Canary in the coal mine and Cap: Difference between pages

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''Risk management - economic indicators.''
1.
An option hedging structure which effectively establishes a maximum worst case hedged rate or price for a cash outflow or a liability, while allowing the holder of the cap to retain the potential benefit of more favourable lower market rates or prices.  If creating a cap for an extended period the transaction can be structured into a series of "caplets", each caplet being for a set period coinciding with the interest periods of the borrowing being hedged eg 3 month LIBOR.


Information that helps to identify potential problems at an appropriately early stage.


Especially key information about potential future downturns in economic activity in a particular sector - or more broadly - before adverse effects have been detected elsewhere.
2.
A risk management arrangement whereby limits are placed on the positions that participants in an interbank funds transfer system can incur during the business day.  


They may be set by each individual participant or by the body governing the transfer system; they can be set in multilateral net, bilateral net or (less commonly) gross terms and can be either a credit cap or a debit cap; for example, bilateral net credit caps, set by an individual participant, will constitute a limit on the credit exposure which that participant will accept in relation to each other participant.


From the past practice of using caged canaries to detect odourless poisonous gases - including carbon monoxide and methane - in mines.
In contrast, sender net debit caps, which may for example be set by the governing body of the clearing system based on a particular formula, limit the aggregate value of transfers that an individual participant may send to all other participants over and above its incoming transfers.
 
The birds would fall sick or die before the human miners, giving the miners a signal to leave the mine immediately if at all possible.
 
 
:<span style="color:#4B0082">'''''Musk's warning could be auto industry's 'canary in the coal mine' moment'''''</span>
 
:"CEO Elon Musk's 'super bad feeling' about the economy could be the auto industry's 'canary in the coal mine' moment, signaling a recession for an industry whose bosses have shown no signs of concern.
 
:Musk said the electric carmaker needed to cut about 10% of its workforce in an email to executives seen by Reuters....
 
:Musk's warning is the first loud and public dissent in a united stance by the auto industry that underlying demand for cars and trucks remains strong despite two years of global pandemic. One executive this week called demand 'sky high.'
 
:'Tesla's not your average canary in the coal mine. It's more like a whale in the lithium mine,' Morgan Stanley analyst Adam Jonas said in a research note, referring to the metal used in EV batteries."
 
:''Reuters - 3 June 2022.''


Sender net debit limits may be either collateralised or uncollateralised.


== See also ==
== See also ==
* [[Chief Executive Officer]] (CEO)
* [[Capped FRN]]
* [[Dovish]]
* [[Collar hedge]]
* [[Early warning indicator]] (EWI)
* [[Floor]]
* [[Electric vehicle]] (EV)
* [[Interest rate cap]]
* [[Hawkish]]
* [[Interest rate collar]]
* [[Key risk indicator]] (KRI)
* [[Notional amount]]
* [[Liquidity risk]]
* [[CertICM]]
* [[Methane]]
* [[Recession]]
* [[Risk management]]
* [[Stress]]
* [[Whale]]
 
 
==External link==
*[https://www.reuters.com/business/autos-transportation/musks-warning-could-be-auto-industrys-canary-coal-mine-moment-2022-06-03/ Musk's warning could be auto industry's 'canary in the coal mine' moment - Reuters - June 2022]
 
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]

Revision as of 10:35, 23 November 2014

1. An option hedging structure which effectively establishes a maximum worst case hedged rate or price for a cash outflow or a liability, while allowing the holder of the cap to retain the potential benefit of more favourable lower market rates or prices. If creating a cap for an extended period the transaction can be structured into a series of "caplets", each caplet being for a set period coinciding with the interest periods of the borrowing being hedged eg 3 month LIBOR.


2. A risk management arrangement whereby limits are placed on the positions that participants in an interbank funds transfer system can incur during the business day.

They may be set by each individual participant or by the body governing the transfer system; they can be set in multilateral net, bilateral net or (less commonly) gross terms and can be either a credit cap or a debit cap; for example, bilateral net credit caps, set by an individual participant, will constitute a limit on the credit exposure which that participant will accept in relation to each other participant.

In contrast, sender net debit caps, which may for example be set by the governing body of the clearing system based on a particular formula, limit the aggregate value of transfers that an individual participant may send to all other participants over and above its incoming transfers.

Sender net debit limits may be either collateralised or uncollateralised.

See also

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