| money market | The institution set up by society to channel temporary surpluses of cash into temporary loans of funds, one year or less to maturity.
|
 |
|
|
| market risk (or interest rate risk) | The probability that the prices of securities or other assets will fall (due to rising interest rates), confronting the investor with a capital loss.
|
|
|
|
| reinvestment risk | Probability that earnings from a loan or security will have to be reinvested in lower-yielding assets in the future.
|
|
|
|
| default risk | The risk to the holder of debt securities that a borrower will not meet all promised payments at the times agreed upon.
|
|
|
|
| inflation (or purchasing power) risk | The probability that increases in the average level of prices for all goods and services sold in the economy will reduce the purchasing power of an investor's income from loans or securities.
|
|
|
|
| currency risk | Possible losses to a borrower or lender or to a holder of assets in foreign markets due to adverse changes in currency prices.
|
|
|
|
| political risk | The probability that changes in government laws or regulations will result in a lower rate of return to the investor or, in the extreme case, a total loss of invested capital.
|
|
|
|
| liquidity | The quality or capability of any asset to be sold quickly with little risk of loss and possessing a relatively stable price over time.
|
|
|
|
| original maturity | The interval of time between the issue date of a security and the date on which the borrower promises to redeem it.
|
|
|
|
| actual maturity | The number of days, months, or years between today and the date a loan or security is redeemed or retired.
|
|
|
|
| federal funds | Funds that can be transferred immediately from their holder to another party for immediate payment for purchases of securities, goods, or services.
|
|
|
|
| clearinghouse funds | Money transferred by writing a check and presenting it for collection.
|
|
|
|
| U.S. Treasury bills | A debt obligation, one year or less to maturity, issued by the United States government.
|
|
|
|
| auction | A method used to sell assets in which buyers file bids and the highest bidders receive the assets.
|
|
|
|
| bank discount method | The procedure by which yields on U.S. Treasury bills, commercial paper, and bankers' acceptances are calculated; a 360-day year is assumed and there is no compounding of interest income.
|
|
|
|
| primary dealers | Security firms that are recognized by the Federal Reserve System to buy and sell securities with the Fed.
|
|
|
|
| demand loan | A borrowing of funds (usually by a security dealer) subject to recall of those funds on demand by the lender.
|
|
|
|
| repurchase agreement (RP) | A loan (usually granted to a bank or security dealer) that is collateralized by high-quality assets (usually government securities).
|
|
|
|
| long position | The purchase of assets outright from the seller in order to hold them until they mature or must be sold.
|
|
|
|
| short position | Dealers and other investors promise to sell and deliver in the future assets they do not currently own, hoping asset prices will fall in the interim.
|
|
|
|
| carry income | The difference between interest income and interest cost experienced by a dealer in securities.
|