Money markets

Indicative content

1. Financial market and its instruments
Financial market - characteristics, division, functions. Financial market instruments. Securities as a basic market tool, their division according to various aspects and specifications. Derivatives - a specific financial market instrument. The current situation on the financial market.
2. Basics of investing in financial markets
The magic triangle of investing. Yield, risk and liquidity. Interest rates such as the price of money and the criterion of profitability. Interest rate theory. Development of interest rates depending on the economic cycle. Investment area and its attributes. Time values and interest rates. Simple payments and annuity payments and their use in financial investment. Internal return on investment. Decision criteria for return on investment. Yield curve of market instruments and its practical use.
3. Risk in the money and capital markets
Specific and market risk. Quantification of market risk. Expected return on the quantification of risk. Variance and standard deviation as an indicator of market risk. Specific risk and its assessment – rating.
4. Liquidity and yield on money and capital markets
Liquidity and its attributes. Price stability, reversibility, tradability. Issues of liquidity levels. Return on investment. The importance of taxation in financial investment – factors.
5. Discount market as part of the money market
Treasury bills and their role in bridging the current state budhet deficit of the Slovak Republic - a tool of fiscal policy. Treasury bills in the world and in the Slovak Republic - primary market and trading, ARDAL. Valuation of T-bills in issuance and trading. Yield of T-bills. Calculation of WAR. Calculation of yield for the holding period.
6. Bill of exchange as a security and its specifications
Legislative preconditions for the operation of bill of exchange on the money market. Bills of exchange in the sense of legislation. Geneva bill of exchange law, comparison with Anglo-Saxon law. Advantages of bills of exchange and their use in practice. Valuation of bills of exchange. Trading on the secondary market.
7. Certificate of deposit, its forms, and other money market securities
Characteristics and advantages of investing in certificates of deposit. The price of certificate of deposit and its yield. Profitability during the holding period. Use of effective profitability in certificates of deposit. Innovations in the deposit certificate market. Commercial securities and other money market securities.
8. Money market and its forms – Euro area interbank market
Euro area interbank market. Transactions between commercial banks and the central bank and types of transactions. Transactions between commercial banks with each other. Collateral. Conditions for the functioning of the euro area interbank market. Interbank interest rates in the euro area and worldwide.
9. Money market instruments to manage financial risks
Financial derivatives. Types of financial derivatives. Interest rate forwards. Interest rate futures. Use of derivative interest rate instruments. Advantages of use for the investor. Examples of interest rate forward and interest rate futures. Money market dealers and their role in hedging and the function of market makers.
10. Use of interest rate derivative financial instruments for trading on the money market
Interest rate swaps – coupon, basis swap. The breakdown of interest rate swaps. The use of interest rate swaps when trading on the money market. Option contracts, interest rate options – agreements cap, floor and collar, their use and comparison with other financial derivatives.
11. Trading in the money market - Repo transactions - secured loans on the money market. The essence of repo, types and division of repo transactions. Causes of emergence of repo transaction. Advantages and disadvantages of repo transactions. Use of repo transactions on the money market. Documentation of repo transactions. Characteristics of repo transactions - repo rate, collateral, risks, margins, leverage mechanism, returns, substitution. Failure of repo transactions. The European repo market in London and its participants. Repo market in the euro area.