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Difference Between Money Market And Capital Market

1209 Words5 Pages

Topics Covered:-

• Participants in a Money Market
• Comparison between Money Market & Capital market
• International Money Market

- Himani Bhatt
- 14020241044 Participants in Money Market The basic idea of a money market is to have financial institutions and dealers who wish to either borrow or lend in money or cash. Participants lend and borrow for short periods of time, usually upto thirteen months. Money market does trading in the form of short-term financial instruments called “paper”. This contrasts with the capital-market as it deals with long-term funding through bonds and equity.

The core of the money market usually consists of interbank lending- banks borrowing and lending to each other using repurchase …show more content…

The central authority will seek to have the real value of its currency reflected accurately in the FX market. If it thinks this is not the case, it will intervene in the market if it feels this intervention will be effective in achieving the desired result.

Comparison Between Money Market and Capital market
Money market is differentiated from capital market on the basis of the following :-
1) Credit Instruments

The main credit instruments of the money market are collateral loans, call money, acceptances, bills of exchange. On the other hand, the main instruments used in capital markets are shares, debentures, stocks, bonds, securities of the government.

2) Maturity Period

The money market deals in borrowing and lending of short-term finance ( i.e. for one year or less), while the capital market deals in the borrowing and lending of long-term finance (i.e., for more than one year).

3) …show more content…

The transactions are among various central banks of the nations , usually carried out in gold or in US dollar. The international money market has grown phenomenally over last few years and is expected to grow even more. The international money market mainly handles the currency trading between the countries. The trading of one country's currency for another one is also named as the foreign exchange currency trading or forex trading. It is the largest financial market in the world and the participants in this large market are large banks, central banks, governments, multinational corporations.

A money market is commonly used by the big financial institutions, large corporations and governments and it is the safest financial market available. The investment made in a money market is generally for a very short period of time. Hence they are referred as cash

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