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Seigniorage

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Definition of Seigniorage

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Seigniorage

Funding available to the government through printing money.



Related Terms:

Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae").


At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.


Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.


Conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not
guaranteed by government agencies. Compare agency pass-throughs.



Fiat Money

Fiat money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.


Flow-through basis

An account for the investment credit to show all income statement benefits of the credit
in the year of acquisition, rather than spreading them over the life of the asset acquired.


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Flow-through method

The practice of reporting to shareholders using straight-line depreciation and
accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to the
financial statement prepared for shareholders.


Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.


Funding Costs

The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.


Funding ratio

The ratio of a pension plan's assets to its liabilities.


Funding risk

Related: interest rate risk


Government bond

See: government securities.


Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.


Government securities

Negotiable U.S. Treasury securities.


Government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.


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High-coupon bond refunding

ReFunding of a high-coupon bond with a new, lower coupon bond.


High-Powered Money

See money base.



Hot money

money that moves across country borders in response to interest rate differences and that moves
away when the interest rate differential disappears.


In-the-money

A put option that has a strike price higher than the underlying futures price, or a call option
with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures
contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money
by $0.50 an ounce.
Related: put.


Liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed
the client's obligations.


Low-coupon bond refunding

ReFunding of a low coupon bond with a new, higher coupon bond.


Modified pass-throughs

Agency pass-throughs that guarantee (1) timely interest payments and (2) principal
payments as collected, but no later than a specified time after they are due. Related: fully modified passthroughs


Money

Any item that serves as a medium of exchange, a store of value, and a unit of account. See medium of exchange.


Money base

Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.


Money Base

Cash plus deposits of the commercial banks with the central bank.


Money center banks

Banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.


Money Laundering

This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.



Money management

Related: Investment management.


Money manager

Related: Investment manager.


Money market

money markets are for borrowing and lending money for three years or less. The securities in
a money market can be U.S.government bonds, treasury bills and commercial paper from banks and
companies.


Money Market

A market that specializes in trading short-term, low-risk, very liquid
debt securities


money market

Market for short-term financial assets.


Money Market

A financial market in which short-term (maturity of less than a year) debt instruments such as bonds are traded.


Money Market

Financial market in which funds are borrowed or lent for short periods. (The money market is distinguished from the capital market, which is the market for long term funds.)


Money market demand account

An account that pays interest based on short-term interest rates.


Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.


money market fund

A type of mutual fund that invests primarily in short-term debt securities maturing in one year or less. These include treasury bills, bankers’ acceptances, commercial paper, discount notes and guaranteed investment certficates.


Money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the
home currency value of a foreign currency transaction.


Money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs.


Money Multiplier

Change in the money supply per change in the money base.


money order

A guaranteed form of payment in amounts up to and including $5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.


Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account plan.


Money Rate of Interest

See interest rate, nominal.


Money rate of return

Annual money return as a percentage of asset value.


Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.


Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.


Net advantage of refunding

The net present value of the savings from a reFunding.


Neutrality of Money

The doctrine that the money supply affects only the price level, with no long-run impact on real variables.


New money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.


Out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price
of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of
the underlying security.


Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.


Pass-through rate

The net interest rate passed through to investors after deducting servicing, management,
and guarantee fees from the gross mortgage coupon.


Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security


Payable through drafts

A method of making payment that is used to maintain control over payments made
on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft
to the payer, which must approve it and return it to the bank before payment can be received.


Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.


Printing Money

Sale of bonds by the government to the central bank.


Private Export Funding Corporation (PEFCO)

Company that mobilizes private capital for financing the
export of big-ticket items by U.S. firms by purchasing at fixed interest rates the medium- to long-term debt
obligations of importers of U.S. products.


Private-label pass-throughs

Related: Conventional pass-throughs.


Projected available balance

The future planned balance of an inventory item,
based on the current balance and adjusted for planned receipts and usage.


Quantity Theory of Money

Theory that velocity is constant, and so a change in money supply will change nominal income by the same percentage. Formalized by the equation Mv = PQ.


Real Money Supply

money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.


Refunding

The redemption of a bond with proceeds received from issuing lower-cost debt obligations
ranking equal to or superior to the debt to be redeemed.


Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.


Stopping curve refunding rate

A reFunding rate that falls on the stopping curve.


throughput

the total completed and sold output of a plant during a period


Throughput agreement

An agreement to put a specified amount of product per period through a particular
facility. For example, an agreement to ship a specified amount of crude oil per period through a particular
pipeline.


Throughput contribution

Sales revenue less the cost of materials.


Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.


Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.



 

 

 

 

 

 

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