|
The money in circulation is indicated by Broad Money or M3.
Liquidity refers to surplus funds available with banks.
CRR is to be calculated on the basis of DTL with a lag of one fortnight.
SLR is to be maintained in the form of Cash, Gold and approved securities.
All security dealings are done through NDS and settled by CCIL.
…………………………………………………………………………………………………………………………………………………………
In Treasury business front office is called Dealing Room.
Exposure limits protect the bank from Credit Risk. The exposure limits are fixed on the basis of the counter party’s net worth, market reputation and track record.
The Counter party Risk is bankruptcy or inability of counter party to complete the transaction at their end.
Trading limits are of three kinds, they are 1) Limits on deal size 2) Limits on open positions and 3) Stop loss limits.
The Market Risk is closely connected with ALM. The Market Risk is also known as Price Risk.
Two important measures of risk are Value at Risk and Duration method.
Value at Risk (VAR) at 95% confidence level implies a 5% probability of incurring the loss.
Duration is widely used in investment business. The rate at which the present value equals the market price of a bond is known as YTM. Yield & price of a bond moves in inverse proportion.
Duration method is also known as Mecalay Duration, its originator is Frederic Mecalay.
Derivatives are used to protect treasury transactions from Market Risk.
……………………………………………………………………………………………………………………………………………
|
