Define terms and explain their role in the finacial markets: SIV, CDO, STRIP, federal fund rate, LIBOR?

Question

Define terms and explain their role in the finacial markets: SIV, CDO, STRIP, federal fund rate, LIBOR?

Answer 1

ill try to answer what i can.

libor stands for london interbank offering rate. its the rate banks charge each other to loan at. when people are offered variable rate mortgages or other products, the variable rate is based on libor. because it goes up and down with the economy.

siv is structured investment vehicle. its a fund that buys long term assets and funds these with short-term assets like commercial paper. long term assets wil give them a higher rate than short term ones, and thats how they make their money.

cdo is collateralized debt obligation. theyre securities that are backed by pools of assets. so you have all these fixed income products, you pool them into an asset, and sell them off as cdo's.

the federal fund rate is the rate at which banks lend funds that are held at the federal reserve.