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| Weighted average collateral yield less the weighted average risk-free rate. This represents a measure of the excess return generated by the investment process. It is also referred to as the investment spread, asset spread, reinvestment spread or collateral spread. |
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| An individual or firm authorized to act on behalf of another, such as by executing a transaction. The agent does not assume any financial risk in the transaction, as a principal or dealer would. A securities lending agent is usually a global custodian financial institution, such as State Street. Agents are an attractive counterpart for borrowers, who want to deal with holders of very large pools of assets. Lenders look to agents for their access to a wide range of markets, ability to manage credit and risk analysis, and their expertise in all aspects of the securities lending process. |
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| Weighted average collateral yield less the weighted average risk-free rate. This represents a measure of the excess return generated by the investment process. This is also referred to as the investment spread, above-the-line spread, reinvestment spread or collateral spread. |
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| A risk management technique designed to earn a surplus return on assets beyond the cost of liabilities. Takes into consideration interest rates, earning power and degree of willingness to take on debt. In securities lending transactions the objective of the asset-liability management process is to ensure that reinvestment securities purchased with cash collateral (an asset of the lender) earn an adequate yield and cover the cost (the rebate rate) of the security loans (a liability of the lender) that finance the purchase of the reinvestment securities. |
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| The process of maintaining assets and liabilities with different durations in an attempt to optimize return. In securities lending transactions, securities loans (liabilities of the lender) are typically overnight instruments while the reinvestment securities (assets of the lender) have various durations, depending on the condition of the yield curve at the time of purchase. |
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| Any item of economic value owned by an individual or entity, especially that which could be converted to cash. In securities lending transactions, the instruments acquired or secured transactions entered into as part of the collateral reinvestment process are the assets of the securities lender. |
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| For loans vs. cash collateral, it is the weighted average risk-free rate less the weighted average rebate rate. It represents a measure of the demand value of the loaned security and is also referred to as the funding spread, the intrinsic spread, the intrinsic value, the natural spread or the demand spread. For loans vs. non-cash collateral it is equal to the premium paid by the borrower. |
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| A pre-specified standard against which performance can be measured. |
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| The right of an individual to enjoy the benefits of owning a security or property, regardless of whose name the title is in. When a security is loaned, legal title to the security is typically transferred to the borrower; however, in such cases the lender retains a beneficial interest in the security and is thereby entitled to receive some or all of the benefits of ownership of a security or financial instrument, such as the receipt of the value of an interest or dividend payment, irrespective of its on-loan status. |
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| In most instances, a securities borrower is a financial intermediary, such as a broker, dealer or market-maker. These firms use the securities to meet an array of short-term needs, including: avoiding settlement failures, supporting hedging — short selling strategies and to facilitate arbitrage opportunities. |
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| A registered securities firm that typically borrowers securities for its proprietary use or in support of its customer's investment activity. |
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| A purchase of securities in the open market by a lender (or its agent) in order to replace loaned securities that a borrower has not been able to return. |
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| Short- or medium-term, interest-bearing debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments. |
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| An asset pledged or delivered to a lender or its agent to secure a loan. |
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| A portfolio of securities, each with a specified yield (or yield formula) and expected term to maturity that is purchased by a lender with cash collateral received in connection with a securities loan. The collateral pool is an asset of the lender; therefore, the investor is "long" this portfolio. Also referred to as a collateral portfolio or reinvestment portfolio. |
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| A pool of securities, each with a specified yield (or yield formula) and expected term to maturity that is purchased by a lender with cash collateral received in connection with a securities loan. The collateral portfolio is an asset of the lender; therefore, the investor is "long" this portfolio. Also referred to as a collateral pool or reinvestment portfolio. |
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| The potential that investments purchased with cash collateral will provide insufficient return to satisfy rebate payments owed to the borrower on the cash collateral and/or that investments purchased with cash collateral will decrease in value to an extent that there is insufficient value to return the cash collateral owed to the borrower at the end of the term of the loan. The collateral reinvestment risk is comprised of interest rate risk, credit risk and spread risk. Also known as reinvestment risk. |
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| Weighted average collateral yield less the weighted average risk-free rate. This represents a measure of the excess return generated by the investment process. This is also referred to as the asset spread, reinvestment spread, investment spread or the above-the-line spread. |
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| The annual rate of return on a collateral portfolio, expressed as a percentage. Also called the reinvestment yield. |
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| The difference between the yield generated by the cash collateral and the rebate paid on the securities loans (or, the in case of loans vs. non-cash collateral, the premium). It is comprised of the demand spread and the reinvestment spread. Also referred to as gross spread, integrated or total spread. |
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| A statistical measure that identifies a range within which an observation would be expected to fall with a particular degree of probability, expressed as a percentage. |
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| A statistical calculation measuring the degree of certainty, expressed as a percentage, that an actual observation will fall within an estimated range of values. |
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| Trading maximums set by one party to manage its activity with and exposure to another party. |
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| The risk that a counterparty will not settle an obligation in full, either on the due date or at any time afterwards. This risk is present on both the lending side (borrower as counterpary) and the collateral reinvestment side (reinvestment security issuer as counterparty) of a securities lending transaction. Synonymous with credit risk. |
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| The chance that a change in the credit quality of a security issuer will impact the value of securities it has issued or that a change in the credit quality of a structured security will impact its value. |
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| The potential for a decline in asset value brought about by the inability, or perceived inability, of a security issuer or borrower to meet its financial obligations. Credit risk is comprised of migration risk and default risk. It is present on both the lending side (borrower credit risk) and the collateral reinvestment side (reinvestment security issuer credit risk) of a securities lending transaction. |
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| The potential for the value of a security to decrease due to the inability or the perceived inability of a security issuer to meet its financial obligations. |
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| A firm that provides securities safekeeping and settlement services. |
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| The potential for the loss of securities held with a custodian as a result of the insolvency, negligence or fraudulent activities of the custodian. |
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| Failure to comply with conditions of an obligation or agreement. Failure to complete a funds or securities transfer according to contractual terms, for reasons that are not technical or temporary, usually as a result of a credit event or bankruptcy. |
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| The possibility that a bond issuer will default by failing to repay principal and interest in a timely manner, or the possibility that a security borrower will default by failing to maintain appropriate collateral margin or by failing to return the borrowed securities when required. Default risk is a component of credit risk. |
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| A mechanism in some settlement systems (including CREST) whereby a member may borrow or lend cash versus overnight collateral. The system automatically selects and delivers securities and retrieves them the following day over the term of the transaction (securities are pledged intraday and delivered in the evening creating an intra-day exposure). |
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| A link between a securities transfer system and a funds transfer system that ensures that the delivery of securities and payment occur simultaneously. |
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| For loans vs. cash collateral, it is the weighted average risk-free rate less the rebate rate. It represents a measure of the demand value of the loaned security and is also referred to as the funding spread, the intrinsic spread, the intrinsic value, the natural spread or the below-the-line spread. For loans vs. non-cash collateral it is equal to the premium paid by the borrower. |
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| A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks and bonds, whose values/prices are unlikely to all move in the same direction. The goal of diversification is to reduce the risk in a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions. Diversification can be present across borrowers or within collateral reinvestment guidelines (e.g. assets, issuers). |
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| The change in the value of a fixed income security that will result from a 1% change in interest rates. Duration is stated in terms of time. For example, a 5-year duration means the bond will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. Duration is a weighted measure of the length of time the bond will pay out. Unlike maturity, duration takes into account interest payments that occur throughout the course of holding the bond. Basically, duration is a weighted average of the present value of all the income streams from a bond or portfolio of bonds. Investors use duration to measure the volatility of the bond. Generally, the higher the duration (the longer an investor needs to wait for the bulk of the payments), the more its price will drop as interest rates go up. There are three duration measures: McCauley duration, modified duration and effective duration. |
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| The line on a risk-reward graph comprised of all efficient portfolios. |
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| A portfolio that provides the greatest expected return for a given level of risk, or equivalently, the lowest risk for a given expected return. |
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| An effective overnight rate computed as a weighted average of all overnight unsecured lending transactions in the interbank market, initiated within the euro area by the contributing panel banks. Daily reports are provided by the same panel of 57 banks as quoted for Euribor. It is reported on an act/360 day count and is calculated by the European Central Bank. |
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| A failure to settle a securities transaction on the contractual settlement date, usually because of technical or temporary difficulties. |
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| The negotiated percentage that defines how securities lending income will be divided between a securities lending agent and its lending client. |
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| A yield curve showing the same (or almost the same) yield for short-maturity and long-maturity bonds. |
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| A security, whose rate of interest adjusts or floats, based on a short-term rate index. The interest adjusts, or resets, on specified dates. |
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| Delivery of securities with no corresponding payment of funds. |
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| In securities lending transactions, the funding portfolio is made up of a group of loaned securities. The cash collateral received by the lender from the borrower (the funding) is a liability of the lender. The lender invests the cash collateral in the collateral portfolio, an asset; therefore, a lender is considered to be "short" the funding portfolio. |
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| The interest rate that a securities lender pays the borrower on cash collateral. This will normally be below the risk-free rate and will reflect the demand value of the securities. Also referred to as the rebate rate. |
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| Securities that are not highly sought after in the market by borrowers; demand for general collateral is not issue specific. Repo rates, rebate rates and premiums for these specific securities tend to be lower than the prevailing rate for special collateral. |
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| Economy-wide perils that threaten all businesses. |
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| The amount of income earned from the collateral portfolio less the amount of the rebate owed to the borrower. It is the income to be split between lender and agent. |
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| The difference between the yield generated by the cash collateral and the rebate paid on the securities loans (or, the in case of loans vs. non-cash collateral, the premium). It is comprised of the demand spread and the reinvestment spread. Also referred to as combined spread, integrated spread or total spread. |
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| A fund, usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other mutual funds, which allows them to accomplish aggressive investing goals. Hedge Funds are major users of prime brokerage services and are significant drivers of demand for securities loans. |
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| A bar graph in which the frequency of occurrence for each class of data is represented by the relative height of the bars. |
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| A group of observations collected in the past. |
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| A breakdown of total income by its sources. In securities lending transactions, total income is driven by demand spread and reinvestment spread. |
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| An agreement to compensate for damage or loss. Custodians sometimes offer it to lending clients in a variety of forms. Most often to protect against borrower default or operational losses. |
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| The combination of the funding and collateral portfolios. |
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| The difference between the yield generated by the cash collateral and the rebate paid on the securities loans (or, the in case of loans vs. non-cash collateral, the premium). It is comprised of the demand spread and the reinvestment spread. Also referred to as combined spread, gross spread or total spread. |
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| The possibility of a reduction in the value of a security or loan resulting from a change in interest rates levels. |
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| For loans vs. cash collateral, it is the weighted average risk-free rate less the weighted average rebate rate. For loans vs. non-cash collateral it is equal to the premium paid by the borrower. It represents a measure of the demand value of the loaned security and is also referred to as the funding spread, the demand spread, the intrinsic value, the natural spread or the below-the-line spread. |
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| For loans vs. cash collateral, it is the weighted average risk-free rate less the weighted average rebate rate. For loans vs. non-cash collateral it is equal to the premium paid by the borrower. It represents a measure of the demand value of the loaned security and is also referred to as the funding spread, the intrinsic spread, the demand spread, the natural spread or the below-the-line spread. |
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| Weighted average collateral yield less the weighted average risk-free rate. This represents a measure of the excess return generated by the investment process. This is also referred to as asset spread, reinvestment spread, above-the-line spread or collateral spread. |
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| The possibility of loss because of the unexpected application of a law or regulation or because of the lack of enforceability of the provision(s) of an agreement. |
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| One recognizable or enforceable in law, or one which is complete and perfect as regards the apparent right of ownership and possession, which may carry no beneficial interest. |
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| A measure of the aggregate market value of the securities available for loan. |
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| Lenders of securities are typically institutional investors, such as a pension plan, foundation, endowment or money manager, with a significant proportion of assets that are bought and held long-term. |
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| A financial obligation, debt, claim or potential loss. In the securities lending context, the securities loans are a liability of the lender. The cash collateral posted by borrowers to support a securities loan is the means by which a lender "finances" the purchase of reinvestment securities. The lender is obligated to return the collateral to the borrower upon the termination of the loan. |
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| The risk that arises from the difficulty of selling an asset. An investment may sometimes need to be sold quickly. An insufficient secondary market may prevent the liquidation or limit the funds that can be generated from the asset. Some assets are highly liquid and have low liquidity risk (such as US Treasuries), while other assets are highly illiquid and have high liquidity risk (such as a house). |
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| The state of actually owning an asset, such as security, contract or commodity, and being the beneficiary of all cash flows. Opposite of short position. |
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| A payment made by the borrower of securities to the lender in lieu of actual dividends or other income earned on the securities (net of any applicable taxes). This payment is equal to that which the lender would have received if it had not lent the securities. Also referred to as a substitute payment. |
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| The amount or percentage by which the collateral value exceeds the value of securities or funds on loan (e.g. 2%, 5%). It sometimes refers to the total value of the collateral as a percentage of the loan value (e.g. 102%, 105%). Margin reduces replacement cost risk resulting from changes in market prices. Initial margin is deposited at the start of the transaction. Variation margin is called during the life of the loan if the value of the collateral falls below the initial margin requirement. Also referred to as a haircut. |
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| A demand for additional funds or collateral, following the marking-to-market of a securities lending transaction, if the market value of the collateral falls below a certain level relative to the loaned asset. If the value of the underlying collateral assets exceeded the agreed margin, the return of collateral would be required. |
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| A security's last reported sale price (if on an exchange) or its current bid and ask prices (if over-the-counter); i.e. the price as determined dynamically by buyers and sellers in an open market. Also called market value. |
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| Risk that is common to an entire class of assets or liabilities. The value of investments may decline over a given time period simply because of economic changes or other events that impact large portions of the market. Asset allocation and diversification can protect against systematic risk because different portions of the market tend to under perform at different times. Also called systematic risk. |
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| A security's last reported sale price (if on an exchange) or its current bid and ask prices (if over-the-counter); i.e. the price as determined dynamically by buyers and sellers in an open market. Also called market price. |
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| The practice of (re)valuing securities and financial instruments using current market prices. Both securities loans and collateral are revalued daily. |
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| Recording the price or value of a security, portfolio or account on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met. Also referred to as repricing or revaluation. |
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| An agreement that sets out the standard terms and conditions applicable to all or a defined subset of transactions that the parties may enter into from time to time, including the terms and conditions for close-out netting of the transactions. |
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| The arithmetic average of a population or a sample of observations. |
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| One type of average, found by arranging the values in order and then selecting the one in the middle. The median is a useful number in cases where the distribution has very large extreme values that would otherwise skew the data. |
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| The chance that a change in the credit quality of a security issuer will impact the value of the securities it has issued. Migration risk is a component of credit risk. |
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| The most commonly occurring value in a data set. |
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| Theory that states that the most efficient portfolios are those that achieve the greatest return for a given level of risk, or alternatively, those that achieve a particular return for the least amount of risk. |
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| Market for short-term debt securities, such as banker's acceptances, commercial paper, repos, negotiable certificates of deposit, asset backed securities, agencies and Treasury Bills with a maturity of one year or less and often 30 days or less. Money market securities are generally very safe investments that return a relatively low interest rate that is most appropriate for temporary cash storage or short-term time horizons. Bid and ask spreads are relatively small due to the large size and high liquidity of the market. Most securities lending collateral reinvestment portfolios are structured like money market funds. |
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| For loans vs. cash collateral, it is the weighted average risk-free rate less the weighted average rebate rate. It represents a measure of the demand value of the loaned security and is also referred to as the funding spread, the intrinsic spread, the intrinsic value, the below-the-line spread or the demand spread. For loans vs. non-cash collateral it is equal to the premium paid by the borrower. |
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| A graphical screen in SL PerformanceAnalyzer that details the NAV of the collateral portfolio and how it tracks relative to risk estimates. |
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| Uncommon situations in which long-term interest rates have lower yields than short-term interest rates. This is often a sign that interest rates are expected to decline. Also called inverted yield curve. |
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| The dollar value of a single commingled fund share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day. |
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| Uncertainty related to the future net asset value of a portfolio. In the securities lending context, NAV risk is driven by borrower default risk, credit spread risk, interest rate risk, issuer default risk, credit migration risk and liquidity risk. |
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| A probability distribution shaped like a bell, often found in statistical samples. The distribution of the curve implies that for a large population of independent random numbers, the majority of the population often clusters near a central value (the average, or mean), and the frequency of higher and lower values taper off smoothly. |
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| The value of securities loaned to a borrower through the securities lending process. |
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| Transactions with no fixed maturity date that are subject to the possibility of daily termination or renegotiation of rebate rates. Securities loans are generally considered overnight, or open, transactions. |
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| The risk that deficiencies in information systems or internal controls could result in an unexpected loss. |
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| A situation in which long-term debt instruments have higher yields than short-term debt instruments. This is the usual condition, and happens because investors demand a higher return for taking on the additional risk of the longer-term investment. Also called normal yield curve. |
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| Fee paid by a borrower to a lender on loans of securities vs. non-cash collateral |
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| Risk resulting from the possibility that the price of a security or physical commodity may decline. |
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| The provision by brokerage houses of credit, clearing, securities lending and other services to clients (typically hedge funds). |
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| A party to a transaction that acts on its own behalf or the entity on whose behalf an agent acts. In acting as a principal, a firm is buying/selling (or lending/borrowing) from its own account. A principal bears financial risk for the transactions it enters into. Alternatively, principal can refer to the assets/capital owned held by an entity. |
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| The risk of loss of the assets/capital owned by an entity (e.g., NAV risk). Alternatively, the risk of loss engendered by being a principal to a transaction. |
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| Trading in securities or derivatives for the account of a firm, rather than on behalf of clients. |
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| The interest rate that a securities lender pays the borrower on cash collateral. This will normally be below the risk-free rate and will reflect the demand value of the securities. Also referred to as the funding rebate. |
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| A demand by a securities lender for the return of securities on loan, typically to effect settlement of a plan sponsor sale of such securities. |
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| A pool of securities, each with a specified yield (or yield formula) and expected term to maturity that is purchased by a lender with cash collateral received in connection with a securities loan. The collateral portfolio is an asset of the lender; therefore, the investor is "long" this portfolio. Also referred to as a collateral pool or collateral portfolio. |
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| The potential that investments purchased with cash collateral will provide insufficient return to satisfy rebate payments owed to the borrower on the cash collateral and/or that investments purchased with cash collateral will decrease in value to an extent that there is insufficient value to return the cash collateral owed to the borrower at the end of the term of the loan. The reinvestment risk is comprised of interest rate risk, credit risk and spread risk. Also known as collateral reinvestment risk. |
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| Securities purchased with cash collateral received on securities loans on behalf of securities lenders. |
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| Weighted average collateral yield less the weighted average risk-free rate. This represents a measure of the excess return generated by the investment process. This is also referred to as asset spread, investment spread, above-the-line spread or collateral spread. |
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| The annual rate of return on a collateral portfolio, expressed as a percentage. Also called collateral yield. |
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| The potential that loaned securities will increase in value to such an extent that the value of investments purchased with cash collateral will be insufficient to buy-in the loaned securities, in the event of a borrower default. |
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| Recording the price or value of a security, portfolio, or account on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met. Also referred to as marking-to-market or revaluation. |
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| A financing arrangement in which the holder of securities sells them to a lender under an agreement to repurchase them on a specified date at an agreed-to price. |
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| A group of observations. |
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| Represents average return relative to volatility of returns. Can be viewed as a measure of risk adjusted return. |
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| Recording the price or value of a security, portfolio or account on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met. Also referred to as repricing or marking-to-market. |
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| A contract with a counterparty to buy and subsequently resell securities at a specified date and price; the other side of a repo. |
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| Uncertainty with regard to potential outcome. Commonly considered the quantifiable likelihood of loss or less-than-expected returns. |
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| The return on your lending activity based on the risks you took to earn the income. Also called risk-adjusted return. |
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| The return on your lending activity based on the risks you took to earn the income. Also called risk-adjusted performance. |
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| A theoretical interest rate that would be returned on an investment that was completely free of risk. The very short-term government securities are usually used as proxies for the risk free rate, since they are virtually risk-free. In securities lending transactions the overnight US Government Repo Rate and the Eonia are used as close approximations of the risk-free rate for loans vs. USD collateral and loans vs. Euro collateral, respectively. The risk-free rate serves as the breakpoint that segments the total spread/income earned on a securities lending transaction into the portion of spread/income attributable to the demand for the loaned securities and the portion attributable to the reinvestment process. |
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| A graphical screen in SL PerformanceAnalyzer that provides analysis on spread income in the context of the risk to net asset value (NAV) for each of the collateral, funding and integrated portfolios. The risk-return relationships are expressed in terms of ratios that detail return per unit of risk |
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| Transactions that have the same effect and intent as a repurchase agreement and that consist of two separate but simultaneous purchase and sale transactions for different value dates – one for immediate settlement and the other for forward settlement. Typically sale-and-buybacks do not allow for marking to market and margin calls. |
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| A loan of specific securities, usually against collateral (cash, securities or other financial assets). |
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| The completion of a transaction, where the seller transfers securities or financial instruments to the buyer and the buyer transfers money to the seller. |
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| The risk that the completion or settlement of individual transactions will not take place as expected. |
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| The state of having sold an asset or of holding a liability and being the obligor/payer of all cash flows. Opposite of long position. |
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| A graphical screen in SL PerformanceAnalyzer that displays the performance of State Street's collateral reinvestment portfolios relative to specific security types available to be purchased by short-term money managers. |
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| Statistical measure of the symmetry of a distribution of data values around the mean. |
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| A graphical screen in SL PerformanceAnalyzer that presents the range of State Street's collateral reinvestment portfolio alternatives on a comparative risk-return, or efficiency, basis. |
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| State Street's online performance measurement system that enables securities lenders to establish risk-return expectations and view their risk-adjusted performance. SL PerformanceAnalyzer employs statistical risk measurement principals, including the Value-at-Risk (VaR) approach, to create a shared context for integrating the risk elements associated with securities lending. |
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| State Street's online securities lending reporting system, available via State Street's Web platform, my.statestreet.com that provides comprehensive tools that allow clients to assess the additional value added by securities lending to the overall investment process. |
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| Securities that, for a specific reason, are highly sought after in the market by borrowers. Repo rates, rebate rates and premiums for these specific securities tend to be higher than the prevailing repo rate for general collateral. |
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| Risk that applies to an individual company and perhaps its immediate competitors but not to all companies in the economy at large. |
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| Generally, the difference between any two prices or rates. |
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| Equal to the reinvestment return minus the rebate paid to the borrower, or in the case of loans vs. non-cash collateral, the premium. Also known as spread return. |
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| The potential that the reinvestment spread earned by the lender will be insufficient to cover the rebate owed to the borrower. |
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| Equal to the reinvestment return minus the rebate paid to the borrower, or in the case of loans vs. non-cash collateral, the premium. Also known as spread income. |
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| A graphical screen in SL PerformanceAnalyzer that looks at spread income in the context of its historic variability. |
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| Uncertainty of the consistency of future spreads or earnings. |
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| Statistical measure of the variability of values in a set that are dispersed around their mean. Used as a measure of risk for securities and portfolios in financial markets. |
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| An agent hired by a custodian in a local market to hold cash and securities for that particular market. |
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| A payment made by the borrower of securities to the lender in lieu of actual dividends or other income earned on the securities (net of any applicable taxes). This payment is equal to that which the lender would have received if it had not lent the securities. Also referred to as a manufactured payment. |
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| Recalling the securities pledged as collateral by a borrower and replacing them with other securities of equivalent market value during the life of the transaction. |
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| Risk that is common to an entire class of assets or liabilities. The value of investments may decline over a given time period simply because of economic changes or other events that impact large portions of the market. Asset allocation and diversification can protect against systematic risk because different portions of the market tend to under perform at different times. Also called market risk. |
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| Risk that affects an entire financial market or system, and not just specific participants. It is not possible to avoid systemic risk through diversification. |
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| The amount of time between now and when a bond matures. |
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| Transactions with a fixed end or maturity date and a set interest rate. There are two types of term trades: those with a right of substitution and those without. Borrowers generally enjoy a higher rebate rate for term trades where the cash collateral they have posted is locked in for a fixed term. |
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| An intermediary, similar to an agent, that lends securities on behalf of clients and may provide other specialist services. A third party lender is not the custodian of the assets being lent. |
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| A type of certificate of deposit held in a financial institution for a fixed term or with the understanding that the depositor can withdraw only by giving notice. |
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| Conveyance of the ownership interest in property from one counterparty to another. Title transfer is used as one method of collateralization. The title transfer method employs an outright transfer of the ownership interest in property serving as collateral. |
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| The difference between the yield generated by the cash collateral and the rebate paid on the securities loans (or, the in case of loans vs. non-cash collateral, the premium). It is comprised of the demand spread and the reinvestment spread. Also referred to as gross spread, integrated spread or combined spread. |
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| Arrangement in which securities and/or cash are delivered by trading counterparts to a single independent custodian bank, clearing house or securities depository that takes responsibility for ensuring the maintenance of adequate collateral value during the life of the transaction. |
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| A technique, which uses the statistical analysis of historical market trends and volatilities to estimate the likelihood that a given portfolio’s losses, will exceed a certain amount over a particular time horizon. |
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| Additional margin required to bring an account up to the required level due to market fluctuations. |
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| The relative rate at which a value moves up and down. Volatility is used as an indicator of the degree of inherent risk. For example, if the price of a stock moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility. It is typically measured by the standard deviation. |
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| A curve that shows the relationship between yields and maturity dates for a set of similar bonds, usually Treasuries, at a given point in time. |
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