TMA Treasury Markets Certificate flashcards
TMA Treasury Markets Certificate · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Discount rate vs yield
- A bill quoted at a discount rate prices below face; the true yield is higher because the investor pays less than face value and earns the discount over the holding period.
- DV01
- The cash change in a position's value for a one basis point move in yield; equals modified duration times dirty price times 0.0001, scaled by notional.
- Covered interest parity
- The forward FX rate equals the spot rate adjusted by the interest rate differential between the two currencies; deviations reflect funding and credit costs, not riskless profit.
- Repo haircut
- The percentage by which collateral value exceeds the cash lent in a repo; it protects the cash lender against collateral price falls and counterparty default.
- 2s10s spread
- The yield difference between 10-year and 2-year government bonds; inversion (negative spread) historically signals tightening conditions and slower growth ahead.
- Day count convention
- The rule for calculating interest accrual, such as actual/360 for USD and EUR money markets or actual/365 for GBP; it must match the currency convention.
- Forward points
- The difference between forward and spot FX rates, quoted in pips; driven by the interest rate differential, with the higher-yielding currency at a forward discount.
- Quantitative tightening
- Central bank reduction of its balance sheet by letting bonds mature or selling them; it tends to raise term premium and long-end yields.
- Cash conversion cycle
- Days inventory outstanding plus days sales outstanding minus days payables outstanding; measures how long cash is tied up in operations before collection.
- Liquidity coverage ratio
- High-quality liquid assets divided by net cash outflows over a 30-day stress period; the regulatory minimum is 100 percent.
- Net stable funding ratio
- Available stable funding divided by required stable funding; minimum 100 percent, limiting reliance on short-term wholesale funding for long-dated assets.
- Notional pooling
- A cash management structure that offsets credit and debit balances across accounts without physical transfers; requires a legal right of set-off.
- Zero-balance account
- A bank account swept daily to a header account so its end-of-day balance is zero; concentrates cash and reduces idle balances.
- Transaction exposure
- The risk that known foreign currency cash flows change in domestic value due to FX moves; typically hedged with forwards, futures or options.
- Translation exposure
- Accounting exposure from converting foreign subsidiary financial statements into the parent's currency; managed with balance sheet hedges and matching.
- IRRBB repricing gap
- The difference between rate-sensitive assets and liabilities repricing within a bucket; a positive gap benefits from rising rates, a negative gap from falling rates.
- Herstatt risk
- Cross-currency settlement risk where one party pays out before receiving the counter-currency; mitigated by CLS, netting and payment-versus-payment arrangements.
- Segregation of duties
- Separating dealing, confirmation, settlement and reconciliation functions so no single person can initiate and complete a transaction without independent oversight.
- Insider dealing
- Trading or disclosing material non-public information about an issuer or instrument; a market abuse offence under conduct rules.
- Front-running
- Dealing ahead of a known client order to profit from the expected price impact; prohibited as a conflict of interest and market abuse.
- Personal account dealing
- Staff trading for their own account; requires pre-clearance, is restricted around client flow, and must be logged and monitored.
- Chinese walls
- Information barriers separating teams with conflicting interests, such as advisory and trading, to prevent misuse of confidential information.
- Inducements
- Payments or benefits given or received that could impair independence; must be disclosed, proportionate and consistent with client best interest.
- Dual authorisation
- A control requiring two independent approvals before a payment or trade is released; reduces fraud and error risk in treasury operations.
- Breach escalation
- The duty to report conduct or control failures promptly to compliance, cooperate with investigation and avoid retaliation against reporters.
- Last look
- A practice allowing a liquidity provider to reject a trade after receiving it; must be disclosed, applied consistently and not used to exploit latency.
- FX Global Code
- A set of global principles for good practice in wholesale FX markets covering ethics, governance, execution, information sharing, confirmation and settlement.
- Pre-hedging
- Trading ahead of a client order to manage anticipated risk; permitted only where disclosed and consistent with the client's interest.
- WM/Reuters fix
- A benchmark FX rate calculated from trades in a five-minute window around 4pm London; orders around it need fixing risk controls.
- CLS settlement
- A payment-versus-payment system that settles both legs of eligible FX trades simultaneously, reducing principal settlement risk.
- Algo kill switch
- A control allowing immediate suspension of an algorithmic trading strategy; pre-trade limits and testing are expected governance measures.
- Principal vs agent
- Disclosure of whether a firm is trading on its own account or acting for a client; it determines duties, conflicts and information handling.