The microeconomic functions of the financial market mainly include:
1. The agglomeration function refers to the collective function of the financial market to guide many scattered small funds to converge into large funds for social reproduction.
2. Wealth function means that financial instruments in the financial market provide investors with ways to store wealth, retain assets and increase wealth.
3. The hedging function refers to that the financial market provides a risk compensation mechanism for market participants in two ways:
First, insurance institutions sell insurance policies; second, financial markets provide conditions and opportunities for hedging and portfolio investment to achieve the purpose of risk hedging, risk transfer, risk diversification and risk aversion.
4. The transaction function refers to the convenient transaction of financial instruments by virtue of the transaction organization, transaction rules and management system of the financial market.
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What are the main functions of the financial market? Why are these functions of financial markets important to every economic entity?
The main functions of the financial market are financing, regulation, risk avoidance and signaling.
The importance of these functions of the financial market for each economic entity lies in:
1. The financial market can quickly and effectively guide the rational flow of funds and improve the efficiency of capital allocation.
(1) It has expanded the contact opportunities between capital supply and demand parties, facilitated financial transactions, reduced financing costs and improved the efficiency of capital use.
(2) The financial market has opened up broader financing channels for fund raisers and investors.
(3) The financial market provides the necessary conditions for the conversion of various financial instruments with different terms and contents.
2. The financial market has a pricing function, and the fluctuation and change of the price in the financial market is a barometer of economic activities.
(1) Financial assets have par value.
(2) The intrinsic value of enterprise assets - including the value of enterprise debt and the value of shareholders' equity - can only be "discovered" through the process of interaction between buyers and sellers in financial market transactions. That is, the valuation must be based on the price of the financial assets related to the enterprise formed by the market transaction, rather than simply based on the book figure in the accounting statements.
(3) The pricing function of the financial market also depends on the degree of market perfection and market efficiency.
(4) The pricing function of the financial market contributes to the realization of the market resource allocation function.
3. The financial market provides conditions for the financial management department to carry out indirect financial regulation.
(1) The indirect financial regulation system must rely on the developed financial market to transmit the policy signal of the central bank, guide the behavior of various microeconomic entities through the price changes in the financial market, and realize the intention of monetary policy adjustment.
(2) Within the developed financial market system, there is a high correlation between each sub market.
(3) With the increase of reserve position and liquidity reserve ratio of various financial assets in financial institutions, financial institutions will be more widely involved in the operation of financial markets, and the scope and strength of indirect regulation by the central bank will be continuously strengthened with the development of financial markets.
4. The development of financial market can promote the innovation of financial instruments.
(1) Financial instruments are a set of standardized contracts combining expected returns and risks.
(2) Diversified financial instruments enable investors with different preferences for risk and return to seek the investment that best meets their needs by more detailed division of the risks inherent in various investments in the economy.
(3) Diversified financial instruments can also meet the diversified needs of financiers as much as possible.
5. The financial market helps to realize risk diversification and risk transfer.
(1) The development of financial market promotes the diversification of residents' financial assets and the diversification of financial risks.
(2) The development of financial markets has opened the way for diversification of residents' investment, diversification of financial assets and diversification of bank risks, and provided conditions for sustained and stable economic development.
(3) Residents have enhanced their awareness of investment and risk by choosing a variety of financial assets and flexibly adjusting the preservation form of surplus currency.
6. The financial market can reduce the search cost and information cost of transactions.
(1) Search cost refers to the cost of finding a suitable counterparty.
(2) Information cost is the cost incurred in the process of evaluating the value of financial assets.
(3) The function of financial market to help reduce search and information costs is mainly played by professional financial institutions and consulting institutions.
Extended data:
A complete financial market should include four basic elements:
(1) Fund suppliers and fund demanders. Including governments, financial institutions, enterprises and institutions, residents, foreign businessmen, etc., they can not only provide funds to the financial market, but also raise funds from the financial market. This is a basic factor for the formation and development of financial markets.
(2) Credit instruments. This is the target of loan capital trading in the financial market. Such as various bonds, stocks, bills, negotiable certificates of deposit, loan contracts, mortgage contracts, etc., are the objects that must be relied on to realize investment and financing activities in the financial market.
(3) Credit intermediary. This refers to some institutions that act as intermediaries between the supply and demand of funds and play the role of contact, media and agent buying and selling, such as banks, investment companies, stock exchanges, securities dealers and brokers.
(4) Price. The price of the financial market refers to the value it represents, that is, the sum of the specified monetary capital and the interest rate or yield it represents.
What are the functions of the financial market?
The functions of the financial market include financing, regulation, risk avoidance and signaling. The financial market can quickly and effectively guide the rational flow of funds and improve the efficiency of capital allocation. The financial market has a pricing function, and the fluctuation and change of the price in the financial market is a barometer of economic activities. The financial market provides conditions for the financial management department to carry out indirect financial regulation. The development of financial market can promote the innovation of financial instruments.
1. Financing function: there is a large amount of liquidity funds in the financial market itself, which can gather funds from many aspects and channels to circulate in the market;
2. Regulation function: the financial market can fully mobilize the good operation of the economy, and can realize the reallocation of resources, thus realizing the redistribution of social wealth and risk;
3. Risk avoidance function: financial market has the function of risk transfer and risk diversification;
4. Signal function: the financial market is a barometer of the national economy.
Development materials:
1. The financial market can quickly and effectively guide the rational flow of funds
And improve the efficiency of capital allocation. It has expanded the opportunities for contacts between the supply and demand of funds, facilitated financial transactions, reduced financing costs, and improved the efficiency of fund use. It has opened up a broader financing channel for fund raisers and investors, and provided necessary conditions for the mutual conversion of financial instruments with different terms and contents.
2. The financial assets related to enterprises are valued on the basis of the prices formed by market transactions, rather than simply based on the book figures in the accounting statements: the pricing function of the financial market also depends on the degree of market perfection and market efficiency: the pricing function of the financial market helps to realize the function of market resource allocation.
3. The indirect financial regulation system must rely on the developed financial market to transmit the policy signal of the central bank, guide the behavior of various microeconomic entities through the price changes in the financial market, and achieve the purpose of monetary policy adjustment: within the developed financial market system, There is a high correlation between each sub market. With the increase of reserve positions and liquidity reserve ratios of various financial assets in financial institutions, financial institutions will be more widely involved in the operation of the financial market. The scope and strength of indirect regulation by the central bank will continue to be strengthened with the development of the financial market.
