The Organization for Economic Co-operation and Development (OECD) started an inter-governmental project in 2003 with the objective of providing ways to improve financial education and literacy standards through the development of common financial literacy principles. In March 2008, the OECD launched the International Gateway for Financial Education, which aims to serve as a clearinghouse for financial education programs, information and research worldwide.

International findings

International conference

An international OECD study was published in late 2005 analysing financial literacy surveys in OECD countries. A selection of findings included:

In Australia, 67 percent of respondents indicated that they understood the concept of compound interest, yet when they were asked to solve a problem using the concept only 28 percent had a good level of understanding.
A British survey found that consumers do not actively seek out financial information. The information they do receive is acquired by chance, for example, by picking up a pamphlet at a bank or having a chance talk with a bank employee.
A Canadian survey found that respondents considered choosing the right investments to be more stressful than going to the dentist.
A survey of Korean high-school students showed that they had failing scores—that is, they answered fewer than 60 percent of the questions correctly—on tests designed to measure their ability to choose and manage a credit card, their knowledge about saving and investing for retirement, and their awareness of risk and the importance of insuring against it.
A survey in the US found that four out of ten American workers are not saving for retirement.

Increasing rate of financial literacy

Yet it is encouraging that the few financial education programmes which have been evaluated have been found to be reasonably effective.
However, academic analyses of financial education have found no evidence of measurable success at improving participants' financial well-being.
According to 2014 Asian Development Bank survey, more Mongolians have expanded their financial options, and for instance now compare the interest rates of loans and savings services through the successful launch of the TV drama with focus on the fiscal literacy of poor and non-poor vulnerable households. Given that 80% of Mongolians cited TV as their main source of information, TV serial dramas were identified as the most effective vehicle for messages on financial literacy.

Finance

Finance is the management of money, particularly in relation to companies, organisations, or governments. Specifically, it deals with the questions of how an individual, company or government acquires the money needed - called capital in the company context - and how they then spend or invest that money.Finance is then often split per the following major categories:

1.corporate finance

2.personal finance

3.public finance.

A major focus within finance is thus investment management — called money management for individuals, and asset management for institutions — and finance then includes the associated activities of securitie strading & stock broking, investment banking, financial engineering, and risk management.
More abstractly, finance is concerned with the investment and deployment of assets an liabilities over "space and time": i.e. it is about performing valuation and asset allocation today, based on risk and uncertainty of future outcomes, incorporating time value of money.
Core finance theories can largely be divided between the following categories: 1.financial economics
2.mathematical finance
3.valuation theory.

Areas of finance

Personal finance

Personal finance

Personal finance is defined as the mindful planning of monetary spending and saving, while also considering the possibility of future risk.Personal finance may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.
Personal finance may also involve paying for a loan, or debt obligations.
The main areas of personal finance are considered to be income, spending, saving, investing, and protection.
The following steps, as outlined by the Financial Planning Standards Board, suggest that an individual will understand a potentially secure personal finance plan after:

Purchasing insurance to ensure protection against unforeseen personal events
Understanding the effects of tax policies (tax subsidies or penalties) management of personal finances
Understanding the effects of credit on individual financial standing
Developing of a savings plan or financing for large purchases (auto, education, home)
Planning a secure financial future in an environment of economic instability
Pursuing a checking and/or a savings account
Preparing for retirement/ long term expenses

Corporate finance

Corporate finance deals with the sources of funding and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. (Capital is of two types in the main, equity, and debt). Although it is in principle different from managerial finance which studies the financial management of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.Short term, financial management is often termed "working capital management", and relates to cash-, inventory- and debtors management. In the longer term, corporate finance generally involves balancing risk and profitability, while attempting to maximize an entity's assets, net incoming cash flow and the value of its stock, and generically entails three primary areas of capital resource allocation.

In the first, "capital budgeting", management must choose which "projects" (if any) to undertake. The discipline of capital budgeting may employ standard business valuation techniques or even extend to real options valuation
The second, "sources of capital" relates to how these investments are to be funded: investment capital can be provided through different sources, such as by shareholders, in the form of equity (privately or via an initial public offering), creditors, often in the form of bonds, and the firm's operations (cash flow). Short-term funding or working capital is mostly provided by banks extending a line of credit. The balance between these elements forms the company's capital structure.
The third, "the dividend policy", requires management to determine whether any unappropriated profit (excess cash) is to be retained for future investment / operational requirements, or instead to be distributed to shareholders, and if so, in what form.

Financial risk management, an element of corporate finance, is the practice of creating and protecting economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. (Other risk types include foreign exchange, shape, volatility, sector, liquidity, inflation risks, etc.) It focuses on when and how to hedge using financial instruments; in this sense it overlaps with financial engineering. Similar to general risk management, financial risk management requires identifying its sources, measuring it , and formulating plans to address these, and can be qualitative and quantitative.
Financial management overlaps with the financial function of the accounting profession. However, financial accounting is the reporting of historical financial information, whereas as discussed, financial management is concerned with the allocation of capital resources to increase a firm's value to the shareholders and increase their rate of return on the investments.

Public finance

Public finance describes finance as related to sovereign states and sub-national entities (states/provinces, counties, municipalities, etc.) and related public entities (e.g. school districts) or agencies. It usually encompasses a long-term strategic perspective regarding investment decisions that affect public entities.These long-term strategic periods usually encompass five or more years. Public finance is primarily concerned with:

Identification of required expenditure of a public sector entity
Source(s) of that entity's revenue
The budgeting process
Debt issuance (municipal bonds) for public works projects.

Financial theory

Financial economics

Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to goods and services. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance. It centres on managing risk in the context of the financial markets, and the resultant economic and financial models.
Financial economics is a branch of economics that analyzes the use and distribution of resources in markets in which decisions are made under uncertainty. Financial decisions must often take into account future events, whether those be related to individual stocks, portfolios or the market as a whole.

Financial economics analyzes the use and distribution of resources in markets in which decisions are made under uncertainty.
It employs economic theory to evaluate how time, risk (uncertainty), opportunity costs, and information can create incentives or disincentives for a particular decision.
Financial economics often involves the creation of sophisticated models to test the variables affecting perticular decision.

Financial econometrics is the branch of financial economics that uses econometric techniques to parameterize the relationships suggested.

Financial mathematics

Financial mathematics is a field of applied mathematics, concerned with financial markets. The subject has a close relationship with the discipline of financial economics, which is concerned with much of the underlying theory that is involved in financial mathematics. Generally, mathematical finance will derive, and extend, the mathematical or numerical models suggested by financial economics.In terms of practice, mathematical finance also overlaps heavily with the field of computational finance (also known as financial engineering). Arguably, these are largely synonymous, although the latter focuses on application, while the former focuses on modeling and derivation. The field is largely focused on the modelling of derivatives, although other important subfields include insurance mathematics and quantitative portfolio problems.

Experimental finance

Experimental finance aims to establish different market settings and environments to observe experimentally and provide a lens through which science can analyze agents' behavior and the resulting characteristics of trading flows, information diffusion, and aggregation, price setting mechanisms, and returns processes.
Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions and therefore prove them, and attempt to discover new principles on which such theory can be extended and be applied to future financial decisions. Research may proceed by conducting trading simulations or by establishing and studying the behavior, and the way that these people act or react, of people in artificial competitive market-like settings.

Behavioral finance

Behavioral finance studies how the psychology of investors or managers affects financial decisions and markets when making a decision that can impact either negatively or positively on one of their areas. Behavioral finance has grown over the last few decades to become central and very important to finance.
Behavioral finance includes such topics as:

Empirical studies that demonstrate significant deviations from classical theories.
Models of how psychology affects and impacts trading and prices
Forecasting based on these methods.
Studies of experimental asset markets and the use of models to forecast experiments.

A strand of behavioral finance has been dubbed quantitative behavioral finance, which uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation.

Financial Market

Definition: Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources, in the country’s economy. It acts as an intermediary between the savers and investors by mobilising funds between them.

The financial market provides a platform to the buyers and sellers, to meet, for trading assets at a price determined by the demand and supply forces.

Functions of Financial Market

The functions of the financial market are explained with the help of points below:

It facilitates mobilisation of savings and puts it to the most productive uses.
It helps in determining the price of the securities. The frequent interaction between investors helps in fixing the price of securities, on the basis of their demand and supply in the market.
It provides liquidity to tradable assets, by facilitating the exchange, as the investors can readily sell their securities and convert assets into cash.
It saves the time, money and efforts of the parties, as they don’t have to waste resources to find probable buyers or sellers of securities. Further, it reduces cost by providing valuable information, regarding the securities traded in the financial market.

The financial market may or may not have a physical location, i.e. the exchange of asset between the parties can also take place over the internet or phone also.

Classification of Financial Market

By Nature of Claim
- Debt Market: The market where fixed claims or debt instruments, such as debentures or bonds are bought and sold between investors.
- Equity Market: Equity market is a market wherein the investors deal in equity instruments. It is the market for residual claims.
By Maturity of Claim
- Money Market: The market where monetary assets such as commercial paper, certificate of deposits, treasury bills, etc. which mature within a year, are traded is called money market. It is the market for short-term funds. No such market exist physically; the transactions are performed over a virtual network, i.e. fax, internet or phone.
- Capital Market: The market where medium and long term financial assets are traded in the capital market. It is divided into two types:
  - Primary Market: A financial market, wherein the company listed on an exchange, for the first time, issues new security or already listed company brings the fresh issue.
  - Secondary Market: Alternately known as the Stock market, a secondary market is an organised marketplace, wherein already issued securities are traded between investors, such as individuals, merchant bankers, stockbrokers and mutual funds.
By Timing of Delivery
- Cash Market: The market where the transaction between buyers and sellers are settled in real-time.
- Futures Market: Futures market is one where the delivery or settlement of commodities takes place at a future specified date.
By Organizational Structure
- Exchange-Traded Market: A financial market, which has a centralised organisation with the standardised procedure.
- Over-the-Counter Market: An OTC is characterised by a decentralised organisation, having customised procedures.

Since last few years, the role of the financial market has taken a drastic change, due to a number of factors such as low cost of transactions, high liquidity, investor protection, transparency in pricing information, adequate legal procedures for settling disputes, etc.

Share Market

Share market is platform where people can buy and sell shares of publicly listed companies.

stock represent ownership interest in company. But individual cannot buy/sell shares in stock market

directly, it can be only purchased through registered intermediate known as stock broker. In stock market share price is basically depends on concept of Demand and Supply.

A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment in the stock market is most often done via stockbrokerages and electronic trading Platforms. Investment is usually made with an investment strategy in mind.

STOCK EXCHANGES

There are two major stock exchanges in India

1) National Stock Exchange (NSE)

2) Bombay Stock Exchange (BSE)

1) National Stock Exchange (NSE) :

It was established in the year 1992 and is located in Mumbai. Many companies are listed in national

stock exchange. NIFTY50 is index of NSE's 50 companies which based on its trading volume and market capitalization.

NSE

2) Bombay Stock Exchange (BSE) :

It is Asia's first as well as oldest stock market exchange in India. It was established in 1875 and is located in Mumbai. BSE SENSEX is index measures the performance of the 30 largest, most liquid and financially stable companies.

BSE

Securities Exchange Board of India (SEBI) is regulator of Indian stock market. It ensures the

development and safeguard of investors.

DEMAT ACCOUNT

In order to trade in stock market one must have demat account. Shares are transferred to stock holder's

account digitally through demat account. In order to open demat account we need to approach depository participant (DP).

TRADING ACCOUNT

Trading account is account where you can trade in stocks. One can open trading account through

SEBI registered stock broker.

There are mainly two types of trading

1) Intraday Trading

2) Delivery Trading

1) Intraday Trading :

In intraday trading one must buy and sell or vice versa in same trading day. If one fails to do so broker completes trade and charges user. Trader don't get delivery of share in intraday.

2) Delivery Trading :

In delivery trading, delivery of share is delivered in demat account of share holder. Stock owner can sell share at any live trading day. Brokerage on Delivery is generally lower than that of Intraday.

Investment

An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or wil later be sold at a higher price for a profit.
An investment always concerns the outlay of some asset today (time, money, effort, etc.) in hopes of a greater payoff in the future than what was originally put in.

International Trade

Imports & Exports

International trade is the exchange of goods and services between countries, because there is a need or want of goods or services.
Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or which would be more expensive domestically.
The importance of international trade was recognized early on by political economists like Adam Smith and David Ricardo.
Still some argue that international trade actually can be bad for smaller nations, putting them at a greater disadvantage on the world stage.

Importance: International trade plays an important role in the economy of each individual country. It allows to satisfy the needs of the population; stimulates the internal development of the country. International trade is the exchange of goods and services between countries.

Techno4Ideas

Financial Education : The key to the growth of Economy

International findings

Finance