Capital Market Instruments

Capital market instruments are responsible for generating funds for companies, corporations and sometimes national governments. These are used by the investors to make a profit out of their respective markets.


Instruments of Capital Market

There are a number of capital market instruments used for market trade, including –

The Capital market is also known as Securities Market because long-term funds are raised through trade on debt and equity securities. These activities may be conducted by both companies and governments.


Capital Market Instruments


This market is divided into:

The primary market is designed for the new issues and the secondary market is meant for the trade of existing issues. Stocks and bonds are the two basic capital market instruments used in both the primary and secondary markets.

Also Explore: Capital Market Theory

There are three different markets in which stocks are used as the capital market instruments: the physical, virtual, and auction markets.

Bonds, however, are traded in a separate bond market. This market is also known as a debt, credit, or fixed income market.

Trade in debt securities is done in this market. These include the T-bills and Debentures.
These instruments are more secure than the others, but they also provide less return than the other capital market instruments.

While all capital market instruments are designed to provide a return on investment, the risk factors are different for each and the selection of the instrument depends on the choice of the investor.

The risk tolerance factor and the expected returns from the investment play a decisive role in the selection by an investor of a capital market instrument. Capital market instruments should be selected only after doing proper research in order to increase one.


More Information About Capital Market
Primary Market Secondary Market Primary Vs Secondary Market
Global Capital Market Capital Market Companies Capital Market Reform
Venture Capital Market Capital Market Transactions Capital Market Line
Capital Market Services Capital Market Securities Capital Market Liberalization
Secondary Infrastructure Fund Capital Market Risk Capital Market Integration
Capital Market Instruments Equity Capital Market Efficient Capital Market
Debt Capital Market Capital Market Consultants Capital Market Conditions
Market Regulation Committee Capital Market Assumptions Capital Market Trends
Capital Market Theory Role Of Capital Market Risk Advisor
Capital Market Regulations Capital Market Investment Capital Market Research

Last Updated on : 21st July 2016

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