Overdraft and RFR: Difference between pages

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imported>Doug Williamson
(All link to O/N page.)
 
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1. ''Facility''.
Risk-Free Rate.


An overdraft facility is a line of credit which is applied to a current account and may be drawn on demand.
The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.


It is also known as a demand loan, as it is repayable to the bank on demand by the bank.
Also known as ''near'' risk-free rates, recognising that such rates are never entirely risk-free.


For this reason, it is risky to use overdrafts for core financing needs.


Theoretically risk free rates of ''investment'' return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.


2. ''Financial reporting - balance sheet - liabilities.''


The amount by which an account is overdrawn.
==See also==
*[[Capital asset pricing model]]
*[[O/N]]
*[[RFR WG]]
*[[Risk-free rate of return]]
*[[Risk-free rates]]
*[[SONIA]]


Also known as an overdraft balance.
[[Category:Corporate_financial_management]]
 
[[Category:Financial_products_and_markets]]
 
:<span style="color:#4B0082">'''''Example: Overdraft'''''</span>
 
:We have an overdraft of £50k at the start of April. In other words we owe £50k to the bank.
 
:We need to put more money into our account.
 
:Now we deposit £60k into the account during the month of April.
 
:This repays our overdraft, with some cash left over.
 
:At the end of April, our bank account now has a positive amount in it, of:
 
::-50 + 60 = 10k
 
:We now have £10k cash in our bank account at the end of April.
 
:The situation of a positive amount in the bank is known as cash at bank (or being 'in credit').
 
 
 
== See also ==
* [[Balance]]
* [[Balance sheet]]
* [[Bridge financing]]
* [[Concentrate]]
* [[Facility]]
* [[Liabilities]]
* [[Overdrawn]]
* [[Revolving credit facility]]
* [[Round tripping]]
 
[[Category:Liquidity_management]]

Revision as of 12:29, 24 March 2019

Risk-Free Rate.

The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.

Also known as near risk-free rates, recognising that such rates are never entirely risk-free.


Theoretically risk free rates of investment return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.


See also