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Money Market Derivatives - Coggle Diagram
Money Market Derivatives
Secure Liquidity Note (SLNs)
Formal maturity date
( up to 365 days)
Expected maturity date
Shorter than formal maturity
issuer reapay interest & principal
SLN be extended to formal maturity
If investors 're unable to repay
Collateralized callable notes
call option: exercised by issuer before final maturity date
Yield Penalty:
yield increase for remaining term 10-25bps If issue is not called as expected
Forward Rate Agreement
a forward- starting loan
no exchange of principal
difference in interest rates is exchanged
Interest rise, buyer be protected
Interest fall, buyer pay the difference betw. FRA rate & actual rate
Commercial Paper
Liquidity Facility in CP program
Issuers arrange a line of credit from bank to against risk when can not place in new issue
Methods to issue
Direct paper
issuing firm directly to investors
Dealer paper
sold by using a banking or securities house intermediary.