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What is Capital Market
Capital Market is a term that refers to that part of financial market in which the securities movement takes place. The capital market is a subject of trading the medium and long-term capital, i.e. capital with low liquidity.

Capital Market is a term that refers to that part of financial market in which the securities movement takes place. The capital market is a subject of trading the medium and long-term capital, i.e. capital with low liquidity. They are the securities with a maturity of more than one year, mainly stocks, bonds, investment certificates. By contrast, in the so called money market there are traded short-term securities (with maturity up to one year).

In the capital market there are on one side, issuers of securities and on the other side there are securities holders - investors. The issuer receives in the capital market financial resources for his business (usually for capital expenditures) and the investor (owner of the securities) wants to evaluate his available financial resources. From the perspective of the issuer, it may be a private or foreign resources, by type of security.

Advantage of the capital market lies in the fact that investors can exchange the securities with each other (due to the nature of the securities). For this exchange the stock exchange usually serves.

Capital market is further divided into:

  • Stock Market (Equity securities)
  • Bond Market (Debt securities)

Use of the capital market in practice: Organizations and enterprises use the capital market to raise the long and medium term financial resources. An alternative to raising capital on the capital market are various forms of Venture capital.

For capital market is also applied that it is monitored and regulated.

Related terms and methods:

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Last update: 04.03.2016

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