Cyber*School

see also exposure at default

Early repayment clauses include the possibility of repayment of the securities issued to investors before the originally stated maturity, when a certain event occurs.

The income of a security includes interest and dividend payments (dividends) and other distributions and capital gains resulting from price increases (course).

Earnings before interest and taxes (EBIT = earnings before interest and taxes). Bank earnings before assessment of risk business in the field of securities and loans (= before individual value adjustment).

The annual profit of a company divided by the number of outstanding common shares.

Net earnings per share over the previous 12 months as a percentage of the share price. Inverse of the price-earnings ratio.

Income risk is the possibility of losing the income from the invested capital.

abbr. Earnings Before Interest and Taxes. This is the operating profit.

see also external credit assessment institution

abbr. for European Central Bank

The amount of capital allocated and held internally by an organisation as a result of its own risk assessment methodology

a cycle of economic activity around a trend growth rate typically characterised by a trough, upswing, peak and downswing

Costs which incurre through the holding of equity beyond regulativ capital which is economically necessary to cover unexpected losses. The economic capital may therefore differ from the legally required equity.

v. Euro commercial paper

abbr. Ex dividend

abbr. Expected Default Frequeny

abbr. Exchange Delivery Settlement Price, the price at which futures contracts are settled upon delivery. The EDSP is determined by the exchange, and is often an average of traded prices over a set period or linked to certain fixing (e.g. LIBOR)

The annual interest rate of an amount of capital with time consideration of all cost and revenue factors that lead to payments.

The Effective Duration is a measure of sensitivity, which indicates how much the total return of a bond changes if the paid market interest rate changes. (= spot rates).

under the Basel II agreement, banks are required to use standard values for M or to measure M using a specified definition

The effective interest rate can not be obtained from the bond conditions. It depends on the nominal interest rate, the issue price of the bond, the redemption price of the bond, the majurity and the incidental costs.

revenue gained by an investment over several periods of interest payments in consideration of compound interest

Term for the tradable securities on the capital market.

Also optimal portfolio. A portfolio, which corresponds to the risk attitude of the investor and ensures the highest income starting from a given risk level or includes the lowest risk with an expected yield.

Known range from portfolio theory of those portfolios in which risk and return are not dominated by other portfolios.

Cashable bills of exchange at the Bank of England. An Eligible Bill is a discount instrument and is trading with a discount.

In order to be handled as a recognized credit rating agency under Basel II, a CRA must meet six criteria: objectivity, independence, International access / Transparency, publication, resources, credibility.

The Banking Act requires banks to back up at least 8% of their basis of assessment with own funds. (ie, 0% of the volume of loans to federals, states and municipalities, 20% for interbank loans, 50% for housing loans 100% for other assets) Own funds include in particular registered capital, disclosed reserves, liability reserves, valuation reserves and profit after dividends and taxes (net income). Meaning of the provision is to build up sufficient risk capital for risks from the lending business, with which a corresponding depositor and shareholder protection should be achieved.

release of securities at the primary market with the objective of raising funds in terms of equity capital (shares) or bonded capital (bonds, CD, CP, etc.)

The value of a security as measured by the portfolio. The weight of a particular asset class, an industry or sector.

To an employee of a company's issued share, often at a discounted price. The employee usually has to wait for a lock-up period prior to the sale

a transaction with a term starting and ending at the last days of the month (mainly deposit, forward contract, FX-swap)example: A two-months deposit, which starts on the 31. March and would end on the 31. May. If the 31. May would be a weekend or a holiday, the muturity date would be the last bank day in the month May, not as usual the next working day, i.e. the 29. or 30.

see interest method actual/365

abbr. for Euro Overnight Index Average,is the benchmark for overnight EUR and is calculated as a weighted average of all unsecured overnight-transactions of the banks which participate in the fixing,www.euribor.org

EUR interest rate swap where the floating rate is linked to EONIA see also: OIS

risk factor of options, also called rho expresses how much the price of an option changes if the level of interest rates changes

Regulatory term. Own funds include, in particular registered capital, disclosed reserves, liability reserves, valuation reserves as well as profit after dividends and taxes (net income). It serves to cover the risks from the lending business with which a corresponding depositor and shareholder protection should be achieved.

calculative return, which is assumed that the equity of a bank should bear equity cost is the result of the aimed return on equity (ROE) target, set by the board, minus the risk free interest rate (e.g. government bonds)

Under the Basel II agreement, equity exposures are defined on the basis of the economic substance of the instrument. They include both direct and indirect ownership interests and must meet a set of requirements to be classified as such

A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed. The owner of shares of such a fund has the possibility to be involved indirectly in the substance and the yields of public limited companies.

A Security which represents a share of the company itself usually, for example for shares. In the case of funds you are not involved in the company itself, but in the special assets of the capital investment company.

Securities which normally represent a share of the company. Shares are equity securities. In the case of Investment fund certificates, one is not involved in the company itself, but in the special assets of the capital investment company.

Securities, which include membership rights in a company or ownership interests in a pool of assets. In investment companies: A Note representing joint ownership of the fund assets (investment certificate).

v. SAFE

abbr. European System of Central Banks

abbr. BWA(german) means federal securities and market authority.

abbr. Exchange Traded Funds

abbr. ISO currency code for Euro

Futures market which is arisen from the merger of the German DTB and the Swiss SOFFEX. www.eurexchange.com

EURo Interbank Offered Rate, average rate which is formed by 57 reference banks from Euro-countries and non Euro-countries.It has replaced the national reference rates (e.g. Fibor) on 1.1.99. In many market segments the EURIBOR has replaced the LIBOR as an important reference rate. The calculation is executed by the information service company Bridge. (www.euribor.org)

(EUR) Official name of the common European currency. One Euro is divided into 100 cents. In 1999 the exchange rates of the currencies of the participating countries were irrevocably fixed to the euro and the listing of the Securities switched to euro (1 euro = 13.7603 ATS).

A bond issued in a currency other than the currency of the country or market in which it is issued.

CP issued in the Euro market

USD which are traded in the euro-money market, i.e. outside of the United States e.g. in Tokyo in general, a currency is called euro-currency if it is traded outside the country where it is the legal tender

previously

see actual/360

(EONIA) The weighted average of overnight Euro Interbank Offer Rates for inter-bank loans. EONIA is the standard interest rate for Euro currency deposits. The European Central Bank is responsible for calculating the EONIA every day. www.euribor.org

Bond which is issued outside the home country of the issuer in the international capital market, normally not in the home currency of the issuer. It is common practise that the legal basis is English or US law.

the LIBOR for EUR calculated by the BBA,as the most important benchmark for the EUR replaced by EURIBOR

market for credits and deposits in euro-currenciesa currency becomes an euro-currency when it is dealt outside the country where it is legal tender

USD which are traded in the euro money market, ie outside of the home market. For example, USD traded in Tokyo.

see Euronext

The EBA acts as network of the EU and national authorities and is responsible for safeguarding public values such as the stability of the financial system, the transparency of markets and financial products and the protection of depositors and investors and is equipped with wide-ranging competences.

The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union. The European Central Bank has been responsible for the monetary policy of the European Union since January 1, 1999, when the euro currency was adopted by the EU members. The responsibilities of the ECB are to formulate monetary policy, conduct foreign exchange, hold currency reserves and authorize the issuance of bank notes, among many other things.

The successor to the European Monetary System (EMS), the combination of European Union member states into a cohesive economic system, most notably represented with the adoption of the euro as the national currency of participating members.

An option in which the holder is entitled to exercise its option right only and exclusively on the expiration day.

see european option

the ESCB is composed of the ECB and of the national central banks. Its primary objective is to maintain price stability. Its basic tasks are to define and implement the monetary policy of the European currency area, to hold and manage the official reserves of the participating Member States and conduct foreign exchange operation, to promote the smooth operation od payment systems in the EUR-area

Consists of the European Central Bank (ECB) and the national central banks of the current 13 EU Member States which have adopted the euro in the third stage of the Economic and Monetary Union. The national central banks of the Member States which have not yet joined the euro area are amongst the European System of Central Banks (ESCB), but not to the euro system. The euro system perceives the sovereign rights in the field of monetary policy for the member states of the monetary union.

The valuation of the fund's assets is important, since this determines the value of each share. Therefore, the valuation principles are given in any prospectus, according to the which the value of each share, or any portion of the fund's assets are determined. Basically a domestic investment fund may only acquire values for which there are regularly and objectively measurable values (prices) and which are traded on certain stock exchanges or organized markets (according to the fund rules). The acquisition of unlisted securities is only permitted if this is provided in the fund regulations and only to the specified amount.

The current rate is reduced by the amount of the dividend. On payday the dividend, the stock is equipped with the share price addendum "ex-dividend".

The day on which shares are traded ex. i.e. without a specific right, for example, to receive dividends, subscription right or bonus shares (capital adjustment)

An addition to the price which indicates that on this day the value of subscription rights was deducted from the price of the stock (at the ex-date).

Declaration of an option holder that he buys (call) or sells (put) the underlying accordance with the agreed conditions.

defined as gross finance charge collections and other income received by a trust or special-purpose entity, minus certificate interest, servicing fees, charge-offs, and other senior trust or special-purpose entity expenses

A marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange - such as a stock exchange - is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public.

Settlement price of the futures contract at which will be settled on the last trading day upon delivery. It shall be determined by the Exchange. It is often calculated as average of the prices of a particular period or is it tied to a specific fixing (eg LIBOR).

The determined price by supply and demand of the traded value. (securities, currency, etc.) It is operated by an exchange corporation.

v. SAFE

An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.

Is the immediate information of the trading participant on an order specifying the execution time, the price and the executed volume.

Execution limits are designed for the specifications of market orders and are configured as either Fill Or Kill or Immediate Or Cancel.

By the supervisory board of a public limited company ordered Management Board of a PLC.

Period during which exercise can be made in the clearing system.

Those option variants which are not attributable to the traditional options (call or put), because they have additional properties. Contrary plain vanilla options

The estimate of the average expected loss on a portfolio. In case of a finance company value adjustments should cover the expected loss.

It iIt is the expected positive exposure in respect of a counterparty.s the expected positive exposure amount to a counterparty

Expiration occurs when an option can not be exercised, ie the maturity is over.

The date on which the option will expire if not exercised early. Always Saturday following the third Friday of the month.

Month in which the option on the day following the last trading day, expires if it has not been exercised before. See maturity

The amount that is lost in the case of the lowest possible realization proceeds from the liquidation or bankruptcy of the borrower. See also probability of default, loss given default, liability in case of failure.

The expected amount of the claims for a particular bond / debt securities at the time of the failure.

a common risk management tool on both the trading desk and in loan portfoliosExposure limits are predictive, and therefore indicate risk before its financial consequences occur (see also exposure).

the expected exposure of a credit institution for a given debt instrument upon the default of the counterparty

Asset class of the Basel II framework. Covers receivables from banks and investment firms that are subject to Basel II comparable regulatory requirements. The asset class further includes other public bodies, which are treated as receivables to banks under the standardized approach and multilateral development banks that reach no 0% risk-weight in the standard approach.

(External Audit) The goal of external financial audit is to get an independent opinion about whether the accounts of a bank were prepared in accordance with the relevant accounting standard.

a credit rating agency.to qualify for treatment as an ECAI, a firm must satisfy six criteria: objectivity, independence, international access/transparency, disclosure, resources, credibility

These data are collected according to Basel II outside of the institution and used to model a specific risk.

The time value is the option price minus the intrinsic value of the option. It is influenced by the volatility of the underlying asset, the remaining term of the option, the money market interest rates and the option type. If the option is at-the-money the time value is the highest.