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.
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
Foreign Exchange Swaps
Characteristics of Money Market Instruments are:
Risk are associated
Money Market returns are lower than Capital Market returns. Capital Market is used for raising long-term capital.