Money Market Flashcards
The Money Market
Is a place where debt instruments trade between large institutions.
Only high liquid short term debt instruments w/ under a year till maturity can trade here
Commercial Paper
Unsecured Promissory notes sold by the largest companies in the world
270 day max duration
No Interest. Sold at discount to par
Bankers Acceptances
Used to promote Imports/ Exports
Company wants to purchase foreign goods but doesn’t want to put down the money until they have the goods in hand. Bank gives the money from their own funds then collecting the money from the buyer once shipment is received
Negotiable CD’s
A CD that can be traded between 2 parties
$100k minimum
They trade with accrued Interest
Repurchase Agreements
A fully collateralized loan
A company instead of going to a bank and putting up collateral for a loan, they just sell the bank some securities and promise to buy them bank at a specific time and price.
Are Treasury and Agency Issued Securities In the Money Market
Only if they have less than a year left until maturity
Discount Rate
The rate the FED charges member banks on loans directly from the FED
Federal Funds Rate
The rate Banks charge each other (usually overnight loans or a little longer)
Broker Call Loan Rate
The rate banks charge broker dealers on loans to finance their customers margin purchases
Prime Rate
The rate that banks charge their best corporate customers
LIBOR
London Inter-Bank Offered Rate
The most highly quoted interest rate in the world.
Like the Federal Funds Rate but International
