...Islamic money market Based my reading, I founded that most of the stakeholder are seeking for the pure markets, which eliminate interest and other prohibited products. For this reason, Bank Negara Malaysia has made some effort of making the Islamic Money Market become one of the vital and important markets as compared to conventional money market. In addition, I mentioned that the conventional money market or Islamic money market both them have the same characteristics, purposes, and aims. However, there are some point that can differentiate between them is the instruments allowed in the Islamic money market are restricted to certain circumstances and conditions. The Islamic Money Market is one of the financial markets that all the activities are involved or carried out in a ways that do not conflict with the conscience of Muslims and the religion of Islam even Shari’ah principle. The all Instruments involved in the Islamic money market should be adhered and complied to principles established by the Shari'ah or the Islamic law as revealed in the Qur'an and Sunnah. In Islam, it is required that all products involve in the sale and buying (including the instruments in the financial markets) shall be from the ethical sectors or in other words, the profits gained shall not be in or from the prohibited activities. These prohibited activities include alcohol production, gambling, pornography, interest-base (riba) sector and should be free from the interest-based debt. The Islamic...
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...Business, governments and financial institutions get chances to finance their short term cash needs by using money market instruments. They are fixed-income securities with maturities in a year or less make them extremely liquid. They issue discount to their face value and provide a high degree of safety because the issuers commonly come from the highest credit rating. They are many instruments listed in Islamic Money Market in Malaysia. Mudharabah Interbank Investment (MII) is one of the instruments which focusing on profit sharing in a day-to-day basis, or at weekends for three days. The deficit Islamic bank institutions can also invest money and make investment from the help of surplus Islamic bank institutions. Deficit must be financed...
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...MP A R Munich Personal RePEc Archive The Islamic Inter bank Money Market and a Dual Banking System : The Malaysian Experience Bacha, Obiyathulla I. INCEIF the Global University in Islamic Finance 2008 Online at http://mpra.ub.uni-muenchen.de/12699/ MPRA Paper No. 12699, posted 13. January 2009 / 09:41 The Islamic Inter bank Money Market and a Dual Banking System: The Malaysian Experience. (1st Draft : June 2007) (1st Revision : September,2007) (This revision: March, 2008) Obiyathulla Ismath Bacha Dept. of Business Administration College of Economics and Management Sciences International Islamic University, Malaysia obiya@iiu.edu.my ………………………………………………………………………………………….. The author gratefully acknowledges Rahmatina Kasri for her research assistance, as well as that of participants of the 2nd International Islamic Financial Markets Conference, Bahrain, for the useful comments Abstract This paper examines the operation of an Islamic Inter-bank Money Market (IIMM), within a dual banking system. The paper argues that even though an Islamic money market operates in an interest-free environment and trades Shariah-compliant instruments, many of the risks associated with conventional money markets, including interest-rate risks are relevant. The empirical evidence, based on Malaysian data, points to Islamic money market profit rates/yields that are highly correlated and move in tandem with conventional money market rates. Given the dynamics of fund flows and...
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...International Journal of Islamic Financial Services Vol. 1 No.1 ISLAMIC INSTRUMENTS FOR MANAGING LIQUIDITY Yahia Abdul-Rahman This paper provides a practitioners perspective on the overwhelming need for prudent management of liquidity and development of Islamic money market instruments. Islamic banking and financing is gaining momentum world-wide. Many of the international RIBA banks are now focusing on LARIBA banking and financing to gain a significant market share of the funds and the deals which insist on LARIBA dealings. Many estimate the LARIBA funds looking for halal investing and banking to be from $ 50 billion to $80 billion. Most of these funds are now handled in Europe; mainly in the London financial markets. In 1996, Citibank has started "Citibank Islamic" in Bahrain and is now providing limited Islamic financing windows out of its international operations in New York & San Francisco. Islamic banks world-wide have not yet come up with the competitive financial instruments and products which allow them to provide valid avenues to the LARIBA owner of funds and which compete in quality and security with instruments offered by other RIBA banks and investment companies in the world. Yahia Abdul-Rahman 1. The Problem of Liquidity Management Liquidity is the ease by which an asset can be exchanged for another with little or no loss of value; usually cash. Liquid assets are those held in cash or are invested in instruments which can be converted rapidly into cash...
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...4 Government owned commercial banks, 30 domestic private banks (PCBs) (of which 6 banks are operating under Islamic Shariah), 9 foreign banks (FCBs) (of which 1 bank is operating as Islamic bank); and 5 government-owned specialized banks (DFIs); (c) 28 non-bank financial institutions (NBFIs) – licensed by the Bangladesh Bank); (d) 2 large government- owned insurance companies (life and general) and 60 private owned (17 life and 43 general) insurance companies; (e) 2 stock exchanges and, (f) some co-operative banks. Besides, a good number of semi-formal micro finance institutions (MFIs) also are operating in Bangladesh. Structure of Financial System: The main constituents of financial system are : i) Financial Institutions ii) Financial Instruments, and iii) Financial Markets. Financial Institutions The modern name of Financial Institution is Financial Intermediary (FI), because it mediates or stand between ultimate borrowers and ultimate lenders and helps transfer funds from one to another. The Financial system helps production, capital-accumulation and growth by i) encouraging savings and ii) allocating them among the alternative uses and users. Financial Instruments Financial Instruments are of two types: i) Primary (or Direct) ii) Secondary (or Indirect) ------------------------------------------------- Financial markets Financial markets facilitate the flow...
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...TREASURY MANAGEMENT MONEY MARKET AND MONEY MARKETS INSTRUMENTS ABROAD BY:- VISHESH KUMAR 10BSP1181 MONEY MARKET AND MONEY MARKETS INSTRUMENTS ABROAD The money market is the arena in which financial institutions make available to a broad range of borrowers and investors the opportunity to buy and sell various forms of short-term securities which are highly liquid and are relatively low-risk debt instruments. The maturities of money market instruments range from one day to one year and are often less than 90 days. It comprises of the call and notice money market, repo market and the market for debt instruments. There is no physical "money market." Instead it is an informal network of banks and traders linked by telephones, fax machines, and computers. Banks financial institutions, companies and government are the key participants in the money market. The size of the transactions in the money market typically is large ($100,000 or more). At the center of this web is the central bank whose policies have an important bearing on the interest rates in the money markets. The money market provides an equilibrium mechanism for levelling out the demand and supply of short term funds and serves as a focal point for the intervention by the central bank (RBI in India) for influencing the liquidity and interest rates in the financial systems.The money market is important for businesses because it allows companies with a temporary cash surplus to invest in short-term securities;...
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...OF FINANCIAL MARKET IN BANGLADESH 1. INTRODUCTION The financial system in South Asia is dominated by the banking system in terms of assets, or finance of private households and domestic companies; major financial institutions are banks. This is why financial instrument of the financial market of Bangladesh are bank dominated. But a developed and diversified financial system with a sound debt and equity market enhances risk pooling and risk sharing opportunities for investors and borrowers. This also provides a safety cushion for banks as it helps move a crisis outside the banking system making it easier for the government to stand back. Bond financing reduces macroeconomic vulnerability to shocks and systemic risk through diversification of credit and investment risks. A mature bond market helps develop the derivatives market thereby facilitating hedging mechanisms and enabling greater diversification of risks by participants. Also, the wide variety of instruments available in a developed debt market results in gains to savers and borrowers. Besides, the coexistence of a developed domestic bond market and banking system helps each to act as a backstop for the other. In Bangladesh, an efficient bond market can play a critical role in supplementing the banking system to meet the requirements of the corporate sector for long-term capital investment and asset creation. It can provide a stable source of finance when the equity market is volatile. The bond market in Bangladesh...
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...Financial Markets C h a p t e r - 6 59 helped to keep the money market sound and stable during the financial year 2008. A number of steps were taken for activation of secondary trading in treasury bills/bonds. As a result, the overall money market situation was moderate during FY08. Developments in the money market during FY08 are summarized below: Call Money Market 6.3 The volume of transactions in the call money market depicted a mixed trend during FY08 (Table 6.1) reflecting some brisk activities in the money market particularly during the second quarter of the year. It remained sluggish 6.1 A healthy, transparent and dynamically evolving financial system helps mobilize savings and allocate resources, ensure safe and efficient payment and settlement arrangements and ease financial crisis management. Efforts continued in FY08 to establish a healthy and transparent financial system in the country. In addition to the challenges emanating from the internal and external shocks that affected the real sector, there were signs of strain both in the interbank call market and forex market. Volatility in these two markets was tamed through repo operation and intervention by the Bangladesh Bank. Money Market 6.2 Money market, the important segment of financial market that basically channelizes the short term fund in the country was quite active and vibrant with the participation of both banks and non-bank financial institutions during FY08. The...
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...the deficit units. It is a framework for describing set of markets, organisations, and individuals that engage in the transaction of financial instruments (securities), as well as regulatory institutions. The basic role of Financial System is essentially channelling of funds within the different units of the economy – from surplus units to deficit units for productive purposes. 1.1 COMPONENTS OF FINANCIAL SYSTEM: There are mainly three components of financial system. These are: I. Financial Market II. Financial Intermediaries III. Financial Instrument I. FINANCIAL MARKET Financial markets are a mechanism enabling participants to deal in financial claims. The markets also provide a facility in which their demands and requirements interact to set a price for such claims. Financial markets perform the essential function of channeling funds from economic players that have saved surplus funds to those that have a shortage of funds. At any point in time in an economy, there are individuals or organizations with excess amounts of funds, and others with a lack of funds they need for example to consume or to invest. Exchange between these two groups of agents is settled in financial markets. The first group is commonly referred to as lenders. The second group is commonly referred to as the borrowers of funds. * There exist two different forms of exchange in financial markets. The first one is direct finance, in which lenders and borrowers...
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...FINANCIAL INSTITUTIONS AND MARKETS COURSE FACILI TATION MATERIAL COMPILED BY ANGELA M. KITHINJI UNIVERSITY OF NAIROBI UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS DFI 503: FINANCIAL INSTITUTIONS & MARKETS COURSE OUTLINE COURSE FACILITATOR MRS KITHINJI [Financial Markets, Financial Institutions, the Power of Information, and Financial Policies] WEEK 1. An Overview of Financial Institutions and Markets • The Financial System of an Economy • The Structure of a Financial System • The Stock Market 2. Emerging Markets, African Markets and Capital Market Development • Financial Markets and the Organized Exchange • Characteristics of Emerging Capital Markets • Indicators of Capital Market Development 3. Financial Regulation, Intermediation, Capital Market Structures and Development • The Players in a Typical Capital Market: - Capital Market Intermediaries - The Regulator: The Capital Market Authority - The Stock Exchange [NSE] - Investors - Government • The Institutional, Regulatory and Legal Framework in Financial Markets - Types of Regulations in Financial Markets - Market Based Banking Regulations - Crisis in Banking Regulation. 4. Securities and Their Characteristics • Shares, Fixed Income Securities, Derivatives • Challenges of Trading of securities in the Stock Market • Why Derivatives Trading is Absent in Most Emerging Markets 5. Financial Contracting...
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...FINANCIAL MARKETS FIN 4040A 1. A financial market is the market for capital, a significant factor of production. The obligations created are in form of financial assets or financial instruments severally called securities. These assets are intangible and offer promises and claims by issuers and holders. A classification of the financial markets will greatly improve our mental constructs. CLASSIFICATION OF FINANCIAL MARKETS | | Type of classification |Specific operational terms | | |1 |Nature of claim |DEBT MARKETS | | | | | | | | | |EQUITY MARKETS | | |2 | |MONEY MARKET | | | | | | | | |Maturity of claim |CAPITAL MARKET | | |3 | ...
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...and (3) the company hedges using the money market. No hedge: Present Value: 86.23 * 1815= BRL 156,362.25 BRL 156,362.25 * .4368= $68,299.03 Future Value: BRL 156,362.25 * .4234= $66,203.78 Hedge using forward contract: Present Value: 66,094.32 / (1 + .0215)= $64,703.20 Future Value: BRL 156,362.25 * .4227= $66,094.32 Hedge using money market: Present Value: BRL 156,362.25 / (1 + .065)= BRL 146,819.01 BRL 146,819.01 * .4368)= $64,130.54 3. Are the money markets and forward markets in parity? The above data shows the calculations for the present value of the expected future cash inflow assuming there is no hedge, the company hedges using a forward contract, and the company hedges using the money market. These calculations are done using the current price per gallon of adhesives at 86.23 in Brazilian Real. As you will see below we take into account the change in material cost and find the new price per gallon of the adhesive. This turns out to be 88.39 and we go on to calculate the new present value of the expected future cash inflow assuming there is no hedge, the company hedges using a forward contract, and the company hedges using the money market. The data below shows that the money markets and forward markets are not in parity. We come to this conclusion by looking at the different interest rates. The difference between the discount rates of 6.5% used to arrive at the PV of the money market loan and 5.08% used to arrive at the...
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...and Portfolio Management University of Phoenix January 16, 2011 Alger Marable Abstract This paper will serve to determine the asset class for Bank of America, a Dow 30 organization and explain how that classification and the current investment environment affect organizational decisions concerning portfolio composition. Asset Classes An asset class is a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations (Investopedia, 2011). Financial markets are traditionally segmented into money markets and capital markets. Money market instruments include short-term, marketable, liquid, low-risk debt securities. Money market instruments sometimes are called cash equivalents. Capital markets, in contrast, include longer-term and riskier securities. Securities in the capital market are much more diverse than those found within the money market (Bodie, Kane, Marcus, 2008). Bank of America is an equity fund, more specifically, a common stock. Common stock represent ownership shares in a corporation. Each share of common stock entitles its owners to one vote on any matters of corporate governance put to a vote at the corporation’s annual meeting and to a share in the financial benefits of ownership (Bodie, Kane, Marcus). Factors that affect asset class selection are risk tolerance and rate of return. The investment environment affects organizational decisions regarding...
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...Chapter 1: Introduction True/False 1. Primary markets are markets where users of funds raise cash by selling securities to funds suppliers. Answer: True Level: Easy 2. Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period. Answer: False Level: Easy 3. In a private placement the issuer typically sells the entire issue to one or only a few institutional buyers. Answer: True Level: Easy 4. The NYSE is an example of a secondary market. Answer: True Level: Easy 5. Privately placed securities are usually sold to one or more investment bankers and then resold to the general public. Answer: False Level: Easy 6. Money markets are the markets for securities with an original maturity of 1 year or less. Answer: True Level: Easy 7. Eurodollar bonds are dollar denominated bonds issued outside the United States. Answer: True Level: Easy 8. Financial intermediaries such as banks typically have assets that are riskier than their liabilities. Answer: True Level: Easy 9. Spinning is the process of allocating shares in a ‘hot’ IPO to certain favored clients of investment banking firms in exchange for receiving additional investment banking business. Answer: True Level: Easy 10. Many stock research analysts of investment banking firms have been accused of issuing overly optimistic stock research reports on firms in order to help support the investment...
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...Prepare a glossary for the terms below: Financial market - A financial market is a market in which people trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods. Financial instruments - Financial instruments are tradable assets of any kind. They can be cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument. Financial intermediaries - A financial intermediary is a financial institution such as bank, building society, insurance company, investment bank or pension fund. A financial intermediary offers a service to help an individual/ firm to save or borrow money. Shares/ stocks – Shares/stocks is a share in the ownership of a company. It represents a claim on the company's assets and earnings. As you acquire more shares, your ownership stake in the company becomes greater. Bonds - A bond is a debt investment in which an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer. Treasury bills - A short-dated government security, yielding no...
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