Sarasota County Investment Policy 2018

Sarasota County Investment Policy 17 17. CERTIFICATE OF PARTICIPATION (COP): A lease-financing agreement used by a municipality or local government to acquire real property. Under the agreement, the local government makes regular payments over the annually renewable contract for the acquisition and use of the property. A lease-financing contract is typically made available in the form of a certificate of participation. 18. COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. 19. COLLATERALIZATION: Process by which a borrower pledges securities, property, or other deposits for securing the repayment of a loan and/or security. 20. COMMERCIAL MORTGAGE BACKED SECURITY (CMBS): A type of mortgage-backed security that is secured by mortgages on commercial properties, instead of residential real estate. The underlying loans that get securitized into CMBS include loans for properties such as apartment complexes and buildings, factories, hotels, office buildings and shopping malls. Issuers can include government agencies, commercial banks, insurance companies and brokerage firms. 21. COMMERCIAL PAPER: An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates. 22. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for Sarasota County, Florida. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. 23. CONVEXITY: A measure of a bond's price sensitivity to changing interest rates. A high convexity indicates greater sensitivity of a bond's price to interest rate changes. 24. CORPORATE BOND: A corporate bond is a debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. Corporate debt can be classified according to maturity with Commercial Paper being the shortest, followed by Notes and Bonds - similar to the maturity classification of U.S. Treasury Bills, Notes and Bonds. 25. COUPON: The annual interest rate paid on a bond, expressed as a percentage of the face value. 26. CREDIT QUALITY: The measurement of the financial strength of a bond. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by nationally recognized security rating organizations (NRSROs). 27. CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security. 28. CURRENT YIELD (CURRENT RETURN): A yield calculation determined by dividing the annual interest received on a security by the current market price of that security.