Money market: Difference between revisions

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(Linked to The Treasurers Handbook - Money market fund reform: a light at the end of the tunnel?)
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* [[Market]]
* [[Market]]
* [[Money market fund]]
* [[Money market fund]]
* [[Money market fund reform: a light at the end of the tunnel?]]
* [[Money market lines]]
* [[Money market lines]]
* [[Nominal annual rate]]
* [[Nominal annual rate]]

Revision as of 11:27, 1 December 2014

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 days

So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365

For example a 272 day sterling 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

For example 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