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FINANCIAL MARKET COURSES

Money Markets

Courses In This Course

Wholesale money markets ensure that cash washes between surplus and deficit accounts in order to bring things to balance. Although these markets have their historical roots in government bill transactions, trade finance discounting, and simple interbank lending, most markets have evolved much further. Today’s money markets, for instance, have significant repo and commercial paper sectors. In addition, alongside traditional bank players, money market funds now play a prominent role in providing liquidity and financing. The global financial crisis also altered the landscape, with central banks reducing interest rates to near-zero levels in order to boost liquidity, while counterparty credit concerns led to an increase in the attractiveness of secured forms of lending.

Objectives

In this course, you will explore:

The role and functioning of the interbank market, including the practicalities associated trading and settlement

Money market interest rates and benchmarks, including official (central bank) rates, market average rates such as LIBOR and Euribor, and overnight indices

Money market securities and products such as repos, government (treasury) bills, commercial paper (CP), certificates of deposit (CDs), and bankers’ acceptances (BAs)

The features, characteristics, and valuation of money market funds

Banks’ approach to funding their balance sheets and the associated risks

The creation and covering of money market positions, and the management of interest rate gap exposures on mismatched future cash flows

The course also includes an interactive scenario that tracks a typical day in the life of a money market trader.

  •    INTERBANK MARKET

    Overview

    Money markets play a key role in the economy of every country, and the interbank market in particular is the lifeblood of the money markets in those countries. This course focuses on banks and their role in the interbank money market. The structure of the wholesale money markets is examined, as well as the relationship that banks have with each other in terms of credit and their ability to manage currency payments. The course also describes some of the practicalities associated with trading and settlement in the interbank market.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Money Markets – An Introduction

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  •    INTEREST RATES & BENCHMARKS

    Overview

    This course introduces official interest rates and their influence on financial markets and the economy as a whole. The course outlines the use of simple, zero-coupon, interest rates and their application to accrual products in the money markets. It also examines market rates and the currency day count conventions used in money market calculations. Finally, the course shows how reference rates such as LIBOR and Euribor are calculated in today’s money markets, and how overnight indices have developed as a benchmark replacement for LIBOR and Euribor

    Course Duration

    60 mins

    Prerequisite Knowledge

    Interbank Market

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  •    MONEY MARKET SECURITIES - AN

       INTRODUCTION

    Overview

    Money market instruments are a very important subset of the capital markets. They offer short-term investors liquidity and (usually) high credit quality, but at a lower yield than is available in the bank deposit market. There are interest bearing and discount instruments to suit varied requirements.

     

    This course describes the essential features of Treasury bills, certificates of deposit, commercial paper and bankers’ acceptances. We will examine the nature of these products, their features, how they are used, and their usefulness in today's markets.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Money Markets – An Introduction

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  •    MONEY MARKET SECURITIES - PRICING

    Overview

    Money market instruments are a very important subset of the capital markets. They offer short-term investors liquidity and (usually) high credit quality, but at a lower yield than is available in the bank deposit market. There are interest bearing and discount instruments to suit varied requirements, but structural conventions in the market make straight comparisons difficult.

     

     It is important to have a grasp of the structuring and pricing conventions in the money market in order to evaluate investment alternatives correctly. In addition, these markets are the foundation for more complex capital markets instruments and the construction of some yield curves. In the market, it is necessary to be comfortable relating one instrument to another in order to arrive at the best investment alternative. Therefore, a solid understanding of this course is essential.

    Course Duration

    45 mins

    Prerequisite Knowledge

    Money Market Securities – An Introduction

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  •    REPURCHASE AGREEMENTS (REPOS)

    Overview

    A repurchase agreement (or repo) is a money market instrument whereby a borrower sells securities (or some other asset) to another party at a fixed price and agrees to repurchase the securities at an agreed future date and dirty price. Repos are a form of collateralized borrowing. The course shows how the repo process works, how repo interest is calculated, and how haircuts and margins are applied to these transactions.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Not Applicable

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  •    MONEY MARKET FUNDS

    Overview

    The money market is the market where the buying, selling, lending, and borrowing of short-term funds (one year or less) occur. Money market instruments include deposits, treasury bills and certificates of deposit (CDs).

     

    Money market futures contracts are one of the most convenient and useful instruments available to market participants looking to hedge an existing or future interest rate exposure. They benefit from high liquidity, easy price discovery, and very low credit risk. Apart from hedging, short-term interest rate futures can also be used for trading or speculative purposes and in building a yield curve.

     

    This course provides an overview of the major money market futures exchanges and contracts. The course also looks at how future contracts are used and focuses on how market participants use short-term interest futures for hedging.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Prior to studying this course, you should have a sound understanding of futures as detailed in the following courses:

     

    Forwards & Futures – An Introduction

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  •    BANK FUNDING & POSITION MANAGEMENT

    Overview

    Banks earn income on the assets shown on their balance sheets. These assets include cash, loans to customers/clients, trading positions, and other investments – all of which must be funded by the bank on the liabilities and equity side of the balance sheet. This course explores the various funding methods used by banks as well as the risks involved. These risks were exposed by the global financial crisis, with the result that regulators imposed strict requirements concerning bank funding and introduced a number of liquidity ratios in this regard. These are also described in this course. In addition, the course focuses on how various money market positions are created and covered, together with an explanation of the management of interest rate gap exposures on mismatched future cash flows.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Money Markets – An Introduction

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  •    SCENARIO - A DAY IN THE LIFE OF A

       MONEY MARKET TRADER

    Overview

    This scenario will provide you with an appreciation of how various money market trades, created by a bank and its clients through the use of different products, are brought together in a bank trader’s position sheet on a particular value date. The action takes place in an environment of uncertainty because of possible changes to short-term interest rates. You will observe a bank money market trader as he absorbs cash flows into his positions and squares them, while attempting to preserve profitability. At various intervals, you will be asked to apply your knowledge and step into the trader’s shoes as he makes decisions and undertakes transactions while interacting with both clients and colleagues.

    Course Duration

    45 mins

    Prerequisite Knowledge

    A good understanding of money market products – such as overnight deposits, repos, CDs, and commercial paper – is required, along with knowledge of bank funding and position management.

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