by Capital Market structures refer to the frameworks within which financial instruments intended for long-term funding and investment are issued and traded. These structures are shaped by a variety of factors including the types of instruments available, the regulatory environment, market participants, and the mechanisms through which securities are issued and traded.
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Equity Markets
Equity markets involve the issuance and trading of stocks, representing ownership stakes in companies. They provide companies with a mechanism to raise capital in exchange for a share of ownership.
- Subtypes:
Can include primary markets (where new issues of stocks are sold via IPOs) and secondary markets (where existing shares are traded among investors).
- Debt Markets
Debt markets deal with the issuance and trading of bonds and other debt instruments. These instruments represent loans made by investors to borrowers (typically corporations or governments), who must pay back the principal amount along with interest.
- Subtypes:
Includes corporate bonds, government bonds, municipal bonds, and more exotic forms such as convertible bonds and high-yield bonds.
- Derivative Markets
Derivative markets involve financial instruments whose value is derived from the value of other assets (the underlying). Derivatives are used for hedging risks, speculation, and leveraging positions.
- Subtypes:
Includes options, futures, forwards, and swaps.
- Hybrid Markets
Hybrid markets involve instruments that combine features of debt and equity markets or include other complex structures.
- Subtypes:
Preferred stocks, convertible bonds, and mezzanine financing instruments can be considered hybrids.
- Private Markets
Private capital markets deal with the trading of securities and instruments that are not listed or traded on public exchanges. Transactions in these markets are typically made directly between parties.
- Subtypes:
Private equity, venture capital, and private debt.
- Public Markets
Public capital markets are where publicly listed securities are traded. These markets are highly regulated and transparent, with stringent requirements for listing and ongoing disclosures. Ex. Stock exchanges and bond markets.
