5 market related terms

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December 16, 2012

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There are many important terms in the financial market, including the Euribor which is certainly one of the better-known ones. This term refers to the interest rate charged by banks belonging and operating within the European Union, with which then deposits give loans with terms ranging from 1 to return only up to 13 months.

Euribor is going to replace all the various rates that regulate the various interbank rates such as: Ribor, FIBOR, Pibor and others. This rate is used as a parameter for comparison and index the different loans at floating bank rate with more short-term. And ‘in fact also known as “indexation parameter.”

Euribor is used on a large scale, the same rate can fluctuate also sensitive enough to remember the time not so far of the subprime crisis, during which there have been many turmoil in European markets and beyond.

Currencies is another term that we must fully understand in order to understand the financial market. This is the monetary value of a country. There are two general categories in which currencies are divided : the strong are the ones mostly used by banks in general to build up the reserves, or by investors in the Forex market in particular, and the weak. Consider themselves strong currencies: the euro, the dollar, the yen and the pound. Very often the loans are offered with rates of interest directly related to foreign currencies. It usually focuses on the stability of a currency.

The fixed interest rate is another term often used, and is nothing more than the interest that must be paid by the person who requests a loan to the lender. This can varies depending on the duration and the amount of the loan, but it will be fixed for the entire duration. The quota and the interest will be therefore constant over time, is usually higher than thevariable rate as a cost.

Often you hear of “spread“, but what does it mean? Simple, the spread is the difference between the purchase price and selling when choosing a particular financial instrument, for example, one can speak of the difference between the rent that is paid in two bonds. The spread is often applied to various financial instruments.

The capital is the basis of any investment and hence of any financial transaction. We are generally in front of what someone can invest, either a person or a company. A capital can be owned or instead a capital of third-party creditors and then a borrowed capital. Normally the capital is invested to fund the development of the business of a company, but when it comes to investors they invest in certain financial instruments to try to profit from it. Obviously capital if borrowed, should improve the interest rate of the loan. You can choose to borrow at a rate of 5% for a return in excess of say 7%. Manage in the best way the capital is the only way to make money in this financial world.

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