Year: 2026

Capital formation, liquidity, price discovery, and risk management in theory and practice Abstract Financial markets are often described as the “circulatory system” of modern economies because they mobilize savings, finance investment, and distribute risk. This paper explains how financial markets promote economic growth and innovation through (i) capital formation in…

Financial intermediaries connect savers with borrowers by pooling funds, transforming maturities and liquidity, diversifying and pricing risk, and reducing information and transaction costs. This paper develops an academic overview of the major types of intermediaries—depository institutions, contractual savings institutions, and investment intermediaries—then explains the economic logic of intermediation through foundational…

Introduction Global financial markets are complex, adaptive systems in which capital is allocated and financial risks are transferred among heterogeneous participants. These participants—ranging from households investing for retirement to institutions executing large-scale asset allocation and risk management—jointly generate liquidity, price discovery, and capital formation. Financial markets, broadly defined as venues…

Introduction Financial markets are structured systems in which buyers and sellers exchange financial instruments such as bonds, stocks, derivatives, and foreign exchange. These markets are foundational to modern economies, enabling the efficient allocation of capital, risk management, and price discovery. They serve a range of participants including individual investors, corporations,…

Financial markets are foundational to economic activity, enabling the exchange of financial assets, efficient capital allocation, risk management, price discovery, and liquidity provision. This paper examines the economic and operational dimensions of financial markets, reviews key theoretical and empirical contributions from the literature, and discusses how these markets shape economic…