  2. Facilitates the borrowing and lending of short-term funds (usually less than one year).
  3. Helps in the implementation of monetary policy by central banks through open market operations.
  4. Offers a low-risk environment for investors looking to park their cash temporally and earn a modest return.
*Risk management in money market:
1. Interest Rate Risk: Money market participants are exposed to interest rate risk due to fluctuations in short-term interest rates. Managing this risk involves diversifying investments across various money market instruments with different maturities.
  2. Credit Risk: There is a risk of default by issuers of money market instruments, such as commercial paper or certificates of deposit. Investors manage this risk by conducting thorough credit analysis and diversifying their holdings.
  3. Liquidity Risk: Money market instruments are supposed to be highly liquid, but there can be instances of market illiquidity. Managing liquidity risk involves ensuring that investments can be easily sold or redeemed when needed.
*Role of central bank in money market:
1. Monetary Policy Implementation:
 Interest Rates: Central banks set baseline interest rates, such as the federal funds rate in the U.S., which influence the rates at which banks lend to each other.
 Open Market Operations (OMOs): Buying and selling of government securities in the open market to manage liquidity and control short-term interest rates.
