Question

Which of the following is TRUE about the differences between the onshore and offshore money markets?

a. Offshore markets are more regulated than onshore markets.

b. Participants in the offshore are mainly known and credit-worthy firms.

c. Interest rate spread is often larger in the offshore markets than onshore markets.

d. Onshore markets are more cost efficient than offshore markets.

Answer 1

d. Onshore markets are more cost efficient than offshore markets

Any money market which is outside the investor's country jurisdiction is offshore money market. Offshore money market has its own Pros and Cons such as Pros- Tax efficient, Diversification, Lower level of regulation and Cons - Risky, Costly, Panic selling etc.

Investing in offshore money markets requires Professional management as normal investor is not aware of terms and condition of investment in foreign (offshore) market. Thus, it increases the cost of offshore money market funds.