Fiancial Market
In a broad sense, the financial market refers to a market whereby parties, no matter if it is from the demand side or supply side, distribute capital resources through various financial tools. As a crucial stabilizing element in a capitalist economy, the financial market includes stock markets, bond markets, foreign exchange markets, commodity markets, and all derivatives markets.
Demand and supply sides of capital resources can trade in the form of spot markets, futures markets, off-exchange or exchange floor, through different forms of products and derivatives—which thus constitute the makeup of the entire financial market. In other words, the financial market promotes capital raising and the development of capitalist society, creates liquidity for corporations and opportunities for investors, even speculators.
Stock Market
The stock market consists of exchanges or OTC markets in which shares and other financial securities of publicly held companies are issued and traded. The reality is that investing in the stock market carries risk, but when approached in a disciplined manner, it is one of the most efficient ways to build up one's net worth.
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Numerous studies have shown that, over long periods of time, stocks generate investment returns that are superior to those from every other asset class. Stock returns arise from capital gains and dividends
Bond market
There are two main markets in Bonds, primary markets and secondary markets. The primary market is a marketplace where government, corporation and financial institutions sell bonds to investors and first-time buyers to raise capital. Bondholders can freely sell their bonds to cash out fin the secondary market. As a market for each government to raise capital for its budget, the bond market is also a vital channel for a central bank to dictate its monetary policy. As the benchmark of yields of other financial assets as well as a crucial indicator of market risks, the yields and yield curve of all bonds allow investors to evaluate the value of financial assets.
Commodity market
Different from other markets operating with cash transactions, the commodity market trades commodities in the form of futures and the process is more complicated.
Firstly, delivering the commodities to a designated warehouse within the timeframe stipulated by a centralized exchange. Secondly, the commodities will be inspected and kept in a warehouse which then issues a warehouse receipt. Thirdly, come the due date of delivery, the seller submits the warehouse receipt, and the buyer pays a sufficient sum to purchase the commodities and process the delivery at a centralized exchange.
In conclusion, thanks to market development, trading of commodities now can also be done in the forms of settling price difference, letting investors trade through contracts and hedge against the commodities.