What is financial market?A financial market is a marketplace where buyers and sellers trade financial securities, commodities, and other fungible items at prices determined by supply and demand. These markets facilitate the allocation of capital and the transfer of risk between investors and borrowers.Financial markets can be categorized into the following types:1. Capital Markets: These markets deal with long-term securities, such as stocks and bonds. Capital markets are further divided into:- Primary Market: Where new securities are issued and sold to initial investors.- Secondary Market: Where existing securities are bought and sold among investors.2. Money Markets: These markets deal with short-term debt securities, such as Treasury bills, commercial paper, and certificates of deposit, with maturities typically less than one year.3. Derivatives Markets: These markets deal with financial instruments whose value is derived from an underlying asset, such as options, futures, and swaps. Derivatives are used for hedging, speculation, and arbitrage.4. Forex (Foreign Exchange) Market: This market deals with the trading of currencies between countries, facilitating international trade and investment.The importance of financial markets in today's world cannot be overstated, as they play a vital role in the global economy .Here are some key reasons why financial markets are crucial in today's world:1. Capital Allocation: Financial markets enable companies and governments to raise capital by issuing stocks, bonds, and other securities, which can be used for investment in projects, infrastructure, and innovation, driving economic growth and development.2. Investment and Wealth Creation: Financial markets offer opportunities for individuals and institutions to invest in a diversified portfolio of assets, such as stocks, bonds, mutual funds, and ETFs, allowing them to earn returns and build wealth over time.3. Risk Management: Financial markets provide instruments like derivatives, options, and insurance products that allow investors, businesses, and governments to hedge against various types of risks, including interest rate risk, currency risk, commodity price risk, and market volatility.4. Liquidity and Price Discovery: Financial markets provide liquidity by connecting buyers and sellers.