Inversion and Notional pooling: Difference between pages

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1.
''Banking''.
A term used in foreign exchange rate quotation.


Consider the historical FX quote of 1 GBP = USD 1.4598 - 1.4602.
The technique used by banks for calculating interest on balances in a notional cash pool.  
The base currency is GBP.


The inversion of this FX quote means expressing the same price, but with the other currency as the base currency (USD here).
Excess funds in the accounts of a company or its subsidiaries are used to offset deficits in other company accounts for the purpose of determining interest earned or owed.  


So 1 USD = GBP [1/1.4602] - [1/1.4598]
Notional pooling is also referred to as interest offset pooling.
1 USD = GBP 0.6848 - 0.6850.


2.
In any market, the reversal of a normal - or commonly expected - relationship.
For example the situation of an Inverse yield curve, where longer maturities of funds are trading at LOWER yields than shorter-dated maturities (being the opposite of the normally expected upward-sloping relationship).


== See also ==
== See also ==
* [[Base currency]]
* [[Cash pool]]
* [[Foreign exchange]]
* [[CertICM]]
* [[Inverse quote]]
* [[Cross-guarantees]]
* [[Inverse yield curve]]
* [[Interest rate enhancement]]


[[Category:Long_term_funding]]
[[Category:Cash_management]]

Revision as of 08:14, 29 November 2014

Banking.

The technique used by banks for calculating interest on balances in a notional cash pool.

Excess funds in the accounts of a company or its subsidiaries are used to offset deficits in other company accounts for the purpose of determining interest earned or owed.

Notional pooling is also referred to as interest offset pooling.


See also

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