Interbank Operations Flashcards
What is the interbank Market?
Where short term highly liquid instruments are traded, these are large-scale markets where the players are credit institutions
What are the different sectors of the interbank market?
The deposit market, the repo market, the SWAPS market, and the FRA market.
What is the European Deposit Market?
Is the market where the banks fix there liquidity necessities with maturities ranging from one day to one year. The most popular transaction is one-day maturity
Why is the deposit market important?
Because it sets the interest rates charged to their costumers, by using as a reference the interest of the traded instruments
How are the interest rates of the Deposit market generated?
Through EONIA and EURIBOR. The first is generated by calculating a weighted average of all the effective overnight interest rates of the unsecured lending interbank operations. The second, is the interest rate that indicates the supply of deposits between the lending entities.
What is a FRA?
It is a contract that involves an agreement on a future loan at a previously agreed interest trate on a pre-determined quantity and for a pre-defined period. It includes the deal date, the settlement date and the termination date
What happens when the agreed rate (expected EURIBOR) is higher or lower thant the EURIBOR?
If r>EUR the buyer pays to the seller, but if the r
