Core indicator approachOne of the three methods for quantifying capital requirements for operational risks in accordance with the capital requirements proposed by Basel II. Banks using the benchmark approach must hold capital for operational risk, which is the average of a fixed percentage of positive annual gross income over the past three years. Based on dubious assumptions that losses due to operational risks are closely related to gross income. See also Standard Approach, Advanced Measurement Approaches and Operational Risk. A contract of obligation is described as a contract used for private debt. For securities or investment vehicles that are private (not sold to the general public), bond contracts are used when issued by small businesses and sold to banks, savings and credit institutions and brokerage firms. An exemption from SEC registration requirements is possible for bond contracts that may increase the investor`s level of risk without the contractual arrangement that accompanies a bond commitment agreement. A bond is an investment vehicle where you lend money to the company issuing the bonds. The characteristics of bonds include: Base(1) The difference between interest rates or asset prices that are related but not identical. For example, the difference between the spot price and the forward price of a security. Sometimes also called propagation. Recognised securitiesShares, bonds, other securities and certain certificates of deposit that are bought, sold and held only with manual or computerised accounting entries instead of transfers of physical certificates to prove the transfer. Typically, instead of a certificate or physical instrument, buyers only receive receipts or confirmations as proof of ownership.
Bond Market Association (BMA)An industry trading organization for US brokers/traders. Among other things, the BMA has developed standard documentation for reverse repurchase agreements and to describe advance payments received from MBS. Formerly known as the Public Securities Association (PSA). Equilibrium interest rateMaximum interest rate that a business or property can pay from free cash flow while having enough cash to make all necessary principal and interest payments. (4) The price level of a call option corresponding to the sum of the strike price plus the premium paid for the purchase of the option, or the price level of a put option corresponding to the strike price less the premium. In a loan offer, a closed clause can be used to describe all the collateral involved that support the offer. Closed tickets include guarantees as well as provisions that ensure that the guarantee can only be awarded to a specific offer. Buy/SellbackThe short-term guaranteed investment form in which a security is acquired with a simultaneous agreement to resell it to the seller at a later date.
Purchase and sale contracts are simultaneous, but transaction settlement dates are not. The purchase is a cash transaction, while the resale is a forward transaction because it takes place at a later date. A buy/sell is very similar to a reverse repurchase agreement, except that in a buy/sell, the investor is compensated by the difference between the purchase price and the sale price and not by interest. Unlike a reverse repurchase agreement, a buy/sell is unlikely to involve a discount or collateral margin. In addition, the purchase/sale may be treated differently in the event of bankruptcy of the buyer. Any transaction that is a purchase/sale from the buyer/lender`s point of view is, by definition, a sale/redemption from the seller`s/borrower`s point of view. Basel IIThe common name of the capital guidelines of the Bank for International Settlements (BIS), based in Basel, Switzerland. The Basel II Capital Guidelines replace the older and much simpler BIS Guidelines. The guidelines are developed by an international committee of banking supervisors and implemented by the rules of national supervisors. Bond insuranceCredit support for a bond or tranche in a multi-tranche bond. Loan support is provided by an external third party – usually an insurance company that specializes in financial guarantees.
The act refers to a legal and binding agreement, contract or document between two or more parties. Traditionally, these documents had recessed pages or perforated edges. In the past, the act also referred to a contract that requires one person to work for another person for a certain period of time (contract servant), especially European immigrants. In modern finance, the word indentured labour most often appears in bond contracts, real estate transactions and certain aspects of bankruptcies. BackOrders of goods or services that are unfinished. Orders for goods or services that the Company has not yet delivered or provided to its customers. BinderA fixed-term provisional insurance contract that obliges the insurance company to pay the insured if the insured damage occurs after the issuance of the file, but before the issuance of the insurance policy. Bad deliveryA warranty delivery that does not meet the requirements of a good delivery. See good delivery. (2) The process of comparing a forecast or simulation with a standard for the purpose of assessing the accuracy of the forecast or simulation.
For example, the projected change in net income projected by an ALM simulation model can be compared to subsequent returns by comparing this forecast. Also called benchmarking. Bond contract A document that defines the terms of a bond issue, the bonds of a bond issuer and the rights of bondholders. Bond debt is a contract between the company that issued the bonds and the trustee acting on behalf of the bondholders. Bonds can contain a variety of provisions and thus define and create differences in maturity and risk. Below are some of the most common types of debentures and clauses that can be associated with contracts. Beneficial ownerThe party who receives all the benefits or rights of an owner of a security, even if the legal ownership of the title is registered in the name of a broker or bank in the name of the street. Due to the technical nature of the commitment agreement, some situations benefit from a trustee appointed to act on behalf of the bondholder. The fiduciary is usually a large bank. The trustee ensures that the bondholder is satisfied that it meets important criteria, such as: (2) A guarantee provided by a guarantor or insurance company. For example, the obligation of fidelity, the obligation of compensation, the obligation of performance or the obligation of payment.
The beta-adjusted gapGap reports have been modified to mitigate errors caused by the baseline risk. The essential concept of the beta-adjusted spread is that not all interest rates change by the same amounts, but that there is an identifiable relationship, a correlation, between changes in different interest rates. Some rates are more sensitive to change than others. The beta-adjusted spread analysis weights the volumes of assets and liabilities being revalued to reflect the historical sensitivity of the returns or costs of those assets and liabilities relative to certain benchmark returns or costs.