The organization of financial (debt, equity, foreign exchange, Essay

The organization of financial (debt, equity, foreign exchange, derivative) and commodity markets and their role in international trade and economic performance - Essay Example At maturity of specific time period, the bond issuers not only repay the principal amount of debt but also the periodical interest payments to the bond holders (Berk and Martin, 2011). Stocks are the equity instruments mainly issued by the corporations for an indefinite time period. Stockholders become the owners of the corporations and play a key role in the decision making process of the company. Stock holders can buy and sell the stocks in the stock market such as New York Stock Exchange, London Stock Exchange etc. (Babu, 2012). Foreign exchange market deals in the currencies of various countries such that it provides the mechanism for trading the foreign currencies. The difference between the buying and selling price is called as the spread which is the profit of the trader. Foreign currency markets work round the clock thus, minimizing the arbitrage opportunities (Sheeba, 2011). Derivatives are the hedging instruments which provide the holders the opportunity to mitigate the risk against the undesired movements of financial securities. Common types of derivatives include forwards, futures, swaps, and options (Brigham and Ehrhardt, 2008). Commodity market comprises of various commodities such as metals, energy, foods, etc. These commodities are regulated by the commodity exchanges such as New York Mercantile Exchange (NYMEX) and Chicago Mercantile Exchange (CME). Financial markets and commodity markets are the major indicators of the international economic prosperity such that in times of booming periods, the prices of the instruments traded under these markets are at their peak whereas in times of depression, these prices steeply