This lesson examines the money market, where short-term debt instruments are traded, providing a mechanism for liquidity management for financial institutions, corporations, and governments .

2.1 Key Instruments and Participants
Key money market instruments include Treasury bills, commercial paper, repurchase agreements (repos), short-term bank deposits, and certificates of deposit . The money market is distinct from the capital market in both the maturity of instruments and the profile of participants . Main participants include central banks conducting monetary policy operations, commercial banks managing liquidity, corporations issuing commercial paper, and governments issuing Treasury bills .

2.2 Trading and Valuation Mechanisms
Money market instruments are typically traded over-the-counter (OTC) rather than on organised exchanges . A key valuation tool is the valuation-by-replication model, which applies the principle of no-arbitrage to short-term instruments . The market is characterised by standardised conventions: day count conventions (Actual/360), quoted rates and yields, and settlement procedures .