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the FHA, VA or FmHA mortgages. The term “pass-throughs” is often used to describe Ginnie <br />Maes. <br />LIQUIDITY:A liquid asset is one that can be converted easily and rapidly into cash withouta <br />substantial loss of value. In the money market, a security is said to be liquid if the spread <br />between bid and asked prices is narrow and reasonable size can be done at those quotes. <br />LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political <br />subdivisions that are placed in the custody of the State Treasurer for investment and <br />reinvestment. <br />MARKET VALUE:The price at which a security is trading and could presumably be purchased <br />or sold. <br />MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions <br />between the parties to repurchase—reverse repurchase agreements that establishes each <br />party’s rights in the transactions. A master agreement will often specify, among other things, the <br />right ofthe buyer-lender to liquidate the underlying securities in the event of default by the seller <br />borrower. <br />MATURITY:The date upon which the principal or stated value of an investment becomes due <br />and payable. <br />MONEY MARKET:The market in which short-term debt instruments (bills, commercial paper, <br />bankers’ acceptances, etc.) are issued and traded. <br />OFFER:The price asked by a seller of securities. (When you are buying securities, you ask for <br />an offer.) See Asked and Bid. <br />OPEN MARKET OPERATIONS:Purchases and sales of government and certain other <br />securities in the open market by the New York Federal Reserve Bank as directed by the FOMC <br />in order to influence the volume of money and credit in the economy. Purchases inject reserves <br />into the bank system and stimulate growth of money and credit; sales have the opposite effect. <br />Open market operations are the Federal Reserve’s most important and most flexible monetary <br />policy tool. <br />PORTFOLIO:Collection of securities held by an investor. <br />PRIMARY DEALER:A group of government securities dealers who submit daily reports of <br />market activity and positions and monthly financial statements to the Federal Reserve Bankof <br />New York and are subject to its informal oversight. Primary dealers include Securitiesand <br />Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few <br />unregulated firms. <br />PRUDENT PERSON RULE:An investment standard. In some states the law requires that a <br />fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody <br />state—the so-called legal list. In other states the trustee may invest in a security if it is one <br />which would be bought by a prudent person of discretion and intelligence who is seeking a <br />reasonable income and preservation of capital. <br />19 <br />