Firms can issue stock, corporate bonds, commercial paper, or borrow money to finance projects. The weights of debt and equity components are assigned using market value. Preferred stock is issued to raise capital. While preferred stock is less risky than common equity, it is riskier than debt. The value of the stock is dependent on the number of shares outstanding by the market value per share.
Most stock is traded on organized exchanges.
The OTC market does not have a trading floor, but instead executes buy and sell orders through a telecommunications network. Recent developments have led to electronic trading over the internet. Since capital derived from stock issue is dependent on shares outstanding and price per share, market volatility becomes a concern. When determining the volatility of a stock, the method of exchange is taken into consideration. When stocks move from the Nasdaq to other exchanges, their volatility declines.