Financial - srkadali

A bail-out, in economics and finance, is a fresh injection of liquidity given to a bankrupt or nearly bankrupt entity, such as a corporation or a bank, in order for it to meet its short-term obligations. Often bailouts are by governments, or by consortia of investors who demand control over the entity as the price for injecting funds.

 

Basel II or the new Basel Capital Framework is a set of proposals issued by the Basel Committee on Banking Supervision to enhance global stability and risk management in the banking industry.

One one-hundreth of one percentage point (1/100th of one percentage point). Changes in interest rates are measured in basis points.

In a bear market, prices are falling and investors, anticipating losses, tend to sell. This can create a self-sustaining downward spiral.

 

A debt security - or more simply an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. Banks and investors buy and trade bonds.

 

A bull market is one in which prices are generally rising and investor confidence is high

 

Defined as the delegation of one or more IT-intensive business processes to an external provider that, in turn, owns, administrates, and manages the selected process or processes based on defined and measurable performance metrics. Usually, it is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain their position in the marketplace. BPO services are generally categorized into horizontal or vertical services. A horizontal BPO involves function centric outsourcing - the vendor specializes in carrying out particular functions across different industry domains. Examples of horizontal BPO are outsourcing in procurement, payroll processing, human resources, facilities management and similar functions. On the other hand, a vertical BPO focuses on providing various functional services in a limited number of industry domains. Healthcare, financial services, manufacturing and retail are examples of vertical BPO domains

The wealth - cash or other assets - used to fuel the creation of more wealth. Within companies, often characterized as working capital or fixed capital.

A collateralized debt obligation is a financial structure that groups individual loans, bonds, mortgages or other assets in a portfolio, which is pooled, sliced up and resold to investors. In theory, CDOs attract a stronger credit rating than individual assets due to the risk being more diversified. But as the performance of some assets has fallen, the values of many CDOs have also been reduced

 

Short-term loans, issued primarily by corporations, which are typically used as working capital (such as making payroll) rather than investment in fixed assets

Is the money one borrows with a promise to pay in the future. A "line of credit" is permission from a bank to borrow money.

It is a sudden reduction in the general availability of loans (or credit), or a sudden increase in the cost of obtaining loans from banks.

Credit default swap is an agreement designed to transfer the credit exposure of fixed income products from seller to buyer. The buyer pays a periodic fee to the seller in return for a potential payment by the seller in the event of a default by the corporate or government issuer.

Bonds are rated according to their safety from an investment standpoint - based on the ability of the company or government that has issued it to repay.

 

Composite Index is a statistical measure of the overall market or sector performance that provides a useful benchmark against which to measure an investor’s portfolio. It is a group of stocks, equities and indexes that are combined in a standardized method to aid various markets by providing measurement of price level changes to an entire stock market or sector.

The money that a company or individual owes a creditor (through the use of loans or bonds). Companies, banks and agencies depend on debt to finance their operations. As the credit markets have frozen up, companies have had trouble operating. Their inability to borrow money has contributed to the economic slowdown.

Debt market provides market participants the lending and borrowing of funds through debt instruments such as notes, bonds, bills, commercial papers, certificates, mortgages, or leases. Through the debt market, market participants can efficiently transfer ownership of debt obligations from one party to another.

 

Failure to meet the terms of a credit agreement.

 

Derivatives are financial instruments that primarily derive its value from the performance of an underlying variable such as interest rates, FX rates, or financial instrument prices. The term derivative comes from how the price of these contracts is derived from the price of some underlying commodity, security or index. The term derivative is used to refer to the set of financial instruments that includes futures, forwards, options and swaps. Market participants enter into a derivatives transaction for several economic purposes such as hedging, managing capital or funding costs, and yield enhancement, among others. Derivatives can be used as insurance to limit the risk of a particular investment. For a growing number of banking organizations, derivatives activities are becoming a direct source of revenue through "market- making" functions, position–taking and risk–arbitrage. Credit default swaps are one form of derivative. So are stock futures

 

A share of the ownership in a company, home or other asset. Companies issue shares of ownership through stock. With a home, equity equals its current market value minus the amount the borrower owes on the mortgage.

Equity market, also known as Stock Market, is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; both of these are securities listed on a stock exchange as well as those only traded privately. It is vital to the economy since it is a source of capital funding by companies and provides ownership share to investors. Stocks are securities that claim on the earnings and assets of a corporation.

 

Fair value, or mark-to-market, refers to an accounting practice of financial institutions to price assets held on their trading book according to current market values.

 

A forward contract is an agreement between two parties to buy or sell an asset at a specified point of time in the future. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes.

 

A futures contract is an agreement to buy or sell a commodity at a predetermined date and price. It could be used to hedge or to speculate on the price of the commodity.

GSEs are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture, home finance and education.

 

GDP refers to the value of all goods and services produced domestically. It is the sum of gross value added of all resident institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the values of their outputs).

 

GNP is a measure of the country’s output of final goods and services. It is equivalent to the Gross Domestic Product adjusted with the net factor income from the rest of the world. It refers to the aggregate earnings of the factors of production (nationals) plus indirect taxes (net) and capital consumption allowance.

 

Lightly regulated private investment funds that gather investments from wealthy private investors, pension funds, state retirement funds and others, and use sophisticated techniques to try to produce high returns, usually with high levels of debt to increase leverage.

 

Making an investment to reduce the risk of price fluctuations to the value of an asset. For example, if you owned a stock and then sold a futures contract agreeing to sell your stock on a particular date at a set price. A fall in price would not harm you - but nor would you benefit from any rise.

 

Herding behavior describes how individuals in a group can act together without planned direction. The term pertains to the behavior of animals in herds, flocks, and schools, and to human conduct during activities such as stock market bubbles and crashes, street demonstrations, sporting events, episodes of mob violence and even everyday decision making, judgment and opinion forming.

 

IFRS are standards and interpretations adopted by the IASB. Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IAS and continued their development, calling the new standards IFRS.

 

Investment banks provide financial services for governments, companies or extremely rich individuals. They differ from commercial banks where you have your savings or your mortgage.

 

The use of borrowed money to invest or finance business operations. The more leveraged a company or investor is, the more risk they take on. Investment banks have traditionally used high levels of leverage. By contrast, federal regulations have limited the use of leverage by commercial banks. Highly leveraged institutions ran into trouble when mortgage-backed investments collapsed, leaving them unable to make their loan payments.

 

Leveraging, or gearing, means using debt to supplement investment. The more you borrow on top of the funds (or equity) you already have, the more highly leveraged you are. Leveraging can maximize both gains and losses. Deleveraging means reducing the amount you are borrowing.

 

A measure of how quickly an asset or investment can be converted into cash (either by selling or redeeming).

This refers to the amount of a bank's loans divided by the amount of its deposits at any given time. The higher the ratio, the more the bank is relying on borrowed funds, which are generally more costly than most types of deposits.

 

Refers to the total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determining a company's size, as opposed to sales or total asset figures.

 

A form of accounting in which companies must value assets at their current price, reflective of what similar assets have been sold, rather than the purchase price or the higher price they might fetch later. Also called 'fair value.'

 

A loan secured by property. The contract between the borrower and the lender gives the lender the right to take possession and resell the property it if the borrower defaults. Mortgages are categorized in terms of their riskiness

 

 

A bond or security backed by a pool of mortgages. These securities, which provide a cash flow based on the principal and interest payments of the underlying mortgages, were long seen as a relatively safe way to earn returns higher than Treasury rates. But mortgage defaults and foreclosures sharply raised their risk. As more investors refused to buy the securities, banks that had been selling them were stuck holding them.

 

The act of bringing an industry or assets like land and property under state control.

 

NFIA refers to the net flow of property income to and from the rest of the world (net payments on income) plus the net flow of compensation of employees (net receipts on compensation). The NFIA is added to the GDP to come up with the GNP.

 

NEER refers to the weighted average exchange rate of the peso vis-a-vis a basket of currencies. An upward movement of the NEER indicates an appreciation while a downward movement indicates depreciation.

 

In the Philippine setting, NPAs refer to the sum of non-performing loans (NPL) and real and other properties owned and acquired (ROPOA). ROPOA are property items acquired by a bank in settlement of uncollected loans or past due accounts which were not paid upon its maturity.

 

REER is the weighted average of a country's currency relative to an index or basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country's currency, with each other country within the index. Essentially it refers to the NEER adjusted for inflation differentials. An increase in REER denotes real appreciation while the opposite implies real depreciation. REER is a more comprehensive measure of external price competitiveness as it takes into account not only the nominal exchange rate movements but also the relative inflation rates among trading countries.

 

To inject fresh money into a firm, thus reducing the debts of a company. For example, when a government intervenes to recapitalize a bank, it might give cash in exchange for some form of guarantee, such as a stake in the company. Taxpayers can then benefit if the bank recovers.

 

A period of negative economic growth. In most parts of the world a recession is technically defined as two consecutive quarters of negative economic growth - when real output falls.

 

Money not paid out as dividend and held awaiting investment in the company.

 

A concept in economics, finance, and psychology related to the behavior of consumers and investors under uncertainty. Risk aversion is the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, expected payoff. The inverse of a person's risk aversion is sometimes called their risk tolerance.

 

Bundling together individual assets, such as mortgages, turning them into a security and selling stakes to investors. For example, taking the debt from a number of mortgages and combining them to make a financial product which can then be traded. Banks who buy these securities receive income when the original home-buyers make their mortgage payments.

 

Structured products are investment instruments created to meet specific needs that cannot be met from the standardized financial instruments available in the markets. Structured products can be used as an alternative to a direct investment; as part of the asset allocation process to reduce risk exposure of a portfolio; or to utilize the current market trend.

 

Home loans offered to people who have had financial problems or who have low or unpredictable incomes. These carry a higher risk to the lender and therefore tend to be offered at higher interest rates

It is a system through which subprime lending is transacted. Lending is considered subprime if it involves borrowers characterized with low repayment capacity due to bad/lack of credit history, low income or poor debt to income ratios. Subprime loans carry higher interest rates than prime or market rates because of higher credit risk assumed by the lender. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards.

An exchange of securities between two parties. For example, if a firm in one country has a lower fixed interest rate and one in another country has a lower floating interest rate, an interest rate swap could be mutually beneficial.

 

Tier 1 Capital is a core measurement of a bank’s financial strength which consists of paid-up common stock, paid-up perpetual and non-cumulative preferred stock, common stock dividends distributable, perpetual and non-cumulative preferred stock dividends distributable, surplus and surplus reserves among others. Specifically it measures the capital adequacy of a bank which is expressed as ratio of a bank's core equity capital to its total risk-weighted assets.

 

Tier 2 Capital also describes the capital adequacy of a bank and includes items, as classified in the Basel I Accord, categorized as paid-up perpetual and cumulative preferred stock, perpetual and cumulative preferred stock dividends distributable, undisclosed reserves, appraisal increment reserves, deposit for common stock and perpetual and non-cumulative preferred stock subscription among others.

 

Debts that are unlikely to be recovered from borrowers. Most lenders expect that some customers cannot repay; toxic debt describes a whole package of loans where it is now unlikely that it will be repaid.

 

Securities sold by the federal government to investors to fund its operations and to cover the interest costs of existing debt and pay off maturing securities.