Money market: Difference between revisions
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''Financial markets.'' | |||
Money markets trade short-term financial instruments, generally with a life up to one year. | Money markets trade short-term financial instruments, generally with a life up to one year. | ||
Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate. | Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate. | ||
Important short term interest conventions are: | Important short term interest conventions are: | ||
For | 1. | ||
= | |||
For GBP yield instruments: Actual / 365 fixed days. | |||
So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365. | |||
This applies in leap years as well as in normal years. | |||
2. For EUR, USD and most other currencies yield instruments: Actual/360 days | <span style="color:#4B0082">'''Example 1'''</span> | ||
So Simple periodic interest = Quoted nominal annual rate x [Actual days]/360 | |||
A 272 day GBP yield instrument quoted at 4% would pay periodic interest of: | |||
= 4% x 272 / 365 | |||
= 2.9808% per 272 day period. | |||
2. | |||
For EUR, USD and most other currencies yield instruments: Actual / 360 days. | |||
So Simple periodic interest = Quoted nominal annual rate x [Actual days] / 360. | |||
<span style="color:#4B0082">'''Example 2'''</span> | |||
A 272 day USD yield instrument quoted at 4% pays periodic interest of: | |||
= 4% x 272 / 360 | |||
= 3.0222% per 272 day period. | = 3.0222% per 272 day period. | ||
== See also == | == See also == | ||
* [[ACT/360]] | |||
* [[ACT/365 fixed]] | |||
* [[Capital]] | |||
* [[Capital instrument]] | |||
* [[Capital market]] | * [[Capital market]] | ||
* [[Depo market]] | * [[Depo market]] | ||
* [[European Money Markets Institute]] | |||
* [[Financial asset]] | |||
* [[Financial liability]] | |||
* [[Financial markets]] | |||
* [[International money market]] | * [[International money market]] | ||
* [[Leap year]] | |||
* [[Market]] | * [[Market]] | ||
* [[Money market fund]] | * [[Money market fund]] | ||
* [[Money market fund reform: a light at the end of the tunnel?]] | |||
* [[Money market instrument]] | |||
* [[Money market lines]] | * [[Money market lines]] | ||
* [[Nominal annual rate]] | * [[Nominal annual rate]] | ||
* [[Primary market]] | |||
* [[Secondary market]] | |||
* [[Simple interest]] | * [[Simple interest]] | ||
[[Category:Long_term_funding]] | |||
Latest revision as of 14:06, 11 August 2021
Financial markets.
Money markets trade short-term financial instruments, generally with a life up to one year.
Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.
Important short term interest conventions are:
1.
For GBP yield instruments: Actual / 365 fixed days.
So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365.
This applies in leap years as well as in normal years.
Example 1
A 272 day GBP yield instrument quoted at 4% would pay periodic interest of:
= 4% x 272 / 365
= 2.9808% per 272 day period.
2.
For EUR, USD and most other currencies yield instruments: Actual / 360 days.
So Simple periodic interest = Quoted nominal annual rate x [Actual days] / 360.
Example 2
A 272 day USD yield instrument quoted at 4% pays periodic interest of:
= 4% x 272 / 360
= 3.0222% per 272 day period.
See also
- ACT/360
- ACT/365 fixed
- Capital
- Capital instrument
- Capital market
- Depo market
- European Money Markets Institute
- Financial asset
- Financial liability
- Financial markets
- International money market
- Leap year
- Market
- Money market fund
- Money market fund reform: a light at the end of the tunnel?
- Money market instrument
- Money market lines
- Nominal annual rate
- Primary market
- Secondary market
- Simple interest
