Funding Operations

DEFINITION of 'Funding Operations'

  1. The process a government uses to swap out floating stock or short-term bonds for long-term bonds. Because floating stock does not guarantee payout or a fixed rate of interest, swapping it for funded debt (long-term bonds that carry a fixed rate of interest) introduces more stability into the government's financing of its national debt.
  2. The process a company uses to convert its capital funding from short-term to long-term debt instruments.

BREAKING DOWN 'Funding Operations'

In July of 2009, amid the lingering global credit crisis, Sheila Bair, Chairwoman of the Federal Deposit Insurance Corporation (FDIC) weighed in on the creation of a Financial Services Oversight Council to prevent a recurrence of the global economic meltdown and credit market freeze of 2007-2008. As part of the proposed Council's work, it was suggested that financial companies be subject to rules that would require them to issue short-term debt that would automatically convert to long-term debt under certain conditions such as during a liquidity crisis.

RELATED TERMS
  1. Bond Market Association (BMA) Swap

    A type of swap arrangement in which two parties agree to exchange ...
  2. Asset Swap

    Similar in structure to a plain vanilla swap, the key difference ...
  3. Delayed Rate Setting Swap

    An exchange of cash flows, one of which is based on a fixed interest ...
  4. Swap Rate

    The rate of the fixed portion of a swap as determined by its ...
  5. Rate Anticipation Swap

    A type of swap in which bonds are exchanged according to their ...
  6. Zero Basis Risk Swap - ZEBRA

    A swap agreement between a municipality and a financial intermediary. ...
Related Articles
  1. Investing

    Interest Rate Swaps Explained

    Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows.
  2. Investing

    How Are Interest Rate Swaps Valued?

    When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
  3. Managing Wealth

    The Advantages Of Bond Swapping

    This technique can add diversity to your portfolio and lower your taxes. Find out how.
  4. Investing

    Different Types of Swaps

    Investopedia explores the most common types of swap contracts.
  5. Markets

    What's an Interest Rate Swap?

    An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount.
  6. Trading

    An In-Depth Look At The Swap Market

    The swap market plays an important role in the global financial marketplace; find out what you need to know about it.
  7. Managing Wealth

    How To Read Interest Rate Swap Quotes

    Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes
  8. Trading

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  9. Investing

    What Warren Buffet Calls "Weapons of Mass Destruction": Understanding the Swap Industry

    A full analysis of how the swap industry works.
  10. Managing Wealth

    Convertible Bonds: Pros And Cons For Companies And Investors

    Find out why businesses choose this type of financing and what effect this has on investors.
RELATED FAQS
  1. What are interest rate swaps on the OTC market?

    Learn about interest rate swaps and how they are traded over the counter, and understand the impact of Dodd-Frank on swaps ... Read Answer >>
  2. Can individual investors profit from interest rate swaps?

    Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >>
  3. What is an absolute rate?

    An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >>
  4. Which of the following strategies is (are) appropriate? I. If a borrower has a fixed ...

    The correct answer is: a) (II) is incorrect because if an investor has floating rate assets and is expecting interest rates ... Read Answer >>
  5. Do interest rate swaps trade on the open market?

    Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>
  6. What would motivate an entity to enter into a swap agreement?

    Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center