abu yahya's definitions
(FINANCE) a type of financial derivative which two parties "swap," or exchange, the streams of income (or payments) from two different sources. The actual instrument is created by a third party, such as an investment bank.
The most familiar version of the swap is the interest rate swap, in which the holder of a fixed rate loan and the holder of an adjustable rate loan agree to exchange revenue streams.
The variety of swaps available is massively greater than with options or futures; essentially, swaps exist for every arbitrage opportunity that any combination of markets provides; the market for swaps is huge.
The most familiar version of the swap is the interest rate swap, in which the holder of a fixed rate loan and the holder of an adjustable rate loan agree to exchange revenue streams.
The variety of swaps available is massively greater than with options or futures; essentially, swaps exist for every arbitrage opportunity that any combination of markets provides; the market for swaps is huge.
BILL: Why do firms buy swaps? Why don't they just sell the loans they have to other banks, or whatever?
ANNA: One is that swaps are a method of hedging risk; you hold the bond in case the price goes up, but you buy interest rate swaps to protect against having average rates in your portfolio that are two high or two low.
ANNA: One is that swaps are a method of hedging risk; you hold the bond in case the price goes up, but you buy interest rate swaps to protect against having average rates in your portfolio that are two high or two low.
by Abu Yahya April 5, 2010
Get the swap mug.title of book by John Maynard Keynes (1883-1946) outlining the general concept of Keynesian economics. The book was published in 1936.
*Context*
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Prior to the Great Depression, opinions about how to properly manage the economy were dominated by Neoclassical economics, which advocated little government intervention. In particular, unemployment was regarded as the consequence of workers failing to accept wages sufficiently low to permit full employment.
During the Great Depression, unemployment soared to 25% in the USA and Germany. Economics had no advice to give to leaders anxious to do something, and none of the neoclassical predictions were coming true. The government of the UK commissioned J.M. Keynes to lead a commission of top British economists in a general review of economic theory; their finding were summarized by Keynes in *The General Theory*.
*The Findings*
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The Cambridge team did not have access to statistics of national income and product accounting (NIPA). They did have some data on unemployment and prices, especially from the USA.
Keynes also identified several inherent logical problems with neoclassical economic theory about saving and investment. The theory said that all economic output of an economy would tend to be consumed; all saving would be invested; and all workers would be employed, *provided wages fell low enough*.
Keynes noted the economic mechanism by which investment occurs has little to do with the existing rate of saving; both are influenced by interest rates, but other forces come into play (e.g., liquidity preference for saving, business opportunities and user cost for investment). Hence, aggregate demand can drift very far out of alignment with output (or potential output).
Another finding was that employment rates actually did not respond in a predictable way to the fall in wages. The US economy suffered periods when a reduction in the wage level lead to increases in employment, despite the assumption that workers would have withdrawn from the labor market.
Finally, Keynes proposed the use of monetary policy and fiscal policy for regulating business cycles.
*Context*
______________________________
Prior to the Great Depression, opinions about how to properly manage the economy were dominated by Neoclassical economics, which advocated little government intervention. In particular, unemployment was regarded as the consequence of workers failing to accept wages sufficiently low to permit full employment.
During the Great Depression, unemployment soared to 25% in the USA and Germany. Economics had no advice to give to leaders anxious to do something, and none of the neoclassical predictions were coming true. The government of the UK commissioned J.M. Keynes to lead a commission of top British economists in a general review of economic theory; their finding were summarized by Keynes in *The General Theory*.
*The Findings*
______________________________
The Cambridge team did not have access to statistics of national income and product accounting (NIPA). They did have some data on unemployment and prices, especially from the USA.
Keynes also identified several inherent logical problems with neoclassical economic theory about saving and investment. The theory said that all economic output of an economy would tend to be consumed; all saving would be invested; and all workers would be employed, *provided wages fell low enough*.
Keynes noted the economic mechanism by which investment occurs has little to do with the existing rate of saving; both are influenced by interest rates, but other forces come into play (e.g., liquidity preference for saving, business opportunities and user cost for investment). Hence, aggregate demand can drift very far out of alignment with output (or potential output).
Another finding was that employment rates actually did not respond in a predictable way to the fall in wages. The US economy suffered periods when a reduction in the wage level lead to increases in employment, despite the assumption that workers would have withdrawn from the labor market.
Finally, Keynes proposed the use of monetary policy and fiscal policy for regulating business cycles.
The *The General Theory of Employment, Interest, and Money* completely shook up the world of economic policy. Hereafter, governments took responsibility for economic conditions or they lost power.
by Abu Yahya March 3, 2009
Get the The General Theory of Employment, Interest, and Money mug.(IRANIAN HISTORY) (1882-1967) Democratically elected Prime Minister of Iran from 1951 to 1953. Ousted by coup d'etat organized by MI-6 and the CIA after he nationalized the assets of the Anglo Iranian Oil Company (BP, p.l.c.).
Mossadegh was involved in the 1924 Constitutional Revolution that was supposed to have ended autocracy in Iran and replaced it with a democratic republic. Instead, Reza Khan (Shah Reza) replaced the Qejars as as monarch. Later, Mossadegh rose to power because of rising anger at colonial deal between AOIC and Iran. His nationalization of AOIC triggered a balance of payments crisis for the UK, and two years later he was ousted by Operation Ajax. After he was overthrown, Shah Muhammad Reza was a dictator, and dependent on the USA to remain in power.
Mossadegh was involved in the 1924 Constitutional Revolution that was supposed to have ended autocracy in Iran and replaced it with a democratic republic. Instead, Reza Khan (Shah Reza) replaced the Qejars as as monarch. Later, Mossadegh rose to power because of rising anger at colonial deal between AOIC and Iran. His nationalization of AOIC triggered a balance of payments crisis for the UK, and two years later he was ousted by Operation Ajax. After he was overthrown, Shah Muhammad Reza was a dictator, and dependent on the USA to remain in power.
Muhammad Mossadegh was a true Iranian patriot whose overthrow in a British Petroleum-instigated coup poisoned relations between the USA and the Islamic world.
by Abu Yahya July 19, 2010
Get the Muhammad Mossadegh mug.(ECONOMICS) situation in which demand confidence in banks or borrowers is so low that monetary policy (i.e., lowering interest rates) has no positive impact on the economy. A characteristic of an economic depression.
When the economy contracts, or is in a recession, it is occasionally sufficient for the authorities to lower the discount rate or the federal funds rate. This lowers the cost of borrowing money, so more people do so, more stuff is bought, and the economy recovers. But in a depression, people will hoard cash (if they have any); if the interest rate is lowered, they still won't borrow, and the banks won't lend (because they want to restore their balance sheets).
When this happens, only fiscal policy has any chance of restoring economic growth.
When the economy contracts, or is in a recession, it is occasionally sufficient for the authorities to lower the discount rate or the federal funds rate. This lowers the cost of borrowing money, so more people do so, more stuff is bought, and the economy recovers. But in a depression, people will hoard cash (if they have any); if the interest rate is lowered, they still won't borrow, and the banks won't lend (because they want to restore their balance sheets).
When this happens, only fiscal policy has any chance of restoring economic growth.
In the fall of 2008, the failure of so many major banks caused a global liquidity trap. For two quarters, the world economy suffered a very severe contraction, and millions of people lost their jobs.
by Abu Yahya April 18, 2010
Get the liquidity trap mug.a current account deficit; a negative net flow of liquid assets to the citizens of a particular country. The external balance includes the trade balance, net foreign factor income, and net foreign aid *received*. Usually the main cause of an external deficit is a trade deficit.
by Abu Yahya February 14, 2009
Get the external deficit mug.(MATHEMATICS) a number consisting of a real number and an imaginary number; imaginary numbers are multiples of the square root of -1.
by Abu Yahya April 23, 2010
Get the complex number mug.(FINANCE) a person or entity that lends money to someone else by creating securities and selling them. In commercial milieux, this is investment banking, and the most famous investment bank is Goldman Sachs. Another major investment bank is Morgan Stanley.
Most major countries have a ministry of the treasury, or ministry of finance, that issues bonds for the government and is responsible for selling them to raise money for government borrowing. These are treasury securities.
Most major countries have a ministry of the treasury, or ministry of finance, that issues bonds for the government and is responsible for selling them to raise money for government borrowing. These are treasury securities.
by Abu Yahya May 5, 2010
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