A | |
| Accrual: | The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.
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| Adjustable Peg: | An exchange rate system where a country's exchange rate is 'pegged' (ie. fixed) in relation to another currency. The official rate may be changed from time to time.
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| Aggregate Risk: | Total amount of exposure a bank has with a customer for both spot and forward contracts.
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| Algorithmic Trading: | Placing a buy or sell order of a defined quantity into a quantitative model that automatically generates the timing of orders and the size of orders based on goals specified by the parameters and constraints of the algorithm.
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| All or None: | A limit price order that requires the entire order to be filled at the stated price or not at all.
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| All-or-none: | Order is not considered filled unless the total/amount is traded.
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| Alpha: | Alpha is a risk-adjusted measure of the so-called 'excess return' on an investment. It is a common measure of assessing active managers' performance.
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| Amount: | The quantity traded.
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| API (trading): | Application program (or programming) interface. In the 'market API' sense, it is the specific method prescribed by a market by which a programmer writing an automated trading model can communicate with the market so that the model may place orders, receive market data etc.
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| Appreciation: | A currency is said to 'appreciate' when it strengthens in price in response to market demand.
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| Arbitrage: | The simultaneous purchase and sale of an instrument in two different markets to profit from a temporary price disparity.
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| Around: | Used in quoting forward 'premium/discount'. 'Five-five around' would mean five points on either side of the present spot value.
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| Ask (Offer) Price: | The price at which the market is prepared to sell a specific currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USDCHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
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| Association Cambiste Internationale (ACI): | The international society of foreign exchange dealers consisting of national 'Forex clubs' affiliated on a worldwide basis.
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| At Best: | An instruction given to a dealer to buy or sell at the best rate that can be obtained.
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| At or Better: | An order to deal at a specific rate or better.
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| At Par Forward Spread: | When the forward price is equivalent to the spot price.
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| At the Price Stop-Loss Order: | A stop-loss order that must be executed at the requested level regardless of market conditions.
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| Auto-matching: | ICAP will automatically match a bid and an offer when the Dealable Bid equals or exceeds the Dealable Offer.
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| Automated Trading Model: | A set of rules for market entry/exit that are monitored by a computer, and when the conditions for entry/exit are satisfied, the computer automatically places the order(s) into the market.
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| Average Rate Option: | A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an 'Asian option'.
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B | |
| Back office: | The part of a financial institution responsible for settlement and related processes.
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| Balance of Trade: | The value of a country's exports minus its imports.
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| Balance-of-Payments: | System of recording a country's economic transactions
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| Bank for International Settlements (BIS):
| An international organisation located in Basel, Switzerland and intended to foster cooperation among central banks and international financial institutions. In effect, the BIS acts as a central bank for central banks and does not itself provide financial services to corporations and individuals. It also publishes a detailed triennial survey of activity in the FX market.
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| Bank Notes: | Paper issued by the central bank, redeemable as money and considered to be full legal tender.
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| Bar Chart: | A type of chart which consists of four significant points: the high and the low prices, which are represented by top and bottom of a vertical bar, the opening price, which is marked with a small horizontal line attached to the left of the bar, and the closing price, which is marked with a small horizontal line attached to the right of the bar.
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| Base Currency: | The first currency in a currency pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USDCHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of 1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British pound, the euro and the Australian dollar.
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| Base Price: | One hundredth of a percentage point. 50 basis points [50bp] is half a percentage point.
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| Basis: | The spot price minus the futures price.
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| Bear Market: | A market distinguished by declining prices.
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| Bear: | A trader expecting a market decline.
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| Best Bid Field: | Shows the best dealable bid price. Only the pips are shown. The big figure component of the price is displayed separately in the Best Big Figure.
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| Best Effort: | An order to be executed at the best available price. Discretion is given to the dealer as to when to execute the order.
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| Best Local Bid: | The best bid as submitted by the same trading floor.
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| Best Local Price: | The best local bid on that floor (highest in price and earliest in submission time).
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| Best Local Trader ID: | The Trader ID of best bid as submitted by the same trading floor.
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| Bid Price: | The bid is the price at which the market is prepared to buy a specific currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USDCHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
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| Bid/Ask (Bid/Offer) Spread: | The difference between the bid and offer price.
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| Big Figure Malformed: | Error Message for Figure which is formatted other than as prescribed in the EBS Precesio file.
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| Big Figure: | Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes. For example, a USDJPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits ie. '30/35'.
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| Bollinger Bands: | A quantitative method which combines a moving average with the instrument's volatility. The bands were designed to gauge whether the prices are high or low on relative basis. They are typically plotted two standard deviations above and below a simple moving average. The bands look like an expanding and contracting envelope model.
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| Book: | In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions.
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| Breakaway gap: | A price gap which occurs in the beginning of a new trend, many times at the end of a long consolidation period. It may also appear after the completion of major chart formations.
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| Bretton Woods Agreement: | An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at USD 35 per ounce. The agreement lasted until 1971, when US President Nixon overturned it.
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| Bro: | Brokerage Fee.
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| Broken Dates: | Deals that are undertaken for value dates that are not standard periods eg. 1 month. The standard periods are 1 week, 2 weeks, 1, 2, 3, 6, and 12 months. Terms also used are odd dates, or cock dates, or broken period.
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| Broker: | An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
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| Broker: | An EBS system component to which each trading floor connects whose functions include deal completion and credit limit management.
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| Bull Market: | A market distinguished by rising prices.
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| Bull: | A trader expecting a market rise.
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| Bundesbank: | Germany's Central Bank.
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| Buying Rate: | Rate at which a bank is prepared to buy foreign exchange. Also known as the Bid Rate.
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| Buying Selling FX: | Buying and selling in the foreign exchange market always happens in the currency which is quoted first. 'Buy dollar/euro' means buy the dollar/sell the euro. Traders buy when they expect a currency's value to rise and sell when they expect a currency to fall.
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C | |
| Cable: | Trader jargon referring to the Sterling/US dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 19th century.
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| Calendar Spread: | An option position comprised of purchase and sale of two option contracts of the same type with different expiration dates at the same exercise price.
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| Call: | (1) An option that gives the holder the right to buy the underlying instrument at a specified price during a fixed period. (2) A period of trading. (3) The right of a bond issuer to pre-pay debt and demand the surrender of its bonds.
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| Candlestick Chart: | A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
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| Capital Account: | Juxtaposition of the long and short term capital imports and exports of a country.
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| Carry: | The interest cost of financing securities or other financial instruments held.
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| Carry Trade: | An investment position that consists of buying a higher yielding currency with the capital of a lower yielding currency to gain an interest rate differential.
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| Carry-Over Charge: | A finance charge associated with the storing of commodities (or foreign exchange contracts) from one delivery date to another.
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| Cash Market: | The market in the actual financial instrument on which a futures or options contract is based.
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| Cash Settlement: | A procedure for settling financial contract where the cash difference between the contract and the market price is paid instead of making physical delivery.
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| Central Bank: | A government or quasigovernmental organisation that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
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| Central Counterparty: | An entity which interposes itself as the buyer to every seller and as the seller to every buyer of a specified set of contracts.
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| CHAPS: | Clearing House Automated Payment System.
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| Chartist: | An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as a Technical Trader.
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| Check Big Figure: | (On Both Sides) The Quote Panel Big Figure is over XX minutes old. The trader must make sure this is the Big Figure he wants to use. (On Bid Side) The EBS market and the FXT calculated price are not in sync. That is, the EBS offer is less than the FXT calculated bid, so the EBS offer was used to populate the Bid Figure. (On Offer Side) The EBS Market and the FXT calculated price are not in sync. That is, the EBS bid is greater than the FXT calculated offer, so the EBS bid was used to populate the Offer Figure.
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| Check Price: | Confirmation panel. The Bid/Offer submitted is different from the FXT calculated price by more than the XX pips. The number of pips (75) is carried in the Precesio file. The Check Price Validation switch in the trader profile must be enabled for this Panel to appear.
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| Check Rate: | This occurs when the Market Rate and the Bid/Offer pips have a 30-pip difference. This is set on the Central Node. The Check Rate Warning Threshold (CRWT) for each currency pair can be found on the Currency Pair Table.
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| CHIPS: | (Clearinghouse House Interbank Payment System) A computerised system used for foreign exchange dollar settlements.
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| Choice: | A condition of the market when the best bid and best offer prices are the same.
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| Cleared Funds: | Funds that are freely available to settle a trade.
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| Clearing: | The process of settling a trade.
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| Clearing House: | An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. Clearing houses act as third parties (central counterparties) to all futures and options contracts - as a buyer to every clearing member seller and a seller to every clearing member buyer.
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| Closed form solution: | A closed form solution (sometimes referred to as a closed form expression) is any formula that can be evaluated in a finite number of standard operations. The Black Scholes and Garman Kohlhagen option pricing models are both closed form solutions, while the Cox, Ross, Rubinstein (often referred to as the binomial model) is not.
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| Closed position: | A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
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| Closing purchase transaction: | The purchase of an option identical to one already sold to liquidate a position.
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| Collateral: | Something given to secure a loan or as a guarantee of performance.
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| Commission: | A transaction fee charged by a broker.
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| Confirmation: | A document exchanged by counterparts to a transaction that states the terms of said transaction.
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| Contagion: | The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in the domestic currency, the rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.
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| Continuous Linked Settlement (CLS): | Continuous Linked Settlement (CLS) is a financial clearing system used mainly by banks to settle foreign exchange trades. The primary characteristic of CLS compared to other clearing systems is that it settles transactions on a 'Payment versus Payment' basis, also known as PVP. When a foreign exchange trade is settled, each of the two parties to the trade pays out (sells) one currency and receives (buys) a different currency; PVP ensures that these payments and receipts happen simultaneously. Without PVP there is a (small) chance that one party could pay out without receiving, this is known as Settlement, or Herstatt, risk.
CLS was created by many of the world's largest banks and began operation in September 2002. Since then it has rapidly become the standard for foreign exchange settlement between major banks and as of January 2006 it settles some 220,000 trades a day with a value of about USD 2.6trn.
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| Contract: | The standard unit of size/terms for a futures trade.
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| Correlation: | A statistical measure referring to the relationship between two or more variables (events, occurrences etc.). A correlation between two variables suggests some causal relationship between these variables. For example, before the advent of the euro, the Swiss franc had a close correlation with the German mark.
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| Cost of Carry: | The cost of borrowing money in order to maintain a position. It is based on the interest parity which determines the forward price.
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| Counter Currency: | The second listed currency in a Currency Pair.
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| Counterparty: | One of the participants in a financial transaction.
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| Country Risk: | Risk associated with a crossborder transaction, including but not limited to legal and political conditions.
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| Covered Interest Rate Arbitrage: | An arbitrage approach which consists of borrowing currency A, exchanging it for currency B, investing currency B for the duration of the loan, and, after taking off the forward cover on maturity, showing a profit on the entire set of deals.
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| Credit Limit Matrix: | Indicates whether bilateral credit is available with other trading floors. There is an entry in the matrix for each trading floor.
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| Credit Limit: | The monetary amount available to be settled in all currencies, with a particular counterparty.
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| Credit Line: | The amount of foreign currency exposure a firm will allow a client or counterparty to take.
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| Credit Risk: | The idea that an outstanding currency position will not be repaid as agreed by the counterparty, either voluntarily or not. Also known as counterparty risk.
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| Cross Rates: | Often referred to as the exchange rate between any two currencies not involving the US dollar. In reality, however, all rates are technically cross rates.
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| Cumulative normal density function: | An accumulation function of a normal probability density function. The cumulative normal density function shows how probabilities accumulate as the value of the random variable increases.
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| Currency Convertibility Risk: | Currency convertibility risk is the risk that investors will not be able to exchange local currency revenues for the foreign exchange required to make debt service and other foreign currency payments, or that they will have to convert at discriminatory or artificially low exchange rates.
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| Currency Pair: | The two currencies that make up a foreign exchange rate. For example, EURUSD
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| Currency Risk: | The probability of an adverse change in exchange rates.
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| Currency: | The type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another. If one pound can buy 1.55 euros, then one euro can buy 0.65 pounds.
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D | |
| Day-Count Convention: | A system used to determine the number of days between two coupon dates, which is important in calculating accrued interest and present value when the next coupon payment is less than a full coupon period away. Each market has its own day-count convention.
For example, a 30/360 day-count convention assumes there are 30 days in a month and 360 days in a year. An actual/actual day-count convention uses the actual number of days in the month and year for a given interest period.
This concept might sound illogical, as (leap years apart) there will always be 365 days in a year. However, these conventions are standards that have evolved over time and help to avoid confusion when calculating interest payable.
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| Day Trader: | Speculators who take positions in commodities that are then liquidated prior to the close of the same trading day.
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| Daylight Position Limit: | Position limits on a currency or aggregate on a series of currencies that a trader can carry during regular trading hours.
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| Deal Ticket/Deal Slip: | The primary method of recording the basic information relating to a transaction.
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| Dealable Bid: | A bid submitted by a trading floor which has bilateral credit with the given floor.
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| Dealable Price: | The best price on which a trader can deal.
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| Dealer: | An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
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| Dealing Systems: | On-line computers which link the contributing banks around the world on a one-on-one basis
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| DEaR (Daily Earnings at Risk): | VaR with a one-day horizon.
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| Deficit: | A negative balance of trade or payments.
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| Delivery Date: | The date of maturity of the contract, when the exchange of the currencies is made. This date is more commonly known as the value date in the FX or Money markets.
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| Delivery Risk: | A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.
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| Delivery: | An FX trade where both sides make and take actual delivery of the currencies traded.
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| Depreciation: | A fall in the value of a currency due to market forces.
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| Depth of Market: | The amount of business that can be done without causing a material change in prices. A thin market would see noticeable price changes on a limited amount of transactions.
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| Derivative: | A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument.
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| Devaluation: | Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
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| Diamond Caution Icon: | Both bid/offer prices are different from the FXT Calculated Price by more than the Check Rate Warning Threshold. The difference between the dealable bid and the dealable offer is greater than the Wide Spread Warning Threshold.
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| Direct Dealing: | An approach whereby dealers contact each other to transact without a broker.
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| Direct Quotation: | Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
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| Discount Forward Spread: | The forward points subtracted from the spot to arrive at the forward price. This means that the foreign interest rate is lower than the USD rate for the period. Also known as swap points.
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| Discount Rate: | The interest rate at which eligible depository institutions may borrow funds directly from the Federal Reserve Banks. This rate is controlled by the Federal Reserve and is not subject to trading.
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| Dollar: | Million dollars.
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| Double: | An option either to buy or sell an instrument or currency at a specified price. The exercise of the right to sell causes the right to buy to expire and vice versa.
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| Due diligence: | The process of examining the financial underpinnings of an organisation as a preliminary step prior to establishing some for of trading relationship.
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| Durable Goods Order: | An economic indicator which measures the changes in sales of products with a life span in excess of three years.
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E | |
| EBS Best Price: |
The single best price in the EBS market for a given currency pair, regardless of a counterparty's credit worthiness.
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| EBS Prime: |
An FX application offered by EBS that enables customer banks to view and deal on the best dealable prices from the EBS Dealing System through another bank.
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| EBS Prime bank: |
A bank that loans its credit to an EBS Prime customer so that it can view and deal on the EBS Spot Dealing System
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EBS Prime customer: |
A customer bank or hedge fund that can view and deal on the best dealable prices from the EBS Dealing System using its Prime bank's credit.
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| EBS Trading Day: |
The EBS Trading Day ends at 17.00 hrs local New York time. At that point, the Value Date is refreshed and all trades for the next 24 hours are considered part of the next Trading Day. Thus, any trades done after 17.00 hrs local New York time and before midnight (GMT) will have an Effective EBS Trade Date advanced by one day from the actual date and a refreshed Value Date based on that Effective Trade Date. The Deal Ticket will show the current and actual date. However, the Value Date will be calculated by counting forward from the Effective Trade Date a number of business days (usually two). An exception to this rule occurs on Friday when the Effective Trade Date does not move forward until 17.00 hrs local New York time on Saturday. Trades done after 17.00 hrs Saturday and before 17.00 hrs Monday local New York time will have an Effective Trade Date of Monday. |
| Economic and Monetary Union (EMU): | The irrevocable fixing of exchange rates between member currencies and their replacement by a single European currency, the euro.
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| Economic Exposure: | Reflects the impact of foreign exchange changes on the future competitive position of a company.
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| Economic Indicator: | A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
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| Elliot Wave Principle: | A system of empirically derived rules for interpreting action in the markets. It refers to a five-wave/three-wave pattern which forms one complete bull market /bear market cycle of eight waves.
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| End Of Day Order (EOD): | An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 17.00 hrs ET.
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| Entitlements: | The functions that a trader is entitled or authorised to perform.
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| Equity Curve: | The value of a trading account graphed over a period of time. An equity curve gives a visual performance measure of a trading model (or models) and is used by many traders as a measure of the reserves above margin requirements needed to trade a certain strategy.
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| ERP (Enterprise Resource Planning): | A type of business management system used by many corporations that integrates all facets of the business, including finance, planning, manufacturing, sales, and marketing.
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European Central Bank (ECB):
| The Central Bank for the European Monetary Union.
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| European Joint Float: | A European currency agreement originating in 1972 that ran partly concurrently with the Smithsonian Agreement. The intention on the part of the European community was to move away from their dependency on the dollar. The scheme was established by West Germany, France, Italy, the Netherlands, Belgium and Luxemburg. Failed in 1973.
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| Exercise Notice: | A formal notification that the holder of an option wishes to exercise it by buying or selling the underlying stock at the exercise price.
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Exercise Price (Strike Price):
| The price at which an option may be exercised.
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| Exotic Currency: | A currency with little liquidity and limited dealing, which is neither a major or minor currency.
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| Expiry Date: | The last day on which the holder of an option can exercise his right to buy or sell the underlying security.
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| Exposure: | The total amount of money loaned to a borrower or country. Banks set rules to prevent overexposure to any single borrower. In trading operations, it is the potential for running a profit or loss from fluctuations in market prices.
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F | |
| Factory Orders: | An economic indicator which refers to the total orders of durable and nondurable goods. The nondurable goods orders consist of food, clothing, light industrial products and products designed for the maintenance of the durable goods.
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| FASB #8 (Financial Accounting Standards Board's Statement Number 8): | The original accounting rules regarding foreign exchange were standardised in 1975, which set the procedures for foreign currency translations into US dollars in the consolidated balance sheets of US multinational corporations.
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Federal Deposit Insurance Corporation (FDIC):
| The regulatory agency responsible for administering bank depository insurance in the US.
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| Federal Reserve (Fed): | The Central Bank for the United States.
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| Fedwire: | An automated communications and settlement system linking the Federal Reserve banks with other banks and with depository institutions.
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| Fill or Kill: | An order which if not filled is immediately cancelled.
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| First In First Out (FIFO): | Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
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| Fixed rate regime: | Fixed rates are those that have direct convertibility towards another currency. In case of a separate currency, also known as a currency board arrangement, the domestic currency is backed one to one by foreign reserves. A pegged currency with very small bands (< 1%) and countries that have adopted another country's currency and abandoned its own also fall under this category.
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| Flat/square: | Dealer jargon used to describe a position that has been completely reversed, eg. the trader bought USD 500,000 then sold USD 500,000, thereby creating a neutral (flat) position.
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| Foreign Exchange Centres: | London is the largest centre of foreign exchange trading. New York, Tokyo, Singapore, Zurich and Hong Kong are also important.
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| Foreign Exchange Market: | Market where currencies are traded internationally. About a trillion (million million) dollars-worth of foreign exchange is traded globally every day, making forex larger than all bond markets put together. Currency markets exist in the form of spot, forward, futures and options markets.
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| Forward Forward: | A forward/forward deal is one where both legs of the deal have value dates greater than the current spot value date.
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| Forward Outright: | Foreign exchange deal which matures on any day past the spot delivery date.
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| Forward Points: | The pips added to or subtracted from the current exchange rate to calculate a forward price.
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| Forward Rate: | Forward rates are quoted in terms of forward points, which represent the difference between the forward and spot rates. In order to obtain the forward rate from the actual exchange rate the forward points are either added or subtracted from the exchange rate. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.
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| Forward Spread (forward points or forward pips): | Forward price used to adjust a spot price to calculate a forward price. It is based on the current spot exchange rate, interest rate differential and the number of days to delivery.
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| Forward: | The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
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| Fundamental Analysis: | Analysis of economic and political information with the objective of determining future movements in a financial market.
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| Futures Contract: | An obligation to exchange a good or instrument at a set price on a future date. Typically an exchange traded, rather than OTC instrument.
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| FX: | Foreign exchange.
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G | |
| G7: | The seven leading industrial countries: US, Germany, Japan, France, UK, Canada, Italy.
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| Gap: | The price Gap between consecutive trading ranges (ie. the low of the current range is higher than the high of the previous range).
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| Give-up: | A type of financial trade where execution is performed by one brokerage firm and given-up (cleared) through another brokerage at a later time.
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| Globex: | A system for global after hours electronic trading in futures and options developed by Reuters for CME and CBOT for use in conjunction with various exchanges around the world.
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| Going Long: | The purchase of a stock, commodity, or currency for investment or speculation.
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| Going Short: | The selling of a currency or instrument not owned by the seller.
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| Gold Standard: | The original system for supporting the value of currency issued. The way that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.
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| Gold Tranche: | Part of the country quota for IMF members that had to be paid in gold. This was normally 25% of the quota, the remainder being in domestic currency. The Gold Tranche was automatically available to members without condition.
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| Golden Cross: | An intersection of two consecutive moving averages which move in the same direction and suggest that the currency will move in the same direction.
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| Good Until Cancelled: | An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.
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| Gross Domestic Product: | Total value of a country's output, income or expenditure produced within the country's physical borders.
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| Gross National Product: | Gross domestic product plus 'factor income from abroad' - income earned from investment or work abroad.
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| Gross Settlement: | A process where full payment of each transaction is made rather than clearing a group of transactions as currently occurs in the FX market. A method designed to eliminate capital risk.
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H | |
| Hard Currency: | A currency whose value is expected to remain stable or increase in terms of other currencies.
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| Hedge Ratio: | The number of futures or options required to hedge a given exposure in the cash market.
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| Hedge: | A position or combination of positions that reduces the risk of your primary position.
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| Hedging: | A strategy used to offset market risk, whereby one position protects another.
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| Herstatt Risk: | (Another term for settlement risk.) The risk to Counterparty A in the settlement of a foreign currency transaction with Counterparty B, that A would deliver its payment to B, but B might not pay, as agreed. If A and B deliver their payments in different time zones, then Herstatt risk occurs regularly. Named after Bankhaus Herstatt, which defaulted on a number of currency transactions when it failed in 1974.
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| Hit the bid: | Situation in which a dealer agrees to sell at the highest price offered ('bid') by another dealer.
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| Hot money: | Money that is moved by its owner quickly from one form of investment to another, as to take advantage of changing international exchange rates or gain high short-term returns on investments.
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I | |
| ICCH: | International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.
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| IFEMA: | International Foreign Exchange Master Agreement.
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| IMF International Monetary Fund): | International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.
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| IMM: | International Monetary Market (part of the Chicago Mercantile Exchange) that lists a number of currency and financial futures.
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| Immediate or Cancel: | Trading practice whereby order is executed immediately in whole or part and the remainder is cancelled.
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| Implied Rates: | The interest rate determined by calculating the difference between spot and forward rates.
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| Implied Volatility Skews: | The implied volatility varies for different strikes of an option.
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| Implied Volatility: | A measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.
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| Inconvertible Currency: | Currency which cannot be exchanged for other currencies, because this is forbidden by the foreign exchange regulations.
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| Index Linking: | The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.
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| Indicative Quote: | A market-maker's price which is not firm.
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| Indicator: | Shows the total amount (size) of all Dealable and local bids available at the Best Bid Price. If this amount is regular the Best Bid amount Indicator is blank.
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| Industrial Production Index: | A coincident indicator measuring physical output of manufacturing, mining and utilities.
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| Inflation: | Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
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| Initial Margin: | The margin paid initially to trade currency futures or margined OTC forex. A trader's loss may not exceed this margin per contract/lot.
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| In-Market bid: | Any Bid whose price is within the X pips value of the Best Bid Price.
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| Inside: | Quote higher than the current Bid, but lower the current Offer.
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| Instruction: | The specification of the banks at which funds shall be paid upon settlement.
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| Interbank Rates: | The bid and offer rates at which international banks place deposits with each other. The basis of the interbank market.
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| Inter-dealer Broker: | A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.
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| Interest Arbitrage: | Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, ie. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.
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| Interest Parity: | One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity.
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| Interest Rate Cap: | An agreement that provides the buyer of a cap with a maximum interest rate for future borrowing requirements.
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| Interest Rate Collar: | A combination of a cap and a floor to provide maximum and minimum interest rates for borrowing or lending.
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| Interest Rate Differential: | The difference in yield between two comparable instruments denominated in different currencies.
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| Interest Rate Floor: | An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.
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| Interest Rate Options: | An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.
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| Interest Rate Swaps: | An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.
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| Intervention: | Action by a central bank to change the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
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| In-the-Money: | A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price.
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| Intra-Day limit: | Limit set by bank management on the size of each dealer's Intra Day Position.
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| Intra-Day Position: | Open positions run by a dealer within the day. Usually squared by the close.
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| Intrinsic Value: | The amount by which an option is in-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security.
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| Inverted Market: | Where short term instruments are trading at premiums to long term instruments.
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| IOM: | Index and Options Market (part of the Chicago Mercantile Exchange).
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| ISO currency codes: | Three letter and three digit codes that act as unique identifiers for individual currencies. The full list can be found at: http://www.iso.org/iso/en/prods-services/popstds/currencycodeslist.html
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J | |
| J Curve: | A term describing the expected effect of a devaluation on a country's trade balance. It is anticipated that import bills rise before export orders and receipts increase.
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| Jawbone: | Announcements and statements by politicians or monetary authorities to influence decisions by business, consumer, or trade union sectors, often associated with forecasts and policy implications.
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| Join: | Submit a quote equal to the best quote already in the market.
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| Jurisdiction Risk: | (1) The risk inherent in placing funds in the Centre where they will be under the jurisdiction of a foreign legal authority. (2) The risk in making a loan subject to the laws of another country.
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K | |
| Kappa: | A measure of the sensitivity of the price of an option to a change in its implied volatility.
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| Key currency: | Small countries, which are highly dependent on exports, orientate their currencies to their major trading partners, the constituents of a currency basket.
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| Keypad: | Peripheral device for input. It has all the keys except the alphabetical keys. Trader can access the workstation with it instead of with keyboard.
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| Kiwi: | A market term for the New Zealand dollar.
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| Knock In: | A process where a barrier option (European) becomes active as the underlying spot price is in the money. Knock out has a corresponding meaning although the option may permanently cease to exist.
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L | |
| Ladder: | Dealers analysis of the forward book or deposit book showing every existing deal by maturity date, and the net position at each future date arising.
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| Lagging Indicator: | A measure of economic activity which tends to change after change has occurred in the overall economy eg. CPI.
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| Lapsed Rights: | Rights for which call payments have not been made by he acceptance date.
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| Large Difference: | Parameter set at the Central Node. If a trader enters pips which are greater than or less than the current rate in the market by the parameter, it is called large difference.
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| Last Trading Day: | The day on which trading ceases for an expiring contract.
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| Lay Off: | To carry out a transaction in the market to offset a previous transaction and return to a square position.
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| Leading Indicators: | Statistics that are considered to precede changes in economic growth rates and total business activity, eg. factory orders.
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| Leads and Lags: | The effect on foreign trade payments of an anticipated move in the exchange rate, normally a devaluation.
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| Left-hand Side: | Taking the left hand side of a two way quote ie. selling the quoted currency. See Right-hand Side.
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| Leverage: | In options terminology, this expresses the disproportionately large change in the premium in terms of the relative price movement of the underlying instrument.
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| Leverage: | The ratio of the amount used in a transaction to the required security deposit.
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| Liability: | In terms of foreign exchange , the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.
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| LIBOR: | London Interbank Offered Rate. This is the rate at which banks will lend to each other, set at 11.00 hrs London time.
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| Life of Contract: | The period between the beginning of trading in a particular future and the expiration of trading.
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| LIFFE: | London International Financial Futures Exchange.
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| Limit Down: | The maximum price decline from the previous trading day's settlement price permitted in one trading session.
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| Limit Move: | A price that has advanced or declined the permissible limit permitted during one trading session.
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| Limit Order: | An order to buy or sell a specified amount of a security at a specified price or better.
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| Limit Up: | The maximum price advance from the previous trading day's settlement price permitted in one trading session.
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| Limit: | (1) The maximum price fluctuation permitted by an exchange from the previous session's settlement price for a given contract. (2) In international banking the limit a bank is willing to lend in a country. (3) The amount that one bank is prepared to trade with another. (4) The amount that a dealer is permitted to trade in a given currency.
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| Limited Convertibility: | When residents of a country are prohibited from buying other currencies even though non-residents may be completely free to buy or sell the national currency.
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| Lines: | An arrangement by which a bank agrees to lend to the line holder during some specified period any amount up to the full amount of the line.
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| Linked Amounts: | A trader submitting a bid or offer (ie. acting as a Maker) for a certain size into the EBS system may also specify an additional amount that will be invisible to the market, but which can be matched and included in deals.
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| Liquidation: | The closing of an existing position through the execution of an offsetting transaction.
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| Liquidity: | The ability of a market to accept large transaction with minimal to no impact on price stability.
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| Local Bid: | Any bid submitted from the given trading floor.
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| Local Currency: | The second currency in a currency pair (also known as quoted currency).
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| Local Offer: | Error Message to prevent a trader from entering a quote which would result in an arbitrage price submitted by the trading floor.
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| Local: | A futures trader who normally trades on an exchange on his/her own account.
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| Locked Market: | A market is locked when the bid price equals the asked price.
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| Long Dated Shorts: | A forward purchase and sale with a brief uncovered position between them. This may also be referred to as long short dates.
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| Long Hedge: | The purchase of futures contracts for price protection purposes, as a defensive position against an increase in cash prices, or falling interest rates.
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| Long position: | A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.
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| Long: | The holding of an excess of a particular currency.
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| Lot: | A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
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M | |
| M1: | Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.
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| M2: | Includes demand deposits time deposits and money market mutual funds excluding large CDs.
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| M3: | In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.
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| M4: | In the US it is M2 plus negotiable CDs.
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| Maintenance Margin: | The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.
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| Make a Market: | A dealer is said to make a market when he quotes bid and offer prices at which he stands ready to buy and sell.
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| Maker: | Submitter of price to the market. Also see Taker.
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| Managed Float: | When the monetary authorities intervene regularly in the market to stabilise the rates or to aim the exchange rate in a required direction.
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| Margin Call: | A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
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| Margin: | (1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward. (2) For options the sum required as collateral from the writer of an option. (3) For futures a deposit made to the clearing house on establishing a futures position account. (4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction.
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| Marginal Risk: | The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.
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| Mark to Market: | The daily adjustment of an account to reflect accrued profits and losses -often required to calculate variations of margins.
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| Market Amount: | The minimum amount conventionally dealt for between banks.
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| Market Maker: | One that consistently makes two way prices, providing both a bid and an offer. Unlike brokers, market makers trade their capital, although they will hedge.
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| Market Order: | An order to buy or sell a financial instrument immediately at the best possible price.
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| Market Risk: | Exposure to changes in market prices.
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| Markup: | Premium.
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| Marry: | Where a dealer is able to match two customer deals which off set one another.
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| Marshall - Lerner: | A model that states that if the sum of the elasticities of demand for a country's and that of the imports exceed one, then devaluation will have a positive effect upon the trade balance.
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| Matched Book: | If the distribution of the maturities of a banks liabilities equal that of its assets, it is said to be running a matched book.
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| Matching Systems: | An electronic system that attempts to duplicate the brokers market. Bids and offers are available to any bank for execution. EBS is a matching system.
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| Matching: | The process of ensuring that purchases and sales in each currency and deposits given and taken in each currency are in balance, by amount and maturity.
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| Maturity Date: | (1) The last trading day of a futures contract. (2) Date on which a bond matures, at which time the face value will be returned to the purchaser. Sometimes the maturity date is not one specified date but a range of dates during which the bond may be repaid.
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| Maximum Drawdown Period: | The length of time the maximum drawdown for an investment or equity curve persisted.
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| Maximum Drawdown: | This is the largest overall drop in an investment or equity curve value which occurred in a given period before it regained its previous high. Large maximum drawdowns indicate higher risk.
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| Maximum Trade Size: | The trade size which, if exceeded, generates a warning to the trader.
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| Mechanical Trading Model: | A set of rules for market entry/exit that are monitored by a computer, and when the conditions for entry/exit are satisfied, the computer issues an alert to a human trader, who places the order(s) into the market.
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| Middle office: | The group of employees in a financial services company that manages risk, and calculates P & L etc.
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| Mid-price or Middle Rate: | The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.
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| Minimum Price Fluctuation: | The smallest increment of market price movement possible in a given futures contract.
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| Minimum Reserve: | Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves.
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| Minor Currency: | The Canadian dollar, the Australian dollar, and the kiwi are minor currencies.
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| Mismatch: | (1) A mismatch between the interest rate maturities of a banks assets and liabilities. (2) Forward purchases differ in the value date from the forward sales in a given currency.
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| MITI: | Japanese ministry of International Trade & Industry.
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| MM: | Money Markets.
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| Monetarism: | A school of economics which believes that strict control of money supply is the principal tool for implementing monetary policy, especially against inflation. Policies include cuts in public spending and high interest rates.
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| Monetary Base: | Currency in circulation plus banks' required and excess deposits at the central bank.
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| Monetary Easing: | A modest loosening of monetary constraint by changing interest rate, money supply, deposit ratios.
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| Monetary Policy: | A central bank's management of a country's money supply. Economic theory underlying monetary policy suggests that controlling the growth of the amount of money in the economy is the key to controlling prices and therefore inflation. However, central banks' monetary capability is severely limited by global money movements. This forces them to use the indirect tool of exchange rate manipulation.
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| Monetary Union: | An agreement between countries to maintain a fixed exchange rate between their currencies. A process which the EMS is intended to lead to, especially after the Maastricht Treaty.
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| Money Market Operations: | Comprises the acceptance and re-lending of deposits on the money market.
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| Money Market: | A market consisting of financial institutions and dealers in money or credit that wish to either borrow or lend.
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| Money Supply: | The amount of money in the economy, which can be measured in a number of ways. See definitions of M0-M4.
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| Most Favoured Nation (MFN): | An undertaking to give the rate of tariff concession offered to members of the GATT. More concessionaire rates can exist.
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| Moving Average: | A way of smoothing a set of data, widely used in price time series.
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N | |
| Naked Intervention: | A central bank type of intervention in the foreign exchange market which consist solely of the foreign exchange activity. This type of intervention has a monetary effect on the money supply and a long term effect on foreign exchange.
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| Narrow Money: | Limited definition of money to include cash or near cash, ie. M1 or M0.
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| Nearby Contracts: | The closest active futures contracts, i.e. those that expire the soonest.
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| Negative Carry: | A market position whereby the currency owned pays a lower rate of interest than that of the currency borrowed resulting in a negative cash flow.
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| Negative Sloping Yield Curve: | A yield curve where interest rates in the shorter dates are above those in the longer dates.
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| Net Position: | The amount of currency bought or sold which have not yet been offset by opposite transactions.
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| Netting: | A process which enables institutions to settle only the net positions with one another at the end of the day, in a single transaction, not trade by trade.
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| Next Best Price Stop-loss Order: | A stop-loss order which must be executed after the request level was reached.
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| Nominal Quotation: | Used in Futures markets to refer to the estimated price for a future month or date for which there is no bid, ask or trade price.
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| Nominee Name: | Name in which a security is registered and held in trust on behalf of the beneficial owner.
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| Normal Trade Size: | The default trade size defined in the Trader Profile for Making and Taking a price.
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| Nostro Account: | A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident.
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| Note: | A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness.
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| Notice Day: | Any day on which notices of intent to deliver on futures contracts may be issued.
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O | |
| Odd Lot: | A non standard amount for a transaction.
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| OECD: | Organisation of Economic Co-operation and Development. Membership is the more than developed countries.
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| Offer: | The price for which a willing seller will sell the asset.
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| Offered Market: | Temporary situation where offers exceed bid.
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| Official Settlements Account: | A US balance of payments measure based on movement of dollars in foreign official holdings and US reserves. Also referred to as reserve transaction account.
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| Offsetting transaction: | A trade with which serves to cancel or offset some or all of the market risk of an open position.
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| Old Lady: | Old lady of Threadneedle Street, a term for the Bank of England.
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| Omnibus Account: | An account maintained by one broker with another in which all of the accounts of the former are combined and carried only in its name, rather than designated separately.
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| On: | The currency identified as the On currency.
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| Open Interest: | The total number of outstanding option or futures contracts that have not been closed out by offset or fulfilled by delivery.
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| Open Market Operations: | Central Bank operations in the markets to influence exchange and interest rates.
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| Open order: | An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.
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| Open Outcry: | A public auction method of trading conducted by calling out bids and offers across a trading ring or pit and having them accepted.
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| Open position: | An active trade with corresponding unrealised P&L, which has not been offset by an equal and opposite deal.
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| Option Class: | All options of the same type - calls or puts - listed on the same underlying instrument.
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| Option Series: | All options of the same class having the same exercise/strike price and expiration date.
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| Option: | A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.
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| Order Cancels Order (OCO): | A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.
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| Order: | An instruction to execute a trade at a specified rate.
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| Original Margin: | See Initial Margin.
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| Oscillators: | Quantitative methods designed to provide signals regarding the overbought and oversold conditions.
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| OTC: | A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor. These markets have not been very popular. They were never part of the Stock Exchange since they were seen as 'unofficial'. Each OTC firm operates a market in the shares of a restricted list of (generally small and little-known) companies. Sometimes the dealer simply puts would-be buyers and sellers together but does not take a position in the shares himself. These days OTC trading is seen as 'consumer-friendly', meaning that it is interested in getting the buyer and seller the best possible price. Some see this as what share-trading is all about. However, market makers, many of which create market movements purposefully, feel they are being elbowed out by OTC, and that speculation, arbitrage and 'smart-trading' are undermined by the new market.
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| Out-of-the-Money: | A put option is out-of-the-money if the exercise/strike price is below the price of the underlying instrument. A call option is out-of-the money if the exercise/strike price is higher than the price of the underlying instrument.
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| Outright Deal: | A forward deal that is not part of a swap operation.
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| Over the Counter (OTC): | Used to describe any transaction that is not conducted over an exchange.
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| Overhang: | A holding of foreign exchange that is temporarily unable to be converted from the reserve currency into other reserve assets.
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| Overheated (Economy): | An economy where high-growth rates placing pressure on production capacity resulting in increased inflationary pressures and higher interest rates.
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| Overnight Position Limit: | Position limits on a currency or aggregate on a series of currencies that a trader can carry during overnight trading hours. These limits are usually smaller than day light position limits. Net long or short position in one or more currencies that a dealer can carry over into the next dealing day.
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| Overnight Position: | A trade that remains open until the next business day.
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| Overnight: | A deal from today until the next business day.
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P | |
| Package deal: | When a number of exchange and /or deposit orders have to be fulfilled simultaneously.
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| Par: | (1) The nominal value of a security or instrument. (2) The official value of a currency.
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| Paris: | A term for USD FRF Spot Rate.
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| Parities: | The value of one currency in terms of another.
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| Parity Grid: | A term used in the context of the European Monetary System which consists of the upper, central and lower intervention points between member currencies.
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| Parity: | (1) Foreign exchange dealer's slang for 'your price is the correct market price'. (2) Official rates in terms of SDR or other pegging currency.
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| Payment Date: | The date on which a dividend or bond interest payment is scheduled to be paid.
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| Pegged: | A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement:
- Crawling bands: the rate is allowed to fluctuate in a band around a central value, which is adjusted periodically. This is done at a pre-announced rate or in a controlled way following economic indicators.
- Crawling pegs: Here, the rate itself is fixed, and adjusted as above.
- Pegged with horizontal bands: The currency is allowed to fluctuate in a fixed band (bigger than 1%) around a central rate.
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| Petrodollars: | Foreign exchange reserves of oil producing nations arising from oil sales.
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| Philadelphia Stock Exchange (PHLX): | The oldest US.securities exchange which offers currency futures and options on currency futures.
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| Pip: | See Point.
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| Point: | (1) 100th part of a per cent, normally 10,000 of any spot rate. Movement of exchange rates are usually in terms of points. (2) One percent on an interest rate eg. from 8%-9%. (3) Minimum fluctuation or smallest increment of price movement.
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| Political Risk: | Exposure to changes in governmental policy which will have an adverse effect on an investor's position.
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| Portfolio Insurance: | An option hedging strategy to protect long cash market positions.
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| Position Clerk: | A clerk who assist the dealer in recording a dealer's position and ensures that all deal tickets are completed and transferred to the back office or input into the books in a position keeping system.
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| Position Limit: | The maximum position, either net long or net short, in one future or in all futures of one currency or instrument combined which may be held or controlled by one person.
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| Position: | The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short (more currency sold than bought).
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| Positive Carry: | A market position whereby the currency owned pays a higher rate of interest than that of the currency borrowed, resulting in a positive cash flow.
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| Precisio: | File containing the limits for the Big-Fig/Pips, Wide Spread, Large Difference and Check Rate, etc. The Workstation uses this file data for auto tabbing and it will check this file to determine the pips limit before issuing a warning message.
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| Premium Forward Spread: | The forward points that are added to the spot price to determine a forward price. A forward premium means that the foreign interest rate is higher than the US rate for the period.
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| Premium: | (1) The amount by which a forward rate exceeds a spot rate. (2) The amount by which the market price of a bond exceeds its par value. (3) Options, the price a put or call buyer must pay to a put or call seller for an option contract. (4) The margin paid above the normal price level.
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| Pre-Spot Dates: | Quoted standard periods that fall between the transaction date and the current spot value date.
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| Price Matches Local Bid/Offer: | Error conditions to prevent a trader from submitting a buy or well request which could result in a trade at a price equal or worse than a local price. BUY REQUEST PRICE>=BEST LOCAL OFFER SELL REQUEST PRICE<=BEST LOCAL BID.
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| Price Transparency: | Describes quotes to which every market participant has equal access.
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| Primary Reserves: | Gold related monetary reserves, being gold, SDR, etc.
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| Prime Brokerage: | A service provided by investment banks to hedge funds. Often includes the following:
- Global custody (including clearing, custody, and asset servicing)
- Securities lending
- Financing (to facilitate leverage of client assets)
- Customized Technology (provide hedge fund managers with portfolio reporting needed to effectively manage money)
- Operational Support (prime brokers act as a hedge fund's primary operations contact with all other broker dealers)
Further services may include some or all of the following:
- Capital Introduction - introducing hedge fund clients to potential hedge fund investors.
- Office Space Leasing and Servicing - some prime brokers lease office space, and then sublet it to hedge fund tenants, often including on site services such as IT as well.
- Risk Management Advisory Services - the provision of risk analysis technology, sometimes including consulting from the prime broker's senior risk professionals.
- Consulting Services - services, typically provided to hedge fund start-ups, typically focused on matters associated with regulatory requirements relating to both the jurisdictions where the hedge fund manager will be resident and the fund itself will be domiciled.
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| Prime Indicator: | A blue notation that says 'EBS Prime' on the deal ticket summary indicates that the deal was done by a Prime bank for one of its Prime customers.
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| Prime Rate: | (1) The rate from which lending rates by banks are calculated in the US. (2) The rate of discount of prime bank bills in the UK.
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| Principal: | A dealer who buys or sells stock for his/her own account.
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| Producer Price Index: | An economic indicator which gauges the average changes on prices received by domestic producers for their output at all stages of processing.
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| Profile: | Variable data peculiar to and determined by the trader.
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| Profit/Loss or P & L or Gain/Loss: | The actual 'realised' gain or loss resulting from trading activities on Closed Positions, plus the theoretical 'unrealised' gain or loss on Open Positions that have been marked to market.
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| Profit Taking: | The unwinding of a position to realise profits.
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| Proprietary ('Prop') Trading: | When a firm trades for direct gain instead of commission dollars. Essentially, the firm has decided to profit from the market rather than commissions from processing trades or from quoting a bid/offer spread. Firms who engage in proprietary trading believe they have a competitive advantage that will enable them to earn excess returns.
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| Proxy Hedge: | A term to describe when it is necessary to hedge against a currency where there is no market but it follows a major currency, the hedge is entered against the major currency.
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| Purchasing Power Parity: | Model of exchange rate determination stating that the price of an item of goods in one country should equal the price of the same goods in another country, exchanged at the current rate. Also known as the law of one price.
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| Put Call Parity: | The equilibrium relationship between the premiums of call and put options with the same strike and expiry.
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| Put Option: | A put option confers the right but not the obligation to sell currencies, instruments or futures at the option exercise price within a predetermined time period.
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| Pyramiding: | The use of cash generated by positive variation margins on a futures position to increase the size of the position, each reinvestment in successively smaller increments.
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Q | |
| Quota: | (1) A limit on imports or exports. (2) A country's subscription to the IMF.
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| Quotation American Terms: | A quotation that reflects the number of USD units per foreign currency.
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| Quotation European Terms: | A quotation that reflects the number of foreign currency units per US dollars.
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| Quote: | An indicative market price, normally used for information purposes only.
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R | |
| Rally: | A recovery in price after a period of decline.
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| Random Walk Theory: | An efficient market hypothesis, stating that prices move randomly versus their intrinsic value. Therefore, no one can forecast market activity based on the available information.
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| Range: | The difference between the highest and lowest price of a future recorded during a given trading session.
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| Rate: | (1) The price of one currency in terms of another, normally against USD (2) Assessment of the credit worthiness of an institution.
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| Ratio Calendar Spread: | Selling more near-term options than longer maturity options at the same strike price.
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| Ratio Spread: | Buying a specific quantity of options and selling a larger quantity of out of the money options.
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| Reaction: | A decline in prices following an advance.
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| Real: | A price, interest rate or statistic that has been adjusted to eliminate the effect of inflation.
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| Realignment: | Simultaneous and mutually co-ordinated re- and devaluation of the currencies of several countries. An activity that mostly refers to EMS activity.
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| Real-Time Gross Settlement (RTGS): | A type of payments system operating in real-time rather than batch processing mode. It provides immediate finality of transactions. Gross settlement refers to the settlement of each transfer individually rather than netting. Fedwire is an example of a real-time gross settlement system.
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| Reciprocal Currency: | A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.
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| Red Quote: | A bid or an offer which is best in price and in time on at least one trading floor which does not have a bid or an offer of equal price in the market.
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| Regular (Size): | The size that is set from the Central Node that tells you what is the common size of the transaction if dealing with that particular currency pair.
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| Regular Bid Field: | Shows the Dealable regular price which may be from a single or multiple counterparties.
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| Regular Bid Price: | The Price at which the total amount of all available Dealable Bids, at or above this price, become regular.
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| Reinvestment Rate: | The rate at which interest earned on a loan can be reinvested. The rate may not attract the same level of interest as the principal amount.
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| Repo Rate: | See Repurchase Agreement.
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| Report: | French term for premium.
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| Reporting Dealer: | Term for US Primary Dealers.
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| Repurchase Agreement: | Agreements by a borrower where they sell securities with a commitment to repurchase them at the same rate with a specified interest rate.
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| Rescheduling: | The renegotiation of the terms of existing debts. The term is usually used with reference to LDC debt. The term rescheduling is considered to be refinancing to avoid any implication of default.
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| Reserve Currency: | A currency held by a central bank on a permanent basis as a store of international liquidity, these are normally dollar, euro, and Sterling.
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| Reserve Requirement: | The ratio of reserves to deposits, expressed as a fraction prescribed by national banking authorities, including the United States.
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| Reserve Tranche: | The 25% of its quota to which a member of the IMF has unconditional access, and for which there is no obligation to repay.
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| Reserves: | Funds held against future contingencies, often a combination of convertible foreign currency, gold, etc. Official reserves are to ensure that a government can meet near term obligations. They are an asset in the balance of payments.
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| Resistance Point or Level: | A price recognised by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.
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| Retail Price Index: | Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.
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| Revaluation Rate: | The rate for any period or currency which is used to revalue a position or book.
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| Revaluation Rate: | Revolving credit Upon repayment by the borrower the credit becomes automatically available.
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| Revaluation: | An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.
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| Reversal: | Process of changing a call into a put.
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| Reversal: | Reversal patterns that occur at the end of the trend, signalling the trend change.
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| RFQ: | Request for Quote.
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| Right-hand Side: | To do a deal on the right hand side of a two way quote, normally to buy the currency and sell dollars. See Left-hand Side.
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| Ring: | An area on a trading floor where futures or equities are traded.
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| Risk Factor: | The risk factor (delta) indicates the risk of an option position relative to that of the related futures contract.
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| Risk Free Arbitrage: | An arbitrage opportunity arising whenever it is possible to create two portfolios that have identical payoff profiles but different prices.
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| Risk Management: | The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.
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| Risk Position: | An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.
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| Risk Premium: | Additional sum payable or return to compensate a party for adopting a particular risk.
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| Risk Reversal: | A combination of purchasing put options with the sale of call options.
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| Risk/Return: | The relationship between the risk and return on an investment. Usually, the more risk you are prepared to take, the higher the return you can expect. Depositing your money in a bank is safe and therefore a low return is regarded as sufficient. Investing in stock market exposes you to more risk (from capital losses) and so investors will expect a higher return.
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| Risk: | The degree of uncertainty associated with an investment. The main elements that contribute to the risk of an investment are volatility, liquidity and leverage. All things being equal, a high degree of volatility and leverage makes an investment more risky. An illiquid market, where buyers are not always matched by sellers, also increases risk and investors can be left holding an asset that is falling in price.
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| Rollover Credit: | Medium term credit with a variable interest rate, which is governed by the currently prevailing rates on the euromarkets.
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| Rollover: | A transaction designed for spot deals whereby the delivery is extended and 'exchanged' from the old spot delivery date to the current spot delivery date. Swap points are either subtracted or added reflecting either a positive cost of carry of negative.
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| Round Trip: | Buying and selling of a futures or options contract.
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| RTV: | Real Time View. RTV will initially support two application features, news and market views. Two aspects of market view will be enhanced by RTV - local market views and market view distribution from broker to client. News headline distribution and news story caching will be also be supported by RTV.
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| Running a Position: | Keeping open positions in the hope of a speculative gain.
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S | |
| Same Day Transaction: | A transaction that matures on the day the transaction takes place.
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| Sandwich Spread: | Same as a butterfly spread.
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| Scale Factor: | Implied units of trading (millions and billions) of the particular currency.
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| Scalping: | A strategy of buying at the bid and selling at the offer as soon as possible.
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| SDR: | Special Drawing Right. A standard basket of five major currencies in fixed amounts as defined by the IMF.
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| Seller/Grantor: | Also known as the option writer.
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| Selling rate: | Rate at which a bank is willing to sell foreign currency.
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| Serial Expiration: | Options on the same underlying futures being contract which expire in more than one month.
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| Series: | All options of the same class which share a common strike price and expiration date.
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| Settlement Date: | The date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.
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| Settlement Price: | The official closing price for a future set by the clearing house at the end of each trading day.
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| Settlement Risk: | Risk associated with the non settlement of the transaction by the counter party.
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| Settlement: | The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
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| Short Contracts: | Contracts with up to six months to delivery.
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| Short Covering: | Buying to unwind a shortage of a particular currency or asset.
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| Short Forward Date/Rate: | The term short forward refers to period up to two months, although it is more commonly used with respect to maturities of less than one month.
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| Short Position: | An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short. Selling an instrument not already owned.
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| Short-Term Interest Rates: | Normally the 90 day rate.
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| Sidelined: | A major currency that is lightly traded due to major market interest being in another currency pair.
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| SIMEX: | Singapore International Monetary Exchange.
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| SITC: | Standard International Trade Classification. A system for reporting trade statistics in a common manner.
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| Small (Size): | A size which is smaller than the Normal Size is called Small size.
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| Smithsonian Agreement: | An international currency agreement that started in December 1971. As with Bretton Woods, the countries of the world pledged to maintain fixed exchange rates, but this time with no gold or world money to provide currency backing. Many European currencies were fixed at undervalued parities in relation to the dollar so in the anxious months of February-March 1973 it became impossible for European hard money countries such as West Germany to continue to buy dollars in order to support the dollar at an overvalued rate. The Smithsonian agreement duly collapsed In February 1973.
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| SOFFEX: | Swiss Options and Financial Futures Exchange, a fully automated and integrated trading and clearing system.
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| Soft Market: | More potential sellers than buyers, which creates an environment where rapid price falls are likely.
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| Sovereign Immunity: | Legal doctrine which means that the state cannot be sued nor have its assets seized.
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| Sovereign Risk: | (1) Risk of default on a sovereign loan (2) Risk of appropriation of assets held in a foreign country. Split Date.
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| Spoof: | Submitting a price or size to market, contrary to trader's true intentions but with a view to moving the market in a favourable direction.
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| Spot Month: | The contract month closest to delivery or settlement.
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| Spot Next: | An FX deal which matures one business day past the spot date, thus three business days to maturity.
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| Spot Price: | The current market price. Settlement of spot transactions usually occurs within two business days.
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| Spot Week: | A standard period of one week swap measured from the current value date of the currency spot rate.
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| Spot: | (1) The most common foreign exchange transaction (2) Spot or Spot date refers to the spot transaction value date that usually requires settlement within two business days (apart from CAD, which is one day).
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| Spread: | (1)The difference between the bid and ask price of a currency. (2) The difference between the prices of two related futures contracts. (3) For options, transactions involving two or more option series on the same underlying currency.
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| Square: | Purchase and sales are in balance and thus the dealer has no open position.
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| Squawk Box: | A speaker connected to a phone often used in broker trading desks.
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| Squeeze: | Action by a central bank to reduce supply in order to increase the price of money.
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| Stable Market: | An active market which can absorb large sale or purchases of currency without major moves.
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| Stagflation: | Recession or low growth in conjunction with high inflation rates.
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| Stand by Credit: | An arrangement with the IMF for draw downs on a 'need' basis. The term is sometimes more generally used.
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| Standard: | A term referring to certain normal amounts and maturities for dealing.
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| Sterilisation: | Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
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| Sterling Index: | An index based on the movement of Sterling against the major currencies.
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| Sterling: | British pound, otherwise known as cable.
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| Stocky: | Market slang for Swedish Kroner.
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| Stop Loss Order: | Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD versus JPY at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate below 155.49.
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| Stop Out Price: | US term for the lowest accepted price for Treasury Bills at auction.
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| Straddle: | The simultaneous purchase/sale of both call and put options for the same share, exercise/strike price and expiry date.
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| Straight Through Processing (STP): | The process of seamlessly passing financial information to all parties involved in the transaction process, spanning the investment manager decision through to reconciliation and statement production, without manual handling or redundant processing in real time.
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| Strap: | A combination of two calls and one put.
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| Strike Price: | Also called exercise price. The price at which an options holder can buy or sell the underlying instrument.
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| Strip: | A combination of two puts and one call.
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| Supply Side Economics: | The concept is that tax cuts will boost investment leading to an increase in the supply of goods in the economy. To be compared with demand led Keynesian economics.
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| Support Levels: | When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further downward movement. See Resistance Point.
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| Swap as a Percentage: | Swaps expressed as an annualised percentage.
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| Swap Price: | A price as a differential between two dates of the swap.
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| Swap: | The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
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| Swaption: | An option to enter into a swap contract.
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| SWIFT: | Society for World-wide Interbank Telecommunications is a Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions.
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| Swissy: | Market slang for Swiss franc.
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T | |
| Take the offer: | A Dealer or customer who agrees to Buy at another dealer's offered price is said to take the offer.
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| Taker: | Aggressor, trader who deals on price submitted by another bank. Also see Maker.
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| Talking Up: | Statements made normally by the central bank or government minister designed to bolster market sentiment with respect to the currency.
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| Technical Analysis: | An effort to forecast prices by analysing market data, ie. historical price trends and averages, volumes, open interest, etc.
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| Technical Correction: | An adjustment to price not based on market sentiment but technical factors such as volume and charting.
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| Temporal Accounting: | Method of determining accounting exposure which translates all balance sheet items at the current rate of exchange, not the one at the time the cost was incurred.
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| Tender: | (1) A formal offer to supply or purchase goods or services. (2) In the UK the term for the weekly Treasury Bill issue.
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| Tenor: | Maturity or number of days to maturity normally on bills of exchange.
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| Terms of Trade: | The ratio between export and import price indices.
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| TFA: | Trading Floor Administrator. A person who performs system administration functions for a trading floor.
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| Theory of Elasticity: | A model of exchange rate determination stating that the exchange rate is simply the price of the foreign exchange which maintains the BOP in equilibrium. The degree to which the exchange rate responds to a change in price.
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| Theta: | A measure of the sensitivity of the price of an option to a change in its time to expiry.
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| Thin Market: | A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
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| Threshold of Divergence: | A safety feature for the EMS which creates an emergency exit for currencies which become the singular focus of various adverse forces. The threshold of divergence indicates when the specific country with the pressured currency should take additional steps other then simple central bank intervention in the foreign exchange markets.
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| Thursday/Friday Dollars: | A US foreign exchange technicality. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
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| Tick: | Display of completed deals; also an EBS market data product.
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| Ticker: | Display of completed deals; Also the ICAP FX Market Data provided free to qualifying customers which displays ICAP FX Live live rates on a dumb terminal.
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| Ticket: | See Deal Slip.
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| Tier One: | A measure of a bank's financial strength used by the BIS being the shareholders' equity available to cover actual or potential irredeemable and non-cumulative preference shares. It excludes hybrid forms of capital such as fixed term stock, goodwill, and revaluation reserves. BIS has a minimum requirement of four per cent on risk-weighted assets.
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| TIFFE: | Tokyo International Financial Futures Exchange.
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| Tight Money: | A condition where there is a shortage of credit as a result of monetary policy restricting the supply of credit normally through raising interest rates.
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| Time Decay: | The decline in the time value of an option as the expiry approaches.
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| Time Deposit: | Interest bearing deposits at a savings institution that has a specific maturity.
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| Time Value: | That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.
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| Today/Tomorrow: | Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
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| Tombstone: | Colloquial term for announcement in a publication that a loan or bond has been arranged.
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| Tomorrow Next (Tom Next): | Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
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| Tradable Amount: | Smallest transaction size acceptable.
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| Trade Date: | The date on which a trade occurs.
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| Trade Deficit/Surplus: | The difference between the value of imports and exports. Often only reported in visible trade terms.
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| Trade Ticket: | See deal ticket.
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| Traded Options: | Transferable options with the right to buy and sell a standardised amount of a currency at a fixed price within a specified period.
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| Trader Profile: | A set of parameters associated with each trader that controls the operation of the system for that trader.
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| Trade-weighted Exchange Rate: | The changes in the exchange rate against a trade weighted basket including the currencies of the county's principal trading partners.
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| Trading Floor: | A business entity that manages and operates a currency trading floor. The trading floor typically is a subdivision of a larger parent organisation.
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| Tranche: | A portion of, specifically used for borrowings from the IMF.
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| Transaction Cost: | The cost of buying or selling a financial instrument.
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| Transaction Date: | The date on which a trade occurs.
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| Transaction Exposure: | Potential profit and loss generated by current foreign exchange transactions.
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| Transaction: | The buying or selling of securities resulting from the execution of an order.
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| Translation Exposure: | The calculation of loss or profit resulting from the valuation of foreign assets and liabilities for balance sheet purposes, when consolidating into the base currency.
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| Treasury Bills: | Short-term obligations of a government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date. In the UK they are normally for 91 days, and are offered at weekly tenders. In the US they are auctioned.
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| Turnover: | The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.
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| Turnover: | The total money value of all executed transactions in a given time period; volume.
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| TWAP: | Time Weighted Average Price. To calculate the TWAP, a time period (eg. a complete trading session) is sliced into intervals (eg. minutes) and a snapshot of the stock price is taken at the end of each interval. These sample prices are then averaged. Unlike VWAP, no extra weight is given to any one interval regardless of how much trading occurred in the interval.
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| Two Way Price: | When both a bid and offer rate is quoted for a FX transaction.
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| Two-Tier Market: | A dual exchange rate system where normally only one rate is open to market pressure, eg. South Africa.
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| Two-Way Quotation: | When a dealer quotes both buying and selling rates for foreign exchange transactions.
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U | |
| US Quote: | Exchange rate quotation on a reciprocal basis. Also known as an American Quote.
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| Uncovered: | Another term for an open position.
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| Under Reference (Order): | Before finalising a transaction all the details should be submitted for approval to the order giver, who has the right to turn down the proposal.
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| Under-Valuation: | An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
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| Undo: | A colloquial term for reversing a transaction, eg. a spot sale by means of a forward purchase or if done in error a spot purchase.
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| Unload: | Term for sale of assets or unwinding positions either to limit loss or to undermine other market participants' positions.
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| Unmatched Book: | If the average maturity of a bank's liabilities is less than that of its assets, it is said to be running an unmatched book.
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| Unrealised Gain/Loss:
| The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealised Gains' Losses become Profits/Losses when position is closed.
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| Unwind: | Selling of assets and or instruments to square a position.
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| Uptick: | A new price quote at a price higher than the preceding quote.
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| Up-Tick: | A transaction executed at a price greater than the previous transaction.
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| Upto: | This option indicates you wish a quote on up to a certain amount. The countertrader cannot change the amount when he quotes, however, you can change the amount to a lesser number if you decide to buy or sell.
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| US Prime Rate: | The interest rate at which US banks will lend to their prime corporate customers.
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| USDX: | Currency index which consist of the weighted average of the prices of ten foreign currencies against the US dollar
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V | |
| Value at Risk (VaR): | A category of risk measurement that describes the market risk of a trading portfolio in terms of probability. VaR might be used to track the market risk of a portfolio by using historical volatility to calculate boundaries of risk based upon standard deviation multiples.
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| Value Date Field: | Displays the current spot value date for the currency pair specified by the Currency Pair Selector.
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| Value Date: | For exchange contracts it is the day on which the two contracting parties exchange the currencies which are being bought or sold. For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is where the spot day in the quoting centre coincides with a bank holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month If the one month date falls on a non-banking day in one of the centres then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not affect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also referred to as maturity date.
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| Value Spot: | Normally settlement for two working days from today.
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| Value Today: | Transaction executed for same day settlement; sometimes also referred to as 'cash transaction'.
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| Vanilla: | A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike.
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| Variation Margin: | Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavourable price movements.
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| Vega: | Expresses the price change of an option for a one per cent change in the implied volatility.
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| Velocity of Money: | The speed with which money circulates or turnover in the economy. It is calculated as the annual national income
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| Vertical (bear or bull) Spread: | The sale of an option with a high exercise price and the purchase (in the case of a bull) or the sale (in the case of a bear) of an option with a lower exercise price. Both options will have the same expiration date.
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| Visible Trade: | Trade in merchandise goods as compared with capital flows and invisible trade.
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| Volatility: | A measure of the amount by which an asset price is expected to fluctuate over a given period.
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| Vostro Account: | A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
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| VWAP: | Volume Weighted Average Price. This is the average price for the stock over the specified time horizon, with more weight given to the periods of heaviest trading. Computing the VWAP over any time period is just a matter of dividing the total dollar volume by total share volume over the time period.
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| Warning Threshold: | When the system detects a variance that is beyond limits established for Wide Spread, Check Rate and Large Difference, a Warning Threshold is said to be exceeded and a warning message is issued by the system to the dealer. For example, if Dealable Best Offer price is greater than the Dealable Best Bid price, and the spread between them is greater than or equal to the Wide Spread threshold (the Wide Spread threshold value is currency pair specific), then this is known as the Wide Spread warning.
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W | |
| Wholesale Money: | Money borrowed in large amounts from banks and institutions rather than from small investors.
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| Wholesale Price Index: | It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.
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| Window-dressing: | Where financial institutions or companies raise funds for specific reporting dates such as year ends to give the appearance of high liquidity.
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| Working Balance: | Discretionary element in the monetary reserves of a central bank.
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| Working Day: | A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the banks in both (all relevant currency centres in the case of a cross) are open.
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| World Bank: | A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.
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| Writer: | The seller of a call or put option, who receives a premium and who is required to perform if it is exercised.
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Y | |
| Yard: | Slang for a billion.
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| Yield Curve: | The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities. |