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FINANCIAL MARKET COURSES

Money Market Funds

This course examines the important role played by money market funds (MMFs) in the wholesale money markets. It explores the difficulties that money market fund managers face in terms of counterparty credit risk and in identifying investment products that will deliver a better return than bank deposits. Key regulatory requirements in relation to issues such as credit quality, liquidity, diversification, and maturity are also discussed. Finally, the course describes the accounting approach to the valuation of MMF assets and the use of net asset value (NAV) in this process.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Identify the various features and characteristics of money market funds

    Compare the different valuation methods for money market funds, namely constant net asset value (CNAV) and variable net asset value (VNAV)

  • COURSE OUTLINE

    Topic 1: Overview of Money Market Funds

    What is a Money Market Fund?

    The Case for MMFs

    Features of MMFs

    o Fund Type

    o Yield

    o Share Price (NAV)

    o Credit Ratings

    o Liquid Assets

    o Redemptions

    o Lack of Deposit Insurance

    Establishing MMFs

    MMF Risks & Challenges

    Harmonization of Regulations

    Key Regulatory Requirements

    o Credit Quality

    o Diversification

    o Maturity

    o Liquidity

    o Stress Testing

    o Transparency

    Investor Considerations

    MMFs Around the World

    Topic 2: Valuation of Money Market Funds

    Net Asset Value (NAV)

    Constant Net Asset Value (CNAV)

    o Distributing CNAV

    o Accumulating CNAV

    Variable Net Asset Value (VNAV)

    o Distributing VNAV

    o Accumulating VNAV

    Share Price Rounding (“Penny Rounding”)

    Accounting Considerations for MMFs

    o Amortized Value

    o Market Value

    o Shadow NAV

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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