It is part of a series of articles dealing with current market conditions. Market conditions in recent days have made many arcane financial terms in the vocabulary familiar. Words and phrases such as breaking the buck, securitization, counterparty risk and short selling are frequently used in the media. But many of these terms are not easily understood by the average consumer who does not deal with every day. Given the recent headlines, the definitions of terms and phrases can be useful while you are reading daily coverage of today’s business environment: auction rate securities: short-term instruments to preserve capital while generally achieving rates of return than traditional money market investments (eg, municipal auction rate securities, preferred stocks and shares municipal preference share). The interest rate or dividend reset frequently, usually every seven to 49 days, through Dutch auction. Interest or dividends received may be 70% to 100% exempt from federal taxes. Issuers of states, municipalities, businesses, utilities, hospitals, housing finance, the government student loan finance and universities. Breaking the Buck: When a money market fund net asset value drops below $ 1 per share. Money market funds are not federally insured bank deposits, as, therefore, fund assets have an implicit promise to preserve capital at all costs and preserve the floor of the $ 1 share price . These funds are governed by the Securities and Exchange Commission rules restricting what they can invest in based on credit quality and maturity with the hope of ensuring stability main. Collateralized Debt Obligation (CDO): a title of quality investment (including one with a high bond ratings as BBB) covered by a set of bonds, loans and other assets. CDOs do not specialize in one type of debt, but are often non-mortgage loans or bonds. A similar structure to a collateralized mortgage obligation (CMO) or obligation bond guarantees (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as “slices” or “slices. “Each tranche has a different maturity and risk associated with it. More risk, more the CDO pays. Commercial Bank: An institution that offers full-service customer deposits, payment and credit, in addition to other financial services. Counterparty risk: The risk to each party to a contract that the counterparty will not live up to its contractual obligations. A counterparty is the other party involved in a financial transaction. Each transaction must have a consideration for the transaction to happen. More specifically, every buyer of an asset must be coupled with a seller who is willing to sell and vice versa. Credit Default Swap (CDS): * A swap designed to transfer credit risk products Fixed income securities (securities that pay specific interest rates, as a bond, money market instrument or preferred shares) between the parties. The purchaser of a credit swap receives credit protection, whereas the seller of the swap guarantees the creditworthiness of the product. In doing so, the risk of default is transferred from the holder of fixed income security to the seller of the swap. For example, the buyer of a credit swap will be entitled to nominal value of the obligation by the seller of the swap, in case of default of the obligations of its coupon payments. * Note: A swaps traditionally means the exchange of security for another to change the maturity (bonds) quality issues (stocks or bonds) or because investment goals have changed. Deleveraging means a process undertaken by a corporation to reduce its leverage, or the extent to which the company is using the borrowed money. Leverage can be beneficial for a company, but if it becomes too risky or dangerous, the company may need to reduce debt by repaying the amount of the debt he owes. Derivatives: In finance, a security whose price depends on or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. Assets underlying the most common include shares, bonds, commodities, currencies, interest rates and stock indices. Most derivatives are characterized by high leverage. Investment banking: An individual or institution acting as underwriter or agent for corporations and municipalities issuing securities. Most also maintain operations Broker Dealer /, maintain markets for previously issued securities and offer advisory services to investors. Banks of investment have an important role in facilitating mergers and acquisitions, private equity placements and corporate restructuring. Unlike traditional banks, investment banks do not accept deposits and provide loans to individuals. deposit account Money Market: A type of savings account offered by banks and credit unions, like ordinary savings accounts. However, they generally pay higher interest, have higher minimum balance requirements and limit the number of withdrawals per month. As for bank accounts, money in a money market account is usually provided by the Federal Deposit Insurance Corporation (FDIC) subject to certain limitations. The recent announcement by the U.S. Treasury on Money market mutual funds does not deposit accounts or money market the impact of FDIC insurance of deposit accounts. Money Market Mutual Fund: A fund that invests in a pool of high quality, short-term interest-bearing securities. A money market fund is not a bank deposit and are not insured or guaranteed by Bank of America, the FDIC or any other government agency. Resolution Trust Company (RTC): A U.S. government-owned company asset management charged with liquidating assets (primarily real estate related assets, including mortgage loans) that were active savings and credit in bankruptcy by the Office of Thrift Supervision, as a consequence of the crisis loans Savings and 1980s. In 1995, its functions were transferred to the Savings Association Insurance FDIC. Between 1989 and mid 1995, the Resolution Trust Corporation closed or otherwise resolved 747 Savings with total assets 394 billion. Securitisation (or the assets securitized): The process of risk allocation in the aggregating debt securities (eg mortgages) in a pool, then issuing securities that are guaranteed by the pool and are available for purchase by investors in the secondary mortgage market. subprime mortgage: A type of mortgage that is sometimes offered to borrowers with a higher risk than average to repay the loan. Credit institutions often charge interest on subprime loans at a rate higher than a conventional mortgage (often called “premium”) to compensate themselves for carrying more risk. short sale: A transaction in which an investor sells borrowed stock, paris the stock decreases with the intention to repurchase at a lower price to make a profit. Mandate: Certificate issued to its shareholders or holders of bonds by an issuer that enables the holder to purchase a specific quantity of securities to a fixed price. A warrant may be sold to another investor if the owner chooses not to exercise the warrant. You should be aware that http://104inc. COM is still a useful resource for terms and acronyms. You can help 104inc keep abreast of updates and submitting ideas for features you would like added to the site through their feedback button. Sources for definitions in this section include a glossary of business, Investopedia, and words INVESTOR Wikipedia.
