Refers to interest bearing deposits which are repayable on call, i.e. on demand. This covers both domestic money market and the Euromarket funds. Also known as day to day money or sight money.

A contract giving the buyer or the holder the right but not the obligation to buy the underlying at an greed price within or at a specified time. The seller or writer ha the obligation to sell. See Put Option.

The Common Agricultural Policy by which the European Community aims to guarantee farmers' incomes by bridging the gap between world market prices for major commodities and the normally higher prices set by the EC. It is effected through a complex of price support mechanisms, export restitutions, social and other measures.

An interest rate option which protects the holder from an increase in interest rates. The holder, by exercising, receives a cash settlement representing the difference between the strike level and the underlying interest rate, should the latter be higher for the set period. Caps have a life of normally between two and five years. The option can be exercised at regular intervals (e.g. every six months) during the life of the cap. Originally created by banks to protect issues of floating rate debt. See Floor.

In economics, there are three production factors: land, labour and capital. The latter can be factories and machinery or working capital comprising raw materials, components and money.

Comprises, within the balance of payments, long term flows – as used for investment in land and plant – and short term flows such as those stemming from profits from appreciating currencies or high interest rates on deposits. See Current Account, Basic Balance of Payments.

Under an accord of 1988 the Central Banks of the group of ten nations set out conversion capital adequacy standards for the commercial banks they regulate. This was formulated under the auspices of the Bank for international settlements. Most of the G-10 nations required banks to raise Capital Ratios gradually. The rules determined how much and what type of capital banks can raise in the financial markets and what type of loans they are allowed to make. See Tier One.

Impending capital controls, imposed by governmental regulatory authorities, can cause investors and fund managers to extract money from one country and send it to another. Such controls, which can be short term, would restrict or completely bar sending of capital outside a country. This Flight of Capital can also reflect fears of a currency, devaluation or general discontent with a political situation.

The profit resulting when assets are sold or transferred at the higher price than their initial worth. Inflation and currency movements can affect the real capital gain.

Commercial banks are required to set aside capital equal to eight percent of assets judged to be at risk. Some assets, such as loans to Central Banks carry a zero percent risk weighting while, at the other extreme, pure corporate loans are judged at 100 percent risk. See Tier One.

The purity of gold is described by its finest or carat as parts of 24. Thus 18 carat (out of 24) is 75 percent gold. Gold is often alloyed with other metals to increase its hardness or change its color.

Formed in 1992 by the Caribbean Association and Commerce and other regional bodies to represent the interest of the Caribbean private sector in the European Community. Based in London.

Caribbean Community and Common Market. Formed in 1973, it replaced the Caribbean Free Trade Association (CARIFTA). Members are Antigua and Barbuda, Bahamas (community only), Barbados, Belize, British Virgin Islands (associate), Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Christopher and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, Turks and Caicos Islands (associate).

Total amount of a commodity left over at the end of the crop year. In the US the total must be broken down between the total in various government programs or owned by the government, and the total which is available to the free market.

Certificates of Deposits are negotiable money market instruments which certify that a time deposit has been made with a bank at a fixed interest rate for a fixed period. The instrument is quoted on as interest bearing face value basis rather than at a discount and interest is paid at maturity. See Fixed Term Deposit, Term CDs, Variable Rate or Floating Rate CDs, Eurodollar CDs, Sterling CDs.

Major regulatory bank in a nation's monetary system. Its role normally includes control of the credir system, the note issue, supervision of commercial banks, management of exchange reserves and the national currency's value as well as the government banker.

Excessive buying and selling on a customer's portfolio allowing a broker who controls an account to earn extra commission. This practice can act against the best interests of the customer.

A system which facilities the transfer of ownership for securities and arranges custody. See CEDEL, EUROCLEAR.

A fund which, after the Initial Public Offering has taken place, does not typically issue new shares nor redeem old shares. It is therefore closed and thereafter the fund's shares are bought and sold like stock on the stock exchange and over the counter. Also known as a publicly traded fund.

Crop producing beans which contain 50-57 percent fat called cocoa butter. The manufacturing process includes shelling, roasting and grinding the beans. The fat is largely removed in making powder for drinking while extra cocoa butter is added in making chocolate. Cocoa butter is also used in some cosmetics. The world's largest producer is the Ivory Coast. Others are Brazil, Cameroon, Colombia, Dominican Republic, Ecuador, Ghana, Indonesia, Malaysia, Mexico, Nigeria, Papua New Guinea, Sierra Leone, Togo and Venezuela. The European Community consumes about 40 percent of world cocoa output with the Netherlands, Germany and the U.K. the major processors. The U.S. consumes about 12 percent of world output. See Main Crop.

This 13 member group produces 87 percent of the world's cocoa. In 1993 it adopted an accord giving producers complete control over their rate of production. This accord – adopted by 44 nations – has to be ratified by at least five producer countries covering 80 percent of world exports and by consumer countries responsible for at least 60 percent of imports. Producers have already agreed to reduce output by an average 74,000 tonnes a year for five years. Based in Lagos.

Lauric vegetable oil extracted from dried kernels of coconut, known as copra. Competes with soybean oil in world markets. Produced in tropical and subtropical regions. Largest producer is the Philippines, followed by Indonesia.

The two main types of coffee are Arabicas and Robustas with the latter mostly used for instant coffee. The beans are green until they are roasted. Largest producers are Brazil (arabicas, some robustas), Colombia (arabicas), Indonesia (robustas) and Mexico (arabicas). Other producers are Cameroon, Costa Rica, Guatemala, Honduras, India, the Ivory Coast, Kenya, Salvador, Uganda and Zaire. Leading consumers are the U.S., Germany, France and Japan. Coffee production tends to be cyclical with a large crop one year followed by a smaller crop, mainly in Brazil. Drought is the main adverse weather factor. In Brazil, the trees are also vulnerable to frost attacks.

Profit-earning establishments which operate in wholesale and retain banking and allied markets, the latter including insurance and a wide range of financial services. When in need of short term funds they are allowed to borrow from their relevant central bank. They have control over their interest rates at which they lend to, and take deposits from, their consumers.

A customs union which also has a common system of commercial law allowing freedom of movement of goods, services, capital and labour with domestic parameters. Often used as a reference to the European Community.

The interest amount paid or earned on the original principal plus the accumulated interest. With interest compounding, the more periods for which interest is calculated, the more rapidly the amount of interest on interest and interest on principal builds. Compounding annually means that there is only one period annually when interest is calculated. See Simple interest.

A licence area leased to a company for a given period for exploration and development. Specifications include the area to be explored, time period for the concession and how the area's owner (i.e. government) is to be compensated if oil/gas is found.

Group of companies formed to promote a common project.

Insurance term where the cost of repairing, retrieving and forwarding the goods exceeds their insured value.

An option for which the holder only pays the premium if the option is exercised. Contingent options are therefore a Zero Cost option strategy, unless exercised.

The theory of contrary opinion holds that when more than 80 percent of analysts are bullish then it can be assumed that they and their followers have taken long positions leaving fewer potential buyers to absorb any selling that develops. The converse is true when 80 percent of analysts are bearish.

A bond that is convertible into another instrument, sometimes another type of bond but more commonly into company shares at a fixed price which usually represents a premium over the current or average share price. Because of this inducement, the bond can carry a lower coupon at par. The option to convert usually lasts the life of the bond but borrowers often reserve the right to call the bond earlier than the normal call if the share price reaches up to, say, 150 percent of the conversion price, thus protecting them from offering shares at the lower fixed price should the market price suddenly surge.

One that is freely traded internationally and which can easily be converted into other currencies.

A type of preferred stock granting the holding the right to convert preferred shares into common or ordinary shares. The terms and conditions of the conversion and the conversion radio are stipulated at the time of issue. The radio to convert one preferred share into a fixed amount of ordinary shares is called parity. Once trading begins, the two prices of the two types of share move and disparity may occur which could lead to arbitrage opportunities.

A dealer or group of dealers responsible for advising and dealing with the corporate customers of their bank who have direct access to the trading room. Corporate dealers may quote independently of their own dealers and run their own positions but for larger deals may been to obtain prices from the respective dealers and subsequently hand the positions over.

A correction in technical analysis refers to a movement in price in the opposite direction of the trend. Corrections can occur on both the up and downside of a trend. It is called a correction because the market ultimately reverts to the overall trend.

Import duty imposed over and above normal levels when an importing country considers the export price to contain a subsidy.

A type of mutual fund which invests in a group of securities from a particular country.

The limit deemed advisable, in risk terms, by a lender when making a loan to a country. This can apply to the terms and conditions for the loan he is making and also to the cumulative debt owed by a country and the prospects overall of paying interest and return of capits.

Risks associated with lending funds to, or making an investment in, a particular country. Also known as sovereign risk.

The annual or semi-annual interest paid on a debt security expressed as a percentage of the face value. A coupon is fixed for the life of the security. It also describes the detachable certificate entitling the bearer to payment of the interest. A security which pays interest at predetermined intervals is known as coupon bearing.

Detaching the coupons from a bond and trading the principal repayment and coupon amounts separately, thus forming Zero Coupon bonds.

Commercial paper. A money market instrument issued by non-financial institutions as a short term borrowing facility. The U.S. domestic commercial paper market uses a promissory note or draft of a corporation, government agency or bank holding company. This is generally unsecured but backed by unused bank credit lines and issued for short term credit needs. It has a maturity of up to 270 days and can be sold at a discount from face value or pay interest at maturity. Directly placed paper is sold by the issuer to the investor while dealer placed paper is sold to an intermediary who in turn re-offers it to investors. Domestic commercial paper markets now exist in other countries such as the U.K., Germany, France and Japan. See Direct paper, ECP.

The level considered prudent to which funds in a credit line should be offered. Penal interest rates are often imposed when a credit limit is exceeded and in some cases all the funds extended can be called in at short notice.

An agreement in which a bank lends or borrows money up to a specified limit for a set period.

Overall creditworthiness of a borrower. In the U.S. the two main rating agencies are Moody's Investor Service and Standard & Poor's Corporation. A top rating means that there is thought to be almost no risk of the borrower failing to pay interest and principal. As the rating grade falls, the perceived risk grows. Other rating agencies include: Duff & Phelps, Fitch, IBCA, Japanese Bond Research Institute (JBRI), Japanese Credit Rating (JCR), Mikuni, Nippon Investor Services.

Exposure to a loss resulting from a default on a payment due. Also known as counterparty risk.

Occurs when the supply of money is unable to keep up with demand, thus interest rates rise exacerbating the borrowing position. Also, a government-imposed situation to rein in excessive spending in macro-economic terms. In this case, interest rates do not have to rise excessively because the government can, for example, impose higher reserve requirements upon banks and lending institutions.

A credit rating agency makes an announcement that it is putting a company on credit watch, meaning that it expects shortly to issue a lower or higher credit rating.

Shares which are officially listed on more than one stock exchange and therefore freely traded away from their domestic centre. They can also appear in cross border stock market indices.

A type of preferred share which grants the holder the right to dividend arrears before any payments are made to holders or ordinary shares.

The maximum amount a dealer, a group of dealers or a dealing room is allowed to deal per currency.

An exchange of fixed interest payments in one currency for those in another, coupled with a commitment to exchange the notional principal amount at the end and possibly at the beginning of the swap agreement at a predetermined exchange rate. The exchange of principal increases the credit risk.

Current account balance of payments comprises imports and exports of merchandise, payments and receipts for services such as shipping, banking and tourism, private transfers like remittances from migrant workers, official transfers such as contributions to international bodies like the European Community. See Capital Account, Basic Balance of Payments.

Corporate assets which can be realised easily. These include stock in trade, work in progress, bank balances and marketable securities. In the U.S., the definition can be defined as cash, U.S. government bonds, receivables, monies usually due within one year and inventories.

Short term working commitments of a company such as trade creditors, sums due to banks, taxation and dividends payable.

The value of today's market prices of an investor's total holdings including instruments sold short or on margin.

A measure of the return to a bondholder calculated as a ratio of the coupon to the market price. It is simply the annual coupon rate divided by the clean price of the bond. See Yield to Maturity (YTM).

Traditionally this term means the storing and safekeeping of securities together with maintaining accurate records of their ownership. As a result of an increase in cross border trading, there is a growing need for custody services in several countries. Rather than have several custody services in several countries, investors may prefer to have one global custody service. The services offered by these bodies are also expanding into areas such as settlement of securities bought and sold, coupon/dividend collection and tax matters.