v. FRA

the future value contains capital and interest and can be calculated from the present value by adding accrued interest

agreement to sell or purchase a financial instrument or commodity at a particular price on a stipulated date in the future,contrary to forward contracts futures are exchange traded

Agreement about a future purchase or sale of a particular amount of a commodity in which delivery and payment take place at a specified date and at a specified price.

On the futures market fulfillment of a transaction takes place at a future date. Price, quantity and date of fulfillment are already fixed with the execution of the transaction . Contrary cash market

a series of futures,such a kind a longer period can be producedexample: by using March, June and September 3-months LIBOR futures a 9-months period from March till December can be produced.

Funds which investin the futures or options markets. The choices are (in addition to financial futures) as forward contracts on equities, interest rates, indices and currencies as well as futures contracts on precious metals, agricultural goods and raw materials (collectively Commodities). Futures funds have a significantly higher risk than other securities funds due to the leverage effect of derivative products.

abbr.

v. SAFE

see Generally Accepted Accounting Principle

risk factor of options expresses by how many percentage points the delta of an option changes if the price of the underlying increases by one unit e.g.: call EURUSD delta 0.35 (resp. 35%) gamma +7 meaning: if EURUSD increases by 1 USD Ct the delta of the option changes from 35% to 42% gamma is similar to the convexity of bonds long options always have a positive gamma short options always have a negative gamma

A method of asset-liability management that can be used to assess interest rate risk or liquidity risk excluding credit risk. Gap analysis is a simple IRR measurement method that conveys the difference between rate sensitive assets and rate sensitive liabilities over a given period of time. This type of analysis works well if assets and liabilities are compromised of fixed cash flows. Because of this a significant shortcoming of gap analysis is that it cannot handle options, as options have uncertain cash flows.

Generalized Auto-Regressive Conditional Heteroskedasticity A mathematical model to forecast future variances on the basis of past variances. GARCH is widely used in riskmanagement.

ISO currency code for British pound sterling

abbr. for gross domestic product, measure for the performed work of an economy during a certain period

collateral (usually bonds) that satisfy the general requirement of a lender of cash in a repo transaction The interest rate of a repo with a general collateral is usually slightly below the rate of unsecured interbank deposits opposite: special collateral

Method for modeling time series. Among other things, future volatilities are forecasted with that. The results are often used in the assessment of risk.

The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. That said, keep in mind that GAAP is only a set of standards. There is plenty of room within GAAP for unscrupulous accountants to distort figures.

another designation for 30/360

abbr. Good-for-Day