Money Markets Fundamentals

A practical guide to the instruments, pricing methods, and liquidity decisions that keep the financial system moving.

This book presents a clear, structured examination of money markets and the short-term funding techniques used by banks, corporations, governments, investment funds, and other financial institutions. It explains how participants raise, lend, invest, secure, and manage cash over periods ranging from overnight to one year.

• How money markets differ from capital markets, and how maturity, liquidity, credit quality, and yield shape each transaction.
• How to calculate simple interest, discount yields, add-on rates, bond-equivalent yields, present value, accrued interest, and holding-period returns.
• How Treasury bills are issued, priced, auctioned, settled, and traded in the secondary market.
• How repurchase agreements work, including collateral, haircuts, margin calls, substitutions, repo rates, and central clearing.
• How commercial paper and asset-backed commercial paper support corporate borrowing, along with the risks of refinancing and rollover dependence.
• How certificates of deposit, negotiable CDs, floating-rate deposits, and callable instruments fit into bank funding and cash investment strategies.
• How unsecured and secured interbank funding operates across overnight, term, and open-maturity arrangements.
• How central-bank reserves, standing facilities, open-market operations, collateral rules, and settlement systems support liquidity.

The discussion connects financial theory with the operational realities of treasury and liquidity management. Readers will see how institutions forecast cash flows, maintain liquidity buffers, analyze maturity gaps, prepare for stress events, manage intraday payment obligations, and establish contingency funding plans.

Additional coverage explores money-market funds, institutional cash portfolios, weighted-average maturity, redemptions, valuation, diversification, and investment policy. Risk management receives equal attention, with practical treatment of counterparty exposure, interest-rate and repricing risk, collateral and custody risk, settlement failures, legal documentation, netting, and default procedures.

Each chapter concludes with a practical example, including funding a one-week shortfall, comparing instrument yields, calculating a Treasury bill return, financing securities through repo, pricing a ninety-day commercial paper note, managing an overnight reserve deficit, and constructing a daily liquidity dashboard. The final chapters also address regulation, capital and liquidity requirements, accounting treatment, trade confirmation, reconciliation, reporting, and complete transaction review.

Suitable for students, treasury professionals, banking and finance practitioners, investment managers, analysts, and anyone seeking a reliable foundation in short-term debt and institutional liquidity management.