Professional Documents
Culture Documents
Role of monetary policy – performed start of emergence the traditional money markets
Interbank market – is a market which involves bank borrowing and lending of any funds in
reserve accounts at the central bank.
Money market - participants include mainly credit institutions and other financial
intermediaries, governments, as well as individual households
Tender - is a sealed bid
Competitive bidder - specifies both the amount of the security that the bidder wants to buy, as
well as the price that the bidder wants to pay
Non- competitive bidder - specifies only the amount of the security that the bidder wants to
buy, without providing the price, and automatically pay the defined price
Uniform price - auction is an auction, when all bidders pay the same price
Discriminatory price - auction is an auction, in which each bidder pays the bid price.
Tail – the difference between the stop yield and the average yield
Cover – the ratio between the total amount competitive and non-competitive bids tendered and
the total issue (i.e. the total amount of accepted bids
Basis point - is a very fine measure of interest rates, equal to one hundredth of one percentage
point
Winner’s curse - is the case, when the low bidder wins acceptance of the tender, but pays a
price, which is higher than that of other lower bidders
Commercial paper - is a short-term debt instrument issued only by large, well known,
creditworthy companies and is typically unsecured
Certificate of deposit - states that a deposit has been made with a bank for a fixed period of
time, at the end of which it will be repaid with interest
Advantage to the depositor - is that the certificate can be tradable thus though the deposit is
made for a fixed period
Advantage to the bank - is that it has the use of a deposit for a fixed period but, because of the
flexibility given to the lender, at a slightly lower price than it would have had to pay for a normal
time deposit
Negotiable certificates of deposit - are certificates that are issued by large commercial banks
and other depository institutions as a short-term source of funds
Repurchase agreement - is a fully collateralize loan in which the collateral consists of
marketable securities
Open REPO - is a REPO agreement with no set maturity date, but renewed each day upon
agreement of both counterparties
Term REPO - is a REPO with a maturity of more than one day
Reverse REPO - transaction is a purchase of securities by one party from another with the
agreement to sell them thus a REPO and a reverse REPO can refer to the same transaction but
from different perspectives and is used to borrow securities and to lend cash
Haircut – the function of a broker/ dealer’s securities portfolio, that cannot be traded, but instead
must be held as capital to act as a cushion against loss
Eurocurrency instrument - is any instrument denominated in a currency which differs from
that of the country in which it is traded
Euro certificates of deposits - are negotiable deposits with a fixed time to maturity
Time deposits are non-negotiable deposits with a fixed time to maturity. Due to illiquidity their
yields tend to be higher than the yields on equivalent maturity of negotiable Euro certificates of
deposits
Interbank placements - are short-term, often overnight, interbank loans of Eurocurrency time
deposits
Call money - are non-negotiable deposits with a fixed maturity that can be withdrawn at any
time
Euro Commercial Papers - are securitized short-term bearer notes issued by a large well-
known corporation. They are issued only by private corporations in short maturities with the aim
to provide short-term investments with a broad currency choice for international investors
Syndicated Euroloans - are related to bank lending of Eurocurrency deposits to nonfinancial
companies with the need for funds
Euronotes - are unsecuritized debt instruments, substitutes for non-negotiable Euroloans. They
are short –term, most often up to one year
EONIA (euro overnight index average) - the EONIA is the effective overnight reference rate
for the euro
EURIBOR (euro interbank offered rate) - the EURIBOR is the benchmark rate of the large
unsecured euro money market for maturities longer than overnight (one week to one year) that
has emerged since 1999