Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. The liquidity of marketable securities comes from the fact that the maturities tend to be less than one year, and that the rates at which they can be bought or sold have little effect on prices. The three basic functions of securities markets are: capital formation, liquidity, and risk management. These markets pair the companies that need capital to function, and the investors with capital that are looking for a return on their investments. It also connects investors together, those that are looking to liquify and sell their securities, and those who want to buy those same securities. The liquidity of securities is crucial to the buyer, and it can be the decision maker on whether or not the buyer will invest. These markets diminish the risk involved with purchasing securities by diversifying and hedging their investments. They can purchase groups of securities to lower the overall risk, despite some of the securities having a higher individual risk.

S Sai Hrishikesh

31 resources

0

0

0

Like