Money market: Difference between revisions
imported>Doug Williamson m (Spacing 22/8/13) |
imported>Doug Williamson (Linked to The Treasurers Handbook - Money market fund reform: a light at the end of the tunnel?) |
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* [[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.