Capital markets are essential for economies to function, bringing together those with capital and those who need it. Financial products are the specific instruments traded within these markets, facilitating the flow of capital and enabling investment and risk management.

Key functions of Capital Markets:

• Fundraising: Businesses and governments issue financial products like stocks and bonds to raise capital for projects, expansion, or operations.
• Investing: Investors buy these financial products to earn returns, potentially through capital appreciation or income like dividends or interest payments.
• Liquidity: Capital markets provide a means for investors to buy and sell existing financial products, allowing for a more liquid investment environment.
• Price Discovery: Market forces of supply and demand for financial products determine their prices, leading to efficient allocation of capital.
• Risk Management: Investors and businesses can use financial products like derivatives to hedge against various risks.

Financial Products:

Financial products are tradable assets or contracts that represent monetary value and are used within financial markets like capital markets. They enable the flow and transfer of capital between investors and entities seeking funding.