CDO[r]: Collateralised Debt Obligation. A portfolio of corporate bonds, grouped into tranches that are ranked by estimated risk. [e]
CDS[r]: Credit-Default Swap. An insurance agreement that guarantees protection against a bond default in return for a fee. [e]
Central Bank[r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. [e]
CMO[r]: Collateralised Mortgage Obligation. A portfolio of mortgages, grouped into tranches that are ranked by estimated risk [e]
Commercial paper[r]: unsecured debt_instruments that are issued by corporations to meet short term financing needs (usually repayable after 3 months). [e]
Debt_instrument[r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. [e]
Derivative[r]: An asset whose value depends upon the expected value of another asset. [e]
Fannie Mae[r]: (Federal National Mortgage Association) US government-sponsored enterprise created to provide financial support to Savings and Loans. Privatised in 1968. [e]
Gearing: see Leverage
Freddie Mac[r]: (Federal Home Loan Mortgage Corporation) Fannie Mae clone created to provide competition to Fannie Mae. [e]
Hedging[r]: Protecting against price changes by simultaneously buying(/selling) an asset and making a futures contract to sell(/buy) it. [e]
Hedge fund[r]: A limited-membership, aggressively-managed investment fund, often escaping regulation. [e]
Leverage[r]: (i) The use of borrowing to increase the amount of money that is available for investment or consumption. (ii) A proportional measure of indebtedness, such as the ratio of a company's debt to its shareholders' equity (the same as British "gearing"), or the ratio of the indebtedness of a household to the net value of its assets (ie net of its debts). [e]
Liquidity[r]: (i) The quantity of available assets in its possession that an organisation could rapidly exchange for cash (assets that cannot be exchanged for cash at a particular time are considered to be "illiquid" at that time); (ii) the funding that is unconditionally available to settle claims through monetary authorities (termed "official liquidity"). [e]
Liquidity risk[r]: the risk that assets cannot be sold at time when cash is needed to meet a commitment. [e]
Margin call[r]: a demand for the additional securities required to maintain the minimum maintenance level of a margin account when security prices fall. [e]
Moral hazard[r]: Motivation to take an otherwise unwarranted risk because the cost of an unfavourable outcome would be borne by someone other than the risk-taker. [e]