Debt Markets

Short-term Debt (Money Markets)

Deposits	Cheque/operating account, savings account, overdraft
Trade Credit	Credit account from supplier (i.e. pay for services later)
Interbank Settlements	Borrowing and lending between banks through RBA cash rate
Bills of exchange	Written commit by one party to pay another drafted by the lender
Promissory Notes	Written declaration by one party to pay another
Negotiable Certificates of Deposit	Bank deposit which is tradeable, issued at discount to face value (paid back at face value)
Commercial lending	Term deposit – loan advanced for a fixed term

Loans
Interest-only loan	Interest paid throughout term and principal at end
Amortised Loan	Interest and principal paid over term
Deferred Repayment	Instalments of interest and/or principal commence after a period
Mortgage	Security provided by mortgagor (borrower) to mortgagee (lender/bank). If mortgagor defaults, mortgagee can foreclose.
Interest Rates
Factors affecting loan rates	Credit risk – Risk of default Term of loan – Longer-term loan is more risky Repayment frequency – Higher frequency is less risky
Fixed/Variable	Fixed for specified time period or varying in line with benchmark
Loan Covenants
Positive Covenant	Obligation to take an action e.g. achieve certain financial ratios
Negative Covenant	Obligation to refrain from an action e.g. change of corporate structure

Non-liquid assets
Asset-back securities
Cash flow from asset
Special Purpose Vehicle

Borrowing of an asset in return for regular lease payments. Generally they are property or equipment leases.

Operating Lease

Short-term lease, asset ownership is retained by Lessor

Finance Lease

Long-term lease, on payment of final lease instalment, ownership passes to Lessee

Direct Finance Lease: Lessor purchases asset with own funds/ owns asset outright

Leveraged Finance Lease: Lessor finances asset purchase