Daylight OverDraft (DOD)

(1) Intraday debit in a transaction settlement account at a clearing bank and/or at a clearing house or central bank. While these overdrafts are covered in one way or another by the end of a business day, they expose the clearing bank, the clearing house and its members, or the central bank, to some default risk. (2) Debit incurred by Federal Reserve member banks on an intraday basis. Until recently, no attempt was made to measure intraday exposure of an individual bank or of the system. Recognition of the risks involved in measuring the exposure only at each day's close of business has led to Fed charges based on average intraday overdrafts to encourage banks to monitor and manage this risk exposure.

Glossary * D