Money market instruments, Financial Management

Just as any other financial market, money market also involves transfer of funds in exchange for financial assets. Because of the nature of the money market, the instruments used in it represent short-term financial claims (i.e., instruments issued with maturities up to 12 months). Though there are no statutory definitions for the money market instruments, it is accepted that the maturity preriod of money market instruments varies from one day to one year, thus enabling a short holding period between entrance and exit, paving the way for liquidity. At times, the liquidity of a security may make it a part of the money market even though the maturity may be beyond a year. With short-term liquidity being the main purpose of the money market, various instruments have been developed to suit these short-term requirements. For instance, the amount of funds required by banks to meet their statutory reserves will vary from one day to a fortnight. Similarly, corporates may require funds for their working capital purpose for any period up to a year. Given below is a broad classification of the money market instruments depending upon the type of issuer and the requirements they meet.

Posted Date: 9/8/2012 5:27:44 AM | Location : United States

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