Updated By: LatestGKGS Desk
A capital market is a market for debt or equity where companies and governments can raise long-term funds.
It is reverse of the money market as it is for a long time, at least period longer than a year. It includes stock market which means equity securities and bond market (debt).
The major three components of capital market -the equity market, the debt market, the derivative market.
Issuing and trading in equity shares and also medium and long-term debt instrument as bonds and debentures.
Time period more than one year are considered is long less then that is short term.
Derivative market is the financial market for derivatives, financial instruments like future options which are other forms of assets.
There are various types of derivatives that are Forwards where settlement takes place on a certain date in future at today's pre-agreed price.
Futures-agreement to buy and sell an asset at a certain time in future at a certain price.
Options-gives the right but not obligation to buy or sell underlying at stated date and price.
Swap-counterparties exchange cash flows of ones party's financial instrument for those of the other party's financial involvement.
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