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Financial
Institutions
and Market
Assignment
Submitted By: Submitted To:
Aditya Vadodariya Prof. ATUL KUMAR
0211BBA020
Introduction
Financial Instruments & Markets:
- Instruments: Assets traded (e.g., stocks, bonds,
currencies).
- Markets: Platforms for buying/selling (facilitate
capital allocation).
Key Types:
- Equity: Ownership (e.g., stocks).
- Debt: Investor loans (e.g., bonds).
- Derivatives: Based on underlying assets (e.g.,
options).
- Alternate Investments:
- Beyond stocks/bonds.
Financial Instruments Classification:
• Cash Instruments:
Values directly influenced by markets (e.g., stocks, bonds,
deposits).
Easily transferable securities.
• Derivative Instruments:
Value based on underlying components (e.g., options, futures).
Derive value from other assets.
• Foreign Exchange Instruments:

Involve exchanging one currency for another..
Highlight the characterics and risk-return profiles
associated with each class.
1.Stocks (Equity): 3 Bonds (Debt): Features

Characteristics: - Characteristics:
- Ownership in a company. - Investor loans to issuers.
- Potential for capital - Fixed interest payments.
appreciation. - Lower volatility.
- High volatility, market risk. 4. - Risk-Return Profile:
2. Risk-Return Profile:** - More stable returns.
- High potential returns. - Lower potential for capital appreciation.
- High market risk.
Functionality of Financial Markets
• Primary Market:
• - Securities created and sold for the first time (e.g.,
IPOs).
• - Companies raise capital by issuing new stocks
and bonds.
• Secondary Market:
• - Stocks and bonds traded among investors (e.g.,
stock exchanges).
• - Provides liquidity and allows buying/selling of
existing securities.
Money
Market:
- Money Market: Capital Market:
- Immediate financial needs, - Long-term financial instruments like
short-term (less than one year).
stocks and bonds.
- Key Functions:
- Liquidity provision.
- Functions:
- Working capital. - Raising capital.
- Loan servicing. - Investment opportunities.
- Short-term consumption. - Secondary trading.
- Instruments: - Components:
- Call Money. - Equity Market.
- Bill Market. - Debt Market.
- Certificates of Deposit (CD).
- Derivatives Market.
- Commercial Paper (CP).
- Ready Forward Contracts (Repos).
- Foreign Exchange Market (Forex).
- Government Dated Securities.
Allocation Strategies
• -Capital Market:
• - Long-term financial instruments (stocks, bonds).
• Functions:
• - Raising capital.
• - Investment opportunities.
• - Secondary trading.
• Components:
• - Equity Market.
• - Debt Market.
• - Derivatives Market.
• - Foreign Exchange Market (Forex).
Diversification:
- Spreading investments across different assets and markets.
- Goal: Minimize risk, maximize returns.
- Risk Reduction: Diversify across assets to offset losses.

- Stability
- Opportunity Capture
- Risk Management
- Long-Term Returns
- Risk Assessment: Evaluate investment risks.
- Importance
- Risk Tolerance
- Risk-Return Trade-Off
- Asset Allocation
- Individual Goals
- Monitoring and Adjustments
Case study
• 2008 global economic downturn:

• Similarities to crypto market meltdown.
• Leverage, debt, and counterparty relationships
caused losses.
• Cryptocurrencies rise:
• Emerged during financial crisis.
• Designed to reduce reliance on trusted third
parties.
Regulatory
Environment
● - Definition: Financial regulation encompasses laws and
rules governing the financial industry, including banks,
investment firms, and insurance companies.
● - Objectives:
● - Customer Protection: Regulations aim to safeguard
customers from fraudulent activities and ensure fair
treatment.
● - Financial System Stability: Regulations work to
maintain the stability of the financial system by curbing
excessive risk-taking and preventing systemic failures.
● - Fair Competition: Regulations foster fair competition
among financial institutions.
Regulatory
Environment
• SEBI regulations:
• Govern Indian
securities markets.
• IFRS:
• International
accounting standards.
• Impact financial reporting
and investment decisions.
Conclusion !
1.- Diversification: Spread investments across assets to reduce risk and balance
stability with growth.
2.- Risk Assessment: Understand your risk tolerance, evaluate trade-offs, and
align investments with goals.
3.- Financial Markets: Money markets provide short-term liquidity, capital
markets support long-term investment, both drive economic growth.
4.- Regulatory Compliance: Stay updated on financial regulations for
transparency, stability, and investor protection.
5.- Strategic Allocation: Choose allocation strategies based on objectives,
monitor and adjust regularly.
Thanks!
CREDITS: This presentation template was created
by Slidesgo, and includes icons by Flaticon, and
infographics & images by Freepik

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Financial

• Foreign Exchange Instruments:

1.Stocks (Equity): 3 Bonds (Debt): Features

- Risk Reduction: Diversify across assets to offset losses.

• 2008 global economic downturn:

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