Financial Instruments such as Call Money, Collateral

Solution

Money Market Instruments are simply the instruments or tools which can help one operate in the money market. These instruments serve a dual purpose of not only allowing borrowers meet their short-term requirements but also provide easy liquidity to lenders. Some of the common money market instruments include Banker’s Acceptance, Treasury Bills, Repurchase Agreements, Certificate of Deposits (CoD) and Commercial Papers. Money market instruments allow governments, financial organizations and businesses to finance their short-term cash requirements. Some of the notable characteristics of money market instruments are as follows. ·         Liquidity – Money market instruments are highly liquid because they are fixed-income securities which carry short maturity periods of a year or less. ·         Safety – Issuers of money market instruments have strong credit ratings, which automatically mean that the money instruments issued by them will also be safe. ·         Discount Pricing – Another important characteristic feature of money market instruments is that they are issued at a discount on their face value.