Financial system/Related Articles

Glossary

(For definitions not shown below, see the economics glossary [1])

• Adverse selection [r]: a partial market failure that occurs when there are traders who take advantage of asymmetric information, raising uncertainty and leading to a reduction in the value of its products. ^[e]
• Asymmetric information [r]: a situation in which a seller has information that is not available to potential buyers - or vice-versa. ^[e]
• Bill (finance) [r]: {a) A loan with a duration of no more than a year (b)a documentary record of short-term indebtedness. ^[e]
• Bond (finance) [r]: a fixed-interest security issued by governments, companies, banks and others. ^[e]
• Bretton Woods [r]: An international conference held in 1944, which set up a system of fixed exchange rates linked to the US dollar which was to be freely convertible to gold, and created the International Monetary Fund. ^[e]
• Broker [r]: Individual or firm that provides investment advise to clients and executes their buying and selling instructions, usually by acting as a market maker. ^[e]
• Capital adequacy ratio [r]: The ratio of a bank's capital to its risk weighted credit exposures. May be defined in terms of tier 1 (core) or tier 2 capital. ^[e]
• CDS [r]: Credit-Default Swap. An insurance agreement that guarantees protection against a bond default in return for a fee. ^[e]
• CDS spread [r]: the annual percentage charge for a credit default swap ^[e]
• Central Bank [r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. ^[e]
• Complex interactive system [r]: A system in which an event in one of its components can have significant repercussions in many other components; and which can exist in more states than can be enumerated - including "open systems" whose operation is affected by events that have been generated from outside (such as international trade in the case of an economic system). ^[e]
• Commercial paper [r]: unsecured debt_instruments that are issued by corporations to meet short term financing needs (usually repayable after 3 months). ^[e]
• Contracyclical regulation [r]: a policy of raising banks' statutory minimum capital adequacy ratios when asset prices are rising and relaxing them when asset prices are falling. ^[e]
• Credit crunch [r]: the failure of the banking system to satisfy the economy's need for credit. ^[e]
• Credit risk [r]: The risk that the value of a loan-based security will fall as a result of defaults on the part of borrowers (as distinct from interest rate risks and exchange rate risks). ^[e]
• Debt_instrument [r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. ^[e]
• Deflation [r]: a persistent sequence of reductions in the general level of prices. ^[e]
• Derivative [r]: An asset whose value depends upon the expected value of another asset. ^[e]
• Direct investment [r]: investment in a company's foreign operations. ^[e]
• Discount_rate [r]: (i) The percentage by which current value exceeds value in a year's time. (ii) The rate at which banks may borrow at their central bank's discount window. ^[e]
• Efficient market hypothesis [r]: The hypothesis that all regulated financial markets are efficient markets. ^[e]
• Feedback [r]: The use of information from the monitoring of system performance either to modify or to maintain that performance. ^[e]
• Financial_Intermediary [r]: A go-between organisation that obtains finance from investors (or savers) and lends it to corporations (or other borrowers). Financial intermediaries include banks, building societies (or savings and loans associations) , life insurance companies and credit unions. ^[e]
• Financial_regulator [r]: The United States Securities and Exchange Commission gives as its mission "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation". Financial regulators in other countries have similar responsibilities. ^[e]
• Haircut (finance) [r]: (i) A percentage that is subtracted from the par value of the assets that are being used as collateral (for example, the commission that is charged on a repo transaction). (ii) In a debt restructuring agreement, the percentage reduction in the amount of debt that is due to be repaid to the creditors. ^[e]
• Hedging [r]: Add brief definition or description
• Hedge fund [r]: Add brief definition or description
• Herding (banking) [r]: Add brief definition or description
• Interest rate risk [r]: Add brief definition or description
• Lender of last resort [r]: Add brief definition or description
• Leverage [r]: Add brief definition or description
• LIBOR [r]: Add brief definition or description
• Liquidity [r]: Add brief definition or description
• Liquidity risk [r]: Add brief definition or description
• Liquidity spiral [r]: Add brief definition or description
• Margin account [r]: Add brief definition or description
• Margin call [r]: Add brief definition or description
• Market risk [r]: Add brief definition or description
• Mark to market [r]: Add brief definition or description
• Money market [r]: Add brief definition or description
• Moral hazard [r]: Add brief definition or description
• Option [r]: Add brief definition or description
• Panic (banking) [r]: Add brief definition or description
• Pareto-efficient [r]: Add brief definition or description
• Perfect competition [r]: Add brief definition or description
• Portfolio [r]: Add brief definition or description
• Portfolio insurance [r]: Add brief definition or description
• Repo [r]: Add brief definition or description
• Securitisation [r]: Add brief definition or description
• Selling short [r]: Add brief definition or description
• Sovereign spread [r]: Add brief definition or description

Spread   see Yield spread

• Sovereign wealth fund [r]: Add brief definition or description
• Structured investment vehicle [r]: Add brief definition or description
• Subprime lending [r]: Add brief definition or description
• Tight coupling [r]: Add brief definition or description
• Wholesale banking [r]: Add brief definition or description
• Yield spread [r]: Add brief definition or description