Author Archives: NYC Journals Staff

What is a covered call?  A covered call is when you sell someone else the right to purchase a stock that you already own (hence “covered”), at a specified price (strike price), by a certain date (expiration date). When it’s structured properly, both time and price can work in your favor. Covered calls are one of the most common andContinue reading “Covered Call”

The consumer price index rose 8.6% in May from a year ago, the highest increase since December 1981. Core inflation excluding food and energy rose 6%. Both were higher than expected. Surging food, gas and energy prices all contributed to the gain, with fuel oil up 106.7% over the past year. Shelter costs, which compriseContinue reading “Inflation Rises 8.1, highest since 80’s”

There are several kinds of corporate bonds, giving investors many options when it comes to a bond’s structure, yield, and credit quality. Here are the most common: • Fixed-rate coupon bonds pay coupons on a fixed, regular basis, usually twice a year. The payment amount is a percentage of the bond’s par value. • ZeroContinue reading “Types of Bonds”

Bonds and Interest Rates When it comes to how interest rates affect bond prices, there are three cardinal rules: When interest rates rise—bond prices generally fall. When interest rates fall—bond prices generally rise. Every bond carries interest rate risk. Interest rate changes are among the most significant factors affecting bond return. To find out why,Continue reading “Bonds and Interest Rates”

Risks Associated with Corporate Bonds Compared with other financial securities, many types of bonds may be considered to be a relatively stable investment, but that doesn’t mean they’re not subject to risk, such as: Interest rate risk: Bonds have an inverse relationship with interest rates. When rates rise, bond prices fall, which is why longer-termContinue reading “Risks of Bonds”

A corporate bond is like a loan from an investor to a company, which the company repays with interest by the bond’s maturity date. Businesses consider bonds to be an attractive way to raise funds for their operations or capital expenditures because the interest they must pay to investors is less than what they wouldContinue reading “Corporate Bonds”

A security is a financial asset or instrument that has value and can be bought, sold, or traded. Some of the most common examples of securities include stocks, bonds, options, mutual funds, and ETF shares. Securities have certain tax implications in the United States and are under tight government regulation. Characteristics of Financial Securities SecuritiesContinue reading “Security”

What is a Financial Instrument? Financial instruments are contracts for monetary assets that can be purchased, traded, created, modified, or settled for. In terms of contracts, there is a contractual obligation between involved parties during a financial instrument transaction. For example, if a company were to pay cash for a bond, another party is obligatedContinue reading “Financial Instruments”

Credit ratingThe most significant issuers of bonds are central governments. Others are local governments, financial institutions, and companies. Corporate bonds are more common in the US than in Europe.Central governments issue bonds to finance their budget deficit. In the US, the issuances are organised by the Department of the Treasury. The most important types ofContinue reading “Credit Rating”

Bond marketsBonds are debt instruments similar to loans: the issuer is the debtor, the investor or the buyer of the bond is the lender. The issuer promises to pay the interest and the nominal or face value of the security in the future. However, there are at least two significant differences between loans and bonds.Continue reading “Bond Markets”

Risk typeDefinition / Main characteristiccredit riskthe risk that a borrower will fail to meet its obligations in accordance with agreed termsoperational riskthe risk of loss resulting from inadaquate or failed internal processes, people and systems or from other external eventsmarket riskthe risk that the value of an investment will decrease due to changes on theContinue reading “Overview of Risks”

➡ The interest on loans is charged according to the specified annual interest rate. The types of interest rate have already been discussed in connection with passive banking operations.➡ Potential nominal provision fee should be paid based on the unused amount of the credit limit. Its level is specified by the bank, usually on anContinue reading “The Price of a Loan”

Active operations of banks are those providing loans to customers directly or indirectly. In case of a direct loan the bank contracts its debtor and provides the contracted funds directly on the debtors account. In case of indirect loans the bank contracts with a third party, i.e. a mediatory who contracts with the ultimate userContinue reading “Active Banking Operations”

Issuing of short-term securities generally has a liquidity motive, therefore their majority has a maturity of 90, 180 and 270 days. Many varieties of short-term securities are known, such as savings certificates, bills, etc. In general, they are fixed rate ones, but rarely flexible rate ones also occur. Interest payments are usually made at maturity,Continue reading “Issuing Securities”

Central bank loansIf short- or long-term lack of resources arises at credit institutions, they can turn to the central bank for a refinancing loan. Banks can obtain collateralised loans only by depositing eligible securities at the central bank. The owner of the securities is still the commercial bank, so the amount of credit received forContinue reading “Repo Operations”