Fichas
Money and Banking Midterm Flash Cards
Fichas del conjunto (41)
- 1AssetsWhat you own or what people owe to you. Claims to cash.
- 2LiabilitiesFinancial obligation. What you owe.
- 3Balance SheetA summary of an entity's financial position at a point in time.
- 4Capital MarketsThe market for long term debt or security.
- 5Debt SecuritiesIOUs created through loan-type transactions—commercial paper,
bank CDs, bills, bonds, and other instruments - 6BrokerBring together buyers and sellers for a commission. (money markets)
- 7DealersThey have an inventory. They quote prices at which they are willing to buy and sell securities.
- 8Bid PriceThe highest price that a dealer is willing to pay for a security. (sell price)
- 9Ask PriceThe lowest price that a dealer will accept for a security. (pay price)
- 10Default RiskRisk of timely payment of interest or principal on a debt security. You may not get paid.
- 11Interest Rate RiskRates rise, prices fall. Also known as interest rate exposure.
- 12Yield to MaturityRate of return yielded by a debt security held to maturity. when both interest payments and the institutions capital gain or loss are taken into account.
- 13Basis Point (bp)1/100 of 1%. One of the more commonly referenced terms in the
bond market. 5% to 5.25% increase in 25 bp. - 14Shadow BankingMoney Market funding of capital market lending.
- 15Money MarketsThe market for short term, highly liquid/safe financial instruments.
- 16Currency PrincipleTheory of money. Scarcity of money > monetarism or metal-ism > The value of the metal or commodity upon which it is based.
- 17Banking PrincipleTheory of money. Elasticity of credit > Kenesianinsism or charlisism > defined by the power of the state.
- 18Monetary BaseMB = Total Currency ( Curr in Circ. + Vault Cash) + Reserve Deposits
- 19Reserve Requirements (rr)The percentages of different types of deposits that member banks are required to hold on deposit at the Fed.
- 20Discount RateThe rate of interest charged by the Fed to member banks that borrow at the discount window. The discount rate is set above the fed funds rate. The rules governing the discount rate were changed in 2003.
- 21Fed Funds(1) Non-interest-bearing deposits held by member banks at the Federal Reserve.
(2) Used to denote “immediately available” funds in the clearing sense - 22Federal Funds Rate (ffr)The rate of interest at which fed funds are traded. This rate is currently pegged by the Federal Reserve. The rate banks charge other banks for overnight loans and securities. The Fed changes its monetary policy through fed funds rate.
- 23Open Market OperationsTraditional: The fed controls the money supply. Buying and selling T-Bills.
Real life: The fed targets the federal funds rate (ffr) to control MB. - 24Payment SystemA system that allows for the transfer of monetary value between parties.
- 25ClearingA trade carried out by the seller delivering securities and the buyer delivering funds in proper form. A trade that does not clear is said to fail.
- 26SettlementA trade is cleared by delivery of securities against funds.
- 27Bilateral intra-day nettingExample: Suppose Bank A holds a deposit account at Bank B and uses this account (by drawing on its balance) to make a payment to Bank B.
- 28Correspondent Banking?
- 29CHIPSPrivate clearing network for 47 New York Banks. Elite. Cheaper fees and requires less capital because uses netting system.
- 30FedwirePublic clearing network. Many participants. Ran by the Fed. Real time exchange.
- 31Minsky's Survival ConstraintAssets > Liabilities
- 32Funding vs. PaymentsFunding increase reserves, payments decrease reserves.
- 33Repurchase Agreement (repo)A holder of securities sells securities to an investor w/ the agreement to repurchase the securities at a fixed price on a fixed date (usually the next day).
- 34Reverse RepMost typically, a repurchase agreement initiated by the lender of funds. Reverses are used by dealers to borrow securities they have shorted. Exception: when the Fed is said to be doing reverses, it is borrowing money; that is, it is absorbing reserves
- 35Exogenous MoneyQuantity of money derived outside economic systems. The fed is on the outside.
- 36EndogeniousQuantity of money derived inside the economic system (private institutions).
- 37Matched BookMatched Maturity of securities.
- 38EuroDollarU.S. dollar deposit held in a bank or foreign bank located outside of the U.S.
- 39U.S. Dollar LIBORThe rate on Eurodollar deposits traded
between banks - 40Forward Rate Agreement (FRA)A contract in which the two parties agree to exchange the difference between a specified contract rate and a market rate on a specified "notional" sum at some future date. (Futures for inter bank lending).
- 41IOERInterest on reserves. Floor for federal funds rate (banks wont lend to other banks at a rate lower than they can get by "lending to the fed."
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- Descripción
- ECON 3200 Money and Banking Midterm Study guide
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- Alexander Calawa
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