Glossary

Market-makers commit to maintaining firm bid and offer prices in a given security by standing ready to buy round lots at publicly-quoted prices.

Debt securities usually with a maturity of five to ten years, but the term may be less than one year or as long as 50 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon; with a fixed maturity date (non-callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as senior, unsecured debt.

Entities that specialise in providing credit protection against the notional and interest cash flows due to the holders of debt instruments in the event of default. This protection is typically in the form of derivatives such as credit default swaps.

Asset-backed securities for which the underlying asset portfolios are loans secured on property.

Rights of a mortgage servicer to collect mortgage payments and forward them, after deducting a fee, to the mortgage lender.

The year in which a mortgage loan was made to the customer.

Mortgages where the value of the property mortgaged is less than the outstanding balance on the loan.

Net interest income – is the difference between interest receivable on financial assets classified as loans and receivables or available-for-sale and interest payable on financial liabilities carried at amortised cost. Net interest margin is net interest income as a percentage of average interest-earning assets.

Mortgage loans that do not meet the requirements for sale to US Government agencies or US Government sponsored enterprises. These requirements include limits on loan-to value ratios, loan terms, loan amounts, borrower creditworthiness and other requirements.

A contract that gives the holder the right but not the obligation to buy (or sell) a specified amount of the underlying physical or financial commodity, at a specific price, at an agreed date or over an agreed period. Options can be exchange-traded or traded over-the counter.