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. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities.[1] It provides liquidity funding for the global financial system.
Common
money market instruments
§ Certificate of
deposit - Time deposits,
commonly offered to consumers by banks, thrift institutions, and credit unions.
§ Repurchase agreements - Short-term loans—normally for less
than two weeks and frequently for one day—arranged by selling securities to an
investor with an agreement to repurchase them at a fixed price on a fixed date.
§ Commercial paper - Unsecured promissory notes with a
fixed maturity of one to 270 days; usually sold at a discount from face value.
§ Eurodollar
deposit - Deposits made in
U.S. dollars at a bank or bank branch located outside the United States.
§ Treasury bills -
Short-term debt obligations of a national government that are issued to mature
in three to twelve months. For the U.S., see Treasury bills.
§ Money funds - Pooled short maturity, high quality
investments which buy money market securities on behalf of retail or
institutional investors.
§ Foreign
Exchange Swaps - Exchanging a
set of currencies in spot date and the reversal of the exchange of currencies
at a predetermined time in the future.
Short-lived mortgage- and asset-backed securities