The financial market has three main functions: one is to meet the needs of different participants, here enterprises in order to operate to issue debt (borrowing) is a kind of demand; the second is to determine the equilibrium interest rate; and the third is the effective allocation of assets (capital allocation efficiency). Regulation of arbitrageur profits is not a function of financial markets.

Analysing this kind of problem looks primarily at the motivation for trading: AThe person designs a complex predictive model that can predict the movement of the stock market as a whole with a view to obtaining more than a fair return for the risk involved. He uses the model’s predictions to decide whether to buy, hold or sell shares in an index fund designed to replicate stock market movements. A person who actively seeks out overvalued or undervalued financial products by designing models with the primary motivation of using superior information to generate excess returns is an information-motivated trader. Investors motivation is for future capital needs to do current investment. Hedger generally worried about the risk of price fluctuations, in order to offset and avoid such risks to choose some financial products.

Analysing this kind of problem mainly depends on the motivation of the transaction: worrying about their own foreign currency sales income by the exchange rate impact of depreciation, in order to offset and avoid this risk to choose some futures contracts to hedge against the risk of depreciation, this kind of investor is a hedger. The use of superior information to obtain excess returns, such a person is information-motivated trader. Investors is motivated to make current investments for future capital needs.

Analysing this kind of problem mainly depends on trading motives: a young man with great wealth, after measuring his investment ability and risk level, choose high-risk and high-yield products, the main motive is to make current investments for future capital needs, such a person is a pure investor. Information-motivated trader proactive search for overvalued or undervalued financial instruments, the use of superior information to obtain excess returns. Hedgers generally worried about the risks associated with price fluctuations, in order to offset and avoid such risks to select some financial products.

When investors want to sell their fund shares, investors in open-end funds can sell their shares back into the fund, while investors in closed-end funds need to trade their shares in the secondary market. Closed-end funds are available to new investors, but they must purchase shares in the secondary market. Closed-end fund shares are quoted at a premium or discount to net asset value, while open-end funds are quoted at net asset value.

Warrants cannot be part of this fund. Holders of warrants have the right to purchase common stock issued by a company at a fixed exercise price. Therefore, warrants are generally viewed as equities and are not likely to be found in a fixed-income mutual fund. A fixed-income security is a type of debt with a contractual agreement on how the principal and interest will be repaid in the future. Commercial paper is a short-term bond issued by a company, and a repurchase agreement is a form of borrowing in which the borrower sells a high-quality asset and agrees to buy it back in the future at a high price.

The companies that create ETFs are financial intermediaries, which are in the middle of buyers and sellers, facilitating the exchange of assets, capital and risk. an ETF represents ownership of a basket of stocks and can be traded on the stock market like a stock. The transaction cost of ETFs is significantly less than that of holding a basket of stocks in an ETF fund.

The companies that create ETFs are financial intermediaries, which are in the middle of buyers and sellers, facilitating the exchange of assets, capital and risk. an ETF represents ownership of a basket of stocks and can be traded on the stock market like a stock. The transaction cost of ETFs is significantly less than that of holding a basket of stocks in an ETF fund.

The financial markets can be categorized into the money market and the capital market. The money market is used for trading debt instruments that mature within one year, such as repurchase agreements, negotiable certificates of deposit, government bills, and commercial paper. In this context, hedge funds hold surplus cash in 90-day commercial paper and negotiable certificates of deposit, with an investment horizon of less than one year, making them money market instruments. Conversely, the capital market trades long-term products such as stocks and bonds.

The Standard & Poor’s Depositary Receipts (SPDRs) are investments that track the S&P 500 stock market index. Buying and selling these depositary receipts (DRs) constitutes passive index investing in the secondary market, rather than actively managed active investing. This depositary receipt represents an undivided ownership interest in the investment portfolio that makes up the S&P 500 index and serves as a pooled investment vehicle.