Acronyms Flashcards
(34 cards)
Cash on deposit - CNF
Call deposits - instant access to withdraw funds
Notice deposits - give period of notice before can withdraw funds
Fixed term deposits - only withdraw funds at maturity
Money market instruments - TLCBC
Treasury Bill
Local Authority Bill
Commercial Paper
Bill of Exchange
Certificate of Deposit
Key participants in the money markets - CCO
Clearing Banks - lend when they have excess funds / borrow when they need short-term funds / often overnight lending / borrowing
Central Bank - “lender of last resort” / uses operations to establish short-term interest rates
Other institutions - lend / borrow short-term fouds
Characteristics of assets: SYSTEM T
S - Security - default risk, other risk
Y - Yield - expected return, real vs nominal, running yield
S - Spread -diversification / volatility in price
T - Tax
E - Expenses / Exchange rate - dealing or maintainance, overseas
M - Marketability / Liquidity - bought and sold easily and quickly / marketable + stable price or close to cash in nature
T - Term - to maturity, short, medium, long, irredeemable
Reasons for holding money market assets: POURS
P - Protect market value
O - Opportunity
U - Uncertain outgo
R - Recently received cashflow
S - Short-term liabilities
Economic situations when bouds and equities will fall in value: GRID
G - General economic uncertainty
R - Recession
I - Interest rate rises
D - Depreciation of domestic currency
Describing cashflows - WWSFATT
W - from Whose perspective?
W - What are the cashflows?
S - Sign - positive or negative?
F - Frequency - lump sum or regular payments?
A - Amount - known or unknown
T - Timing - known or unknown
T - Term - known or unknown
Prime property factors: CALL ST
C - Comparables
A - Age and condition
L - Location
L - Lease structure
S - Size
T - Tenant quality
Problems within investing in overseas market: MTV CATER PILLAR
M - Mismatching assets and liabilities
T - Tax issues
V - Volatility of potential returns
C - Custodian may be required
A - Additional administration
T - Time delays
E - Expertise required
R - Regulation may be poorer
P - Political changes - adverse
I - Information - less available
L - Liquidity lower
L - Language barriers
A - Accounting practices differ
R - Restrictions on ownership
Yield curve theories - LIME
L - Liquidity preference
I - Inflation risk premium
M - Market segmentation
E - Expectations
Main economic variables - EUIE
E - Economic growth
U - Unemployment
I - Inflation
E - Exchange rate
Valuation methods - SHAM FADS
S - Smoothed market value
H - Historic book value
A - Adjusted book value
M - Market value
F - Fair value
A - Arbitrage value
D - Discounted cashflow
S - Stochastic model
Factors influencing investment strategy - A SAD CUTER INVESTOR
A - Accounting regulations
S - Size of assets (absolute / relative)
A - Accrual of future liabilities
D - Diversification
C - Currency of the liabilities
U - Uncertainty of the liabilities
T - Tax treatment of assets / investor
E - Environmental / social / governance issues
R - Risk appetite
I - Institution’s objectives
N - Nature of the liabilities
V - Voluntary and legal restrictions
E - Existing portfolio
S - Solvency requirements
T - Term of the liabilities
O - Other fund’s strategies ( competition )
R - Return (expected long-term)
Categories of liabilities - MIDI
M - guaranteed in Monetary terms
I - guaranteed in terms of an intext
D - Discretionary
I - Investment-linked
Matching considerations - TECH SCAM
T - Types of assets that can be invested in
E - Extent of mismatching allowed
C - Currency match between Assets & Liabilities
H - Hold certain proportion of total assets in particular class eg gilts
S - Single counterparty exposure maximum
C - Custodianship of assets
A - Amount of any asset allowed to demonstrate solvency
M - Mismatch reserve
Risk control cycle - ICMCFM
I - Identify
C - Classification
M - Measure
C - Control
F - Financing
M - Monitor
Key features of enterprise risk management - CDE
C - Consistency in approach - holistic, one set of standards, subsidiaries responsible for identifying
D - Diversification benefits - across the group, undiversified risk identifying
E - Efficiency of risk management - centralised team, greater understanding, exploit risk
Risk classification - MC LEOB
M - Market - changes in values / mismatching
C - Credit - borrowers / counterparties / general debtors
L - Liquidity - individual / company / market
E - External - external events / regulatory / legislative / tax / pandemics / climate change (physical, transition, liability)
O - Operational - failed internal processes, people and system, “conduct” risk
B - Business - underwriting / insurance / financing / exposure / claims / expenses / withdrawals
Criteria for insurable risk (ideally) - MUDPIS
M - Moral hazard should be eliminated as far as possible
U - Ultimate limits on the insurer’s liability
D - Data available to quantify the extent and likelihood
P - Pooling of similar risks
I - Independent risk events
S - Small probability of occurring
Criteria for insurable risk (must) - FIA
F - Financial and reasonably quantifiable nature
I - Insurable interest in the risk being insured
A - Amount payable in the event of a claim needs to bear some relationship to the financial loss incurred
Risk evaluation methods - SSCRS
S - Scenario analysis
S - Stress testing
C - Combined stress and scenario testing
R - Reverse stress testing
S - Stochastic modelling
Risk reporting consiteration - CLOT RISK
Clear and relevant
Linked to risk appetite
Operating unit
Traffic lights
Risk type
Indication of likelihood and severity
Summaries of key risk areas
Key risk indicators
Reasons for reinsurance - SAD LIFE
S - Smooth results (profits)
A - Avoid single large losses, eg a liability claim
D - Diversification
L - Limit exposure to risk (single/accumulations)
I - Increase capacity to accept risk (bigger, more, singly, cumulatively)
F - Financial assistance (solvency, NB strain)
E - Expertise, eg data, pricing/underwriting/design/admin/for new risks, unusual risks and new territories
Reasons for Alternative risk transfer (ART) - ECDACA
E - Effective risk management - stabilise results
C - Capital management - lower required, raise new
D - Counterpary diversification
A - Availability
C - Cost
A - Tax
