Money Market Capital Market

 

	Money Market	Capital Market
Definition	Is a component of the financial markets where short-term borrowing takes place	Is a component of financial markets where long-term borrowing takes place
Maturity Period	Lasts anywhere from 1 hour to 90 days.	Lasts for more than one year and can also include life-time of a company.
Credit Instruments	Certificate of deposit, Repurchase agreements, Commercial paper, Eurodollar deposit, Federal funds, Municipal notes, Treasury bills, Money funds, Foreign Exchange Swaps, short-lived mortgage and asset-backed securities.	Stocks, Shares, Debentures, bonds, Securities of the Government.
Nature of Credit Instruments	Homogenous. A lot of variety causes problems for investors.	Heterogeneous. A lot of varieties are required.
Purpose of Loan	Short-term credit required for small investments.	Long-term credit required to establish business, expand business or purchase fixed assets.
Basic Role	Liquidity adjustment	Putting capital to work
Institutions	Central banks, Commercial banks, Acceptance houses, Nonbank financial institutions, Bill brokers, etc.	Stock exchanges, Commercial banks and Nonbank institutions, such as Insurance Companies, Mortgage Banks, Building Societies, etc.
Risk	Risk is small	Risk is greater
Market Regulation	Commercial banks are closely regulated to prevent occurrence of a liquidity crisis.	Institutions are regulated to keep them from defrauding customers.
Relation with Central Bank	Closely related to the central banks of the country.	Indirectly related with central banks and feels fluctuations depending on the policies of central banks.