Monday, 10 February 2014
Money
markets are used for a short-term basis, usually for assets up to one
year. Conversely, capital markets are used for long-term assets, which
are any asset with maturity greater than one year. Capital markets
include the equity (stock) market and debt (bond) market. Together the
money and capital markets comprise a large portion of the financial
market and are often used together to manage liquidity and risks for
companies, governments and individuals.
Capital Markets
Capital
markets are perhaps the most widely followed markets. Both the stock
and bond markets are closely followed and their daily movements are
analyzed as proxies for the general economic condition of the world
markets. As a result, the institutions operating in capital markets -
stock exchanges, commercial banks and all types of corporations,
including nonbank institutions such as insurance companies and mortgage
banks - are carefully scrutinized.
Money Market
The
money market is often accessed alongside the capital markets. While
investors are willing to take on more risk and have patience to invest
in capital markets, money markets are a good place to "park" funds that
are needed in a shorter time period - usually one year or less. The
financial instruments used in capital markets include stocks and bonds,
but the instruments used in the money markets include deposits,
collateral loans, acceptances and bills of exchange. Institutions
operating in money markets are central banks, commercial banks and
acceptance houses, among others.
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