International Securities and Markets

          Dept and equity markets also are well developed in many foreign countries. Corporations domiciled in foreign countries are able to issue bonds and stocks in their own home currencies and markets. Corporations also sell their stocks in securities markets outside their home countries as a way of broadening investor recognition and raising more funds. For example, a U.S corporation may simultaneously sell a new stock issue in the United States and in Germany and Italy.
          Corporation and governments also can sell debt securities in the Eurobond and foreign bond markets. A Eurobond is a bond denominated in U.S dollars that is sold to investors located outside the United States. For example, a German corporation may sell a $20-million Eurobond to German and Swiss investors that will pay interest and repay the amount borrowed at maturity in U.S. Dollars. Likewise a U.S. corporation may issue its own $20-million U.S. dollar-denominated Eurobond for sale to German and Dutch investors. In contrast, a foreign bond is a bond issued by a corporation or government that is denominated in the currency of a foreign country where it is sold. For example, a U.S. corporation may issue bond denominated in euros to investors in Belgium and the Netherlands. The euro is the common currency that has replaced the individual currencies of 12 member countries of the European Union.

Types of Securities

          Money is the fundamental measure of wealth. In addition to money, an individual of a business also measures its wealth in terms of the real and financial assets or claims that it holds. Real assets include the direct ownership of land, buildings or homes, equipments, inventories, durable goods, and even precious metals. Financial assets or claims are dept instruments, equity securities, and other financial contracts that are backed by real assets. A loan to you to purchase an automobile usually provides for the lender to hold the auto title (ownership) until the loan is repaid. Long-term dept issued by a corporation may represent a claim against specific assets, such as buildings and equipment, or the general assets of the issuer. A mortgage loan to you will be backed by the house against which the loan is being made.
          Relatively few of the many types of financial assets actually require the use of secondary financial markets. Checkable deposits, such as checking accounts and share drafts, and time deposits, such as savings accounts held in depository institutions, are also examples of financial assets. In fact, all kinds of promissory notes or IOUs represent financial assets to their holders. When the public holds currency issued by the U.S government, the currency is a financial assets. At the same time, it is a financial liability to the government.

Currency Exchange Markets

          Currency exchange markets are electronic markets in which banks and institutional traders buy and sell various currencies on behalf of businesses and other clients. In the global economy, consumers may want to purchase goods produced, or services provided, in other countries. Likewise, an investor residing in one country may wish to hold securities issued in another country. For example, a U.S. consumer may wish to purchase a product in a foreign country. If the product is priced in the foreign currency in order to complete the transaction. Businesses that sell their products in foreign countries usually receive payment in the foreign currencies. However, because the relative values of currencies may change, firms often use the currency exchange markets to reduce the risk of holding too much of certain currencies.

Derivatives Markets

          Derivatives markets facilitate the purchase and sale of derivation securities, which are financial contracts that derive their values from underlying securities or from other related financial assets. A familiar form of derivative security is the opportunity to buy or sell a corporation's equity securities for a specified price and within a certain amount of time. Derivative securities may be used to speculate on the future price direction of the underlying financial assets, or to reduce price risk associated with holding the underlying financial assets. Organized exchanges handle standardized derivative security contracts, while negotiated contracts are handled in electronic markets often involving commercial banks or other financial institutions.

Mortgage Markets

          Mortgage markets are markets in which mortgage loans, backed by real property in the form of buildings and houses, are originated and sometimes trade. Mortgage loans are usually long-term loans backed by real property and typically are repaid in monthly installments of interest and a partial repayment of the loss amount that was borrowed. If a mortgage loan is not repaid by the borrower, the lender can seize and sell the pledged real property under foreclosure laws. While in continues to be difficult to buy and sell individual home mortgage in a secondary markets, standardized high-quality mortgage have been "pooled" together in recent years into mortgage-backed securities that have active secondary markets. Home mortgage loans to individuals are made available primarily through depository institutions and mortgage companies.