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APPENDIX A: GLOSSARY

Italicized terms within definitions are defined separately.

ABCP see asset-backed commercial paper.
ABS see asset-backed security.
ABX.HE A series of derivatives indices constructed from the prices of  credit default swaps that
each reference individual subprime mortgage–backed securities; akin to an index like the Dow
Jones Industrial Average.
adjustable-rate mortgage A mortgage whose interest rate changes periodically over time.
affordable housing goals Goals originally set by the Department of Housing and Urban Develop-
ment (now by the Federal Housing Finance Agency) for Fannie Mae and Freddie Mac to allo-
cate a specified part of their mortgage business to serve low- and moderate-income borrowers.
ARM see adjustable-rate mortgage.
ARS see auction rate securities.
asset-backed commercial paper Short-term debt secured by assets.
asset-backed security Debt instrument secured by assets such as mortgages, credit card loans or
auto loans.
auction rate securities Long-term bonds whose interest rate may be reset at regular short-term
intervals by an auction process.
bank holding company Company that controls a bank.
broker-dealer A firm, often the subsidiary of an investment bank, that buys and sells securities
for itself and others.
capital Assets minus liabilities; what a firm owns minus what it owes. Regulators often require fi-
nancial firms to hold minimum levels of capital.
Capital Purchase Program TARP program providing financial assistance to -plus U.S. finan-
cial institutions through the purchase of senior preferred shares in the corporations on stan-
dardized terms.
CDO see collateralized debt obligation.
CDO squared CDO that holds other CDOs.
CDS see credit default swap.
CFTC see Commodity Futures Trading Commission.
collateralized debt obligation Type of security often composed of the riskier portions of mort-
gage-backed securities.
commercial paper Short-term unsecured corporate debt.
Commercial Paper Funding Facility Emergency program created by the Federal Reserve in  to
purchase three-month unsecured and asset-backed commercial paper from eligible companies.
Commodity Futures Trading Commission Independent federal agency that regulates trading in
futures and options.

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