finance is a transaction between two parties where one party lends directly to the other party, whereas ▼ indirect direct finance involves three parties: the borrower, the lender, and a third partylong dashsuch as a bank. Which involves financial intermediaries, and which involves financial markets?

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Business

Jeffrey Jones

23 August, 08:31

finance is a transaction between two parties where one party lends directly to the other party, whereas ▼ indirect direct finance involves three parties: the borrower, the lender, and a third partylong dashsuch as a bank. Which involves financial intermediaries, and which involves financial markets?

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Roy Weber · Answer 1

Direct finance requires financial markets, while indirect finance involves financial intermediaries.

The financial intermediary is that person, entity or institution that offers financial services performing an economic function among savers and companies that require financing. It is the intermediation between an investor and a financial instrument issuer in order that the investor does not have to deal directly with said issuer.

It makes use of the functions of a financial intermediary when its financial services are required, entails an operating cost in the form of commissions. That is, the financial institutions issue financial products that the intermediaries are in charge of placing to the client or investor by charging the latter a commission.