1.
The Financial Market and The Recent Financial Crisis
1
2.
Financial Institutions
3
2.1
Types of Financial Institutions
3
2.2
The Role of Financial Institutions in the Financial Markets
4
2.3
The Role of Financial Institutions in the Financial Crisis
6
3.
Conclusion
7
1. Financial Market and Financial Crisis Technology, globalization, competition, and deregulation all have contributed to the revolution of worldwide financial markets and the creation of an efficient, internationally linked market. However, these developments have created potential problems (Brigham 1995: 111). As the worldwide financial crisis, which started in the early summer of 2007 in America and spread globally, still shapes the headlines of newspapers and the political agenda of developed countries. These recent economic developments drew back societies’ attention to the importance of the world economy and financial markets. A financial market is considered as “a market in which financial assets [..] can be purchased or sold” (Madura 2012: 3). Here, any kind of marketplace, where buyers and sellers participate in the trade of financial assets such as equities, bonds, currencies and derivatives, is meant. Mostly financial markets have transparent pricing, basic regulations on trading, costs and fees, and market forces that determine prices of securities that are traded. There are three relevant classifications of financial markets in the context of the financial crisis: money versus capital markets, primary versus secondary markets, and organized versus over-the counter markets (Madura 2012). The money versus capital market distinguishes in various points: The money market is only short- term oriented, a maturity of less than one year, and the trading objects are referred to as money market securities, which are debt securities. These have
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