Net Interest Rate Spread

Net Interest Rate Spread

The difference between the average yield a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings. The net interest rate spread is a key determinant of a financial institution’s profitability (or lack thereof).

In simple terms, the net interest spread is like a profit margin. The greater the spread, the more profitable the financial institution is likely to be; the lower the spread, the less profitable the institution is likely to be. While the federal funds rate plays a large role in determining the rate at which an institution lends immediate funds, open market activities ultimately shape the rate spread.


Investment dictionary. . 2012.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • Net interest income — (NII) is the difference between revenues generated by interest bearing assets and the cost of servicing (interest burdened) liabilities. For banks, the assets typically include commercial and personal loans, mortgages, construction loans and… …   Wikipedia

  • Interest rate swap — An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another party s stream of cash flows. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. They… …   Wikipedia

  • net interest margin — The amount of interest income minus interest expense, usually expressed as a percentage. The net interest margin percentage is calculated by dividing interest income less interest expense by average earning assets. If interest income includes tax …   Financial and business terms

  • Net Interest Income — All firms can divide the balance sheet into assets and liabilities. For banks the assets are commercial and personal loans, mortgages, construction loans and securities. The liabilities are deposits from customers. The net interest income (NII)… …   Wikipedia

  • Net Interest Income — The difference between the revenue that is generated from a bank s assets and the expenses associated with paying out its liabilities. A typical bank s assets consist of all forms of personal and commercial loans, mortgages and securities. The… …   Investment dictionary

  • Net volatility — refers to the volatility implied by the price of an option spread trade involving two or more options. Essentially, it is the volatility at which the theoretical value of the spread trade matches the price quoted in the market, or, in other words …   Wikipedia

  • spread — The price difference between two related markets or commodities. Chicago Board of Trade glossary l) Positions held in two different futures contracts, taken to profit from the change in the difference between the two contracts prices; e.g., long… …   Financial and business terms

  • Options spread — Spread option redirects here. For the American football offensive scheme, see Spread offense. Options spreads are the basic building blocks of many options trading strategies. A spread position is entered by buying and selling equal number of… …   Wikipedia

  • net — Synonyms and related words: acquire, afford, angle, apprehend, arabesque, arrest, asking price, avails, avoirdupois, bag, bait, bait the hook, balance, bargain price, basketry, basketwork, be seized of, beef, beefiness, bid, bid price, birdlime,… …   Moby Thesaurus

  • Debit spread — In finance, a debit spread, AKA net debit spread, results when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium. The investor is said to be a net buyer and expects the premiums of the two… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”