Q.Explain the functions of a financial market.

A financial market does far more than just let two parties trade a security — it performs several distinct economic functions at once.

1. Mobilisation of savings — collects the scattered savings of households and institutions and channels them towards productive use.
2. Facilitates capital formation — connects savers with businesses needing funds for plant, machinery and expansion, supporting industrial growth.
3. Price discovery — the interaction of buyers and sellers determines the price/return a financial asset should command.
4. Provides liquidity — lets an investor convert a financial asset back into cash by selling it to another investor, without waiting for maturity.
5. Reduces the cost of transactions — ready information and standardised trading mechanisms cut the time and cost of matching a buyer with a seller.
6. Allocative efficiency of resources — channels the economy's scarce savings towards the borrowers/projects offering the best return for a given risk, rather than to whichever borrower asks first.

Naming only "mobilisation of savings" and stopping there — examiners expect several distinct functions, including the less obvious ones like price discovery and allocative efficiency.