Money market and Resolution: Difference between pages

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imported>Doug Williamson
(Link with ACT/360 and ACT/365 fixed pages.)
 
imported>John Grout
m (To activate link to "recovery")
 
Line 1: Line 1:
Money markets trade short-term financial instruments, generally with a life up to one year.  
<i>Bank resolution.</i>


Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.
The special process of resolving the problem of the actual or threatened insolvency of financial firms.  


Important short term interest conventions are:
The speed with which value destruction occurs in a failing financial firm means that normal corporate insolvency processes and liquidation are inappropriate for such firms.


As in normal insolvency, losses will be expected for some creditors.


1.


For GBP yield instruments: Actual / 365 fixed days.
Contrast with ‘[[recovery]]’ in which a firm facing financial difficulties is returned to acceptable financial health without imposing losses on the distressed firm's creditors.  


So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365.


== See also ==
* [[Resolution Authority]]


<span style="color:#4B0082">'''Example 1'''</span>
* [[Liquidation and Payout]]
 
A 272 day GBP yield instrument quoted at 4% would pay periodic interest of:
 
= 4% x 272 / 365
 
= 2.9808% per 272 day period.
 
 
 
2.
 
For EUR, USD and most other currencies yield instruments: Actual / 360 days.
 
So Simple periodic interest = Quoted nominal annual rate x [Actual days] / 360.
 
 
<span style="color:#4B0082">'''Example 2'''</span>
 
A 272 day USD yield instrument quoted at 4% pays periodic interest of:
 
= 4% x 272 / 360
 
= 3.0222% per 272 day period.
 


== See also ==
* [[Insolvency]]
* [[ACT/360]]
* [[ACT/365 fixed]]
* [[Capital market]]
* [[Depo market]]
* [[International money market]]
* [[Market]]
* [[Money market fund]]
* [[Money market fund reform: a light at the end of the tunnel?]]
* [[Money market lines]]
* [[Nominal annual rate]]
* [[Simple interest]]
* [[Wholesale markets]]


[[Category:Long_term_funding]]
* [[Key Attributes]]

Revision as of 10:58, 24 March 2014

Bank resolution.

The special process of resolving the problem of the actual or threatened insolvency of financial firms.

The speed with which value destruction occurs in a failing financial firm means that normal corporate insolvency processes and liquidation are inappropriate for such firms.

As in normal insolvency, losses will be expected for some creditors.


Contrast with ‘recovery’ in which a firm facing financial difficulties is returned to acceptable financial health without imposing losses on the distressed firm's creditors.


See also

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