Financial Terms Term repo

# Definition of Term repo

## Term repo

A repurchase agreement with a term of more than one day.
term structure of interest rates
Relationship between interest rates on bonds of different maturities usually
depicted in the form of a graph often depicted as a yield curve. Harvey shows that inverted term structures
(long rates below short rates) have preceded every recession over the past 30 years.

# Related Terms:

## Figuring the tail

Calculating the yield at which a future money market (one available some period hence) is
purchased when that future security is created by buying an existing instrument and financing the initial
portion of its life with a term repo.

## 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.

## Tail

1) The difference between the average price in Treasury auctions and the stopout price.
2) A future
money market instrument (one available some period hence) created by buying an existing instrument and
financing the initial portion of its life with a term repo.
3) The extreme end under a probability curve.
4) The odd amount in a MBS pool.

## Annual report

Yearly record of a publicly held company's financial condition. It includes a description of the
firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.

## Auditor's report

A section of an annual report containing the auditor's opinion about the veracity of the
financial statements.

## Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.

## Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models

## Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.

## Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.

## Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or

## Gestation repo

A reverse repurchase agreement between mortgage firms and securities dealers. Under the
agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a
future date at a fixed price.

## Implied repo rate

The rate that a seller of a futures contract can earn by buying an issue and then delivering
it at the settlement date. Related: cheapest to deliver issue

## Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

## Intermediate-term

Typically 1-10 years.

## Intermediation

Investment through a financial institution. Related: disintermediation.

## Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a

## Long-term

In accounting information, one year or greater.

## Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

## Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.

## Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.

## Long-term debt ratio

The ratio of long-term debt to total capitalization.

## Long-term financial plan

Financial plan covering two or more years of future operations.

## Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.

## Long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity.

## Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

## Open repo

A repo with no definite term. The agreement is made on a day-to-day basis and either the
borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject

## Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.

## Overnight repo

A repurchase agreement with a term of one day.

## Repo

A agreement in which one party sells a security to another party and agrees to repurchase it on a
specified date for a specified price. See: repurchase agreement.

## Reported factor

The pool factor as reported by the bond buyer for a given amortization period.

## Reporting currency

The currency in which the parent firm prepares its own financial statements; that is, U.S.
dollars for a U.S. company.

## Reverse repo

In essence, refers to a repurchase agreement. From the customer's perspective, the customer
provides a collateralized loan to the seller.

## Short-term financial plan

A financial plan that covers the coming fiscal year.

## Short-term investment services

Services that assist firms in making short-term investments.

## Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including
1) the current ratio,
2) the acid-test ratio,
3) the inventory turnover ratio, and
4) the accounts receivable turnover ratio.

## Short-term tax exempts

Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.

## Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds

## Term Fed Funds

Fed Funds sold for a period of time longer than overnight.

## Term life insurance

A contract that provides a death benefit but no cash build-up or investment component.
The premium remains constant only for a specified term of years, and the policy is usually renewable at the
end of each term.

## Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.

## Term insurance

Provides a death benefit only, no build-up of cash value.

## Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: Maturity.

Excess of the yields to maturity on long-term bonds over those of short-term bonds.

## Term trust

A closed-end fund that has a fixed termination or maturity date.

## Terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
firm) on some specified future valuation date.

## Terms of sale

Conditions on which a firm proposes to sell its goods services for cash or credit.

The weighted average of a nation's export prices relative to its import prices.

## LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.

## Annual Report

The report required by the Stock Exchange for all listed companies, containing the companyâ€™s financial statements.

## Financial reports or statements

The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.

## Long-term liabilities

Amounts owing after more than one year.

## financial reports and statements

Financial means having to do with
money and economic wealth. Statement means a formal presentation.
Financial reports are printed and a copy is sent to each owner and each
major lender of the business. Most public corporations make their financial
reports available on a web site, so all or part of the financial report
statements: the statement of financial condition, or balance sheet;
the statement of cash flows; and the income statement. These three key
financial statements constitute the core of the periodic financial reports
that are distributed outside a business to its shareowners and lenders.
Financial reports also include footnotes to the financial statements and
much other information. Financial statements are prepared according to
generally accepted accounting principles (GAAP), which are the authoritative
rules that govern the measurement of net income and the reporting
of profit-making activities, financial condition, and cash flows.
Internal financial statements, although based on the same profit
making and control. Sometimes, financial statements are called simply
financials.

## coefficient of determination

a measure of dispersion that
indicates the â€śgoodness of fitâ€ť of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

## cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate

## responsibility report

a report that reflects the revenues and/or costs under the control of a particular unit manager

## Term structure

The relationship between the yields on fixed-interest
securities and their maturity dates. Expectation of changes in interest rates
affects term structure, as do liquidity preferences and hedging pressure. A
yield curve is one representation in the term structure.

## Annual report

A report issued to a companyâ€™s shareholders, creditors, and regulatory
organizations at the end of its fiscal year. It typically contains at least an income
statement, balance sheet, statement of cash flows, and accompanying footnotes. It
may also contain management comments, an audit report, and other supporting
schedules that may be required by regulatory organizations.

## Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.

## Reporting period

The time period for which transactions are compiled into a set of financial statements.

## Segment reporting

A portion of the financial statements that breaks out the results of

## financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.

## terms of sale

Credit, discount, and payment terms offered on a sale.

## Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.

## Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.

## Intermediate Good

A good used in producing another good.

## Term

See term to maturity.

## Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.

## Term to Maturity

Period of time from the present to the redemption date of a bond.

## Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.

## Termination Pay

Additional pay due to an employee whose employment is
being terminated, usually in accordance with a termination pay schedule contained
within the employee manual.

## Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.

## Change in Reporting Entity

A change in the scope of the entities included in a set of, typically, consolidated financial statements.

## Fraudulent Financial Reporting

Intentional misstatements or omissions of amounts or disclosures
in financial statements done to deceive financial statement users. The term is used interchangeably
with accounting irregularities. A technical difference exists in that with fraud, it
must be shown that a reader of financial statements that contain intentional and material misstatements
must have used those financial statements to his or her detriment. In this book, accounting
practices are not alleged to be fraudulent until done so by an administrative, civil, or
criminal proceeding, such as that of the Securities and Exchange Commission, or a court.

## Where-used report

A report listing every product whose bill of material calls for
the use of a specific component.

## Inspection Report

This is a telephone interview of the person applying for life insurance conducted by someone from the underwriting department of the insurance company. Some insurance companies only sporadically contact applicants and some contact every applicant. On average the interview lasts between 15 to 30 minutes. The questions asked relate to personal habits (like smoking and alcohol consumption) and finances, including income and net worth, confirmation of employment, duties and the nature of the applicant's business. In addition, there are questions about driving, sports, aviation and currently held insurance. All information obtained is strictly confidential and is submitted solely to the underwriter for review.

## Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.

## Yearly Renewable Term Insurance

Sometimes, simply called YRT, this is a form of term life insurance that may be renewed annually without evidence of insurability to a stated age.

## Credit Terms

Conditions under which credit is extended by a lender to a borrower.

## Flexible Term

Optional periods of time which the conditions of a contract will be carried out.

## Intermediary

An independent third party that may act as a mediator during negotiations.

## Long Term Debt

Liability due in a year or more.

## Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.

## Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.

## Term

This is usually the duration of a loan.

## Term Loan

A secured loan made to business concerns for a specific period (normally three to ten years). It is repaid with interest, usually with periodical payments.

## Term Sheet

A list of the major points of the proposed financing being offered by an investor.

## term

The period of time during which a financial contract â€“ such as a GIC or a loan â€“ is in force.

## Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.

## Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.

## Terminal Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become terminally ill. The payment is made to your creditors to pay off your debt owing.

## Terminate

Cease all legal obligations under a contract.

Another term for a repo.

## Dividends per share

Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.

## Earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of outstanding
shares. If a company earned \$2 million in one year had 2 million shares of stock outstanding, its EPS would
be \$1 per share. The company often uses a weighted average of shares outstanding over the reporting term.

## Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating Expense Ratio (OER).

## Pro forma capital structure analysis

A method of analyzing the impact of alternative capital structure
choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will
be able to use projected tax shield benefits fully.