Financial Markets

Financial markets are the formation and transfer of financial assets and financial liabilities. The nature of financial markets can be explained through an analogy to the ordinary goods market. For example, the car market is defined as all car transactions, whether they occur in a showroom, in the used car trading center, or in individual or individual transactions, all of which form the magnitude of car demand and supply.

The function of savings and investment in modern economic activities is carried out by various forms of economic institutions. Individual / company surplus savings units that exceed the amount of investment in their assets will have financial assets, while the savings deficit unit below the investment amount will have financial obligations (promissory notes, bonds and ordinary shares issued by the savings deficit unit).

The transfer of funds from a unit of surplus savings or acquisition (acquisition) of funds by the savings definition unit will form financial assets and financial liabilities. For example deposits in banks. For depositors, their deposits are financial assets. While for banks is a financial obligation. Loans provided by banks, for debtors are financial obligations and for banks are financial assets.


Likewise, the financial market consists of all transactions that give rise to financial assets and financial liabilities. For example, buying and selling transactions carried out by Bapepam, dealers / brokers who buy and sell securities outside the market or free market (over the counter market), individual transactions in shops, savings banks, other financial institutions also create financial assets and liabilities , so everyone participates in the buying and selling process to a certain extent. So financial assets and liabilities that are traded have a maturity of less than one year called the money market. If the maturity is longer or more than one year, it is called the capital market.