CH07MoneyMarkets(金融市场学,上海大学,悉尼大学)ujb.pptx
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1、CHAPTER7Money MarketsChapter ObjectivesnProvide a background on money market securitiesnExplain how institutional investors use money marketsnExplain the globalization of money marketsMoney Market SecuritiesnMaturity of a year or lessnDebt securities issued by corporations and governments that need
2、short-term fundsnLarge primary market focusnPurchased by corporations and financial institutionsnSecondary market for securitiesMoney Market SecuritiesnTreasury BillsnCommercial papernNegotiable certificates of depositsnRepurchase agreementsnFederal fundsnBankers acceptancesMoney Market SecuritiesnT
3、reasury billslIssued to meet the short-term needs of the U.S.governmentlAttractive to investors uMinimal default riskbacked by Federal GovernmentuExcellent liquidity for investorsnShort-term maturitynVery good secondary marketMoney Market SecuritiesnTreasury bill auction(fill bids in amount determin
4、ed by Treasury borrowing needs)lBid process used to sell T-billslBids submitted to Federal Reserve banks by the deadlinelBid processuAccepts highest bidsuAccepts bids until Treasury needs generatedCompetitive BiddingMoney Market SecuritiesnTreasury bill auctionnoncompetitive bids($1 million limit)lM
5、ay be used to make sure bid is acceptedlPrice is the weighted average of the accepted competitive bidslInvestors do not know the price in advance so they submit check for full par valuelAfter the auction,investor receives check from the Treasury covering the difference between par and the actual pri
6、ceNoncompetitive BiddingMoney Market SecuritiesnEstimating T-bill yieldlNo coupon paymentslPar or face value received at maturitylYield at issue is the difference between the selling price and par or face value adjusted for timelIf sold prior to maturity in secondary marketuYield based on the differ
7、ence between price paid for T-bill and selling price adjusted for time Money Market SecuritiesnCalculating T-Bill Annualized YieldYT SP PP PP365 nYT =The annualized yield from investing in a T-bill SP=Selling pricePP=Purchase price n=number of days of the investment(holding period)=Money Market Secu
8、ritiesnT-bill yield for a newly issued securityPar PP PP360 nT-bill discount =percent discount of the purchase price from parPar=Face value of the T-bills at maturityPP=Purchase price n=number of days to maturityT-bill discount=Money Market SecuritieslShort-term debt instrumentlAlternative to bank l
9、oanlDealer placed vs.directly placedlUsed only by well-known and creditworthy firmslUnsecuredlMinimum denominations of$100,000lNot a large secondary marketCommercial PaperMoney Market SecuritiesnCommercial paper backed by bank lines of creditlBank line used if company loses credit ratinglBank lends
10、to pay off commercial paperlBank charges fees for guaranteed line of creditMoney Market SecuritiesnEstimating commercial paper yieldsYCPPar PP PP360 nYCP =Commercial paper yieldPar=Face value at maturityPP=Purchase price n=number of days to maturity=Money Market SecuritieslIssued by large commercial
11、 bankslMinimum denomination of$100,000 but$1 million more commonlPurchased by nonfinancial corporations or money market fundslSecondary markets supported by dealers in securityNegotiable Certificates of Deposit(NCD)Money Market SecuritiesnNCD placementlDirect placementlUse a correspondent institutio
12、n specializing in placementlSell to securities dealers who reselllSell direct to investors at a higher pricenNCD premiumslRate above T-bill rate to compensate for lower liquidity and safetyMoney Market SecuritieslSell a security with the agreement to repurchase it at a specified date and pricelBorro
13、wer defaults,lender has securitylReverse repo name for transaction from lenderlNegotiated over telecommunications networklDealers and brokers used or direct placementlNo secondary marketRepurchase AgreementsMoney Market SecuritiesnEstimating repurchase agreement yieldsRepo RateSP PP PP360 nRepo Rate
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