International Money Market, segments and Instruments.pptx

The money market is a part of the financial market and deals with short-term financial instruments.
The market where liquid financial assets are traded is known as the money market.
Money market instruments are purchased and invested in bulk quantity which can be liquidated easily and quickly within one year.

1. International Financial Market Dr. KAVITHAMANI R Assistant Professor PG & Research Department o f International Business Sri Ramakrishna College of Arts & Science Coimbatore - 641 006 Tamil Nadu, India 1 International Financial Management

2. The International Financial Market is the place where financial wealth is traded between individuals (and between countries). It can be seen as a wide set of rules and institutions where assets are traded between agents in surplus and agents in deficit and where institutions lay down the rules. In short, the international financial market is the worldwide marketplace in which buyers and sellers trade financial assets, such as stocks, bonds, currencies, commodities and derivatives, across national borders. International Financial Market Sri Ramakrishna College of Arts & Science

3. Sri Ramakrishna College of Arts & Science The Institutions or Agencies of International Financial Markets The Institutions or Agencies of International Financial Markets that serve as the sources of international funds are: Multilateral Development Banks or Agencies Government / Governmental agencies International Banks Securities Market

4. Foreign Exchange Market: The Foreign Exchange Market is the world's largest financial market. Foreign exchange market is the market for the purchase and sale of foreign currencies. Borrowing or investing internationally requires the use of foreign exchange market for conversion of currencies. The foreign exchange market facilitates international trade and international transactions . International Bond Market: Foreign bonds and Euro bonds are the two types of international bonds. International bond market also includes a) Sinking fund bonds b) Convertible bonds c) Floating rate notes e) Global bonds. International Equity Market : Equity capital for a company is raised through the issue of shares. A multinational company would often like to raise equity capital from different countries by issuing shares in those countries. These shares are then traded in the stock exchange of the country. Sri Ramakrishna College of Arts & Science Segments of International Financial Markets

5. 4. International Money Market: International Money market is the market for transfer of short- term funds. In international money market, transactions take place in a variety of different currencies. International banks and financial institutions across the world are the major suppliers of funds in these markets, while MNCs and governments of different countries are the major users of these funds. The European money market is an important part of the international money market. 5. International Credit Market: International Credit market refers to the market through which companies and governments issue debt to investors, such as investment-grade bonds, junk bonds, and short-term commercial paper. Sometimes called the debt market, the credit market also includes debt offerings, such as notes and securitized obligations, including collateralized debt obligations (CDOs), mortgage-backed securities, and credit default swaps (CDS). Sri Ramakrishna College of Arts & Science Segments of International Financial Markets

6. The money market is a part of the financial market and deals with short-term financial instruments . The market where liquid financial assets are traded is known as the money market. Money market instruments are purchased and invested in bulk quantity which can be liquidated easily and quickly within one year. It provides returns in the form of interest rates on the securities. A financial asset with high-interest rates is more profitable for an investor as he receives a higher return from such an asset than the other assets. Sri Ramakrishna College of Arts & Science What is the Money Market?

7. Sri Ramakrishna College of Arts & Science International Money Market Instruments

8. A  Promissory Note  is a type of Money market instrument that describes the promise of one party towards another party. The buyer, with the help of the promissory note, promises the seller to pay the specific amount within a specific period. It is a written promise which is to be fulfilled on-demand or at a future date . Commercial paper  is a short-term source of financing used by international business organizations and financial institutions. It helps the organization to meet its debt obligations and liabilities. The maturity period of commercial paper is 270 days. The principal amount along with the interest rate is paid after the maturity period. Drafts, cheques etc., are good examples of commercial paper used in the international market. Sri Ramakrishna College of Arts & Science

9. Treasury Bills  are Money market securities provided by Government corporations . It is provided to meet the regular and ongoing expenses and debts. The validity of such bills is 364 days. It does not bear any type of interest rate. It is sold based on discounted prices. In the international market, Treasury bills are purchased with the help of the auction process organized by financial institutions and can be traded in the secondary market. A   Certificate of Deposit  is an investment vehicle that is mostly provided by financial institutions such as central banks, commercial banks, etc. It has a low level of risk which results in low earnings and low returns to the investors. Banks do not provide loans against such types of deposits. In the international market, such types of instruments are purchased with the help of foreign exchange by converting domestic currency into foreign currency. Sri Ramakrishna College of Arts & Science

10. Money funds  are low-risk Money market instruments that also act as a saving account. It is provided by the financial institutions and financial markets. International investors who like to bear less risk always use money funds. It charges interest rates on money market funds. A   Municipal Note  is a type of Money market fund used to raise capital for various international business organizations. They are provided by Government officials . It is a type of debt security. Sri Ramakrishna College of Arts & Science

11. International aspects of the money market Sri Ramakrishna College of Arts & Science

12. Financing trade:  Money market instruments help to facilitate international trade by providing foreign exchange. It provides finance to conduct the import and export of trade. With the help of such types of instruments, it becomes easy for traders to conduct international financial trades. With the help of foreign exchange, trade can be conducted easily. Safety of investments:  Investment is a strategy that helps the investors to accept the risk and earn a return on it. Money market instruments facilitate the safety and security of the investments by investing in different instruments and securities of the money market . High safety of investments results in high growth and development and increases the possibility of high earnings. It provides less risky investment instruments. Sri Ramakrishna College of Arts & Science

13. Fund management:  The money market helps in the collection, utilization, and management of funds with the help of different money market instruments. It helps to use the money market securities and finance international business activities and operations by utilizing foreign exchange. It helps to manage foreign exchange effectively. Help central bank:  Money market instruments help the central bank to bring stability in the banking services and systems . It provides liquidity to the bank and economy. It helps the central bank to provide short-term money market funds and instruments to the customers to fulfill their needs and requirements. It also helps the bank in easy and quick growth and the development of the banking system. It also allows the central bank to regulate and supervise the different short-term debt securities and instruments. Sri Ramakrishna College of Arts & Science

14. Liquidity and flexibility:  The basic feature of the money market is liquidity and flexibility. As it is short-term security, it can be liquidated within one year , or whenever there is a requirement of cash, it can be sold in the market. At the same time, it provides flexibility in the international market. Some money market instruments do not have a fixed maturity period . Industrial development:  The Money market also helps in industrial and economic development in the international market. It provides various short-term instruments to the small business and industry to undertake the activities and operations. It provides finance to the industrial sector and flourishes the growth and development in the market. Sri Ramakrishna College of Arts & Science

15. International participants of the money market Sri Ramakrishna College of Arts & Science

16. Government corporations  are larger buyers and sellers of money market instruments and securities to international investors than others. It provides various instruments such as treasury bills to the public to fulfill their short-term goals and repay the short-term liabilities. Central banks  are the government bank of all the other banks in the market. It promotes economic growth and development, sets interest rates for various securities and instruments , provides money market instruments to the public for a short period. Commercial banks  are a major participant in the money market. It acts as an issuer of the money market instruments. It provides short-term funds in the form of money market securities to the public and customers. Sri Ramakrishna College of Arts & Science

17. Financial institutions  act as a middleman in the money market. It is the provider and user of the money market securities. It provides funds in the form of money market instruments to the international business and public to meet their liabilities and financial burdens. It also assists in money market financial transactions. Futures Market  exchange provides various financial products such as money market instruments and securities to the international public and sells them in the future on maturity or on-demand or on the date agreed between the parties. Money market mutual funds  provide various types of investments in the short-term securities of the money market. The fund manager allows the investments in commercial paper, treasury bills, certificate of deposits, etc . Sri Ramakrishna College of Arts & Science

18. An   International broker  is a person who helps financial investors to purchase and sell money market instruments in different financial markets with the help of regulations regarding foreign exchange. He or she makes a deal by providing information about foreign exchange and other money market securities . Sri Ramakrishna College of Arts & Science

19. International Money Markets Vs International Capital Markets Money markets deal with short-term securities and capital markets deal with long-term securities. The money market is not a formal market , but a capital market is a formal type of market that has rigid rules and regulations. Commercial papers, certificates of deposits, promissory notes , etc., are money market instruments, whereas shares, bonds, debentures , etc., are capital market instruments. Sri Ramakrishna College of Arts & Science