Hot Money

AAA

DEFINITION of 'Hot Money'

1. Money that flows regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible. Hot money will flow from low interest rate yielding countries into higher interest rates countries by investors looking to make the highest return. These financial transfers could affect the exchange rate if the sum is high enough and can therefore impact the balance of payments.

2. Stolen money that is marked so as as to be traceable.


INVESTOPEDIA EXPLAINS 'Hot Money'

1. Banks usually attract "hot money" by offering relatively short-term certificates of deposit that have above-average interest rates. As soon as the institution reduces interest rates or another institution offers higher rates, investors with "hot money" withdraw their funds and move them to another institution with higher rates.


2. Hot money might have been involved in a robbery and tracked through dye marks on each bill or through recorded serial numbers.





RELATED TERMS
  1. CD Ladder

    A strategy in which an investor divides the amount of money to ...
  2. Horizontal Market

    A market diversified so that the products created are able to ...
  3. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  4. Money Market

    A segment of the financial market in which financial instruments ...
  5. Short Term

    1. In general, holding an asset for short period of time. 2. ...
  6. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
Related Articles
  1. Insurance

    How To Create A Laddered CD Portfolio

    Laddered certificates of deposit offer safe capital and predictable cash flow, while bringing simplicity to your portfolio.
  2. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  3. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  4. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
    Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  5. Bonds & Fixed Income

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
  6. Bonds & Fixed Income

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
  7. Bonds & Fixed Income

    Introduction To Commercial Paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
  8. A money market account is an interest-bearing account that pays a higher interest rate.
    Savings

    Money Market Accounts vs. Savings Accounts

    An interest-bearing account that pays a higher interest rate than a savings account and gives the account holder limited check-writing ability.
  9. Don't focus too much on a mutual fund's recent returns.
    Mutual Funds & ETFs

    Can High Fund Returns Be Deceiving?

    Don't focus too much on a mutual fund's recent returns. To pick a winner, look at how well it is poised for future success, not how it did in the past.
  10. Money market funds
    Investing News

    Money Market Funds: Enough Regulation Already?

    Since September, the Securities and Exchange Commission (SEC) has been sitting on proposed rules for money market mutual funds that would affect 61 million individual investors plus untold businesses ...

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