Welcome Miami Northwestern Bulls! Florida International University State Farm Financial Literacy Lab

Buyers convene to negotiate with Sellers Law of Supply and Demand rules Goods are Allocated Government regulates to make sure competition is fair Equilibrium is the price that buyers and sellers agree on WHAT IS A MARKET?

Direct Search Market Brokered Market Dealer Market Auction Market TYPES OF MARKETS

DIRECT SEARCH MARKET “A market, absent intermediaries, in which transactions are conducted directly between buyers and sellers.” 1 1 Read more: Example:

BROKERED MARKET “The buying and selling of anything where a broker represents one or both counterparties. The broker is thought to be able to extract the best price on behalf of those whom he/she represents. Most securities and real estate transactions occur in brokered markets.” Example:

DEALER MARKET “A market where dealers are assigned for specific securities. The dealers create liquid markets by purchasing and selling against personal inventory.” 4 4 Read more: Example:

AUCTION MARKET “A market in which buyers enter competitive bids and sellers enter competitive offers at the same time. The price a stock is traded represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at. Matching bids and offers are then paired together and the orders are executed.” 3 3 Read more: Example:

MARKET IN ACTION What kind of market is this?

Real Assets vs. Financial Assets Real= Physical and Identifiable ▫Machinery, Agriculture, Gold, Oil Financial Assets ▫Money, Bonds, Stocks, Derivatives Financial Assets allow people to transfer consumption, store value, and have a medium of exchange. ASSET TRANSFORMATION

Financial Markets serve to match those with an excess of funds to those that have shortage Many intermediaries are involved in the process ▫Investment Banks ▫Mutual Funds ▫Pension Funds ▫Commercial Banks FINANCIAL MARKETS

The Players Savers Companies HouseholdsGovernment Financial Intermediary Capital MarketsBanksHedge FundsMutual FundsPension Funds Borrowers Government Companies Households Government

INITIAL PUBLIC OFFERING (IPO) IPO – When a company goes public and sells ownerships as stock to acquire more capital to grow. Recent IPO’s CompanySymbolIndustry Offer Date Offer Price Shares(m) YelpYELP3/2/2012$157.2 ZyngaZNGA12/16/2011$10100 GrouponGRPN11/4/2011$2035

HOW DOES A COMPANY BECOME PUBLIC? Company Investment Bankers (Intermediaries) Primary Market Secondary Market