Call Money Rate

AAA

DEFINITION of 'Call Money Rate'

The interest rate on a type of short-term loan that banks give to brokers who in turn lend the money to investors to fund margin accounts. For both brokers and investors, this type of loan does not have a set repayment schedule and must be repaid on demand.

INVESTOPEDIA EXPLAINS 'Call Money Rate'

Trading on margin is a risky strategy in which investors make trades with borrowed money. The advantage of margin trading is that investment gains are magnified; the disadvantage is that losses are also magnified. When investors trading on margin experience a decline in equity past a certain level relative to the amount they have borrowed, the brokerage will issue a margin call that requires them to deposit more cash in their account or to sell enough securities to make up the shortfall.

RELATED TERMS
  1. Call Money

    Money loaned by a bank that must be repaid on demand. Unlike ...
  2. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  3. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  4. Broker's Call

    The interest rate charged by banks on loans made to broker-dealers, ...
  5. House Maintenance Requirement

    The minimum amount of equity that an account holder must maintain ...
  6. Ceded Reinsurance Leverage

    The ratio of ceded insurance balances to policyholders’ surplus. ...
Related Articles
  1. Investing Basics

    Finding Your Margin Investment Sweet Spot

    Borrowing to increase profits isn't for the faint of heart, but margin trading can mean big returns.
  2. Options & Futures

    Money Management Matters In Futures Trading

    Learn how this overlooked area of trading can help improve your gains.
  3. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  4. Investing Basics

    What is the effect of price inelasticity on demand?

    Find out why price inelasticity of demand shows the relationship between demand and price if the price of an inelastic good is either lowered or raised.
  5. Fundamental Analysis

    How do I calculate the debt-to-equity ratio in Excel?

    Understand the basics of the debt to equity ratio, how it is interpreted as a measure of financial stability and how it is calculated in Microsoft Excel.
  6. Investing

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
  7. Brokers

    Arbitrage Opportunities in Spread Betting

    While the opportunities are few and far between, investors may use arbitrage to take advantage of price differences in financial spread betting.
  8. Brokers

    The Exciting World Of The Top Spread Betting Brokers

    Spread betting can be fun, but it's risky and you will want a reliable broker. Here are the top spread betting brokers.
  9. Options & Futures

    How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing on margin from a broker.
  10. Brokers

    How does lack of corporate social responsibility hurt a company's bottom line?

    Learn about the perils of a lack of corporate social responsibility. Examine the WorldCom fraud, which led to its bankruptcy and imprisonment for its officers.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center