ABBREVIATION USE IN THE TREASURY DEPARTMENT

 Treasury Bills (T-bill):

Highly liquid and risk free instruments priced at discount, Maturity period of 3, 6 and
12 months and issued by Govt. to finance current expenditure, sold by SBP through
auction.

 Pakistan Investment Bonds (PIBs):

Half yearly coupon bonds 3, 5, 10, 15, 20 & 30 years maturity are sold to primary
dealers through auction. Long-term investment SLR eligible security (5%)

 Commercial Papers (CPs):

Commercial paper in a short term unsecured promissory note issued by corporation.

 Term Finance Certificates (TFCs):

Issued by corporate to raise long-term fund.

 Repurchase Transaction (Repo):

Borrowing secured by collateral in the form of securities.

 Rev Repurchase Transaction (Rev Repo):

Lending secured by collateral in the form of securities.

 Swaps:
A swap is an agreement between two or more parties to exchange sets of cash flows
over a period in the future at a certain rate.

 Interest Rate Swap (IRS):

IRS is an agreement between two parties to exchange streams of interest payment one
of which is fixed and the other is floating on a notional amount.

 Currency Swaps:
Exchange of cash-flows in two different currencies for different maturities. The price
of which of swap is determined in swap points based on interest differential of both
currencies.

 Basis Swaps:
Basis swaps can involve a variety of combination of floating rate.

 Auction:
Conducted by Central bank in which it sells Govt. bonds and T-Bills through Primary
Dealer.

 Open Market Operation (OMO):

Conducted by Central bank to manage the liquidity in the market.

 Discount Window:
SBP fix discount rate to offer lending to Banks through discount window. The lending
is done through repo against Govt securities as a last resort.

 Spot:
Sale or purchase of currency for settlement usually in two working days.
 Forward:
Sale or purchase of financial assets settlement at same future date, other than spot at a
rate determined on the deal date.

 TOM:
Deal done for value tomorrow.

 NOP:
Net value of Asset and liability.

 FRA:
Forward rate agreements are forward contract on interest rate. They are simplified
version of forward lending or borrowing with the difference that on settlement date
only the difference between prevailing and contractual interest rate is exchanged on a
notional amount.

 PAD:
Payment against document means to provide the funding against the shipping / Import
document.

 CFS or Badla Market:

Funding against the shares.

 Arbitrage:
Opportunity taken for higher return and to avoid market risk. This opportunity arises
from inefficiency of the market.

 Nostro:
Our account with others.

 Vostro:
Other account with us.

 Gap:
Mismatch by maturities in Assets and Liabilities.

 Primary Market:
First issue of any financial instrument.

 Secondary Market:
Where the Exchange of financial instruments takes place after the initial public
offering
 Demand Time Liability (DTL):
Set of liabilities owe by a Banks.

 Statuary Liquidity Requirement (SLR):

18% maintained by banks in SBP, components in SLR are:
5% PIBs, 100% T-Bills, 100% Cash in Hand.

 Cash Reserve Requirement (CRR):

5% on weekly average basis maintained by banks in SBP in terms of Cash. Daily
minimum average of 4%.