Key Borrowers and Lenders in the Money Market Central Banks Corporate Borrowers & CashManagement Customers Needing to Invest Cash Surpluses Security Dealers & Brokers Money Cent[r]
(1)(2)Chapter 10
Introduction to the Money Market and the Roles Played by
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Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
Learning Objectives
• To understand the many roles and functions performed by the
money market
• To identify the key money market players
• To examine the roles that governments and security dealers
play in the functioning of the money market
(4)Introduction
• All the transactions carried out in the financial markets seem
to be basically the same: borrowers issue securities that lenders buy
• However, the different purposes for which money is borrowed can result in the creation of different kinds of financial assets having different maturities, risks, etc
• For instance, the money market is the market for shortterm
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MoneyandCapitalMarkets,9/e â2006TheMcGrawưHillCompanies,Inc.,AllRightsReserved.
CharacteristicsoftheMoneyMarket
ã Themoneymarketisthemechanismthroughwhichholdersof
temporary cash surpluses meet holders of temporary cash deficits
• The money market arises because for most individuals and
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Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
(8)Characteristics of the Money Market
• Money market investors seek mainly safety and liquidity, plus
the opportunity to earn some interest income
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Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
(10)Characteristics of the Money Market
• Original maturities on money market instruments range from
as short as one day on many loans to banks and security dealers to a full year on some bank deposits and Tbills
• But because there are so many money market securities