Greenspan Put

AAA

DEFINITION of 'Greenspan Put'

A description of the perceived attempt of then-chairman of the Federal Reserve Board, Alan Greenspan, of propping up the securities markets by lowering interest rates and thereby helping money flow into the markets.

Investors assumed that they would be able to liquidate their stocks at a set price at or before a future date as if there was a built-in put option. They believed that Greenspan would manipulate monetary policy and continue to maintain market stability. While the former Fed chair's actions did have an effect on the markets, it was not necessarily his objective.

INVESTOPEDIA EXPLAINS 'Greenspan Put'

The term was coined in 1998 after the Fed lowered interest rates following the collapse of the investment firm Long-Term Capital Management. The effect of this rate reduction was that investors borrowed funds more cheaply to invest in the securities market, thereby averting a potential downswing in the markets.

On February 1, 2006, Ben Bernanke replaced Alan Greenspan as the Federal Reserve Board chairman.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Put

    An option contract giving the owner the right, but not the obligation, ...
  3. Soft Landing

    A term used to describe a rate of economic growth high enough ...
  4. Alan Greenspan

    The former chairman of the Board of Governors of the Federal ...
  5. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  6. Federal Open Market Committee - ...

    The branch of the Federal Reserve Board that determines the direction ...
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Technical Indicators

    What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these approaches to buying the market.
  4. Technical Indicators

    What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of your investment.
  5. Forex Strategies

    Are Doji patterns important when trading forex pairs?

    Find out why forex traders make heavy use of candlestick patterns such as the doji, which can be used as a signal of market indecision and coming breakout.
  6. Forex Strategies

    What are the most common momentum oscillators used in forex trading?

    Explore two frequently used momentum indicators in forex trading, the moving average convergence divergence, or MACD, and the relative strength index, or RSI.
  7. Trading Strategies

    Why is divergence between indicators important for traders?

    Learn what technical analysts mean by a "divergence" between indicators, and determine why a divergence could be a sign the current price trend is ending.
  8. Trading Strategies

    What does it mean when a stock is trading near the Donchian channel, high or low?

    Learn how Donchian channels can be used to spot overbought or oversold positions and how to react to these signals to make a profit.
  9. Trading Strategies

    Is using the Donchian channel more risky or more conservative than using Bollinger BandsĀ®?

    Read about differences between Bollinger Bands and Donchian Channels, and learn why the latter are considered to be a riskier trading tool.
  10. Trading Strategies

    How effective is creating trade entries after spotting a Morning Star pattern?

    Understand the elements of the morning star candlestick pattern and how to best utilize this reversal signal to create effective trade entries.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center