The key role of financial intermediaries and financial markets is to provide a mechanism which resources are transferred and allocated to the most productive opportunities.
No need for intermediation of funds (ie banks):
- Direct financing: borrowers receive funds directly from lenders in the financial markets (with obstacles, difficulty and expense in meeting the needs and their incompatibility)
- Financial claim (any financial asset eg share): a claim for payment of a future total amount of money (or periodic) which implies an obligation for the issuer (borrower) to pay interest periodically and to repurchase the receivable at a fixed value of three (financial) ways:
- On request
- After a specified notification period
- On a specific date or within a time frame
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