Term
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Definition
| The value of an FI to its owners; this is equal to the difference between the market value of assets andthat of liabilities |
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Term
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Definition
| A theory of interest rate determination that views equilibrium interest rates in financial markets as a result of the supply and demand for loanable funds |
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Term
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Definition
| The difference between assets whose interest rates will be repriced or changed over some future period and liabilities whose interest rates will be repriced or changed over some future period |
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Term
| Rate sensitive asset or liability |
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Definition
| An asset or liability that is repriced at or near current market interest rates within a maturity bucket |
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Term
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Definition
| The risk that the cost of rolling over or reborrowing funds will rise above the returns being earned on asset investment |
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Term
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Definition
| The risk that the returns on funds to be reinvested will fall below the cost of the funds |
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Term
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Definition
| Those deposits that act as an FI's long term sources of funds |
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Term
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Definition
| The relations btween chnges in interest rates and changes in net interest income |
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Term
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Definition
| The effect that a change in the spread between rates on RSAs and RSL has on net interest rates change |
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Term
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Definition
| Periodic cash flow of interest andprincipal amortization payments on long term assets, such as conventional mortgages, that can be reinvested at market rates |
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Term
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Definition
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Term
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Definition
| accounting method in which the assets and liabilities ofthe FI are recorded at historic values |
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Term
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Definition
| Accounting method in which the assets and liabilities of the FI are revalued according to the current level of interest rates |
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Term
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Definition
| Valuing securities at their current market price |
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Term
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Definition
| The weighted-average time to maturity on an investment; the interest elasticity of a security's price to small interest rate changes |
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Term
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Definition
1. increases with the maturity of a fixed-incoe secureity but at a decreasing rate
2. decreases as the yield on a security increases
3. decreases as the coupon or interest payment increases |
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Term
| Risk Management of Duration |
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Definition
1. Duration is equal to the maturity of an immunized security
2. Duration gap is used by FIs to measure and manage the interest rate tisk of an overall balance sheet |
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Term
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Definition
| Bond that pays a fixed coupon each year forever |
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Term
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Definition
| The percentage change in the price of a bond for any given change in interest rates |
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Term
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Definition
| Duration divided by 1 plus the interest rate |
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Term
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Definition
| A measure of overall interest rate risk exposure for an FI |
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Term
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Definition
| The degree of curvation of the price-yield curve around some interes rate level |
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Term
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Definition
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Term
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Definition
| A bond rated as speculative or less than investment grade by bond-rating agencies such as Moodys |
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Term
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Definition
| A loan provided by a group of FIs as opposed to a single lender |
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Term
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Definition
| A loan that is backed by a first clain on certain assets(collateral) of the borrower if defaults occurs |
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Term
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Definition
| A loan that has only a general claim to the assets of te borrower if default occurs |
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Term
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Definition
| The loan amount is withdrawn by the borrower immediatley |
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Term
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Definition
| A credit facility with a maximum size and maximum period of time over which the borrower can withdraw funds; a line of credit |
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Term
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Definition
| Unsecured short-term debt instrument issued by corporatios |
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Term
| Adjustable rate mortgages |
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Definition
| a mortgage whose interest rate adjusts with movements in an underlying market index interest rate |
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Term
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Definition
| A credit line on which a borrower can both draw and repay many times over the life of the loan contract |
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Term
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Definition
| national, state, or city-imposed ceilings on the maximum rate FIs can charge on consumer and mortgage debt |
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Term
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Definition
| The London Interbank Offered Rate, which is the rate for interbank dollar loans of a given maturity in the offshore or Eurodollar market |
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Term
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Definition
| The base lending rate periodically set by banks |
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Term
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Definition
| A percentage of a loan that a borrower is required to hold on deposit at the lending institution |
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Term
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Definition
| The risk that the borrower is unable or unwilling to fulfill the terms promised under the loan contract |
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Term
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Definition
| Restricting the quantity of loans made available to individual borrowers |
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Term
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Definition
| Restrictions written into bond and loan contracts either limiting or encouraging the borrower's actions that affect the probability of repayment |
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Term
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Definition
| Long-term customer relationship between a borrower and lnder baed on reputation |
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Term
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Definition
| The ration of a borrower's debt to equity |
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Term
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Definition
| Mathematical modls that use observed loan applicant's characteristics either to calculate a score representing the applicant's probability of default or to sort borrowers into different default risk classes |
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Term
| Treasury strips and zero-coupon corporate bonds |
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Definition
| Bonds that are created or issued bearing no coupons and only a face value to be paid on maturity. As such, they are issued at a large discount from face value |
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Term
| Marginal default probability |
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Definition
| The probability that a borrower will default in any given year |
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Term
| Cumulative default probability |
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Definition
| The Probability that a borrower will default over a specified multiyear period |
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Term
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Definition
| The inability to make a profit without taking risk |
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Term
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Definition
| a one-period rate of interest expected on a bond issued at some date in the future |
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Term
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Definition
| Historic default rate experience of a bond or loan |
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Term
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Definition
| the probability of a bond or loan defaulting in any given year after issue |
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Term
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Definition
| Risk-adjusted return on capital |
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Term
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Definition
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Term
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Definition
| a method to measure loan concentration risk by tracking credit ratings of firs in particular sectors or ratings class for unusual declines |
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Term
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Definition
| a measure of the probability of a loan being upgraded, downgraded, or defaulting over some period |
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Term
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Definition
| external limits set on the maximum loan size that can be made to an individual borrower |
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Term
| Systematic loan loss risk |
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Definition
| a measure of the sensitivity of loan losses in a particular business sector relative to the losses in an FI's loan portfolio |
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Term
| General diversification limits |
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Definition
| maximums set on the amount of investments an isurer can hold in securities of any single issuer |
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Term
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Definition
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Term
| Contingent assets and liabilities |
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Definition
| Assets and liabilities off the balance sheet that potentially can prouce positive or negative future cash flows for an FI |
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Term
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Definition
| an item or activity that, when a contingent event occurs, moves onto the asset side of the balance sheet |
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Term
| Off-balance sheet liability |
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Definition
| an item or activity that, when a contingent event occurs, moves onto the liability side of the balance sheet |
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Term
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Definition
| The Change in the value of an option for a unit change in the price of the underlying security |
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Term
| Notional value of an obs item |
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Definition
| The face value of an obs item |
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Term
| Loan commitment agreement |
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Definition
| A contractual commitment to make a loan up to a stated amoun at a given interest rate in te future |
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Term
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Definition
| the fe charge for making funds available through a loan commitment |
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Term
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Definition
| The fee imposed on the unused balance of a loan commitment |
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Term
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Definition
| The variable spread between a lending rate and a borrowing rate or between any two interest rates or prices |
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Term
| Commercial letters of credit |
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Definition
| Contingent guarantees sold by an FI to underwrite the trade or commercial performance of the buyer of the guaranty |
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Term
| Standby letters of credit |
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Definition
| Cuarantees issued to cover contingencies that are potentially more sever and less predictable than contingencies covered under trade-related or commercial letters of credit |
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Term
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Definition
| Nonstandard contracts between two parties to deliver and pay for an asset in the future |
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Term
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Definition
| Standardized contract guaranteed by organized exchanges to deliver and pay for an asset in the future |
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Term
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Definition
| trading in securities prior to their acutal issue |
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Term
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Definition
| The ability to put an asset or loan back to the seller if the credit quality of that asset deteriorates |
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Term
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Definition
| Intraday crdit risk associated with CHIPS wire transfer activities |
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Term
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Definition
| Risk imposed on one holding company affiliate due to the potential failure of the other holding company affiliates |
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Term
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Definition
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Term
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Definition
| the price received for an asset that has to be liquidated immediately |
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Term
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Definition
| those deposits that provide a DI with a long-term funding source |
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Term
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Definition
| the amount by which cash withdrawals exceed additions; a net cash outflow |
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Term
| Purchased liquidity management |
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Definition
| an adjustment to a deposit drain that occurs on the liability side of the balance sheet |
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Term
| Stored liquidity management |
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Definition
| an adjustment to a deposit drain that occurs on the asset side of te balance sheet |
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Term
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Definition
| a measure of the potential losses an FI could suffer as the result of sudden dsposal of assets |
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Term
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Definition
| the difference between a DI's average loans and average deposits |
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Term
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Definition
| the financing gap plus a DI's liquid assets |
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Term
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Definition
| A sudden and unexpected increase in deposit withdrawals from a DI |
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Term
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Definition
| a systemic or contagious run on the deposits of the banking industry as a whole |
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Term
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Definition
| the amount received by an insurance policyholder when cashing in a policy early |
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Term
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Definition
| an investment fund that sells a fixed number of shares in the fund to outside investors |
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Term
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Definition
| An investment fund that sells an elastic or nonfixed number of shares in the fund to outside investors |
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Term
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Definition
| The price at which investment fund shares are sold. It equals the total market value of the assts of the fund divided by the number of shares in the funds outstanding |
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