Vast amounts of money in a wide variety of currencies are traded on the money markets daily.

Most of this huge volume of short-term instruments is traded on a discount basis; there is no regular coupon payment, the instruments are bought at a discount to their face value; any return for investors comes from the difference between the price at which they were purchased and the payout received when they reach maturity or are sold in the secondary market before then.

There are two important considerations to take note of when undertaking any calculations associated with money market securities:

• day count convention

• the difference between bond equivalent yield and discount yield.