Term: ASSET MARKET

An asset market is the spot market for a particular asset. Thus, the gold market or the oil market or the market for pork bellies in America. Financial assets like shares and bonds are also asset markets. Derivative markets are not themselves asset markets, but are based on assets traded on an organised exchange. Thus, trade in option contracts on Anglo American shares are derivative instruments based on the underlying price of Anglo American shares. The property market is also an asset market, but has the disadvantage that the asset in question is not homogenous. Every Anglo American share is identical to every other Anglo American share. This means that if Anglos are trading in the share market for R220 per share it is highly likely that you would be able to sell your Anglos for somewhere very close to that price. But if your neighbour sells his house for R2m that does not mean that you can get the same for your house – because you have one bathroom and he has two. In other words, no two properties are the same. They are not homogenous.

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