10.

Bank rate and lending interest rate:

Bank rate, also known as discount rate. The rate of interest which a central bank charges on its
loans and advances to a commercial bank. The bank rate is known by a number of different terms
depending on the country, and has changed over time in some countries as the mechanisms used
to manage the rate have changed.
Whenever a bank has a shortage of funds, they can typically borrow from the central bank based
on the monetary policy of the country.
The borrowing is commonly done via repos: the repo rate is the rate at which the central bank
lends short-term money to the banks against securities. It is more applicable when there is a
liquidity crunch in the market.
In contrast, the reverse repo rate is the rate at which banks can park surplus funds with the
reserve bank. This is mostly done when there is surplus liquidity in the market.

Determining the rate

The interest rate that is charged by a country's central or federal bank on loans and advances
controls the money supply in the economy and the banking sector. This is typically done on a
quarterly basis. to control inflation and to stabilize the country’s exchange rates. A change in
bank rates may trigger a ripple effect, as it impacts every sphere of a country's economy. For
instance, stock markets prices tend to react to unexpected interest rate changes. A change in bank
rates affects customers as it influences prime interest rates for personal loans.

Lending interest rate:

i. Lending rate is the bank rate that usually meets the short- and medium-term financing
needs of the private sector. This rate is normally differentiated according to
creditworthiness of borrowers and objectives of financing. The terms and conditions
attached to these rates differ by country, however, limiting their comparability.

11. BASEL II and BASEL III

BASEL II :
Basel II is a set of international banking regulations put forth by the Basel Committee on Bank
Supervision, which leveled the international regulation field with uniform rules and guidelines.
Basel II expanded rules for minimum capital requirements established under Basel I, the first
international regulatory accord, and provided the framework for regulatory review, as well as set
disclosure requirements for assessment of capital adequacy of banks. The main difference
between Basel II and Basel I is that Basel II incorporates credit risk of assets held by financial
institutions to determine regulatory capital ratios.
Basel II is a second international banking regulatory accord that is based on three main pillars:
minimal capital requirements, regulatory supervision, and market discipline. Minimal capital
requirements play the most important role in Basel II and obligate banks to maintain minimum
capital ratios of regulatory capital over risk-weighted assets. Because banking regulations
significantly varied among countries before the introduction of Basel accords, a unified
framework of Basel I and, subsequently, Basel II helped countries alleviate anxiety over
regulatory competitiveness and drastically different national capital requirements for banks
BASEL III:
Basel III is a set of international banking regulations developed by the Bank for International
Settlements to promote stability in the international financial system. The Basel III regulations
are designed to reduce damage to the economy by banks that take on excess risk.

12. Bill of exchange:

A bill of exchange is a written order once used primarily in international trade that binds one
party to pay a fixed sum of money to another party on demand or at a predetermined date. Bills
of exchange are similar to checks and promissory notes—they can be drawn by individuals or
banks and are generally transferable by endorsements.

A bill of exchange transaction can involve up to three parties. The drawee is the party that pays
the sum specified by the bill of exchange. The payee is the one who receives that sum. The
drawer is the party that obliges the drawee to pay the payee. The drawer and the payee are the
same entity unless the drawer transfers the bill of exchange to a third-party payee.
13. Bill of lading:
A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the
type, quantity, and destination of the goods being carried. A bill of lading also serves as
a shipment receipt when the carrier delivers the goods at a predetermined destination. This
document must accompany the shipped products, no matter the form of transportation, and must
be signed by an authorized representative from the carrier, shipper, and receiver.

14. Black money

Black money is money earned through any illegal activity controlled by country regulations.
Black money proceeds are usually received in cash from underground economic activity and, as
such, are not taxed. Recipients of black money must hide it, spend it only in the underground
economy, or attempt to give it the appearance of legitimacy through money laundering.

15. Bond Market:

The bond market—often called the debt market or credit market—is a financial marketplace
where investors can trade in government-issued and corporate-issued debt securities.
Governments typically issue bonds in order to raise capital to pay down debts or fund
infrastructural improvements. Publicly-traded companies issue bonds when they need to finance
business expansion projects or maintain ongoing operations.

Bond investors should be mindful of the fact that junk bonds, while offering the highest returns,
present the greatest risks of default.
The bond market is broadly segmented into two different silos: the primary market and the
secondary market.
16. Bridge financing
Bridge financing, often in the form of a bridge loan, is an interim financing option used by
companies and other entities to solidify their short-term position until a long-term financing
option can be arranged. Bridge financing normally comes from an investment bank or venture
capital firm in the form of a loan or equity investment.
Bridge financing "bridges" the gap between the time when a company's money is set to run out
and when it can expect to receive an infusion of funds later on. This type of financing is most
normally used to fulfill a company's short-term working capital needs.
Bridge financing is also used for initial public offerings (IPO) or may include an equity-for-
capital exchange instead of a loan.

KEY TAKEAWAYS
 Bridge financing can take the form of debt or equity, and can be used during an IPO.
 Bridge loans are typically short-term in nature and involve high interest.
 Equity bridge financing requires giving up a stake in the company in exchange for
financing.
 IPO bridge financing is used by companies going public. The financing covers the IPO
costs and then is paid off when the company goes public.

Hedge funds are alternative investments using pooled funds that employ different strategies to

earn active return, or alpha, for their investors. Hedge funds may be aggressively managed or
make use of derivatives and leverage in both domestic and international markets with the goal of
generating high returns (either in an absolute sense or over a specified market benchmark). It is
important to note that hedge funds are generally only accessible to accredited investors as they
require less SEC regulations than other funds. One aspect that has set the hedge fund industry
apart is the fact that hedge funds face less regulation than mutual funds and other investment
vehicles.
A sovereign wealth fund (SWF) is a state-owned investment fund or entity which comprises of
pools of money derived from a country's reserves. Reserves are funds set aside for investment to
benefit the country's economy and its citizens. The funding for an SWF comes from central bank
reserves which accumulate because of budget and trade surpluses, official foreign currency
operations, money from privatizations, governmental transfer payments and revenue generated
from the exporting of natural resources.

75. Future contracts and Future Markets:

futures contract is a legal agreement to buy or sell a particular commodity or asset at a
predetermined price at a specified time in the future. Futures contracts are standardized for
quality and quantity to facilitate trading on a futures exchange. The buyer of a futures contract is
taking on the obligation to buy the underlying asset when the futures contract expires. The seller
of the futures contract is taking on the obligation to provide the underlying asset at the expiration
date.
A futures market is an auction market in which participants buy and sell commodity and futures
contracts for delivery on a specified future date. Examples of futures markets are the New York
Mercantile Exchange, the Kansas City Board of Trade, the Chicago Mercantile Exchange, the
Chicago Board Options Exchange and the Minneapolis Grain Exchange.
Originally, such trading was carried on through open yelling and hand signals in a trading pit,
though in the 21st century, like most other markets, futures exchanges are mostly electronic.

76. Futures market:

A futures market is an auction market in which participants buy and sell commodity and futures
contracts for delivery on a specified future date. Examples of futures markets are the New York
Mercantile Exchange, the Kansas City Board of Trade, the Chicago Mercantile Exchange, the
Chicago Board Options Exchange and the Minneapolis Grain Exchange.
Originally, such trading was carried on through open yelling and hand signals in a trading pit,
though in the 21st century, like most other markets, futures exchanges are mostly electronic.

77. GATT:
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many
countries, whose overall purpose was to promote international trade by reducing or eliminating
trade barriers such as tariffs or quotas. ... Experts attribute part of these tariff changes
to GATT and the WTO

78. GDP and GNP:

GDP:Gross Domestic Product (GDP) is the total monetary or market value of all the finished
goods and services produced within a country's borders in a specific time period. As a broad
measure of overall domestic production, it functions as a comprehensive scorecard of the
country’s economic health.
Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as
well.
GNP: Gross national product (GNP) is a broad measure of a nation's total economic
activity. GNP is the value of all finished goods and services produced in a country in one year by
its nationals.
79. General insurance:
General insurance or non-life insurance policies, including automobile and homeowners policies,
provide payments depending on the loss from a particular financial event. General insurance is
typically defined as any insurance that is not determined to be life insurance.

80. Global financial crises:

The global financial crisis (GFC) refers to the period of extreme stress in global

financial markets and banking systems between mid 2007 and early 2009. ... Many banks around
the world incurred large losses and relied on government support to avoid bankruptcy.
The financial crisis of 2007–2008, also known as the global financial crisis and the 2008
financial crisis, was a severe worldwide economic crisis considered by many economists to have
been the most serious financial crisis since the Great Depression of the 1930s, to which it is often
compared

81. Global financial system:

. The global financial system is the worldwide framework of legal agreements, institutions, and
both formal and informal economic actors that together facilitate international flows of financial
capital for purposes of investment and trade financing.

82. Hedging:
A hedge is an investment position intended to offset potential losses or gains that may be
incurred by a companion investment.
The best way to understand hedging is to think of it as a form of insurance. When people decide
to hedge, they are insuring themselves against a negative event to their finances. This doesn't
prevent all negative events from happening, but something does happen and you're properly
hedged, the impact of the event is reduced. In practice, hedging occurs almost everywhere and
we see it every day. For example, if you buy homeowner's insurance, you are hedging yourself
against fires, break-ins, or other unforeseen disasters.

83. Herding:

In economics and finance, rational herding is a situation in which market participants react to

information about the behavior of other market agents or participants rather than the behavior of
the market, and the fundamental transactions.

84. Imperfections in international financial markets:

An imperfect market refers to any economic market that does not meet the rigorous standards of
a hypothetical perfectly or purely competitive market, as established by Marshellian partial
equilibrium models. ... Imperfect markets are found in the real world and are used by businesses
and other sellers to earn profits.

85. Inflation and Deflation:

 Inflation is a quantitative measure of the rate at which the average price level of a basket of
selected goods and services in an economy increases over a period of time. ... Often expressed as
a percentage, inflation indicates a decrease in the purchasing power of a nation's currency.
Deflation is a general decline in prices for goods and services, typically associated with a
contraction in the supply of money and credit in the economy. During deflation, the purchasing
power of currency rises over time.

In economics, deflation is a decrease in the general price level of goods and services. Deflation
occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time,
but deflation increases it. This allows more goods and services to be bought than before with the
same amount of currency.

86. Insurance:
Insurance is a means of protection from financial loss. It is a form of risk management, primarily
used to hedge against the risk of a contingent or uncertain loss. An entity which provides
insurance is known as an insurer, insurance company, insurance carrier or underwriter.

87. Interbank transaction:

Interbank. Describing any loan, deposit, transaction or other relationship between two
banks. Interbank transactions provide a great deal of liquidity to the market. Interbank interest
rates are often used as benchmarks for other rates.

88. Interest rate- fixed versus flexible regimes:

A fixed interest rate is an unchanging rate charged on a liability, such as a loan or mortgage. It
might apply during the entire term of the loan or for just part of the term, but it remains the same
throughout a set period. Mortgages can have multiple interest-rate options, including one that
combines a fixed rate for some portion of the term and an adjustable rate for the balance. These
are referred to as “hybrids.”
Flexible exchange rates can be defined as exchange rates determined by global supply and
demand of currency. In other words, they are prices of foreign exchange determined by the
market, that can rapidly change due to supply and demand, and are not pegged nor controlled by
central banks. The opposite scenario, where central banks intervene in the market with purchases
and sales of foreign and domestic currency in order to keep the exchange rate within limits, also
known as bands, is called fixed exchange rate.
A flexible exchange-rate system is a monetary system that allows the exchange rate to be
determined by supply and demand. Every currency area must decide what type of exchange rate
arrangement to maintain. Between permanently fixed and completely flexible however, are
heterogeneous approaches. 

89. Interest rate swap:

An interest rate swap is a forward contract in which one stream of future interest payments is
exchanged for another based on a specified principal amount. Interest rate swaps usually involve
the exchange of a fixed interest rate for a floating rate, or vice versa, to reduce or increase
exposure to fluctuations in interest rates or to obtain a marginally lower interest rate than would
have been possible without the swap.

90. Interest spread:

Net interest spread refers to the difference in borrowing and lending rates of financial institutions
in nominal terms. It is considered analogous to the gross margin of non-financial companies. Net
interest spread is expressed as interest yield on earning assets minus interest rates paid on
borrowed funds.