Discuss the various functions of financial market.

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answered Apr 24 by AdityaBarman (23.0k points)
selected Apr 24 by AnshikaSatyarthi

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Five Functions of financial market:

Capital Formation: Financial markets help companies and governments raise funds to invest in new projects and initiatives, driving economic growth.
Price Discovery: They determine fair prices for financial assets by balancing supply and demand, aiding investors in making informed decisions.
Risk Management: Financial markets offer tools like derivatives to hedge against financial risks, reducing uncertainty for investors and organizations.
Liquidity Provision: They enable quick and low-cost buying and selling of assets, ensuring smooth market functioning and price stability.
Facilitating Monetary Policy: Financial markets help central banks implement monetary policy by transmitting changes in interest rates and money supply to the broader economy, influencing economic activity.