What is Money Market?
The money market is one of the most important aspects of financial markets. It is used for the assets that are involved in the process of borrowing and lending on a short-term basis.
The usual maturity periods are somewhere around one year or even lesser than that.
In case you are involved in the trading process in this line, it would involve many things like the treasury bills, the commercial papers, the certificates that would be needed for deposits, the banker’s acceptance, federal funds, short-lived mortgages, and also the securities that are asset-backed.
There are a number of things it provides. One of the most important ones would be liquidity funding. This would be for the financing system seen globally. The two things that go hand in hand with the financial markets would be the capital markets and the money markets.
There are financial institutions and also dealers who deal in money or in credit. They are ready to either lend or borrow. The lenders and borrowers are doing this for a short term like for 13 months. The money market is usually seen to trade in financial instruments for the short term. They do it in the form of financial instruments called paper.
This is totally opposite to the concept that is seen in the case of the capital market which involves long-term funding. It is done in terms of bonds and equity.
Money Market Homework Help
The major part of the money market is interbank lending. This lending and borrowing between banks happen very often. There are various instruments that are involved in this case, which include the commercial paper, the repurchase agreements, and also instruments of a similar kind.
They are the instruments that have been already benchmarked in most cases. They are usually done to the London interbank offered rate. This would be done accordingly for the appropriate currency and also the term.
There are a number of finance companies that are funding themselves. They do it by the way of issuing these large quantities of asset-backed commercial paper. They are the ones that are usually seen to be secured by the pledge for the eligible assets.
These eligible assets would include auto loans, credit card receivables, mortgage-backed securities, commercial mortgage loans, residential mortgage loans, and also any other similar financial assets.
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