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Recollected - June 2016
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Credit conversion factor - The credit conversion factor (CCF) converts the amount of a free credit line and other off-balance-sheet transactions (with the exception of derivatives) to an EAD (exposure at default) amount. This function is used to calculate the exposure at default.
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CHIPS - Clearing House Interbank Payments System
CHAPS - Clearing House Automated Payment System
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Coupon swap - A zero coupon swap is an exchange of income streams in which the stream of floating interest-rate payments is made periodically, as it would be in a plain vanilla swap, but the stream of fixed-rate payments is made as one lump-sum payment when the swap reaches maturity instead of periodically over the life of the swap.
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Word Mine in dealing room - Dealer takes the spot/forward/deposit whichever has been quoted from the counter party. It is dangerous to use the expression unless amounts have been qualified first. - Intrinsic Risk
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Gone concern - Defunct firm or one in the process of being wound up. Debts of such firms become due immediately in full, their market value is determined on the basis of auction or liquidation value of their tangible assets, and their goodwill counts for nothing.
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Abbreviation of EMV chip - Europay, MasterCard and Visa
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Provision coverage ratio = Cumulative provisions / Gross NPAs
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Intrinsic risk - Risk does not mean volatility; risk means losing your money. That happens when a business fails to deliver the operating performance embodied in the price an investor paid to acquire it.
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Call risk - Call risk is the risk that a bond issuer will redeem its bonds before they mature.
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Certificate of deposit - A certificate of deposit (CD) is a savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks.
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The original Basel III rule from 2010 required banks to fund themselves with 4.5% of common equity (up from 2% in Basel II) of risk-weighted assets (RWAs). Since 2015, a minimum Common Equity Tier 1 (CET1) ratio of 4.5% must be maintained at all times by the bank.[3] This ratio is calculated as follows:
CET1/RWAs >= 4.5 %
The minimum Tier 1 capital increases from 4% in Basel II to 6%,[3] applicable in 2015, over RWAs.[4] This 6% is composed of 4.5% of CET1, plus an extra 1.5% of Additional Tier 1 (AT1).
Furthermore, Basel III introduced two additional capital buffers:
A mandatory "capital conservation buffer", equivalent to 2.5% of risk-weighted assets. Considering the 4.5% CET1 capital ratio required, banks have to hold a total of 7% CET1 capital, from 2019 onwards.
A "discretionary counter-cyclical buffer", allowing national regulators to require up to an additional 2.5% of capital during periods of high credit growth. The level of this buffer ranges between 0% and 2.5% of RWA and must be met by CET1 capital.
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MSF - Marginal Standing Facility (MSF) rate refers to the rate at which the scheduled banks can borrow funds overnight from RBI against government securities. MSF is a very short term borrowing scheme for scheduled commercial banks.
Marginal Standing Facility (MSF) - 7.00% (w.e.f. 05/04/2016).
Decreased from 8.25% which was continuing since 02/06/2015
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European option - A European option is an option that can only be exercised at the end of its life, at its maturity. European options tend to sometimes trade at a discount to its comparable American option. This is because American options allow investors more opportunities to exercise the contract.
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Yield - The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
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BPV - BPV is a method that is used to measure interest rate risk. It is sometimes referred to as a delta or DV01. It is often used to measure the interest rate risk associated with swap trading books, bond trading portfolios and money market books.
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LC crystallisation questions
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Exposure measure
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Basel 3 general features
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swap questions 2
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What is supervisor review role in Basel 3
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Restructuring provision is for how much period
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Leverage ratio
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Addtional tier 1 is how much percentage of tier 1
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modified duration of equity
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Bill buying rate
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Cross rate
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Loss spot
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