THE ANALYSIS OF THE INTERNATIONAL

FINANCIAL MARKETS

By
Mark Zhuk

An essay submitted to the

Higher Education Department
Of Bellerbys College in
The undertaking of the

Pre-Masters Course

This essay is approximately 2000 words

H. E. Department
Bellerbys College
1 Billinton Way
Brighton
East Sussex
Abstract

This essay results from quantitative case study focusing on the information about compare between
monetary market and the market of capitals and the effect of it.
The empirical data were gathered and analyzed data in 2011. As it is clearly noticed from the
analysis of the financial markets, in this was told, that all parts of financial markets have advantages
and disadvantages. Solution of problems, which appear every day, month, and year, must be solved.
EU has very good indexes, which can give poorer countries.
However, another countries joining the EU which has very low indexes, which are a negative
factor of this Membership.

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CONTENTS

Page

1 Introduction 4

2 Hypotheses 5

3 Literature Review 6

3.1 International Finance 6

3.2 Classification of the international financial markets 7

3.3 Advantages and disadvantages types of financial markets. 9

4 Conclusion 10

5 Bibliography 11

6 Declaration 12

1. INTRODUCTION
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 I chose this topic of my course-paper because there are different questions, actions, everyday
decisions of the International financial markets in the world, which is very important, especially in
recent times. The market appeared a long time ago. But today it's not the same market as it used to
be 200 years ago. Today we have not the ideal financial market, but nowadays, it better, comparing
to 10 years ago. It is modified every year.
The market occurs all time. All market transactions occur in particular at 6 o'clock in the evening.
There are some kinds of Stocks exchanges: Dow Jones, RTS, Oil Brent (ICE), ASX 200, NASD,
DJI, FOREX and EOD.
Due to the given market, not only the capital of people increases but also economy of all world
leading countries. A feature of current international relations is that it is an active process of
integration in which countries of almost the whole of Europe were involved, and today such
international association as the European Union has attracted particular attention of the international
community.
The European Union can regulate the markets. For example, when there was a crisis in 2008, the
world markets were crushed. The European Union has played a big role their restoration.
The aim of this essay is in estimating advantages and disadvantages of the present financial
markets.

2. HYPOTHESES:
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 In order to find the possibilities of answering the research question, the following hypotheses
were posited:
1. Financial markets as a part of international financial.
2. Analysis between the monetary market and the market of capital.

LITERATURE REVIEW:
1. International Finance.
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International finance is a section of international economics, which studies the difference in
exchange rates, oversees investment, and how these might influence on international trade. It also
studies international projects, international investments, capital flows and trade deficits. [Madura,
Jeff. (1988)]. There is an important model, which is widely used in international finance called the
Mundell-Fleming Model. It adds a condition of balance of the balance of payments to - LM Model.
It can be described by the equation
X - Z = F, where X is exports, Z is imports; F is net financial inflows (purchases of foreign
securities minus of sale of internal securities). This LM structure broadens the closed economy to
allow discussion of the interaction between a policy of the exchange rate and the currency policy. In
particular, the model underlines distinctions between motionless and floating exchange rates. [The
Mundell-Fleming Model. (2008)]
Market is one of the most important parts of financial system, institutions, social relations and
infrastructures, which shows what for the businesses sell their products, services and labor to people
in exchange for money. The commodity-money relations appeared in the middle of XV century,
when people changed their goods between each other, without money. The system was simple as
people were simply exchanging their goods for goods of other people. Soon, these trade relations
became modern. Goods and services, which are sold, are using an institutionalized instrument of
payment, such as money. This action is the part of economic process. It is an arrangement, which
allows buyers and sellers to exchange goods and services. Market itself represents competitiveness
of the firms. This factor is distinguishes the market from trade. But, for market it’s important to
have different groups of people, that there will be competition between participants of market.
There are some distinctions between markets. Such as: by size, range, location, geographic scale,
types and variety of human. For example: the farmers’ market; markets, which are spread in the
cities squares, in the parking or shopping centers; international currency and trade markets, legal or
illegal markets such as the market for illicit drugs. [September 2003, by Ryan P. M. ]
In market economy, the notion of a market is a structure, which can allow buyers and sellers to
exchange any type of products services or information. There are two main economic agents in the
markets: buyers and sellers. When people exchange their goods or service for money it is called a
transaction. The participants of market consist of the buyers and sellers of a good who influence on
the price.
2. Classification of the international financial markets.
The financial market consists of the monetary market and the market of capitals. It is caused by
different aspects of the financial resources serving basic and working capital. In the monetary
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market the means providing movement of short-term loans address. In the market of capitals there
is a movement of long-term accumulation.
In the financial market the stock market functions. On it as object of trade the securities which
value should be defined by actives standing up for by them act. The securities market serves both
the monetary market, and the market of capitals. But securities serve only a part of movement of
financial resources (except them there are still into firm and intercompany credits, direct bank
loans, etc.).
Thus, the financial market consists of two parts - of the monetary market and the market of capitals.
[(2008). Classification of the financial markets]. The stock market entering into its structure is a
segment of both these markets. Movement of means in the financial market has a direction from
stores to users. By means of the financial market the modulation of financial resources from one
sectors of economy in others can be carried out. In total allocate 4 sectors: households, business
concerns, public sector and financial intermediaries. The most part of the capital of house economy
is formed at the expense of own means. Here the basic surplus of financial assets directed on
financing of business concerns is formed; the states and takes place at financial institutions
(investment funds, banks etc.). The greatest requirement for financial assets is tested by the largest
sector - the state. It is the largest borrower in the financial market, but also acts as the largest
creditor of households, business concerns and financial intermediaries. Into the sector movement of
means takes place also. However these monetary streams since finally the sum of savings (financial
actives) are equal to the sum of investments (financial obligations).
Characteristic feature of development of market relations is fast development of the financial
market and its entire links. The modern financial market represents seven-block system concerning
independent links. The link is the market of certain group of homogeneous financial actives. The
monetary market, the market of loan capitals, the real estate market, the currency market, the
market of precious metals concern such links of the financial market. [ Litnev, O. (2010)].
The market of precious metals as a component of the financial market.
The market of precious metals consists of following sectors:
 The gold market

 The silver market

 The platinum market

 The palladium market

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  The market of products from drags. Metals

 A securities market, quoted in gold

It can be defined as sphere of economic relations between participants of transactions with precious
metals, the jewels quoted in gold. Gold certificates, bonds, futures concerned the last.
As a system phenomenon the market of precious metals can be described from two points of view:
with functional and institutional.
From the functional point of view the market of precious metals and jewels represents the trading-
financial centers in which trades and other commercial and property transactions with connected
with these actives are concentrated. From the position of functioning of the market of precious
metals, they can provide industrial and jeweler consumption of precious metals and jewels, creation
of gold reserves of the state, insurance upon currency risks, profit reception for the account of
arbitration transactions.
From the institutional point of view the market of precious metals represents set of special
representatives of banks, stock exchanges of precious metals.
The market of precious metals includes set of various mutual relations between subjects of the
market at a stage of investigation, extraction, processing and etc. before final manufacturing of
products from precious metals.
Gold, silver and metals of platinum group, which are platinum, palladium, rhodium, ruthenium,
iridium, and osmium, according to the destination, play a double role:
 They are intended for industrial use (the technician, electronics, the medical equipment,
prosthetics and other.);

 They are a subject of investments (manufacturing of coins, jewels), are used as treasure,
reserves.

Actually the gold market was indistinguishable from the currency market till 1968 when exchange
rates became floating and currencies began to be on sale irrespective of gold.
Essential feature of the market of gold is trade which is adhered to the metal location. The trade
centers are: Loko London, Loko Zurich, Loko New York, and Loko of Tokyo. The largest world
center on trade in gold is London. This is a place of payment of standard gold contracts, where the
realization of delivery of gold is made, irrespective of where the transaction has been concluded.
Such transactions carry the name «Loko London», that is with delivery in London.

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However, more conservative investors may prefer to focus their holdings on the gold – given that it
has superior status as both a “store of wealth” and a currency, in most markets around the world.
During the roughly 5,000 years that our species have used these metals as currencies, the average
price ratio is roughly 15:1. As of this moment, the gold silver ratio is very close to 60:1. Gold is
more value than other precious metals. [The market of precious metals, 2009]

3. Advantages and disadvantages types of financial markets.

There are a set of advantages and lacks of the monetary market and the market of capitals, such as:
Monetary market:
Advantages:
Accounts of the monetary market as a rule pay higher interest rate to compare than the savings
accounts offered by establishment. There are a lot of accounts, which also contain frequent interest
rates, with the higher indicators corresponding to higher average balances, which spent in the this
account. Nevertheless, safety of these accounts is almost absolute as they FDIC-are insured in the
same manner as check or other accounts of economy. Moreover they also as a rule show privileges
writing check and defined number of withdrawals of troops in a month without a payment or the
penalty.

Disadvantages:
There are the inconveniences connected with accounts of the monetary market. They in general
have higher requirements of the minimum payment, than do other savings accounts and are not
intended for higher levels of operational activity. After the admissible number of transactions has
been met, there is a payment raised for the subsequent transactions. Apart from that, some accounts
demand a payment for monthly service, and this payment, more possibly, will be above if the
balance of the account is more low. As investments, the monetary market considers
underperformance as other tools. As well as, stocks, bonds and other tools lead much bigger to
quantity of returning, and deposits of the monetary market as in general believe, are cash,
counterbalancing a portfolio. Because of high variability in the tariffs paying for various accounts in
various establishments, investors should make some research to define a site of accessible best
courses.

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The market of capitals:
There are several kinds of advantages and disadvantages of the market of capitals. The market of
capitals not only the part of financial markets, but also the market where there is a redistribution of
spares capitals.
Advantages:
Firstly, this is a local savers may provide cheaper supply; an violent habit among clients and
the public is rewarded; secondly, the lower interest loans supply knowledge for MFI in
borrowed funds; thirdly, local banks become familiar with MSE (micro and small
enterprise) potentials. Moreover it is possible as to include: access to the bigger sums,
which are more quickly based by the biography; permits more longer inertial time
projections than grants and finally, supplying of a discipline approximately similar to that of
MSE clients.Disadvantages:

On the other hand, there are a lot of disadvantages, such as: bigger financial costs force
organizational solutions and changes; the basic initial accompanying requirements; more risks that
debt Owners can carry out closing MFI;
Early negotiations demand a new set of experience and contacts; local banks, perhaps, are not ready
to be joining to be cooperative; loans may be dollarised in an inflationary situation and finally, too
many subsidized loans can detain movement to market rate. [Classification of the financial markets,
2008]

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CONCLUSION

Today securities markets and capitals are very popular. Everyone can take part in the auctions,
without leaving the house and having what or the capital. One are ruined, and others increase the
capital in some hundreds times. Whatever there were perfect financial markets, all of them equally
are not perfect. In days of crisis some people have very well earned on falling of a price of
securities. The analysis has shown that there is a number of lacks which are necessary for solving.
The government of the countries and the European Union should reflect on it not to admit repetition
of errors.

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BIBLIOGRAPHY

1. The book, International Macroeconomics and Finance; Publisher: Wiley-

Blackwell; author: Nelson Mark. 2010. [Assessed: on 02/02/11].

2. The book, International Money and Finance (7th Edition); author: Michael
Melvin. 2010, [Assessed: on 10/02/11].

3. Unknown author. (2010). Classification of the international financial markets.

Available from http://www.bolsaone.com/www/manual/bolsa.asp?lang=en&doc=3
[Assessed: on 6/02/11].

4. Unknown author. (2008). the Mundell-Fleming Model. Available from

http://www.econmodel.com/classic/mf.htm [Assessed: on 01/01/11].

5. Garber, Carter. (1997). Private Investment as a Financing Source for

Microcredit. The North-South Center, University of Miami. Available from
http://seekingalpha.com/article/171094-a-market-derived-valuation-model. [Assessed: on
22/02/2011].

6. Litnev, O. (2010). Financial market. Available from

http://www.nettrader.ru/education/book/6489 [Assessed on: 12/03/11].

7. Litnev, O. (2010). Financial management. Available from

http://books.efaculty.kiev.ua/fnmen/3/g4/1.htm [Assessed on: 01/03/11].
8. Unknown author. (2008). Classification of the financial markets. Available from
http://berg.com.ua/financial-markets/ [Assessed: on 8/02/11].

9. Madura, Jeff. (1988). International Financial Management. Available from

http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Finance.html
[Assessed: on 26/01/11].

10.Ryan P.M. (September 18, 2003) http://www.zeromillion.com/econ/history-of-the-

market-system.html Available from [Assessed: on 14/02/11].

11.Unknown author. (2009). the market of precious metals. Available from

http://www.globfin.ru/articles/precious/market.htm [Assessed: on 10/01/11].

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DECLARATION

I hereby declare that the text of this essay is substantially my own work

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