Money, capital, foreign exchange market.pdf

Financial Markets Ekonomi Moneter

1. Financial MarketsFinancial Markets
MONETARY ECONOMICS
Group 6

2. MEMBERSMEMBERS
Gandhi Revantya N
Arkan Maulana
Daffa Febrian A
M. Gabril Nawa. L
M. Radytia Putra. P
(590)
(280)
(686)
(508)
(274)
Agiva Lutfi Cahyadi
M.Dzaky Ariq F.H
(286)
(314)

3. INTRODUCTION TO
FINANCIAL MARKETS
INTRODUCTION TO
FINANCIAL MARKETS
Financial markets refer broadly to any
marketplace where securities trading
occurs, including the stock market, bond
market, forex market, and derivatives
market. Financial markets are vital to the
smooth operation of capitalist economies.
DEFINITION
Liquidity1.
Information2.
Risk Sharing3.
ROLES

4. MONEY MARKETMONEY MARKET
Key Instruments
The Money Market is a financial
market where short-term financial
instruments are traded. These
instruments typically have
maturities of one year or less,
making them highly liquid.
Certificates of Deposit
(CDs)
Repos
(Repurchase Agreements)
Commercial Paper
Treasury Bills (T-Bills)

5. MONEY MARKET MONEY MARKET
Short-term Liquidity
Management: Helps
businesses, banks, and
governments manage their
short-term financial needs.
Cash Management: Provides a
means for firms and institutions
to park excess cash temporarily
while earning some interest.
Interbank Money Market:
Banks lend to each other to
meet short-term liquidity
needs.
Repo Market: Financial
institutions borrow funds by
selling securities with an
agreement to repurchase
them later.
Functions Market Examples Risk and Return
Low Risk: Since money market
instruments are short-term and
often backed by secure entities
(like governments or large
corporations), they generally
carry low credit risk.
Lower Returns: The trade-off for
lower risk is that the returns
from these instruments are
generally lower compared to
long-term investments.

6. A capital market is a financial marketplace for the purchase
and sale of securities backed by either equity or long-term
debt. It provides a venue for businesses, governments, and
other organizations to generate capital through the issuance
of bonds, stocks, and other financial instruments for long-
term investments. These funds are supplied by capital market
investors who buy securities in the hope of making profits
from capital gains, dividends, or interest.
DEFINITION
CAPITAL MARKETCAPITAL MARKET
Generally, there are two types of capital markets:
-Primary Market: The area in which newly issued securities
are offered for sale to investors directly by the issuer (such as
in initial public offerings, or IPOs).
- Secondary Market: A place, like stock exchanges, where
investors trade already-existing securities after they are first
sold.

7. FOREIGN EXCHANGE
MARKET
FOREIGN EXCHANGE
MARKET
Spot Forex Market
Forward Forex Market
Futures Forex Market
DEFINITION
The foreign exchange market (also known as
forex, FX, or the currencies market) is an over-
the-counter (OTC) global marketplace that
determines the exchange rate for currencies
around the world. Participants in these markets
can buy, sell, exchange, and speculate on the
relative exchange rates of various currency
pairs.
DEFINITION

8. COMPARISON OF MONEY MARKET,
CAPITAL MARKET, AND FOREX
COMPARISON OF MONEY MARKET,
CAPITAL MARKET, AND FOREX
Time Horizon: Short-term vs. long-term
Traded Instruments: Types of instruments and their functions
Investment Goals: Liquidity management vs. long-term
investment vs. currency speculationr

9. TIME HORIZONTIME HORIZON
short term vs long termshort term vs long term
Short Term Long Term Flexible
The Money market has
short term horizon
ranging from a few days
to several months
The Capital market
offers more longer time
horizons, ranging from
several months to
decades.
Money Market Capital Market Forex
In Forex, the transactions
can be conducted at
anytime. Investors can buy
or sell foreign currencies
immediately, without having
to wait for a specific time.

10. MONEY MARKET
Common instruments used in the
money market include term
deposits, commercial paper, and
Certificates of Deposit (CDs).
TRADED INSTRUMENTSTRADED INSTRUMENTS
Investment with relatively low risk.
Funds placed in term deposits are
used by banks as a source of loans to
provide credit to other customers or
specific businesses. In return, the
depositor receives interest or a fixed
income.
Types and FunctionsTypes and Functions

11. CAPITAL MARKET
Common instruments used in the
capital market include stocks
and bonds.
TRADED INSTRUMENTSTRADED INSTRUMENTS
Bonds are used as a financing
instrument for companies. The
funds obtained from the sale of
bonds can be used to finance
operational activities, expansion, or
strategic projects.
Types and FunctionsTypes and Functions

12. TRADED INSTRUMENTSTRADED INSTRUMENTS
Forex is the largest and most
active market in the world, with
a very high volume of
transactions every day. This
market is used for trading
foreign currencies, such as USD
(U.S. Dollar), EUR (Euro), JPY
(Japanese Yen), and others.
Forex
Types and FunctionsTypes and Functions
Forex is used for international
transactions, such as
payments for imports and
exports of goods, as well as
for foreign currency
investment and speculation.

13. INVESTMENT GOALSINVESTMENT GOALS
Liquidity management in the Money Market aims to ensure
that a company has the capability to meet its short-term
obligations, such as debt repayments, employee salaries,
and taxes.
Money Market
80%

14. INVESTMENT GOALSINVESTMENT GOALS
The Capital Market is highly focused on long-term
investment. Instruments such as stocks and bonds are
used to increase asset value over a longer period.
Capital Market
80%

15. INVESTMENT GOALSINVESTMENT GOALS
Forex is highly focused on currency speculation. The
primary goal of Forex trading is to profit from the
price differences in buying and selling currencies.
Forex
80%

16. INTERCONNECTION
BETWEEN MARKETS
INTERCONNECTION
BETWEEN MARKETS
Money Market
Interest Rate Changes: A rise in
interest rates in the money market
can make borrowing more
expensive, which can slow economic
activity and reduce demand for
foreign currency.
Inflation Expectations: If the central
bank raises interest rates to combat
inflation, it can also lead to a
stronger domestic currency, as
investors seek to avoid the erosion
of their purchasing power due to
inflation.
Capital Market
Investor Sentiment: Changes in
investor sentiment can drive capital
flows into or out of a country.
Risk Appetite: Global risk appetite
can influence capital flows. When
investors are risk-averse, they may
prefer to invest in safer assets.
Forex Market
Trade Balance: A country with a
trade deficit (imports exceed
exports) may need to sell its
domestic currency to purchase
foreign currency to pay for imports.
Interest Rate Differentials: If a
country's interest rates are higher
than those of its trading partners, it
may attract foreign capital seeking
higher returns. This can strengthen
the domestic currency.

17. REGULATION
&
POLICY
REGULATION
&
POLICY
Financial market regulations generally aim to:
Protect investors1.
Ensure fair and efficient markets2.
Reduce systemic risk3.
Promote financial stability4.
Financial markets operate under
different regulatory frameworks in
each country or region, shaped by
local laws, institutions, and
international standards.
Some major regulatory bodies include:
United States: SEC, FINRA, CFTC
European Union: ESMA, national
regulators of member states
United Kingdom: FCA, PRA
Japan: FSA
China: CSRC
Key aspects of financial market
regulation often include:
Disclosure requirements1.
Anti-fraud measures2.
Capital and liquidity requirements
for financial institutions
3.
Licensing and registration of market
participants
4.
Trading rules and market
surveillance
5.

18. IMPACT OF GOVERNMENT AND
CENTRAL BANK POLICIES

IMPACT OF GOVERNMENT AND
CENTRAL BANK POLICIES

2. Fiscal Policy:
Government spending: Can
stimulate economic growth or
lead to concerns about deficits.
Taxation: Changes in tax rates
impact corporate profits and
investor behavior.
Impact: Influences sector-specific
stocks, government bond yields,
and overall market sentiment.
Government and central bank policies have
significant impacts on financial markets.
Let's break this down into key areas:
3. Regulatory Policy:
Financial regulations: Can affect
the profitability and operations of
financial institutions.
Industry-specific regulations:
May impact stocks in particular
sectors.
Impact: Can create compliance
costs, change business models,
or open new opportunities.
4. Trade Policy:
Tariffs and trade agreements:
Affect international trade flows
and corporate profits.
Impact: Influences multinational
corporations, commodity
markets, and currency exchange
rates.
Monetary Policy:1.
Interest rates: Central bank
decisions on interest rates
directly affect borrowing costs,
bond yields, and currency values.
Quantitative easing/tightening:
These policies influence money
supply and asset prices.
Impact: Affects stock valuations,
bond markets, forex markets,
and overall market liquidity.

19. IMPACT OF GOVERNMENT AND
CENTRAL BANK POLICIES

IMPACT OF GOVERNMENT AND
CENTRAL BANK POLICIES

5. Crisis Intervention:
Bailouts, emergency lending, or
market interventions during
crises.
Impact: Can stabilize markets in
the short term but may create
moral hazard.
Government and central bank policies have
significant impacts on financial markets.
Let's break this down into key areas:
7. Currency Policy:
Exchange rate interventions or
currency controls.
Impact: Directly affects forex
markets and indirectly influences
trade and investment flows.
6. Economic Indicators and Forecasts:
Government and central bank economic
projections can shift market expectations.
Impact: Affects overall market sentiment
and asset allocations.

20. THANK YOUTHANK YOU