransactions. Examples of such financial institutions include discountbrokers, banks, insu rance companies, and complex multi-functionfinancial institutions such as Merrill Lynch.Financial institutions participate in financial markets by creatingand/or commutation of financial assets. In the financial market there are quatern institutions that carry out in this type of trade. One of whichis a broker which is a commissioned agent of a buyer/seller whofacilitates trade by locating a seller/buyer to complete the sought aftertransaction. A broker does not worry a position in the assets he or shetrades there is no maintaining of inventories in these assets onbehalf of the broker. The commissions they show to the users oftheir services determine the profits of brokers. Examples of brokersinclude real estate brokers and stockbrokers. Dealers, want brokers, facilitate trade by matching buyers withsellers of assets they do not direct in asset transformation. Unlikebrokers, however, a dealer can and does take positions (i.e.,maintain inventories) in the assets h e or she trades that permit thedealer to sell out of inventory rather than always having to locatesellers to match both offer to buy. Also, unlike brokers, dealers donot receive sales commissions.