Financial markets are crucial systems where individuals and institutions trade various financial assets, including stocks, bonds, derivatives, and commodities like oil or gold, typically with low transaction costs. These markets operate through organized exchanges, such as the New York Stock Exchange (NYSE) or NASDAQ, as well as through bilateral agreements. They are broadly categorized into capital markets for long-term financing and money markets for short-term loans, encompassing diverse segments like stock, bond, foreign exchange, and cryptocurrency markets.

A key function of financial markets is to channel funds from investors to corporations, enabling businesses to finance operations and achieve growth. They differentiate between primary markets, where newly issued securities (like during an IPO) are sold, and secondary markets, where existing securities are traded among investors. In secondary markets, liquidity—the ease of selling an asset without significant loss—is a paramount factor for investors.