This presentation about money market....... download for yourself

1. Amanullah Trino
MBA (2010-2011
Finance & Banking
Rajshahi University
Bangladesh
http://www.facebook.com/amanullah.trino

2. What is Money market?
What the Money Market does?
Why is such a Market needed?
The Need for a Money Market
Who are the Principal Borrowers and Lenders in the Money
Market?
Who Participates in the Money Markets?
The Goals of Money Market Investors
What kind of risk do investors face in the financial markets?
Money Market Maturities
Depth and Breadth of the Money Market
Money Market Instruments

3. What is Money market?
 The money market is the market for short-
term (one year or less) credit.
 The money market is a component of the
financial markets for assets involved in short-
term borrowing and lending with original
maturities of one year or shorter time frames.

4.  The money market, like all financial
markets, provides a channel for the
exchange of financial assets for money. To
meet short-term cash needs
 The money market is the mechanism
through which holders of temporary cash
surpluses meet holders of temporary cash
deficits.

5. Why is such a Market needed?
The money market arises because for
most individuals and institutions, cash
inflows and outflows are rarely in perfect
harmony with each other, and the holding
of idle surplus cash is expensive.
To cover the wages and salaries of
government employees, office supplies,
repairs, and fuel costs as well as
unexpected expense.

6. Need for short term funds by Banks.
Outlet for deploying funds on short term basis .
Optimize the yield on temporary surplus funds
Regulate the liquidity and interest rates in the conduct of
monetary policy to achieve the broad objective of price stability,

7. Corporate Borrowers
& Cash-Management
Customers Needing to Nonbank
Government Invest Cash Surpluses Financial
Treasuries Institutions
(borrowing and (mutual funds,
redeeming insurers, etc.)
securities)
Security Money
Dealers & Center
Brokers Banks
Central Banks
(supplying funds and information
and promoting market stability)

8. Central Bank
Commercial Banks, Co-operative Banks and Primary
Dealers are allowed to borrow and lend.
Financial Institutions, Mutual Funds, and certain
specified entities are allowed to access to Call/Notice
money market only as lenders.
 Individuals, firms, companies, corporate bodies, trusts
and institutions can purchase the treasury bills, CPs and
CDs. Short-term investing for income and liquidity
 Short-term financing for short and permanent needs
 Large transaction size and telecommunication network

9.  Safety
 Liquidity
 The opportunity to earn some interest income.
 Speed
 Because funds invested in the money market
represent only temporary cash surpluses and are
usually needed in the near future to meet tax
obligation, cover wage and salary costs, pay
stockholder dividends, and so one.

10. money market investors are especially sensitive to risk.
 Market risk – The risk that the market value of an
asset will decline, resulting in a capital loss when
sold. Also called interest rate risk.
 Reinvestment risk – The risk that an investor will
be forced to place earnings from a security into a
lower-yielding investment because interest rates
have fallen.
 Default risk – The probability that a borrower fails
to meet one or more promised principal or interest
payments on a security.

11. Types of Investment Risk
 Inflation risk – The risk that increases in the
general price level will reduce the purchasing
power of earnings from the investment.
 Currency risk – The risk that adverse
movements in the price of a currency will
reduce the net rate of return from a foreign
investment. Also called exchange rate risk.
 Political risk – The probability that changes
in government laws or regulations will reduce
the expected return from an investment.

12. Money market investments cover a relatively
narrow range of maturities – one year or less.
 Original Maturity- The interval of time
between the issue date of a security and the
date on which the borrower promises to
redeem it is the security
 Actual maturity- refers to the number of days,
months, or years between today and the date
the security

13.  The money market is extremely broad and
deep. It can absorb a large volume of
transactions with only small effects on security
prices and interest rates.
 The money market is also very efficient.
Securities dealers, major banks, and funds
brokers maintain constant contact with one
another through a vast telephone and computer
network and are hence alert to any bargains.

14. Certificate of deposit.
Repurchase agreements
Commercial paper
Treasury bill.
Bankers Acceptance