Sarasota County Investment Policy 2018

Sarasota County Investment Policy 18 29. CUSTODIAL/SAFEKEEPING: See “Safekeeping”. 30. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. 31. DEBENTURE: A bond secured only by the general credit of the issuer. 32. DELIVERY VERSUS PAYMENT (DVP): A securities industry settlement procedure in which the buyer’s payment for securities is due at the time of delivery. Delivery versus payment (DVP) is a settlement system that stipulates that cash payment must be made prior to or simultaneously with the delivery of the security. 33. DERIVATIVES: (a) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (b) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). 34. DISCOUNT: The amount by which the market price of a bond is lower than its principal amount due at maturity. This amount, called its par value, is often $1,000. As bond prices are quoted as a percent of face value, a price of 98.00 means that the bond is selling for 98% of its face value of $1,000 and the bond discount is 2%. 35. DISCOUNT SECURITIES: A money market security, such as a Treasury bill or commercial paper, that is issued at a discount but that matures at face value. The only income received by the investor is the difference between the price paid and the proceeds received at maturity or the sale of the security. 36. DIVERSIFICATION: This risk management technique mixes a wide variety of investments within a portfolio to smooth out unsystematic risk events in the portfolio to allow the positive performance of some investments to neutralize the negative performance of others. The rationale behind this technique contends that a portfolio of different kinds if investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. 37. DURATION: A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security. This calculation is based on three variables: term to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates. Generally a bond with a duration of 6 years, for example, will increase or decrease in value by 6% with a corresponding 1% increase or decrease in its yield. 38. EFFECTIVE DURATION: A duration calculation for fixed income securities that have embedded options. This measure of duration takes into account the fact that expected cash flows will fluctuate as interest rates change. Effective Duration can be estimated using modified duration if a bond with embedded options behaves like an option-free bond. 39. EXPORT-IMPORT BANK (EX-IM BANK): Ex-Im Bank is the official export credit agency of the United States federal government. It was established in 1934 by an executive order, and made an independent agency in the Executive branch by Congress in 1945, for the purposes of financing and insuring foreign purchases of United States goods for customers unable or unwilling to accept credit risk. Ex-Im Bank does not compete with private sector lenders, but rather provides financing for transactions that would otherwise not take place because commercial lenders are either unable or unwilling to accept the political or commercial risks inherent in the deal.