Fixed-Income Markets Issuance Trading and Funding Part 4 Flashcards
Capital protected instruments
Offered different levels of capital protection and are only as good as the issuer of the instrument
guarantee certificate that offers full capital protection
Yield enhancement instruments
Higher risk exposure and possibly a higher expected return
credit-linked note
Characteristics of credit-linked note
Pays regular coupons, but its redemption value depends on a well-defined credit event
investors receive par value at maturity if the event does not occur
investor receives the par value minus nominal value if the event occurs
allows the issuer to transfer the credit risk to investors
Participation instrument
A type of instrument that allows investors to participate in the return of an underlying instrument
floating-rate bond
do not offer capital protection
Leveraged instrument
Structured financial instruments that offer higher returns for small investments
inverse floater
Inverse floater coupon rate
C - (L x R)
C = maximum coupon rate if reference rate is 0
L = coupon leverage
R = reference rate on reset date
Deleveraged inverse floaters
Inverse floaters with a coupon leverage greater than 0 but lower than one
Leveraged inverse floater
Inverse floater with the coupon level is greater than 1
Retail deposits
Demand deposits or checking account
savings account
money market account
Demand deposit or checking account
Depositors have access to funds anytime
funds may be used to pay for transactions
little or no interest paid
Savings accounts
Depositors have access to funds
pays an interest
Money market account
Funds are available at short or no notice
offer money market rates of return
Short-term wholesale funds
Central Bank funds
interbank funds
certificates of deposit
Certificate of deposit
Savings instrument with a maturity date, a fixed interest rate, and can be issued in any denomination
negotiable and non-negotiable
Non negotiable certificate of deposit
The interest and deposit or paid at maturity