ABSTRACT
This chapter considers the general characteristics of instruments so that a decision can be taken on whether an instrument is likely to suit a particular requirement. The management of liquidity will give rise to cash surpluses or requirements and these will need to be invested or borrowed through the use of money-market instruments. The choice of a particular instrument will affect the availability of liquidity. The essential feature of borrowing as it affects liquidity is the availability of borrowed funds when they are required. The critical difference in obtaining borrowing instruments, as compared to deposit instruments, is that the lender or investor will need to be willing to take a credit risk on the borrower or issuer. Consequently, banks will have a target market in mind and the chances are that the bank will try to market these instruments to the company, but at least the company should begin to understand what the bank is describing.
