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Financial Market models
What are Financial Markets? How are they useful?
Financial markets are marketplaces in which assets are bought and sold. These assets include bonds, commodities, stocks, derivatives and foreign exchange. Financial markets are where businesses come to raise capital for growth and reduce risks, and where investors come to make money. They are widely used because they create a regulated and open system for the purpose of raising capital. The stock and bond markets are used for raising capital, whereas the commodities, foreign exchange, futures contracts and derivative markets are used to offset risks. The large size of the financial markets allows liquidity, meaning that sellers can unload assets in order to raise cash. As well as this, financial markets decrease the cost of doing business because you do not have to search very far to find a buyer or somebody who would like to sell.
Types of Financial Markets:
- -Stock Market
-> Also known as the Equity Market. This is where shares of publicly listed companies are traded.
- -Bond Market
-> This is where participants can issue new debt, or buy and sell debt securities- usually in the form of bonds.
-> Derivatives are priced securities that are derived from at least one underlying asset. The derivative is a contract between at least 2 parties, and its value is derived from fluctuations in the underlying asset.
- -Commodities Market
-> This is a physical or virtual marketplace wherein hard and soft commodities are sold or traded. Soft commodities are agricultural products whereas hard commodities are mined, e.g. oil.
- -Foreign Exchange
-> This market buys, sells, or exchanges currencies at current or set prices.
Why are Financial Markets important?
-> Buyers and sellers are brought together through a medium so that money can flow to where it is needed the most.
-> Anybody can invest in company shares through the financial markets, meaning that you can profit from returns over a period of time.
-> They allow households to take out insurance.
-> They allow banks to make money so that in turn, banks can lend to customers seeking loans.
->They provide finance for companies so that they are able to invest and grow.
You can find out more information on Financial Markets here:
- An Excel Model to calculate the implied risk premium in a market454 remove_red_eye
Beta Calculation WorksheetCompute the Beta needed for your CAPM as to calculate the expected return of a company's share256 remove_red_eye
Option Value with Black-Scholes formulaFind the value of puts, calls, and combinations of options using the Black-Scholes formula.200 remove_red_eye
Working Capital Policy TemplateSee how working capital policies are established and how they influence financial needs131 remove_red_eye
Private Equity Band Chart TemplateCompute the Price to Earnings (or other PE ratios) Band Chart for your target stock or index433 remove_red_eye
Valuation Waterfall GraphShow your audience how the share price of a target company can be broken up in its sub-components358 remove_red_eye
How to Calculate Volatility in ExcelA simple methodology and excel file to learn how to compute stock volatility225 remove_red_eye
Option Trading WorkbookPrice options and choose the appropriate strategies. Visualise them in a graph.115 remove_red_eyefreeby Peter McFee
Black-Scholes converted for Binomial TreeConverts the standard deviation input in the Black-Scholes model to up and down movements in the binomial tree.113 remove_red_eye
Effect of a buyback on Earnings per Share (EPS) and ValueAssess how a buyback will affect EPS and Value95 remove_red_eye
Dividend Adjusted Model to value Long Term OptionsA dividend-adjusted model for valuing long term options.83 remove_red_eye
Dividend Adjusted Model to value Short Term OptionsA dividend-adjusted model for valuing short-term options.84 remove_red_eye
Portfolio Variance ModelA simple model to learn and play with portfolio variance in Excel63 remove_red_eyefreeby Risk Prep
How to Double Your Money in the Stock Market with No RiskJeff Rose explaining how you can double your money in the stock market without risk.11 remove_red_eyefreeby Jeff Rose
Technical Analysis Excel Template with Trading Strategy Back TestingThe technical analysis template provides analysis for SMA, ROC, MACD, RSI and Bollinger Band indicatorsNew!
How to do Initial Public Offerings (IPOs)A guide on how privately held companies transition into publicly held companies through IPO.12 remove_red_eye
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