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. Total Debt-to-Capitalization Ratio

    An indicator that measures the total amount of debt in a company’s ...
Related Articles
  1. Finding Your Margin Investment Sweet ...
    Investing Basics

    Finding Your Margin Investment Sweet ...

  2. Money Management Matters In Futures ...
    Options & Futures

    Money Management Matters In Futures ...

  3. The Best Way To Borrow
    Retirement

    The Best Way To Borrow

  4. Introduction to Margin Accounts
    Active Trading Fundamentals

    Introduction to Margin Accounts

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center