{"id":246558,"date":"2022-02-25T07:48:28","date_gmt":"2022-02-25T07:48:28","guid":{"rendered":"https:\/\/imarticus.org\/?p=246558"},"modified":"2022-02-25T07:48:28","modified_gmt":"2022-02-25T07:48:28","slug":"historic-returns-money-market-instruments-and-functions","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/historic-returns-money-market-instruments-and-functions\/","title":{"rendered":"Historic Returns: Money market instruments and functions"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Historic Returns: <\/span><b>Money market<\/b><span style=\"font-weight: 400;\"> instruments and functions<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> is the set of wholesale markets where the exchange of short-term financial assets, up to 18 months, takes place; with a very low level of risk, largely thanks to the solvency of their issuers and high liquidity. This type of financial market includes the interbank market, the Treasury bills, and notes market, the certificates of deposit market, the bills of the exchange market, and, in general, the market for all short-term financial assets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What determines the <\/span><b>money market<\/b><span style=\"font-weight: 400;\">?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The main objective of the <\/span><a href=\"https:\/\/imarticus.org\/certified-investment-banking-operations-program\/\"><b>money market<\/b><\/a><span style=\"font-weight: 400;\"> is to provide users and economic agents with the possibility of holding part of their wealth in the form of securities or bonds, with a high degree of liquidity and an acceptable return. The main economic agents participating in the <\/span><b>money market<\/b><span style=\"font-weight: 400;\">, both offering and demanding short-term funds, tend to be mainly banks, savings banks, and public administrations. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Non-bank financial institutions, such as life insurance companies, also frequently use the <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> as an outlet for surplus cash, although they usually invest their cash holdings in long-term securities.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Characteristics of the <\/span><b>money market<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> is characterized above all by the following features:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The participants in the <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> tend to be specialized and well-resourced financial institutions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The assets traded have a very low level of risk thanks to the solvency of the organizations. There is a high level of security.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They are highly liquid because they have a very short maturity. Investors will have liquidity at the moment they need it.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Transactions can be carried out directly or through specialized intermediaries.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They are very flexible: the <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> investor has the flexibility to invest in a large portfolio of securities and securities, which will result in a diversification of risk even if the options for return diminish.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A distinction must be made between the primary and secondary markets. The primary market is where new securities, commercial paper, are issued and can be issued. The secondary market is where securities that have already been issued are traded. This implies that the purchasers of the securities buy them from the owners and not from the issuers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Types of <\/span><b>money market<\/b><span style=\"font-weight: 400;\">s<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are several types of <\/span><b>money market<\/b><span style=\"font-weight: 400;\">s, as detailed below:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Corporate asset market: corporate bonds stand out, where debt instruments are issued by a company on a short-term basis and have a payment obligation. It is a way of financing businesses and the guarantee of payment is the company itself.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interbank <\/span><b>money market<\/b><span style=\"font-weight: 400;\">s: in this market financial firms conduct credit and lending operations through short-term derivatives, interbank deposits, short-term interest rate swaps, and other financial assets, with a maturity period of either one day or one week.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Government debt <\/span><b>money market<\/b><span style=\"font-weight: 400;\">: this market deals with government debt. Normally after notification of the calendar, the Treasury issues a series of auctions each year.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">When to use it?<\/span><\/p>\n<p><b>Money market<\/b><span style=\"font-weight: 400;\"> investments should be made when you have the liquidity to invest, but you will need it soon and without being able to take excessive risk. This is when the <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> is used because of its high liquidity and safety. In this way, the money is not tied up in the bank, but the investor knows that he can access it at any time and that it is safe because of the guarantees offered by the issuers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Generally, <\/span><b>money market<\/b><span style=\"font-weight: 400;\"> assets can fulfill three roles in portfolios:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">to support planned (and even unplanned) expenses<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">to act as a buffer against unexpected liquidity events<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">to lessen the negative impact of future negative corrections in financial markets and to have an amount available to take advantage of future investment opportunities.<\/span><\/li>\n<\/ul>\n<p><strong>How do learn more about this?<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">The <strong><a href=\"https:\/\/imarticus.org\/certified-investment-banking-operations-program\/\">Certified Investment Banking Operations Professional<\/a><\/strong> of Imarticus equips you with the skills and knowledge necessary to enhance your career in investment banking. Realize your potential and enter the world of finance on the right foot.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Historic Returns: Money market instruments and functions The money market is the set of wholesale markets where the exchange of short-term financial assets, up to 18 months, takes place; with a very low level of risk, largely thanks to the solvency of their issuers and high liquidity. This type of financial market includes the interbank [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":246450,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[22],"tags":[1141,1707,2511,3066,3243],"class_list":["post-246558","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-investment-banking-career","tag-investment-banking-online-training","tag-best-investment-banking-courses-with-placement-in-india","tag-cibop-course","tag-money-market-course"],"acf":[],"aioseo_notices":[],"modified_by":"Imarticus Learning","_links":{"self":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/246558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/comments?post=246558"}],"version-history":[{"count":0,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/246558\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media\/246450"}],"wp:attachment":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media?parent=246558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/categories?post=246558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/tags?post=246558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}