Money market: Difference between revisions
imported>Charles Cresswell No edit summary |
imported>Doug Williamson m (Spacing 22/8/13) |
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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: | ||
1. For GBP yield instruments: Actual/365 days | 1. For GBP yield instruments: Actual/365 days | ||
So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365 | 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: | For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of: | ||
= 4% x 272/365 | = 4% x 272/365 | ||
= 2.9808% per 272 day period | = 2.9808% per 272 day period | ||
2. For EUR, USD and most other currencies yield instruments: Actual/360 days | 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 | 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: | For example a 272 day USD yield instrument quoted at 4% pays periodic interest of: | ||
= 4% x 272/360 | = 4% x 272/360 | ||
= 3.0222% per 272 day period. | = 3.0222% per 272 day period. | ||
== See also == | == See also == | ||
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* [[Wholesale markets]] | * [[Wholesale markets]] | ||
[[Category: | [[Category:Long_term_funding]] | ||
Revision as of 08:42, 22 August 2013
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.
