Discount basis and Microprudential: Difference between pages

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This term can refer either to the cash flows of an instrument (Discount instruments) or to its basis of market quotation (Discount rate).
''Bank regulation''.  


For example when an instrument is quoted - on a <u>discount basis</u>, one period before its maturity - at a discount of 10% per period, this means that it is currently trading at a price of 100% LESS 10% = 90% of its terminal value.
The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole.


(The periodic ''yield'' on this instrument is 10%/90% = 11.11%.  So if the same instrument had been quoted on a <u>yield basis</u>, then the quoted yield per period = 11.11%.)
The relationship between the periodic discount rate (d) and the periodic yield (r) is:
r = d/[1-d]
So in this case:
r = 0.10/[1 - 0.10 = 0.90]
= 11.11%


== See also ==
== See also ==
* [[Discount instruments]]
* [[Bank supervision]]
* [[Discount rate]]
* [[Capital adequacy]]
* [[Sterling commercial paper]]
* [[Macroprudential]]
* [[US commercial paper]]
* [[Yield basis]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]

Latest revision as of 07:33, 29 June 2022

Bank regulation.

The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole.


See also

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