Points BFM / Treasury Management ★☆★
1. Swap generally used for interest arbitrage when one currency is not fully convertible.
2.TOD & TOM rates are generally quoted at discount to the rate of spot rate.
3. CBLO is a money market instrument launched by CCIL. It is generally a repo instrument.
4. The money in circulation is calculated by Broad money or M3.
5. C → 1 days
N→ <= 14 days
T → >14 days but < 1 yr
Here C is call money, N is Notice money & T is Term money
6. LAF is used measure to day to day liquidity in the market.
7. Treasury is proned with market risk.
8. CBLO→ Collatrised Borrowing Lending obligation
9. VaR measure can be used to assess the currency risk , interest risk and price risk.
10. Yield and price of bond move inversely.
11. The option is said to be ITM if strike price is less than the forward rate in case of a call option or if strike price is greater in a ut option.
12. Money market is measured by VaR and duration.
13. IRS( Interest rate swap ) is OTC instrument issued by banks.
14. OTC ( over the counter ) refers to the derivative products sold by banks to meet specific requirements of clients.
15. RBI has permitted banks to borrow and invest through their overseas correspondent in forigen currency subject to a ceiling of 50% of Tier I capital or USD 10 millions.
16. Spot and forward transaction are the primary product of forex market.
17. Treasury is also responsible for balance sheet management.
18. NDS(Negotiated dealing system is an electronic platform for faciliating dealing in gov. Sec.
19. LAF refers to RBI lending funds to banking thtough repo rate.
20. VaR is used to measure potential loss or wrost case scenario while holding a trading position.
21. VaR is a statistical measure indicating worst possible movement of market rate over a given period of time under normal market condition at defined confidence level.
22. Options refers to contracts where the buyer of an option has a right but no obligation to exercise the contract.
23. Options are either call option or put option.
24. Derivatives are basically of three kinds→ forward contracts, optional & swap.
25. Options are primarily used as hedge against price fluctuations , it is similar to insurance against adverse movement of price.
26. Transfer pricing refers to fixing the cost of resources and return an assets of the bank in a rational manner.
27. Transfer pricing is an integral function of ALM.
28. Futures are forward contracts traded in future exchange.
29. FRA(Forward Rate agreement) closely linked with IRS, where the interest payable for future period is commited under the agreement.
30. The difference between sources and uses of funds in specific time band is known as liquidity gap.
31. Derivaties can be used to hedge high value transactions or aggregrate risks as reflected in asset-liability mismatches.
32. For the purpose of ALM ,all assets and liabilities are placed in time buckets is measured as a gap b/w rate sensitive assets and rate sensitive liabilities.
33. CD ( Credit Derivatives) help the issuer diversify the credit risk and use the capital more efficiently.
34. Roles of Treasury → Liquidity management, propritery positions , Risk management.
35. Forwad refers to purchase or sale of currency on a future date. The exchange rate for forward sale or purchase are quoted today, hence such transaction are referred to as forward contracts b/w buyer & seller.
1. Swap generally used for interest arbitrage when one currency is not fully convertible.
2.TOD & TOM rates are generally quoted at discount to the rate of spot rate.
3. CBLO is a money market instrument launched by CCIL. It is generally a repo instrument.
4. The money in circulation is calculated by Broad money or M3.
5. C → 1 days
N→ <= 14 days
T → >14 days but < 1 yr
Here C is call money, N is Notice money & T is Term money
6. LAF is used measure to day to day liquidity in the market.
7. Treasury is proned with market risk.
8. CBLO→ Collatrised Borrowing Lending obligation
9. VaR measure can be used to assess the currency risk , interest risk and price risk.
10. Yield and price of bond move inversely.
11. The option is said to be ITM if strike price is less than the forward rate in case of a call option or if strike price is greater in a ut option.
12. Money market is measured by VaR and duration.
13. IRS( Interest rate swap ) is OTC instrument issued by banks.
14. OTC ( over the counter ) refers to the derivative products sold by banks to meet specific requirements of clients.
15. RBI has permitted banks to borrow and invest through their overseas correspondent in forigen currency subject to a ceiling of 50% of Tier I capital or USD 10 millions.
16. Spot and forward transaction are the primary product of forex market.
17. Treasury is also responsible for balance sheet management.
18. NDS(Negotiated dealing system is an electronic platform for faciliating dealing in gov. Sec.
19. LAF refers to RBI lending funds to banking thtough repo rate.
20. VaR is used to measure potential loss or wrost case scenario while holding a trading position.
21. VaR is a statistical measure indicating worst possible movement of market rate over a given period of time under normal market condition at defined confidence level.
22. Options refers to contracts where the buyer of an option has a right but no obligation to exercise the contract.
23. Options are either call option or put option.
24. Derivatives are basically of three kinds→ forward contracts, optional & swap.
25. Options are primarily used as hedge against price fluctuations , it is similar to insurance against adverse movement of price.
26. Transfer pricing refers to fixing the cost of resources and return an assets of the bank in a rational manner.
27. Transfer pricing is an integral function of ALM.
28. Futures are forward contracts traded in future exchange.
29. FRA(Forward Rate agreement) closely linked with IRS, where the interest payable for future period is commited under the agreement.
30. The difference between sources and uses of funds in specific time band is known as liquidity gap.
31. Derivaties can be used to hedge high value transactions or aggregrate risks as reflected in asset-liability mismatches.
32. For the purpose of ALM ,all assets and liabilities are placed in time buckets is measured as a gap b/w rate sensitive assets and rate sensitive liabilities.
33. CD ( Credit Derivatives) help the issuer diversify the credit risk and use the capital more efficiently.
34. Roles of Treasury → Liquidity management, propritery positions , Risk management.
35. Forwad refers to purchase or sale of currency on a future date. The exchange rate for forward sale or purchase are quoted today, hence such transaction are referred to as forward contracts b/w buyer & seller.
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