Please enable JavaScript.
Coggle requires JavaScript to display documents.
LECTURE 5: Money Market and Money Market Derivatives - Coggle Diagram
LECTURE 5: Money Market and Money Market Derivatives
Money Market
Overview of money market
Characteristics of money market instruments
Low default risk
Short maturity
High marketability
Commercial banks
Bank liabilities or borrowing
Negotiable CDs
Commercial paper
Banker’s acceptances
Federal fund purchased
Repurchase agreement
Federal reserve
Sale: decrease member bank reserves
Purchase: increase member bank reserves
Banks or investments
T-bills
Agency security
Banker’s acceptance
Federal fund sold
Repurchase agreements
T-bills
Settlement proceeds
Simple Rate of return
Effective rate of return
Money market derivatives
Definition
an agreement to borrow or lend a notional cash sum for a period of time lasting up to 12 months, starting at any point over the next 12 months, at an agreed rate of interest (the FRA rate).
