Foreign exchange date conventions (Ofer Abarbanel online library)

The Foreign exchange Options date convention is the timeframe between a currency options trade on the foreign exchange market and when the two parties will exchange the currencies to settle the option. The number of days will depend on the option agreement, the currency pair and the banking hours of the underlying currencies. The convention helps the counterparties to understand when payments will be made for each trade. Continue reading “Foreign exchange date conventions (Ofer Abarbanel online library)”

Delivery versus payment (Ofer Abarbanel online library)

Delivery versus payment or DvP is a common form of settlement for securities. The process involves the simultaneous delivery of all documents necessary to give effect to a transfer of securities in exchange for the receipt of the stipulated payment amount. Alternatively, it may involve transfers of two securities in such a way as to ensure that delivery of one security occurs if and only if the corresponding delivery of the other security occurs.[1] Continue reading “Delivery versus payment (Ofer Abarbanel online library)”

Day count convention (Ofer Abarbanel online library)

In finance, a day count convention determines how interest accrues over time for a variety of investments, including bonds, notes, loans, mortgages, medium-term notes, swaps, and forward rate agreements (FRAs). This determines the number of days between two coupon payments, thus calculating the amount transferred on payment dates and also the accrued interest for dates between payments.[1] Continue reading “Day count convention (Ofer Abarbanel online library)”

Clearing (Ofer Abarbanel online library)

In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment (for example, in the form of a cheque or electronic payment request) into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks. Continue reading “Clearing (Ofer Abarbanel online library)”

Central counterparty clearing (Ofer Abarbanel online library)

Central counterparty clearing (CCP), also referred to as a central counterparty, is a financial institution that takes on counterparty credit risk between parties to a transaction and provides clearing and settlement services for trades in foreign exchange, securities, options, and derivative contracts. CCPs are highly regulated institutions that specialize in managing counterparty credit risk. Continue reading “Central counterparty clearing (Ofer Abarbanel online library)”