IBORIBOR stands for Interbank Offered Rate – a type of interest rate benchmark that represents an average of the rates that banks will offer each other for loans of various maturities.
The most well-known and widely used IBOR is LIBOR. However, you might also encounter EURIBOR, TIBOR and other rates.
IBORs have been used in financial markets for a long time and feature in a huge variety of different products and transactions. Over-the-counter (OTC) derivatives in particular have long been associated with IBORs.
Illiquid MarketAn illiquid market is a market that is difficult to sell assets in due to a lack of interested buyers, available assets, or because the market itself is not viable as a financial asset. Assets in these markets are often difficult to convert to cash without losing a significant portion of its value because of their large bid-ask spreads. Illiquid markets can hold high-value assets, but if no willing buyers are found, sellers may be forced to lower their price or hold on to their assets longer than preferred.
An index’s components are the individual companies that are listed on a stock index. For example, Apple is a component of the Nasdaq stock index. . Components are also known as constituents. There is no set number of components an index must have.
The number of components in an index is significant, though, as each will contribute to the overall price of the index. Indices sometimes have the number of components included in their name. For instance, the FTSE 100 is comprised of 100 components.
Here are some major global stock market indices and the number of components each is made up of:
Dow Jones – (US) 30
FTSE 100 – (UK) 100
DAX – (Germany) 30
CAC 40 – (France) 40
Hang Seng – (Hong Kong) 50
How do an index’s components impact its value?
The combined value of all an index’s components makes up the overall value of the index. This means that a price change in any one of its components can impact the index’s value.
Indices work in different ways. Some apply a weighting on their components, meaning a stock with a large market capitalisation will impact the index more than a stock with a smaller one.Other indices work by applying a price weighting on their components. A price-weighted index applies a weighting for each of its components based on their share price. A strong price change of one of its larger stocks will influence the index’s price more than the same price change of one of its smaller stocks.
InflationInflation is the decline of a specific currency's purchasing power over time. It’s calculated by measuring the cost of a basket of widely consumed goods and services in an economy.
Inflation reduces each unit of currency's purchasing power and increases living costs; consumers must spend more to fill a shopping basket or get a haircut. As prices rise, money buys less so inflation can reduce living standards over time.
Initial margin requirementThe initial margin requirement is the amount of money required to open a position in a given market through a brokerage. It is usually represented as a percentage of the total amount you seek to open as a position. A trader looking to trade £100,000 in the forex market place may pay £10,000 to a brokerage as a 10% initial margin requirement and would still get the total £100,000 exposure through the brokerage.
Interbank rateThe interbank rate is the interest rate charged by banks when conducting transactions of foreign currency with other banks. These rates are typically lower than interest rates paid by retail traders, but they are used to set those higher interest rates paid by individuals and institutions. Like all foreign currency exchange rates, these fluctuate constantly.
Interest rateAn interest rate is the percentage of money charged above the lender's principal – the amount of money loaned – for using its capital.
Global central banks set base interest rates to manage their domestic economies. Base rates are the benchmark all banks use to decide their borrowing and investment rates.
InterventionAction by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
INXSymbol for S&P 500 index.
IPOA private company’s initial offer of stock to the public. Short for initial public offering.
The ISM Non-Manufacturing Index (now called the Services PMI) is an index used to assess the performance of services companies in the United States. The reading, published monthly, is based on surveys of more than 400 purchasing and supply managers in non-manufacturing (services) firms.
Monitoring the ISM Services PMI helps traders and investors in US markets get a detailed snapshot and insight into the country’s economic conditions.
The index is compiled and published by the ISM (Institute for Supply Management) as part of the ISM Report On Business.
Understanding the ISM Non-Manufacturing Index
The ISM services report measures the economic activity of more than 15 industries, measuring prices, inventory levels and employment. A reading which comes in above 50 indicates economic growth, while below 50 indicates contraction.
The reading can prove helpful when choosing which sectors to trade. The US dollar may also react to bullish or bearish ISM readings.
The various PMI/ISM readings are considered leading rather than lagging indicators, because purchasing manager activity predicts future business activity and trends.
The ISM Services PMI gets published in the first week of each month. Trends in the ISM can continue for months, which can be valuable for economists and analysts looking to make long-term financial forecasts.
The index has five major components: business activity, new orders, inventories, employment trends and prices.