Acronyms Flashcards
Cash on deposit - CNF
Call deposits - instant access to withdraw funds
Notice deposits - give period of notice before can withdraw funds
Fixed term deposits - only withdraw funds at maturity
Money market instruments - TLCBC
Treasury Bill
Local Authority Bill
Commercial Paper
Bill of Exchange
Certificate of Deposit
Key participants in the money markets - CCO
Clearing Banks - lend when they have excess funds / borrow when they need short-term funds / often overnight lending / borrowing
Central Bank - “lender of last resort” / uses operations to establish short-term interest rates
Other institutions - lend / borrow short-term fouds
Characteristics of assets: SYSTEM T
S - Security - default risk, other risk
Y - Yield - expected return, real vs nominal, running yield
S - Spread -diversification / volatility in price
T - Tax
E - Expenses / Exchange rate - dealing or maintainance, overseas
M - Marketability / Liquidity - bought and sold easily and quickly / marketable + stable price or close to cash in nature
T - Term - to maturity, short, medium, long, irredeemable
Reasons for holding money market assets: POURS
P - Protect market value
O - Opportunity
U - Uncertain outgo
R - Recently received cashflow
S - Short-term liabilities
Economic situations when bouds and equities will fall in value: GRID
G - General economic uncertainty
R - Recession
I - Interest rate rises
D - Depreciation of domestic currency
Describing cashflows - WWSFATT
W - from Whose perspective?
W - What are the cashflows?
S - Sign - positive or negative?
F - Frequency - lump sum or regular payments?
A - Amount - known or unknown
T - Timing - known or unknown
T - Term - known or unknown
Prime property factors: CALL ST
C - Comparables
A - Age and condition
L - Location
L - Lease structure
S - Size
T - Tenant quality
Problems within investing in overseas market: MTV CATER PILLAR
M - Mismatching assets and liabilities
T - Tax issues
V - Volatility of potential returns
C - Custodian may be required
A - Additional administration
T - Time delays
E - Expertise required
R - Regulation may be poorer
P - Political changes - adverse
I - Information - less available
L - Liquidity lower
L - Language barriers
A - Accounting practices differ
R - Restrictions on ownership
Yield curve theories - LIME
L - Liquidity preference
I - Inflation risk premium
M - Market segmentation
E - Expectations
Main economic variables - EUIE
E - Economic growth
U - Unemployment
I - Inflation
E - Exchange rate
Valuation methods - SHAM FADS
S - Smoothed market value
H - Historic book value
A - Adjusted book value
M - Market value
F - Fair value
A - Arbitrage value
D - Discounted cashflow
S - Stochastic model
Factors influencing investment strategy - A SAD CUTER INVESTOR
A - Accounting regulations
S - Size of assets (absolute / relative)
A - Accrual of future liabilities
D - Diversification
C - Currency of the liabilities
U - Uncertainty of the liabilities
T - Tax treatment of assets / investor
E - Environmental / social / governance issues
R - Risk appetite
I - Institution’s objectives
N - Nature of the liabilities
V - Voluntary and legal restrictions
E - Existing portfolio
S - Solvency requirements
T - Term of the liabilities
O - Other fund’s strategies ( competition )
R - Return (expected long-term)
Categories of liabilities - MIDI
M - guaranteed in Monetary terms
I - guaranteed in terms of an intext
D - Discretionary
I - Investment-linked
Matching considerations - TECH SCAM
T - Types of assets that can be invested in
E - Extent of mismatching allowed
C - Currency match between Assets & Liabilities
H - Hold certain proportion of total assets in particular class eg gilts
S - Single counterparty exposure maximum
C - Custodianship of assets
A - Amount of any asset allowed to demonstrate solvency
M - Mismatch reserve
