Cyber*School

sum of cash and sight deposits v. money supply

M1 plus deposits with a maturity up to two years as well as deposits with an agreed period of notice up to three monthsv. money supply

M2 plus repos, money market funds and debentures up to two years maturity, deposits with a maturity up to two years as well as deposits with an agreed period of notice up to three monthsv. money supply

cp. duration

They are benchmark and index orientated funds which are using the top-down principle. Real bonds, ressources, currencys and futures form the basis of the investment techniques. The objective of the funds is to surpass the market/the benchmark index.

The magic triangle of asset investment illustrates the conflict between safety, liquidity and yield. Investors try to achieve an optimum amount of coordination of these three factors.

Regular open market transaction of the ESCB for providing short-term bank liquidity. They are issued as weekly standard tenders with an agreed period of 14 days. They are the most important monetary instrument of the ESCB which controls interest rates and liquidity at the monetary market.

Lower limit of the margin account, which must not be exceeded, otherwise an additional payment will be required.

in german nother designation for mandatory convertible bond

In US-style repos interim coupon payments have to be transmitted to the seller of the security by the buyer. This is called manufactured dividend.

Canadian coin

deposit which has to be made at the conclusion of certain deals, margins are applicable mainly at exchange-traded futures and options and in repo marketstypes: initial margin and variation margin

call for settlement of a variation margincommon at: futures and repos

A standing facility of the Eurosystem which counterparties may use to receive overnight credit from a national central bank at a pre-specified interest rate against eligible assets. Comparable to earlier Lombard loan. Often the upper limit of the call rate. Therefore it is the key interest rate.

Highest yield which is accepted by the Federation that leads to an allocation to individual banks at the yield tender process.

Is the additional risk that arises when assigning a further loan to a given portfolio. Since the commitments of a loan portfolio among themselves not perfectly correlated, the sum of the individual risks are much higher than the portfolio risk itself.

evaluation of a financial instrument or an entire portfolio on the basis of the current market prices

Market price of a listed company. Calculated from the price of the stock multiplied by the number of shares of a company.

Takes place in a financial market where - due to an offer (and vice verca) - buying and selling prices are provided in short time intervals

This method is based on the opportunity cost principle, which means that every balance sheet item is assessed at a market interest rate, as if a corresponding transaction at the same interest rate were carried out on the money or capital markets.

(Market makers) Market participants (mostly banks), which provide during the entire trading hours bid and offer prices. This ensures sufficient liquidity in the market.

(Market order) order without giving a price limit. The entire order is executed as soon as possible at the best price. The top order can also be provided with the execution restrictions Fill-or-Kill or immediate-or-cancel.

Everyone who buys and/or sells financial instruments on their own or third party account by means of the exchange companies operated markets.

another designation for market risk

another designation for market risk

risk of deterioration of a banks profits, due to a unfavourable developement of market prices (e.g. securities, foreign exchange, interest rates etc.)

(keep, hold, or neutral) Opinion of an analyst that a share will develop parallel to an (sectoral) index.

a type of foreign bondindicates a bond which is issued from a foreign entity in Spain denominated in EUR

This is the matching of supply and demand, corresponding to the pricing rules.

another designation for maturity period

Funds with limited runtime from the outset. Investors can only buy these funds during a tight subscription period. Afterwards the issue of the shares is set. Invested capital remains in the fund until the end of the term. However, investors can sell their fund shares during the term on each trading day. At the expiration date of the entire fund is dissolved and invested capital including accrued income is distributed to the shareholders.

Liquidity / maturity matching

are defined as arrangements concerning capital payment flows (e.g. the capital redemption profiles of a loan, such as final maturity or annuity)

Result of different interest sensitivities of lending business and deposit-taking business of a bank. For example a bank is not refinancing its receivables with liabilities of the same period. That is increasing profits if long-term bonds are purchased and short-term refinanced if the interest rate curve is normal and short-term money is cheaper than long-term. Risk: Interest rate curve gets inverse.

another designation for end of the term or due date

Largest temporary decline in value after reaching a peak until the next positive counter movement. Tells how much the fund has dropped at its largest downward movement.

Maximum monthly or annual loss which the Fund has experienced so far.

Maximum monthly or annual appreciation which the Fund has experienced so far.

Medium-term bonds are the counterpart of the banks to the Federal Treasury bills. They are used for short-term capital increase.

Dealer transactions between banks are conducted at the same rate.

the effective yield depends on:- how the days of the interest period are calculated and- what is assumed concerning the number of days of a yearthe most frequent methods are:- act/360 (= money market method, actual calendar days, 360 days a year)- act/365 (365 days a year)- act/act- 30/360 (30 days a month, 360 days a year)- 30E/360

designation for Companies with a medium market capitalization

Funds that invest their funds primarily in medium-sized listed companies.

The abbreviation MiFID stands for Markets in Financial Instruments Directive. Directive on markets in financial instruments or short MiFID. MiFID is a European Union directive on the harmonization of the financial markets in the European internal market. The primary objective is transparency towards the private investors.

abbr. Market interest method

Investments in funds are usually only possible if the investment specified minimum amount is invested, which is set by the investment company. For further payments minimum amounts may be required by as well. Also for the periodic payments in savings plans a certain amount is usually prescribed by the investment companies.

The minimum amount of reserves a credit institution is required to hold with a central bank. The minimum reserve policy is one of the monetary instruments which regulate the money supply. An increase or a decrease has a direct effect on the liquidity of the banking sector. The minimum reserve is determined as percentage of customer deposits of a bank.

v. money market futures

It is called the theoretical model of the relationships between risk and return and how their relation can be optimized throught diversification.

expresses the estimated decrease of a bond price, if interest rate increases by 100 bp, and vice versa e.g.:bond price 103, modified duration 3.7 if the interest rate increases by 100 bp the bond price decreases by 3,7 % i.e. 3.81 new bond price: 99.19 (103 - 3.81)

Characterizes the market where short term interest instruments are traded (usually up to one year) (e.g. clean deposits, CDs, CPs, T-bills etc.)Market participants are domestic and international banks as well as Central Banks.

Funds that invest up to 100 percent of their assets in bank deposits, money market securities or securities with short maturities or regular yield adjustments. Money market funds are authorized in Germany since August 1, 1994.

futures with a money market-instrument as underlying, e.g. 3-months LIBOR-futures, alike an FRA there is no physical delivery of underlyings, i.e. the deposit, but only a compensation

sum of monetary claims of non-banks vs. banks which exercise currency-functionconsists of cash and sight deposits. Differnet definitions of money supply: M1, M2, M3

statistical method to compute value at risk (var) The monte carlo simulation computes a huge number of portfolio valuation using random data. other methods used in var: variance/covariance method and historical simulation

formula for the calculation of the bond price by Moosmüller,In contrast to ISMA-method interest for periods shorter than the full interest period are calculated on a linear basis (ISMA: exponential)

Tax-advantaged bond. Housing projects financed by the emission proceeds.

Municipal bonds are used to grant loans to states and municipalities with the money of investors.

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share.