A rate of return for a time period that is less than or equal to one year, but is adjusted to represent the return over that time period.
Basis point (bp)
One-hundredth of one per cent, or 100 basis points, equals one per cent.
Cash Reserve Ratio (CRR)
In India, banks are mandated to keep a specific percentage of their deposits (NDTL) in cash. However, banks do not store these sums as cash; instead, they deposit them with the Reserve Bank of India (RBI) / currency chests, which is equal to storing cash with the RBI. Implement this in Debt Investing.
Certificates of deposit
A CD is a bank-issued investment product in which the bank guarantees to refund the principal plus interest on a certain maturity date. CDs are usually negotiable, which means they may be sold on the secondary market and the principle and interest redeemed before maturity.
Commercial paper (CP) is an unsecured, short-term promissory note. It is frequently issued in bearer form, which means it may be traded. The issuer agrees to pay the holder the face value of the paper on a specified maturity date by issuing the paper. CP is normally given out at a reduced rate.
Debt instruments are issued by firms with maturities ranging from one year to more than 20 years. These are usually issued in bearer form, which means they may be traded. Corporate bonds may be used by debt funds in particular circumstances, such as when they fulfil specific maturity and credit standards and the investment manager judges that secondary market liquidity is sufficient.
A standardised appraisal of a company's creditworthiness, presented in alphanumeric form, for the purpose of acquiring loan finance. Credit rating agencies offer ratings based on their publicly available methodology for rating the relevant instrument. Try our SIP Calculator online.
Credit Rating Agency
Independent organisations analyse issuer creditworthiness or credit risk and produce publicly available credit ratings that are used as a reference for investment choices by investors and analysts.
The risk that the issuer of a debt instrument will fail to return the principle and/or accumulated interest to the investor, in whole or in part. The eventual recovery value of a money market fund's debt held by a defaulting issuer will be influenced by the status of the securities held in insolvency proceedings.
A fund may pay distributions in cash or extra shares to represent revenue received minus expenditures.
Interest Rate Risk
The possibility is that a money market fund's yield would lag behind the applicable Central Bank's reference rate. Money market funds take positions based on length, hence their portfolios do not reflect the wider market. As a result, when the market moves (for example, due to an interest rate change), a money market fund's portfolio may take some time to rebalance, resulting in an interest rate lag. Get insights & Ideas online at our website.
• The risk that a security cannot be sold promptly without incurring a loss.
• The danger is that a money market fund will not be able to satisfy redemptions due to a lack of liquid assets.
The tradeable value of each security is it's worth depending on the market price at a given point in time.
A formula that quantifies the quantifiable change in a security's value as a result of interest rate changes.
Repo rate refers to the rate at which the RBI loans money to commercial banks. It is a monetary policy instrument. Banks can borrow from the RBI if they are short on cash.
Rather than buying and selling securities directly from the issuing business, investors can purchase and sell securities from other investors. Try Equity Investing with us.
The exchange of securities between buyer and seller, as well as the associated money transfer between the two contractual parties.
The date on which a security transaction is completed, i.e. payment and delivery of securities. This is the day on which subscription funds must be transferred to the fund or redemption proceeds must be paid by the fund to the redeeming investor in the case of a money market fund investment.
Short term debt instruments
Securities with an initial or continuing maturity of 12-18 months or less. Commercial paper, medium-term notes, variable-rate notes, floating-rate notes, bankers' acceptances, government bonds, treasury bills, Eurobonds, asset-backed securities, and corporate bonds are only a few examples. Try Asset allocation with these.
Statutory Liquidity Ratio (SLR)
Every bank is required to keep a minimum proportion of its Net Demand and Time Liabilities in liquid assets such as cash, gold, and unencumbered authorised securities at the end of each business day. The Statutory Liquidity Ratio is the proportion of liquid assets to demand and time liabilities (SLR). The RBI has the authority to raise this percentage to 40%. SLR increases also limit the bank's leverage position, limiting its ability to inject more money into the economy.
Weighted Average Maturity (WAM)
Based on the reset date of variable rate instruments and the ultimate maturity of other instruments, the weighted average days to maturity of a portfolio of securities.
The yearly rate of return on income paid out on a security or money market fund investment, is represented as a percentage of the relevant securities' current market values. Build your plan with us.
A graphical illustration of the relationship between yield and maturity on comparable debt instruments with varying maturities, generally for a single issuer or a set of issuers that are extremely closely connected.