English

The cancellation of an entry item by an offsetting entry instead of crossing it out. – In older financial language, the settlement of a debt, also called cancellation. – The cancellation (rescission) of a…

The cancellation of an entry item by an offsetting entry instead of crossing it out. – In older financial language, the settlement of a debt, also called cancellation. – The cancellation (rescission) of a…

Unless otherwise defined, the reverse side of a coin. – See Obverse, bayoire, eteostichon, imperial coin, millesime, Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without…

An auction (Gant; auction) in which not the bidder with the highest offer is awarded the contract, but the bidder with the lowest offer (auction in which sellers bid prices for which they are…

Certificate that offers the investor the opportunity to make a profit from falling prices of the underlying asset. There is a reverse variant for almost all types of certificates. However, in order to protect…

If a domestically extracted raw material is sold abroad below market prices, the goods produced with it flow back cheaply into the country This drives domestic manufacturers burdened with the higher raw material prices…

Special form of floating-rate (interest-bearing) security in which the interest yield is negatively correlated with the reference interest rate, i.e. moves in the opposite direction to it (a structured note where the rate of…

Borrowing by domestic enterprises from – their foreign subsidiaries or – via their financing companies operating abroad that specialize in issuing international bonds. These loans must be included statistically in direct investment. – See…

The purchase of securities with an obligation to sell. In the course of this – certain securities – are bought today – for a period fixed in advance and – at the same time…

According to European law, a supervisory authority in the EU may revoke the license granted to an institution only if the institution – has not made use of the license for a period of…

A bank is entitled to refuse to pay out a promised loan if circumstances become known which make repayment on the part of the borrower appear to be at risk; see Section 610 of…

Pursuant to Sec. 1, Para. 1, Sentence 2, № 7 of the German Banking Act, the entering into of an obligation to repurchase previously sold loan receivables before maturity. – The purpose of these…

In former times, a monetary payment that ships had to pay when navigating the Rhine. Its proceeds were largely used to maintain the towpaths (treideln = to tow a ship upstream from the shore)…

A special surcharge on the tax that, by Reich law of August 11, 1923, all income, corporate, and motor vehicle taxpayers had to pay after French and Belgian troops invaded the Ruhr. Due to…

A marking – often an inscription – on the outside edge of a coin. Marking was usually done during the production process for all coins of the same type. Sometimes, however, individual pieces were…

In older financial language, a re-draft drawn by the subrogated party on the subrogated party. It must be payable on demand and issued directly (a drittura) to the person liable to recourse. The bill…

This term is used to describe various phenomena. – The change in capital intensity in an economy depends on the market prices for labor and capital. – High government debt leads to a loss…

Several parties draw and accept bills of exchange from each other, but without any real transactions underlying these bills. Such bills of exchange merely serve to raise money for one or all of the…

The right – money in general, – and, where the currency consists only of coins of metal, to put coins into circulation as part of the monetary unit (the right to mint and issue…

In financial market contracts, generally the power to take possession and ownership of an asset at a later date (a fixed interest in an asset, although the right of possession, use and enjoyment may…

A – less known on the market – for example the “Revios Rückversicherung GmbH”, which was spun off from the Gerling division, but which received top ratings from the agencies; this has meanwhile been…

The payment for the bell ringer (bell ringer: a person who rings church bells) on special occasions such as weddings (wedding bells; wedding bells), deaths (striking the death knell), or funerals (funeral service). –…

In the services of Christian congregations, after the sermon, an ecclesiastic (sexton, vergar) used to walk through the nave (nave) with a bag attached to a long pole with a bell at the bottom.…

Providers who use a variety of dubious methods to persuade people to sign a contract against their will, although the criminal law requirements of fraud do not necessarily have to be met. However, because…

Certain events on the financial market that have – undulating (undulatory, wavelike: spreading persistently from a center), – geographically usually very far-reaching and – temporally possibly long-lasting effects, such as occasionally the subprime crisis).…

The “Act to Limit the Risks Associated with Financial Investments”, which came into force in August 2008, is intended to protect investors in financial investments. The majority of market participants, however, see the act…

In general, the possibility of the occurrence of undesirable future events and consequences of actions, because – due to the course of time – in nearly all types of human engagement there is the…

The fact that borrowers must pay interest on a loan in accordance with their respective credit rating class as determined by rating. This is a requirement under Basel II. – In Germany, healthy small…

In general, the propensity of market participants to take a risk (the amount of capital an investor is willing to lose in order to generate a potential profit). Central banks focus in particular on…

Unless otherwise defined on the stock exchange, the taking of opposing positions in shares of a takeover candidate (target company) and its prospective acquirer, potential buyer (bidder). This is considered to be an extremely…

System developed by the German Federal Financial Supervisory Authority and the Deutsche Bundesbank for the early identification and assessment of banks’ risks. The focus is on a comparative overview that allows an individual bank…

In the case of a company, the proportion of debt in total capital; a popular ratio for assessing the financial stability of the company. – In the case of a bank, the proportion of…

The fundamental reluctance to take a risk. This aversion can only be overcome if there is a correspondingly high incentive to win, as is the case with gambling activities. – In the case of…

In the case of a bank, a special business policy that avoids any kind of risk position by avoiding a risk wherever possible or by fully backing risks taken with equity. – Such a…

Measures aimed at preventing a bank from taking on too large a risk position, i.e. dampening its risk appetite. The means of choice (means to this end) are proportional or even disproportionate borrowed capital.…

In the case of banks, – the model risk calculations prescribed by law and/or by the supervisory authorities, or – the calculation methods specifically permitted for certain banks that deviate from the model calculation.…

In general, the investment of money in a transaction with a foreseeable considerable risk of loss, but at the same time with the prospect of above-average profits (money directed in a risky undertaking). –…

Unless otherwise defined, the amount of capital that ensures that a company remains solvent and capable of acting even in exceptional situations for a certain targeted solvency level (long-term credit rating). In order to…

Unless otherwise defined, the supervisory assignment to a risk class. This is used to determine the intensity of supervision. – See risk inventory, risk capital (investment) ratio, risk assessment system, twelve-field risk matrix. –…

Unless otherwise defined, the body within the supervisory board of an institution that monitors the overall risk situation and, for this purpose, is kept continuously and comprehensively informed by the bank’s Chief Risk Officer.…

at the ECB, the specific facilities and measures aimed at identifying and assessing counterparty risks. – See Actuary, bancassurance risk committee, chief risk officer, action requirement, urgent, credit scoring procedure, rating, external, rating, internal,…

Unless otherwise defined, this refers to a bank’s capital available to offset any losses. – See Basel II, capital requirements, economic, core capital. – Cf. Deutsche Bundesbank Monthly Report, March 2013, p. 41 f.…

In the language of the supervisory authorities, a sensitivity to risks that permeates all levels of an institution. All employees must be willing and able to recognize risks, assess them properly, and propose or…

A document that states as clearly as possible the risks and uncertainties associated with a particular option transaction or forward contract. It is usually accompanied by a detailed statement of the fees and sometimes…

Behavioral change in the presence of asymmetric information, if the expected bad solution is (co-)borne by others (especially when debt no longer acts as an incentive for management, and corporate managers will be tempted…

The assets of a capital management company that promise the investor an above-average return if successful, but inevitably also involve the possibility of losing the money invested, in accordance with the risk-return principle. –…

The calendar period for which risks are measured. The precise definition of this period is a basic prerequisite for any risk calculation. – Cf. Deutsche Bundesbank Monthly Report of March 2013, p. 39 f.…

The accusation that banks lend recklessly without knowing or considering the risk involved. Banks were accused of having contributed to the financial crisis that followed the subprime crisis through their risk-ignorant behavior. When banks…

It is a well-documented empirical fact that financial market participants adjust their return expectations only very sluggishly to the development of market interest rates. As a result, they are more inclined to take risks…

In relation to institutions, the comprehensive, complete inventory of the risks to which a bank is exposed. As a rule, it includes counterparty risk, all market price risks including interest rate risks, company-specific risks…

Person who enters more or less cautiously into risky engagements. – See investment courage, investment risk, footfisher, shorn, investment fund, alternative, risk capacity, risk fund, risk taker, venture capital. Attention: The financial encyclopedia is…

In the case of banks, a management tool for the comprehensive and systematic identification, assessment and monitoring of risks on the exposures associated with the banking business (the process to recognize, control, and minimize…

In connection with Basel II, a body that deals with the areas of interest rate risk in the banking book and operational risk, as well as with the new on-site audit to be introduced…

Under Solvency II, a risk buffer that – in addition to the expected value provision of insurance companies – must be established and calculated using the costof-capital approach. – Cf. BaFin Annual Report 2006,…

According to the definition in Section 1 (13) of the German Banking Act (KWG), time-based stochastic representations of changes in market prices or market values and market interest rates and their effects on the…

A capital management company must have its own risk management system for each of its investment funds in which derivatives are included, which continuously records, measures and manages the risks of the investment fund…

Expression for the probability with which the assets of an investor – for example: 100 EUR – fall below a certain value (threshold value) after a certain time – for example: 24 months. –…

A bank’s own department with the purpose of obtaining all information necessary for risk management. The risk office is also responsible for working through plans for events that lie outside the range of statistical…

Unless otherwise defined, the perception, sense and understanding of risks in the financial market on the part of investors. Evidence shows that risk perception declines in boom times and a false sense of security…

hazard pay): A premium paid to employees who perform work under dangerous circumstances (extra payment for working under dangerous surroundings), such as when defusing mines or bombs. Attention: The financial encyclopedia is protected by…

The risk premium in this sense is one of the most important market signals. It increases when investors have to fear that they will not get their money back as promised. A high risk…

Unless otherwise defined, in the course of Basel II, the disclosure of credit risks at a bank. This should include information on the portfolio structure, the main types of credit risk, their geographical and…

A list compiled by rating agencies and/or other international observers of those countries where sovereign default is likely and investing in them entails a very high risk. In spring 2014, Venezuela topped the list,…

Reporting obligation of banks to the supervisory authority on the details of their risk management, namely their steps to identify, assess and manage risks. – See meltdown risk, Basel III, risk management, risk department,…

A Out of the money call option is purchased and at the same time an out of the money put option on the same underlying instrument is sold (purchase or sale of a call…

Unless otherwise defined, a special business practice of the insurance industry, and here again especially of reinsurers. It consists of issuing – usually through special purpose vehicles – high-yield catastrophe bonds that spread the…

Unless otherwise defined, the possibility of – mitigating temporary fluctuations (oscillations: fluctuations in a system) in a country’s gross domestic product thanks to its economic interdependence with the world economy, – especially the immediate…

Individuals (“finance strategists”) or companies who, especially in the case of options transactions, take on high risks or uncertainties without a second thought. As financial history teaches, such vabanque operations always end sooner or…

Someone who takes a risk (one who risks). – See investment courage, barefoot pilgrim, footfisher, shorn, risk investor, risk taker, speculator. Attention: The financial encyclopedia is protected by copyright and may only be used…

The person or entity that must ultimately make payment in the event of a default. – If a loan is backed by guarantees from EMU member states, as was the case with the aid…

The amount of possible price fluctuations that an investor is willing to accept in order to achieve an investment objective. Risk tolerance is decisive for the choice of a particular type of investment, such…

Generally, the passing on of a risk of loss incurred to another party. – Particularly in the case of the transfer of credit risks, it must always be borne in mind that the transferred…

Banks address risks mainly by: – choosing interest rates so that each credit risk class bears the defaults itself, and – addressing major loan defaults through appropriate provisioning and capital adequacy policies, – transferring…

The attempt to detect obvious and hidden risks through appropriate risk management measures. In the case of financial service providers, this is more or less strictly prescribed by the supervisory authorities. – See Risk…

A person, but usually a public body such as the federal state of North Rhine-Westphalia or the canton of Zurich, undertakes to guarantee unconditionally against any losses incurred by a company – in the…

At the bank, a process whereby each on-balance sheet and off-balance sheet transaction is assigned a percentage weighting that reflects the estimated credit risk. Transactions with a certain risk weight are then grouped into…

The ability of an investor to take a certain risk in an investment without getting into financial difficulties in the event of losses. In other words, the investor should have adequate and sufficient liquidity…

Part of operational risk. Banking management risks (bank processing, banking issues) primarily include settlement risks, operating cost risks and model risks. – Processing risks arise from errors and deficits that can be directly attributed…

The possible occurrence of unpleasant business situations in the banking business. The phrase “banking is risk taking” still applies; and no matter how strict regulation is, banking risks can never be ruled out. In…

The risk that an investment in a company will cause it to fail due to special circumstances that are difficult to foresee. An example is contaminated buildings and soils that have to be decontaminated…

In the case of a company in general and an institution in particular, all disturbances, whether internal or external, which could hinder a company in the provision of its services and lead to losses.…

The effect of sales fluctuations on a company’s profit, taking into account its cost structure. As the proportion of fixed costs increases, the company’s resistance to profit erosion decreases (operating leverage effect). This is…

Special risks arising from the fact that in an area at risk, especially from hurricanes or earthquakes, – a company conducts its operations or – an insurance company has concluded policies on a significant…

Dangers arising from circumstances in a single company. This risk can be reduced by diversifying investments (the risk that is firm specific and can be diversified through holding a portfolio of shares). – In…

In the case of financial investments, the worst-case scenario of a total loss of the capital invested. However, there are no additional funding obligations, i.e., liabilities exceeding the capital loss. – See Bank shareholders’…

Possible occurrence of a loss in cases where a mathematical probability cannot be calculated due to a lack of data. – See flash crash, expectation theory, new, imponderables, residual risk, risk carrier, ultimate, uncertainty.…

Most important part of operational risk according to Basel II. In detail, a distinction is made between – supply risk (bottleneck risk, risk of a lack of high performance employees): skilled top performers are…

In the case of financial investments, the risks arising from the government and economic policies of the corresponding investment country. – See investment risk, supervision, macroprudential, foothold, country risk, net creditor, residual risk, risk…

In the case of financial investments, all risks that depend on circumstances that influence the market as a whole and can hardly be reduced or eliminated by appropriate investment diversification (chiefly the exposure to…

The risk that the international financial system as a whole will suffer severe disruptions or even collapse, with the consequence that regular exchange transactions worldwide will also suffer. – Systemic risks basically reflect disruptions…

In the case of investments, the risk of having to make additional margin calls in excess of the amount lost. Such a margin call can amount to several times the purchase price. Financial products…

In financial investments, the randomness that affects a particular investment object: from a new invention to a change in company management. – The unsystematic risk can be reduced by diversifying one’s portfolio, i.e. by…

In accounting, the back posting of an erroneously posted item (entry that is entered on the opposite side of an earlier entry to cancel its effect on the account balance). – In indemnity insurance,…

The selection of suitable financial centers in Germany and abroad in the course of an issue of securities. – The promotion of a new issue to institutional investors, usually by the lead manager (a…

In 2010, two star economists, Carmen Reinhart and Kenneth Rogoff – the latter was chief economist of the International Monetary Fund – published an empirical study on the relationship between government debt and economic…

Whereas in goods markets the roles (role: the proper or customary activity and action) of sellers and buyers are clearly separated, and thus certain behaviors are fixed – the seller wants to sell a…

Contractual stipulation in the case of mezzanine capital that a certain proportion of the current interest is capitalized in advance. In this case, however, the investor is paid the interest only in arrears, at…

On the Euromarket – loans in very large amounts with a minimum sum of usually EUR 0.5 million, – with a term (period: time to run; time limit) of up to seven years and…

In general, the possibility that creditors will withdraw loan commitments or not renew credit lines due to certain circumstances. – In particular, the risk that arises when a debtor has fixed its assets for…

In the classical Roman Empire as a whole – with the exception of Egypt, where its own monetary system was in force : 1 aureus = twenty-five denarii; 1 denarius = four sestertii =…