The capital market is a part of the financial market. It describes the whole of all institutions, which serve the unification from offer and demand for (financial) capital. This concerns a market in the economic sense, thus not around a physical place, but around all at the market active persons, mechanisms and their relations among themselves.

Participants

Who today in the capital market capital (money; in the broader sense also things or other rights of disposal) offers, usually does this with the intention of getting back later more capitals as if it would not offer the money:

The financial source acquires a contractual requirement on future disbursement of capital fundamental with the dedication of his capital for capital purposes opposite the capital taker agrees upon capital takers and financial source an interest, which is to be paid to the financial source. Usually an annual payment takes place. The interest rate depends primarily on the soil quality (solvent for repaymentness) of the capital taker and the interest situation at the pension markets.

The capital taker steps as a Nachfrager for capital to the capital market and as an offerer of future requirements for disbursement.

To the market actions in the capital market belong among other things the conversion of shares and loans, the capital increase of a corporation or the admission of a credit by a natural person.

Segments

The contractual running time of the capital hirings (Fristigkeit) in the capital market amounts to usually more than one year. With shorter running times frequently of the money market one speaks.

The capital market is divided into the primary market and the secondary market:

• In the primary capital market again published securities are offered for the admission of capital and from investors inquire.
• In the secondary capital market financing titles between the market participants, already existing, are acted.

If the conditions for a trade are fulfilled, one speaks of an organized capital market. The temporal and local concentration of the trade causes ith D. R. an increase of the market liquidity as well as a decrease of the commercial costs (so-called transaction costs) and contributes thereby substantially to the increase of the operability of the capital market.

The organized capital market is divided into the segments

• Pension market
• Stock market
• Market for Investmentanteile (see also: Unit trust fund, real estate funds)

Shares, pensions and Investmentanteile can be acted meanwhile also at the stock exchanges past in the "“over the counter markets in such a way specified (OTC)"”.

By dynamic growth "„structured certificates developed "“in Germany to their own capital market segment. The expression "„structured certificates "“is symbolful with these products, since it acts with these products around the composition and combination of well-known plant and/or speculation instrument such as shares, loans, options or Futures. These are structured in such a way that they accept exactly on the current market situation or the specific customer's request.

Further financial markets are the money market and the market for derivatives.

Economical meaning

Economical task of the capital market is the transformation of financial (money) in material capital (special capital). In detail this means

• the admission of (still) for the consumption unnecessary financial capital (storage tank) (investment and financing),
• the creation of a market reconciliation between offerers and Nachfragern by finding the market price
• the steering of the capital into as productive a uses as possible (steering element function, Allokationsfunktion)

If the capital is supplied with competitive Nachfragern of the economically most favourable use, this leads regularly to an increase of the welfare of a national economy.

The study of the function mode of the institution capital market and its action processes is task of the capital market theory.

Theoretical founding

Both in the political economy and in the management economics (there in particular in the theory over financing and investment) the characteristics represented above are tried to copy by models. Are used in particular the theoretical constructions of perfect capital markets and complete capital markets.

See also

• Market (economics)
• Financial capital
• Globalization

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