Financial Terms
Finance is defined as the management of money or funds; it is structured and regulated by a complex system of power relations within political economies across the state and global markets.
Efficient Market is one where the market price is unbiased estimate of the true value of the investment. One factor to consider is that markets do not become efficient automatically, it is the actions of the investors, sensing bargains and putting into effect schemes to beat the market, that makes them efficient. The role of the efficient market in finance is to have a lower spread and lowest volatility of the market.
Primary market is the part of the capital markets that deals with the issuance of new securities. Some of the features of primary markets are: new long term equity capital, the securities are sold for the first time, and the financial assets sold can only be redeemed by the original holder. The role of primary markets in finance is that they perform crucial functions of facilitating capital information in the economy.
Secondary market which is also called aftermarket is the financial market in which previously issued financial instruments such as stocks, bonds, futures and options are bought and sold. One example is the loans that are sold by a mortgage bank to investors such as Freddie Mac. Their role in finance is to offer sellers the advantage of effectively reducing the purchase price of products and investments by recouping a portion of what they originally paid.
Risk is the probability than an investment’s actual return will be different than expected. It relates to finance is that we must measure credit risk, information timing, and legal risk.
Security is a fungible, negotiable financial instrument representing financial value. Securities may be represented by a certificate.
Stocks represent the original capital paid into or