“Capital Market”

Capital Market Theory



In studying the capital market theory we deal with issues like the role of the capital markets, the major capital markets in the US, the initial public offerings and the role of the venture capital in capital markets, financial innovation and markets in derivative instruments, the role of securities and the exchange commission, the role of the federal reserve system, role of the US Treasury and the regulatory requirements on the capital market.
The market where investment funds like bonds, equities and mortgages are traded is known as the capital market . The financial instruments that have short or medium term maturity periods are dealt in the money market whereas the financial instruments that have long maturity periods are dealt in the capital market.
The issues that have been mentioned above to explain the capital market theory may be discussed under the following heads:
Role of the Capital Market
The main function of the capital market is to channelize investments from the investors who have surplus funds to the investors who have deficit funds. The different types of financial instruments that are traded in the capital markets are equity instruments, credit market instruments, insurance instruments, foreign exchange instruments, hybrid instruments and derivative instruments. The money market instruments that are traded in the capital market are Treasury Bills, federal agency securities, federal funds, negotiable certificates of deposits, commercial paper, bankers' acceptance, repurchase agreements, Eurocurrency deposits, Eurocurrency loans, futures and options.
Capital market in the US
The capital market in the US is very advanced and uses very modern technologies in its operation. The capital market instruments are either traded in the Over-the – Counter markets or in the exchanges. The New York Stock Exchange is the oldest and the most prominent exchange in the US capital Market.
Initial Public Offering and the role of Venture Capital in the capital market
The companies raise their long term capital through the issue of shares that are floated in the capital market in the form of Initial Public Offering. The venture capital are the funds that are raised in the capital market via the specialized operators. This is also a very important source of finance for the innovative companies.
Markets in Derivatives
The derivatives like the options, futures, credit derivatives etc are traded in the capital markets.
Role of the Federal Reserve System and the US Treasury
The Federal Reserve System plays an important role in the capital market by providing liquidity and managing the credit conditions in the US financial system. The US Treasury operations seal the gap between the cash inflow and outflow, thereby, providing liquidity to the US capital Market.

Capital Market Investment

Capital market investment takes place through the bond market and the stock market . The capital marke t is basically the financial pool in which different companies as well as the government can raise long term funds.
Capital market investment that takes place through the bond and the stock market may be elucidated in the following heads.
Capital market investments in the stock market
The stock market is basically the trading ground capital market investment in the following:
• company stocks
• derivatives
• other securities
The capital market investments in the stock market take place by
• small individual stock investors
• large hedge fund traders.
The capital market investments can occur either in
• The physical market by a method known as the open outcry. The New York Stock Exchange is a physical market or
• Trading can also occur in the virtual exchange where trading is done in the computer network. NASDAQ is a virtual exchange.
Investments in the stock market helps the large companies to raise their long term capital . The investors in the stock market have the liberty to buy or sell the stock that they are holding at their own discretion unlike the case of government securities , bonds or real estate . The stock exchanges basically function as the clearing house for such liquid transactions. The capital market investments in the stock market are also done through the derivative instruments like the stock options and the stock futures. The derivatives are the financial instruments whose value is determined by the price of the underlying asset.
Capital Market Investments in the Bond Market
The bond market is a financial market where the participants buy and sell debt securities . The bond market is also differently known as the debt, credit or fixed income market. There are different types of bond markets based on the different types of bonds that are traded. They are :
• corporate
• government and agency >
• municipal
• bonds backed by mortgages , assets
• Collateralized Debt Obligation .
The bonds , except for the corporate bonds do not have formal exchanges but are traded over-the- counter . Individual investors are attracted to the bond market and make investments through the bond funds, closed-end-funds or the unit investment trusts . The net inflows of total bond funds increased by 97% in 2006 than that in 2005. Another way of investing directly in the bond issue is the Exchange-traded-funds .
The capital market investment in the bond market is done by
• institutional investors
• governments, traders and
• individuals.

The Global Capital Market deals with mergers and acquisitions, strategic equity partnering, management buyout services ,acquisition search services, corporate debt and equity and financial restructuring. Each of these terms may be explained under the following heads:
Mergers and Acquisitions
When the shareholder of a successful business is deciding on the sale of his business, then considering his operating experience is not enough. For making such decisions expertise is required. A balanced approach need to be taken in making such decisions and the Global Capital Market offers invaluable suggestions in the case of such mergers and acquisitions.
Seller Representation
The process involving the sale of a business is very complex and dynamic .The Global Capital Market provides an alternative that would be most profitable. This is done after a thorough evaluation of the existing business. The Global Capital Market provides the best mean that could maximize the value in the selling process.
Strategic Equity Partnering
There are participants in the Global Capital Market who do not want to sell their business. In such cases the Global Capital Market offers Strategic Equity Partnership . By this process the business owner can gain liquidity and at the same time can have sufficient control over the business operation. The investor can enjoy quality management accompanied by capital appreciation.


Global Capital Market

The Global Capital Market , in this way, develops partnerships that are profitable and at the same time profitable.
Management Buyout Services
Management is of key importance in running a company successful. The Global Capital Market Helps the management to fulfill their dreams of acquiring the target companies. The following services are provided by the the Global Capital market in order to fulfill this goal.
• Creation of close team support with other professional advisors for the purpose of coordination of the acquisition strategy
• Negotiation and structuring the deals
• Designing and Sourcing the necessary finances in order to close the deal.
• For long term success post transaction capital and support is provided.


The Global Capital Market has a huge database which help to reduce the search cost in the matters of acquisition. With the help of the large network of relationships the Global capital Market can help in making the right deal at the right price.
Corporate Debt and Equity
The Global Capital Market helps in well structured and well priced financing raised through the global equity and debts.
Financial Restructuring
The Global Capital Market Can help the creditors, debtors and equity holders in the following ways:
• By renegotiating the existing debt and loan agreements
• By raising additional debt and equity
• By divesting corporate assets
• By arranging mergers
• By negotiating workout plans with creditors
• By restructuring debt to match the cash generating potential