What is the Federal Open Market Committee (FOMC)

The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. The FOMC is composed of 12 members--the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. The Chairman of the Board of Governors serves as the Chairman of the FOMC; the president of the Federal Reserve Bank of New York is a permanent member of the Committee and serves as the Vice Chairman of the Committee. The presidents of the other Reserve Banks fill the remaining four voting positions on the FOMC on a rotating basis. All of the Reserve Bank presidents, including those who are not voting members, attend FOMC meetings, participate in the discussions, and contribute to the assessment of the economy and policy options. See the current list of FOMC members.

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What is a Covered Call?

Covered Call Definition. A Covered Call is an options strategy in which an investor holds a long position in an asset (security, commodity or currency) and sells (writes) call options on that same asset in order to create additional income. The strategy is appropriate if the investor believes that in the short-term horizon, his asset value in the market will remain flat or neutral. For example, you may be long in a particular currency that is stable in a ranging market. If you sell calls at a strike price above your present value, you pocket the premiums as additional income. However, you have “capped” your gain potential at the level of the strike price. The strategy can also be used to write short options. A Covered Call is also known as a “buy-write”.

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What is Contagion?

Contagion Definition. Contagion is a phenomenon in which an economic crisis spreads from one market to another in much the same way as a disease spreads without recognition of natural boundaries. The recent debt crisis in Europe is a case in point. As the debt and deficit problems in Greece became evident in the daily press, concerns were raised that similar problems might spread to other “PIIGS” in the Eurozone. “PIIGS” was a euphemism for Portugal, Ireland, Italy, Greece and Spain. Economies in these other member states had been similarly impacted by the global recession and were having difficulty maintaining a sustainable recovery. Headlines questioned whether the “Greek Contagion” would spread to these countries, but government officials were quick to assess that issues in each state were different and unrelated to Greek problems.

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What are Federal Reserve Banks?

Federal Reserve Banks were established by Congress as the operating arms of the nation's central banking system. Many of the services provided by this network to depository institutions and the government are similar to services provided by banks and thrift institutions to business customers and individuals. Reserve Banks hold the cash reserves of depository institutions and make loans to them. They move currency and coin into and out of circulation, and collect and process millions of checks each day. They provide checking accounts for the Treasury, issue and redeem government securities, and act in other ways as fiscal agent for the U.S. government. They supervise and examine member banks for safety and soundness. The Reserve Banks also participate in the activity that is the primary responsibility of the Federal Reserve System, the setting of monetary policy.

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what is consumer price index (CPI)

A consumer price index (CPI) measures changes in the price level of market basket of consumer goods and services purchased by households. The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.

The price index excluding tobacco is used to index link many private contracts, alimony, annuities and also the minimum wage (SMIC). The index used for the SMIC is that of the "Households that belong to the lowest equivalized disposable income quintile, excluding tobacco". As of the dissemination of the consumer price index for January 2016, INSEE published a new index with the 2015 base = 100 to replace the 1998 base = 100. This renewed index is the eighth generation of indices since 1914.

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