Creditor is a lender whether by making a loan, buying a bond or allowing money owed now to be paid in the future.
An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favourable market movements. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.
Basis Point – A basis point is one one-hundredth of a percentage point. Any changes in the interest rate, exchange rate and bond yields are often described in terms of basis points. Eg: If the interest rate moves from 3.15% to 3.35%, it has risen by 20 basis points.
Foreign exchange reserves are reserve assets held by a central bank in foreign currencies. These are used to back liabilities on their own issued currency as well as to influence monetary policy.
A closed economy is defined as an economy that does not take part in international trade. It is the opposite of an open economy. Example: North Korea. Also read: #Kredxionary – Adaptive Expectations
Adaptive Expectations – Adaptive Expectation is the theory of how people form their views about the future that assumes they do so using past trends and the errors in their own earlier predictions. It is a contrast with rational expectations.
Indemnity – Indemnity refers to an exemption from the liability of potential damages. The concept could also refer to a scenario in which a particular party agrees to pay a secondary party for the losses caused by the latter.
Capital Adequacy Ratio – Capital Adequacy Ratio is the ratio of a bank’s capital to its total assets required by regulators to be above a minimum level, so that there is little risk of the bank going bust. The ratio determines how high this minimum level is and may vary according to how risky a…
Currency Peg – A Currency Peg is when the Government announces that the exchange rate of its currency is fixed against another currency or currencies.
An Arbitrage is a process of simultaneously selling an asset in two different markets with the intention of profiting on the prevalent price difference. Also read: #Kredxionary – Bed And Breakfast