Haircut and Money market: Difference between pages

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imported>Doug Williamson
(Updated entry. Source ACT Glossary of terms)
 
imported>Charles Cresswell
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1.  
Money markets trade short-term financial instruments, generally with a life up to one year.
Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.


''Secured lending''.
Important short term interest conventions are:


An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset.
1. For GBP yield instruments: Actual/365 days
So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365


For example:  
For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of:
= 4% x 272/365
= 2.9808% per 272 day period


if the market value of the asset were £100,000
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


and the haircut was 2%,
For example a 272 day USD yield instrument quoted at 4% pays periodic interest of:
= 4% x 272/360
= 3.0222% per 272 day period.


the maximum amount of the related secured loan would be £98,000 (= £100,000 LESS 2%).
== See also ==
 
* [[Capital market]]
 
* [[Depo market]]
2.
* [[International money market]]
 
* [[Market]]
The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset.
* [[Money market fund]]
* [[Money market lines]]
* [[Nominal annual rate]]
* [[Simple interest]]
* [[Wholesale markets]]


For example in this context:
[[Category:Debt_Capital_Markets]]
a 50% haircut on Greek debt of EUR 200bn
 
means a loss of EUR 100bn (= 50%)
and a recovery of EUR 100bn.
 
 
3.
 
A fee or commission, expressed as a percentage of the total value of the related transaction.
 
 
== See also ==
* [[Collateral]]
* [[Repurchase agreement]]
* [[Bilateral repurchase agreement]]
* [[Tri-party repurchase agreement]]

Revision as of 21:31, 28 June 2013

Money markets trade short-term financial instruments, generally with a life up to one year. Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.

Important short term interest conventions are:

1. For GBP yield instruments: Actual/365 days So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365

For example a 272 day sterling 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

For example 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

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