Money Market

AAA

DEFINITION of 'Money Market'

A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).

INVESTOPEDIA EXPLAINS 'Money Market'

The money market is used by a wide array of participants, from a company raising money by selling commercial paper into the market to an investor purchasing CDs as a safe place to park money in the short term. The money market is typically seen as a safe place to put money due the highly liquid nature of the securities and short maturities, but there are risks in the market that any investor needs to be aware of including the risk of default on securities such as commercial paper.

The money market is different from the capital market. The differences can be read in the article Financial Markets: Capital Vs. Money Market and Getting to Know the Money Market.

VIDEO

RELATED TERMS
  1. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  2. Money Market Fund

    An investment fund that holds the objective to earn interest ...
  3. Money Market Yield

    The interest rate earned by investing in securities with high ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, ...
  5. Banker's Acceptance - BA

    A short-term debt instrument issued by a firm that is guaranteed ...
  6. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
Related Articles
  1. Bonds & Fixed Income

    Introduction To Commercial Paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
  2. Investing Basics

    Banker's Acceptance 101

    A banker's acceptance, a common way of financing international trade activity, provides a relatively safe, short-term vehicle for investors. An acceptance is a negotiable time draft that a bank ...
  3. Investing Basics

    Financial Markets: Capital Vs. Money Markets

    Two commonly used components of the financial market are money markets and capital markets. Find out the similarities and differences between them.
  4. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  5. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  6. Options & Futures

    Do Money-Market Funds Pay?

    This investment provides security, but its returns may not be adequate for long-term investors.
  7. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  8. Bonds & Fixed Income

    The Money Market: A Look Back

    Learn how past inflationary periods can predict future real rates of return for cash investments.
  9. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  10. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center