The Global Money Markets
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The Global Money Markets
FRANK J. FABOZZI
STEVEN V. MANN
MOORAD CHOUDHRY
The money market is traditionally defined as the market for financial
assets that have original maturities of one year or less. In essence, it is
the market for short-term debt instruments. Financial assets traded in
this market include such instruments as U.S. Treasury bills, commercial
paper, some medium-term notes, bankers acceptances, federal agency
discount paper, most certificates of deposit, repurchase agreements,
floating-rate agreements, and federal funds. The scope of the money
market has expanded in recent years to include securitized products
such mortgage-backed and asset-backed securities with short average
lives. These securities, along with the derivative contracts associated
with them, are the subject of this book.
The workings of the money market are largely invisible to the aver-
age retail investor. The reason is that the money market is the province
of relatively large financial institutions and corporations. Namely, large
borrowers (e.g., U.S. Treasury, agencies, money center banks, etc.) seek-
ing short-term funding as well as large institutional investors with excess
cash willing to supply funds short-term. Typically, the only contact retail
investors have with the money market is through money market mutual
funds, known as unit trusts in the United Kingdom and Europe.
Money market mutual funds are mutual funds that invest only in
money market instruments. There are three types of money market funds:
(1) general money market funds, which invest in wide variety of short-term
debt products; (2) U.S. government short-term funds, which invest only in
U.S. Treasury bills or U.S. government agencies; and (3) short-term munic-
ipal funds. Money market mutual funds are a popular investment vehicle
for retail investors seeking a safe place to park excess cash. In Europe, unit
trusts are well-established investment vehicles for retail savers; a number
of these invest in short-term assets and thus are termed money market unit
FRANK J. FABOZZI
STEVEN V. MANN
MOORAD CHOUDHRY
The money market is traditionally defined as the market for financial
assets that have original maturities of one year or less. In essence, it is
the market for short-term debt instruments. Financial assets traded in
this market include such instruments as U.S. Treasury bills, commercial
paper, some medium-term notes, bankers acceptances, federal agency
discount paper, most certificates of deposit, repurchase agreements,
floating-rate agreements, and federal funds. The scope of the money
market has expanded in recent years to include securitized products
such mortgage-backed and asset-backed securities with short average
lives. These securities, along with the derivative contracts associated
with them, are the subject of this book.
The workings of the money market are largely invisible to the aver-
age retail investor. The reason is that the money market is the province
of relatively large financial institutions and corporations. Namely, large
borrowers (e.g., U.S. Treasury, agencies, money center banks, etc.) seek-
ing short-term funding as well as large institutional investors with excess
cash willing to supply funds short-term. Typically, the only contact retail
investors have with the money market is through money market mutual
funds, known as unit trusts in the United Kingdom and Europe.
Money market mutual funds are mutual funds that invest only in
money market instruments. There are three types of money market funds:
(1) general money market funds, which invest in wide variety of short-term
debt products; (2) U.S. government short-term funds, which invest only in
U.S. Treasury bills or U.S. government agencies; and (3) short-term munic-
ipal funds. Money market mutual funds are a popular investment vehicle
for retail investors seeking a safe place to park excess cash. In Europe, unit
trusts are well-established investment vehicles for retail savers; a number
of these invest in short-term assets and thus are termed money market unit
