International Monetary Fund
Published Date:
November 2009
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Aggregation: the summing of gross position or flow statistics; data for a group of institutional units are equal to the sum of the gross positions or flows for all units in the group (BPM6 3.110).

Asset-backed commercial paper (ABCP): commercial paper, created through securitisation, whose redemption value is dependent on a homogenous pool of assets, either purchased in the secondary market or from the balance sheet of an original asset owner, such as mortgages, residential mortgage-backed securities (RMBS), motor vehicle and equipment loans and leases etc. (see also asset-backed security and commercial paper).

Asset-backed security (ABS): a bond, created through securitisation, whose coupon payments and principal repayments are dependent on a homogeneous pool of assets, either purchased in the secondary market or from the balance sheet of an original asset owner, such as mortgages, credit card loans, motor vehicle loans, etc. (External Debt Guide Appendix I and MFS Guide 4.19).

Asset price-linked: a debt security linked to non-financial asset prices and indices, such as the gold price or a commodities price index, financial asset prices and indices, such as a specific share price or share price index and other asset prices, such as property prices.

Bankers’ acceptance: a negotiable order to pay a specified amount of money on a future date, drawn on and guaranteed by a bank (External Debt Guide Appendix I).

Bill endorsement: similar to a bankers’ acceptance, the bill is drawn by the borrower, accepted by another unit (other than a bank), and is subsequently endorsed by a bank without commitment to purchase the bill.

Bonds and notes: debt securities with an original maturity of more than one year that are negotiable and usually traded in organised and other financial markets; they usually give the holder the unconditional right to fixed money income or contractually determined variable money income (External Debt Guide Appendix I).

Brady bond: a bond issued between the late 1980s and early 1990s to refinance emerging market countries’ debt to foreign commercial banks (External Debt Guide Appendix I).

Certificate of deposit: usually a negotiable certificate issued by a bank acknowledging a deposit in that bank for a specified period of time at a specified interest rate (External Debt Guide Appendix I).

Collateralised debt obligation (CDO): a bond, created through securitisation, whose coupon payments and principal repayments are dependent on a diversified pool of loan and bond instruments, either purchased in the secondary market or from the balance sheet of an original asset owner; similar instruments include collateralised mortgage obligations (CMO), collateralised loan obligations (CLO), and collateralised bond obligations (CBO) (External Debt Guide Appendix I).

Commercial paper: a discount and unsecured debt security issued by a corporation whose name appears on the front of the security and who promises to pay to the security holder a certain amount on a stated maturity date (see also promissory note and asset-backed commercial paper) (External Debt Guide Appendix I).

Consolidation: the elimination of positions or flows between institutional units that are grouped together (2008 SNA 2.68).

Convertible bond: a fixed interest rate bond that may, at the option of the investor, be converted into the equity of the borrower or its parent (External Debt Guide Appendix I).

Coupon payments: part or whole of the interest accrual during a period and payments that reduce the initial principal (BPM6 11.49).

Covered bond: a debt security, created through securitisation and issued by the original asset owner, which is backed by assets remaining on the balance sheet of the original asset owner, but identified as belonging to a cover pool.

Cover pool: a package of assets, such as mortgages and credit card loans, which is used to back debt securities issues.

Credit default swap (CDS): a financial derivative whose primary purpose is to trade credit default risk (2008 SNA 11.122).

Credit-linked note (CLN): a debt security, created through securitisation, with an embedded credit derivative used to hedge the credit risk of reference assets on the balance sheet of the original asset owner (External Debt Guide Appendix I).

Debenture: an unsecured or uncollateralised debt security that is backed by only the creditworthiness of the issuer.

Debt security: a negotiable financial instrument serving as evidence of a debt (2008 SNA 11.64).

Deep-discount bond: a bond that has small or no coupon payments and is issued at a considerable discount to its face value (External Debt Guide Appendix I).

Depository receipt: a financial instrument that allows a non-resident to introduce securities into another market in a form more readily acceptable to the investors in that market; a deposit-taking corporation will purchase the underlying security and then issue receipts in a currency more acceptable to the investor (External Debt Guide Appendix I).

Detachable warrant: a security, often a bond, with an attached financial derivative giving the holder the right to purchase equity securities of the underlying security.

Domestic currency: the currency that is legal tender in an economy and issued by the monetary authority for that economy, that is, either that of an individual economy or, in a currency union, that of the common currency area to which the economy belongs (BPM6 3.95).

Domestic currency-denominated: debt securities whose principal and coupon are both settled in domestic currency.

Domestic market: debt securities issued by a resident of the same economy in which the security is issued (residence of issuer approach) or debt securities issued by both a non-resident and resident of the same economy in which the security is issued (location of issue approach) (External Debt Guide 6.21).

Dual-currency bond: a bond where the interest or principal (or both) differ from the currency in which it was issued (External Debt Guide Appendix I).

Duration: the weighted average term to maturity of a debt security (External Debt Guide Appendix III).

Equity warrant bond: a debt security that incorporates a warrant, which gives the holder the option to purchase equity in the issuer, its parent company, or another company during a predetermined period or on one particular date at a fixed contract price (External Debt Guide Appendix I).

Euro debt security: a debt security issued in international markets, denominated in a Eurocurrency (US dollar, euro, yen, etc.) and underwritten and sold by an international syndicate of financial corporations (MFS Guide Table 4.2).

Exchangeable bond: similar to a convertible bond but instead the holder has the option to exchange the debt security for an equity security in a corporation other than the issuer or its parent.

Face value: the amount of principal to be repaid (2008 SNA 3.154 (d)); also known as “par value”, or simply, “par”.

Financial corporations sector: the sector consisting of all resident corporations that are principally engaged in providing financial services, including insurance and pension funding services, to other institutional units (2008 SNA 4.98).

Fixed interest rate debt security: a debt security whose coupon remains unchanged for the life of the security or for a certain number of years (see also variable interest rate debt security) (External Debt Guide Appendix I).

Flow: economic actions and effects within an accounting period (BPM6 3.2).

Foreign currencies: all currencies other than the domestic currency (BPM6 3.95).

Foreign currency-denominated: debt securities whose principal or coupon (or both) are settled in foreign currencies.

General government sector: the sector consisting of legal entities established by political processes that exercise legislative, judicial or executive authority over other institutional units within a given area (2008 SNA 4.117).

Global bond: a bond issued simultaneously in the euromarket and domestic market (MFS Guide Table 4.2).

Households sector: the sector consisting of groups of persons who share the same living accommodation, pool some or all of their income and wealth and consume certain types of goods and services collectively, mainly housing and food; they also cover unincorporated enterprises (2008 SNA 4.149).

Inflation-linked: a debt security whose principal amount or coupon (or both) is indexed to inflation, such as the consumer price index; as the principal amount increases with inflation, the interest rate that is applied to this increased amount raises coupon payments over time.

Interest payments: periodic payments of the interest costs that the borrower incurs and that primarily take the form of coupons.

Interest rate-linked: a debt security linked to a specific interest rate or interest rate index.

International markets: all markets other than the domestic market (applicable only to the residence of issuer approach) (External Debt Guide 6.21).

Location of issue: a presentation based on a geographic breakdown of debt securities markets.

Long-term maturity: a maturity of more than one year, or with no stated maturity (BPM6 5.103 (b)).

Market value: the price at which debt securities are acquired or disposed of in transactions between willing parties, excluding commissions, fees and taxes (2008 SNA 3.122) but including accrued interest.

Medium-term note (MTN): an unsecured debt security that pays a specified coupon and with an original maturity of between one and five years (External Debt Guide Appendix I).

Negotiable: refers to the fact that legal ownership is readily capable of being transferred from one owner to another by delivery or endorsement (BPM6 5.15).

Nominal value: the outstanding amount the debtor owes the creditor (2008 SNA 3.154 (b)).

Non-financial corporations sector: the sector consisting of corporations whose principal activity is the production of market goods or non-financial services (2008 SNA 4.94).

Non-participating preferred share: a type of preferred share in which the payment of a “dividend” (usually at a fixed interest rate) is calculated according to a predetermined formula and not determined by the earnings of the issuer (External Debt Guide Appendix I).

Non-profit institution serving households (NPISH) sector: the sector consisting of legal entities that are principally engaged in the production of non-market services for households or the community at large and whose main resources are voluntary contributions (2008 SNA 2.17 (e)).

Note issuance facility (NIF) / Revolving underwriting facility (RUF): a note issued under an NIF / RUF is a short-term debt security issued under a legally binding medium-term facility – a form of revolving credit (External Debt Guide Appendix I).

Original asset owner: an institutional unit that is an originator or purchases assets from an originator in the secondary market.

Original maturity: the period from the date of issue of a debt security until the final contractually scheduled payment (BPM6 5.104 (a)).

Originator: an institutional unit that originates assets as part of its regular business activities.

Other financial corporations: the financial corporations sector excluding the central bank, other money-issuing corporations and securitisation corporations.

Other money-issuing corporations: deposit-taking corporations and money market funds that issue liabilities that are included in the national definition of broad money.

Permanent interest-bearing shares (PIBS): deferred shares issued by mutual societies that provide “permanent” capital and pay predetermined (but not necessarily fixed) interest not linked to the issuer’s profits (External Debt Guide Appendix I).

Position: the level (or value) of assets or liabilities at a point in time (BPM6 3.2).

Principal (original): the amount borrowed and to be repaid excluding interest due or accrued (MFS Guide 2.46).

Principal (outstanding): the original principal, less non-interest payments the debtor has made to reduce the original principal (MFS Guide 2.46).

Private placement: a debt security that is issued by an issuer directly to a small number of investors and typically not rated by credit rating agencies.

Promissory note: an unconditional promise to pay a certain sum on demand on a specified date (see also commercial paper) (External Debt Guide Appendix I).

Protection buyer: an institutional unit in synthetic securitisation that makes payments to a protection seller in exchange for credit risk protection for reference assets.

Protection seller: an institutional unit in synthetic securitisation that sells protection against the credit risk on a premium buyer’s reference assets.

Public sector: the sector comprising general government, public non-financial corporations and public financial corporations, including the central bank.

Redemption value: the amount paid to discharge the debtor’s obligation at maturity; also referred to as face value (MFS Guide 2.49).

Remaining maturity: the period from the reference date of a debt security until the final contractually scheduled payment; also referred to as residual maturity (BPM6 5.104 (b)).

Repurchase agreement: an arrangement involving the provision of debt securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price, either on a specified future date or with an “open” maturity (BPM6 5.52).

Residence: the residence of each institutional unit is the economic territory with which it has the strongest connection, in other words, its centre of predominant economic interest (2008 SNA 4.10).

Residence of issuer: a presentation based on a breakdown of the issuers of debt securities by residence.

Securitisation: results in debt securities for which coupon or principal payments (or both) are backed by specified financial assets or income streams.

Securitisation corporation: a financial corporation that specialises in issuing securitisation debt securities (BPM6 4.77 (a)).

Securitisation debt securities: debt securities, created through securitisation, such as covered bonds, asset-backed securities (ABS), credit-linked notes (CLN), and collateralised debt obligations (CDO).

Security: a negotiable financial instrument (BPM6 5.15).

Separate trading of registered interest and principal of securities (STRIPS): securities that have been transformed from a principal amount with periodic interest coupons into a series of zero-coupon bonds, whose range of maturities matches the coupon payment dates and the redemption date of the principal amount (External Debt Guide Appendix I).

Short-term maturity: a maturity of one year or less (BPM6 5.103 (a)).

Sinking fund provision: a stipulation in the terms of issue of a bond that the borrower retire a certain proportion of the debt annually.

Treasury bill: a common form of sovereign short-term debt security that many governments issue; it gives the holder the unconditional rights to receive stated fixed sums on a specified date; issued at a discount to face value that depends on the rate of interest and the time to maturity (External Debt Guide Appendix I and BPM6 5.44).

Variable interest rate debt security: a debt security with a coupon linked with a fixed spread to a reference index, such as an interbank interest rate, a price of a specific commodity, or a price of a specific financial instrument, which normally changes continuously in response to market conditions (BPM6 5.110).

Variable rate note (VRN): a debt security that is similar to a variable interest rate debt security but whose spread to the reference index varies over time depending on the change in the perceived credit risk of the issuer (External Debt Guide Appendix I).

Warrant: a certificate, usually issued along with a bond or preferred share, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price at the time of issue, for an extended period.

Zero-coupon bond: a single-payment debt security that has no coupon payments during its life; it is issued at a discount to its face value and the full return is paid at maturity (External Debt Guide Appendix I).

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