Money Market Capital Market

Is a component of the financial Is a component of financial

Definition markets where short-term markets where long-term
borrowing takes place borrowing takes place
Lasts for more than one year
Lasts anywhere from 1 hour to
Maturity Period and can also include life-time of
360 days.(less than a year)
a company.
Call money, collateral loan,
Certificate of deposit,
Repurchase agreements,
Commercial paper, Eurodollar
Stocks, Shares, Debentures,
deposit, Federal funds,
Credit Instruments bonds, Securities of the
Municipal notes, Treasury bills,
Government.
Money funds, Foreign
Exchange Swaps, short-lived
mortgage and asset-backed
securities.
Homogenous. A lot of variety Heterogeneous. A lot of
Nature of Credit Instruments
causes problems for investors. varieties are required.
Long-term credit required to
Meets the Short-term credit establish business, expand
Purpose of Loan
needs of small investments. business or purchase fixed
assets.
Basic Role Liquidity adjustment Putting capital to work
Stock exchanges, Securities and
Central banks, Commercial exchange commission Nonbank
banks, Acceptance houses, institutions, such as Insurance
Institutions
Nonbank financial institutions, Companies, asset management
Bill brokers, etc. companies, brokerage houses
etc.
Risk is small in the money
Risk is much greater in capital
Risk market as short time give little
market.
chance for a default to occur
Commercial banks are directly
Market regulations are much
closely regulated by CB to
Market Regulation lesser for companies in capital
prevent occurrence of a
maket
liquidity crisis.
Indirectly related with central
Directly and Closely related to banks and feels fluctuations
Relation with Central Bank
the central banks of the country. depending on the policies of
central banks