Money Markets

Posted in Finance, Accounting and Economics Terms, Total Reads: 540

Definition: Money Markets

Financial Markets (Indian) can be classified as:

  1. Money Market
  2. Capital Market
  3. Foreign Exchange Market
  4. Derivatives Market


Money Market is a market which is used to raise short term capital (current assets). The instruments issued in the money market have a maturity ranging from days to a maximum of 1 year.


Various instruments included in Money Market are Treasury- Bills, commercial paper, certificate of deposits, bills of exchange, re-purchase agreements (called repos). These instruments bear different risks, maturities and values.


Short- term instruments are called as ‘paper’. It provides more liquidity.


It includes interbank lending through commercial paper and re-purchase agreements.



  • Corporate
  • Banks
  • Government


Money Market is mostly populated by corporates and it is measured on Commercial Paper (CP).

Banks participate through Certificate of Deposit(CD).

Government participate through T-Bills (Treasury Bills), C- Bills (), Certificate of Deposit (CDs).


Most popular Money Market Instruments are:

  • Certificate of Deposit
  • Repurchase Agreements
  • Commercial Paper
  • Treasury-Bills
  • Money Funds
  • Asset-backed securities
  • Foreign Exchange Swaps


Characteristics of Money Market Instruments are:

  • High Liquidity
  • Short-term maturity
  • Risk are associated


Money Market returns are lower than Capital Market returns. Capital Market is used for raising long-term capital.


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