Special | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O
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(Credit) Conversion Factor (CCF):The value with which off-balance positions are weighted, to calculate the required capital adequacy. |
(US) GAAP:abbr. (US-) Generally Accepted Accounting Principles |
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à la baisse:french designation for bearish |
à la hausse:frensh designation for bullish |
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A-IRB (Basel II):see also advanced internal ratings-based approach |
ABS:see also asset-backed security |
accrued interests:that share of a coupon of a bond which is entitled to seller,The payment of interest (the coupon) is effected to the bearer of bond. If the bearer has not held the bond for the entire interest-rate-period, a share of the payment of interest is entitled to the previous owner. This share is called accrued interest. |
ACI:abbr. Association Cambiste Internationale |
act/360:method of interest calculationthe number of days of the interest rate period are calculated as real calendar daysthe number of days of a year is assumed to be 360also known as: money market method and french method |
act/365:method of interest calculationthe number of days of the interest rate period is calculated as real calendar daysthe number of days of a year is assumed to be 365 |
act/act:method of interest calculationboth the number of days of the interest period and the number of days of a year correspond to the real calendar days |
active management:The fund manager seeks to achieve a higher performance by deviations from the established benchmark than the benchmark. |
active risk:Risk difference between the portfolio and the fixed benchmark. |
actual/360:A 30/360 day-count convention assumes there are 30 days in a month and 360 days in a year. This method is usually used in the money market and among the money market operations of the ESCB. It is also called euro interest rate method, French interest method or money market method. |
actual/365:(ACT / 365) Interest calculation method in which the number of days for the interest period are calculated as true (determined by the calendar) days (ACT). The number of days in a year is assumed to be 365. Also called English interest calculation method. |
Actual/actual:An actual/actual day-count convention uses the actual number of days in the month and year for a given interest period. This method is commonly used in the bond market in the euro zone and the US. Also called American interest calculation method. |
Ad-hoc message:Price-sensitive company announcements are published by companies in the context of ad hoc reports (i.e. pursuant to § 48d of the Exchange Act (Stock Exchange Act) and § 82 (7) and (8) Stock Exchange Act). The issuers of financial instruments have to immediately disclose inside information that directly relates to themself to the public. Ad-hoc reports to ensure a consistent information to all market participants. |
Added Value on Equity (AVE):(Added value on equity, AVE) It includes the absolute contribution of the bank, the divisions or subordinate levels to which the cost of capital (cost of capital employed) are exceeded or undercut. The operating surplus profit is the main control parameter of a bank. |
advanced internal ratings-based approach (A-IRB) (Basel II):One of two types of internal ratings-based approaches. With A-IRB, financial institutions are able to provide internal data to determine the risk-parameters probability of default, exposure-at-default and loss-given default. (See also: Internal ratings-based approach, foundation internal ratings-based approach) |
advanced measurement approach (AMA) (Basel II):Under the AMA the regulatory capital requirement for the operational risk charge will equal the risk measure generated by the bank's internal operational risk measurement modelling system.Financial institutions must collect data on their operational risk losses, and combine this with external data, as well as use key risk indicators and self-assessments of operational risk to calculate the operational risk capital charge. To perform the calculation, firms may use their own modelling technique, but it must be pre-approved by supervisors (See also operational risk). |
agio:(Premium) The commission of securities is the difference between the face value of a security and the price actually payable higher market price or in particular a higher issue price. In most cases, the premium is expressed in%. The premium, which is payable on the purchase of most fund is called the initial charge. Contrary discount. |
AIBD:Association of International Bond Dealers, forerunner of ISMA (International Securities Market Association) |
allotment after oversubscription:Restricted acceptance / allotment of securities |
ALM:abbr. Asset-Liability management |
alpha (Basel II):The multiplier for the operational risk regulatory capital charge calculation under the basic indicator approach (see also basic indicator approach, operational risk) |
Alpine:a type of foreign bondindicates a bond which is issued from a foreign entity in Switzerland denominated in CHF |
alternative risk transfer:An approach to risk management combining capital markets, reinsurance and investment banking techniques that allows a party to either free itself from risks not easily transferred via traditional insurance, or cover such risks in a non-traditional way by using the capital markets, for example. |
alternative standardised approach (ASA) (Basel II):Designed to help prevent double counting of operational risk in emerging market countries. The operational risk capital charge is the same as for the standardised operational risk capital charge, except for two business lines: retail banking and commercial banking. For these business lines, loans and advances multiplied by a fixed factor m replaces gross income as the exposure indicator (see also beta, operational risk, standardised approach operational risk) |
AMA (Basel II):see also advanced measurement approach |
American Depository Receipt:A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction. |
american interest-calculation method:see interest calculation method actual/actual |
american option:see american style option |
american style option:(American style option) An option that can be exercised at any time between purchase and expiration date. |
American-style tender:Method of allocation at interest tenders, where the lowest accepted bids are allocated at the particular bid rates opposite: dutch-style tender |
amortizing bond:bond which is repaid by instalments,Thus the bond has got an amortizing nominal structure. |
annual general meeting:An option that can be exercised at any time between purchase and expiration date. |
Annual Percentage Yield:The effective annual rate of return taking into account the effect of compounding interest. The resultant percentage number assumes that funds will remain in the investment vehicle for a full 365 days. |
APR:abbr. Annual percentage rate |
APY:abbr. Annual percentage yield |
arbitrage:widely riskless profiting of differences in price, when the same instrument (security, currency, commodity etc.) is traded at different markets, the remaining risk is called basis risk |
ARCH:Auto-Regressive Conditional Heteroskedasticity a mathematical model to forecast future variances on the basis of past variances; widely used in risk management |
Arrangement:Organizational form of the settlement on the Vienna Stock Exchange. All completed transactions are netted and settled on each trading day and met three business days later (T + 3). |
ASA:see also alternative standardised approach |
Ask:see Ask rate |
Ask Limit:Limit on the ask side, the ask price |
ask price:see ask rate |
Ask rate:The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price. Opposite of the bid price. |
assessment basis:Purchase price, including commissions and other costs used to calculate the capital gains and losses for tax purposes. |
Asset Allocation:An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time. |
asset backed securities (ABS):An ABS is an asset backed security fixed interest security, which has payment claims against a special purpose entity (also called Special Purpose Vehicle) as its object. The payment claims are covered (backed) by a pool of receivables (assets) that are transferred to the SPV and are available for the holders of the asset-backed securities (investors) as the basis of liability. Sellers of the receivables in such a transaction are usually banks, thus making their loans tradable. |
Asset Correlation:(Asset Correlation) The correlation of returns on two risky assets. |
Asset Liability Committee:A risk-management committee in a bank that generally comprises the senior-management levels of the institution. The ALCO's primary goal is to evaluate, monitor and approve practices relating to interest and liquidity risk due to imbalances in the capital structure. |
asset liability management (ALM):Optimized balancing of the assets, liabilities and off-balance sheet transactions among the objectives of profitability, liquidity and security within the scope of the regulatory framework |
asset securitisation:the packing of mortgages, loans and other receivables into interest-bearing securities (see also asset-backed security, securitisation) |
asset swap:Interest Rate Swap or currency swap which is related to an asset,by means of an asset swap the type of the interest income is changed from fixed into variable or vice versa |
asset-backed security (ABS):a financial instrument that is collateralised by bundled assets such as mortgages, real estate, credit card payments or other receivables |
asset-liability management (ALM):The practice of matching the term structure and cash flows of the asset and liability portfolios of an organisation to maximise returns and minimise interest rate risk. |
Assets:Assets include all assets of a company and are compared with the liabilities. Their composition provides information, in which values the company's capital has been invested. A surplus on the asset side of the balance sheet is equivalent to the profit of a company. |
assignment:A notice received by an option writer stating that the sold option has been exercised by the purchaser of the option. When assigned, the option writer has an obligation to fulfil the requirements of the option contract. If the option was a call (put) option, then the writer would have to sell (buy) the underlying security at the stated strike price. |
Association of Austrian Investment Companies:The Association of Austrian Investment Companies is the umbrella organization of all Austrian investment companies and all Austrian real estate investment companies. The Association represents 100% of the fund's assets managed by Austrian investment companies and Austrian real estate investment companies. Purpose and object of the legally organized association is to promote the domestic investment system as well as the comprehensive care of its members. www.voeig.at |
Association of International Bond Dealers:A professional association of bond dealers. The members consist of over 350 various financial conglomerates and institutions that actively trade bonds. The association makes recommendations pertaining to bond dealing rules to the regulators of various European countries. |
at the money (ATM):Call as well as Puts lie at the money if the strike price and the exchange rate of the underlying are equal. |
at-the-money:An option is at-the-money if the spot price of the underlying is approximately equal to the strike price. |
ATX:abbr. Austrian Traded Index |
auction:A trading model of the market model of a exchange in which the orders are collected and there is a concentration of liquidity. The price will be determined according to the principle of executing. |
Austrian Banking Act:The new version of the act regulating banking and credit business, which entered into force on 1 January 1994. The Banking Act is the central legal norm on banks in Austria. |
Austrian export credit agency:The Austrian Control Bank public limited company is Austria's main financial and information service provider for export economy and capital markets. Owners of the specialist company founded in 1946, are domestic commercial banks. The wide range of services are available to companies, financial institutions and organizations of the Republic of Austria. |
Austrian national bank:The Austrian National Bank is the central bank of the Republic of Austria and as an integral part of the European System of Central Banks (ESCB) or the Eurosystem. It helps to form the economic development in Austria and in the euro area in the public interest. It is a stock company in accordance with the National Bank Act from 1984 and subject to (compared to other corporations) a number of specific arrangements arising from their special status as a central bank. The registered capital of 12 million euros belongs 70% to the state and 30% to the interest groups as well as banks and insurance companies. |
Austrian Stock Exchange:The Vienna Stock Exchange is the oldest stock exchanges in the world and was founded in 1771 by Empress Maria Theresa. In 1997, the Securities Market of the Vienna Stock Exchange was merged with the futures exchange of the Austrian Futures and Options Exchange to the new Wiener Börse AG. The Vienna Stock Exchange specializes in Austrian and Central and Eastern European investment types. |
Austrian Traded Index:(ATX) The ATX is a real-time (Real-time index) calculated price index that covers the blue-chip segment of the Austrian stock market and contains the 20 most liquid shares on the Vienna Stock Exchange and was developed by the Vienna Stock Exchange. The shares are weighted according to their market capitalization therefore values with a high capitalization have a stronger influence on the ATX. The starting point for the calculation of the ATX is the 2nd January in 1991 with 1,000 points. |
authorized capital:By resolution of the Annual General Meeting to the Board for a maximum of five years granted authorization without further questioning of the annual general meeting to increase the share capital by issuing new shares to a certain extent. |
Auto-regressive Conditional Heteroskedasticity:(ARCH). The ARCH model which was developed in the 80s by Robert F. Engle, originally described the development of the volatility. It is based on the assumption that the variance of the random error models depend of realized random errors of the previous period, so that large and small errors tend to occur in groups. The results are often used for risk measurement. For the development of ARCH models Robert F. Engle was awarded with the Nobel Prize in Economics in 2003 |
autocorrelation:also serial correlationThe correlation between a time series of observations, such as interest rates, and the same values at a fixed time interval later. A time series is autocorrelated if future returns are correlated with past returns. |
AVE:abbr. Added Value on Equity |
average exposure (Basel II):Credit exposure arising from market-driven instruments such as interest rate swaps has an ever-changing mark-to-market exposure. This can be projected because it is dynamic and it is possible to estimate an average exposure in each period. Such a projection would be a probability-weighted aggregation across all potential market rate paths. |
average interest rate:the average interest rate is calculated as a term-weighted arithmetic average of interest rates of serveral periods, compound interest are not considered |
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BA:v. Bankers Acceptance |
back-testing:the ex post comparison of the calculated risk and the effectively occured changes of the value of a portfolio, Back testing as well as stress testing methods are essential supplements to value at risk calculations such as variance/covariance method, monte carlo simulation and historical simulation |
backwardation:Backwardation is a market condition where spot rates exceed forward rates. The term is common in commodity markets and corresponds to the term discount in FX-markets. In the energy markets, the prevailing condition may reflect supply and demand. For example, if the crude oil market is at backwardation, it may indicate a lack of immediately available supply. Contango is the opposite. |
Baisse:Name for a longer lasting exchange phase, which is characterized by regular price losses. Derives from the French word baisser = drop,descend. Contrary bull market. |
balance of current transactions:The current account balance is a sub-account of the balance of payments. It summarizes trade balance, services balance, balance of income and balance of the current transfers together. The current account balance shows how a country can fund its exports by imports. A current account deficit causes an increase in the foreign debt of an economy. |
balance of payments:A statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts – the current account and the capital account. |
balance sheet:Comparison of all the assets and liabilities parts of a company to a balance sheet date. Serves the purpose of recognizing income and as a balance sheet. |
balanced funds:A fund that combines a stock component, a bond component and, sometimes, a money market component, in a single portfolio. Generally, these hybrid funds stick to a relatively fixed mix of stocks and bonds that reflects either a moderate (higher equity component) or conservative (higher fixed-income component) orientation. |
bank bond:A medium or long-term bond issued by banks. |
bank bonds:The credit institutions are issuing such form of bonds to provide borrowers money. |
bank exposure (Basel II):Under the Basel II framework, this asset class covers exposures to banks and those securities firms that are subject to supervisory and regulatory arrangements comparable to those under the New Framework.Also included are public-sector entities that are treated like claims on banks under the standardised approach, and multilateral development banks that do not meet the criteria for a 0% risk weight under the standardised approach |
Bank for International Settlements (BIS):an international organisation that fosters co-operation among central banks and other agencies in pursuit of monetary and financial stability |
Bankers Acceptance:A short-term credit investment created by a nonfinancial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts to face value in the secondary market. These instruments have been a popular instrument in the money market. They are commonly used in international transactions. |
Banking act:abbr. (BWG) Banking act in german |
banking book:The banking book covers all the business of the Bank that is not used for commercial transactions and serves the overall bank management. |
banking group (Basel II):Company groups that engage predominantly in banking activities |
bankruptcy:Insolvency of the debtor (eg issuers of securities) |
bankruptcy (Basel II):The liquidation of assets when a firm cannot meet its financial obligations. This is not synonymous with default and a firm may default on a specific debt obligation without declaring bankruptcy. |
base currency:The currency in an international portfolio in which profits and losses are calculated. |
Basel Committee:abbr. Basel Committee on Banking Supervision |
Basel committee on banking supervision:Group of central banks and financial institution supervisory authorities from the group of 10 (G-10) countries, which produce common standards aimed at reducing systemic risk in the global financial system. |
Basel II:Basel II refers to the entirety of the capital requirements proposed by the Basel Committee on Banking Supervision in the recent years. The rules must be applied from 1 January 2007 in the Member States of the European Union for all credit and financial services institutions. Although originally inspired and initiated by the United States, Basel II has not been implemented in the United States with the same vigor as in Europe. The scope of Basel II focuses on three areas: minimum capital requirements (Pillar 1), banking supervision process (Pillar 2) and expanded disclosure (Pillar 3). |
basic indicator approach (BIA) (Basel II):Banks using the BIA must hold capital for operational risk equal to a fixed percentage of (denoted alpha) of average annual gross income over the previous three years (See also alpha, operational risk) |
Basic price:see strike price |
Basis:Difference between the spot price of the underlying and the price of the corresponding futures. One speaks of a positive base if the forward price is higher than the spot price and from a negative base if the forward price is lower than the spot price. |
Basis Point Value:A basis point is 1/100 of a percentage point, i.e. 0.01%. The difference in yield between two bonds is usually given in basis points. (The difference between Bond A with 7.55% and Bond B with 7.83% is 28 basis points.) |
basis risk:The risk that prices of similar, but not identical instruments do not fully correlate. |
basis swap:syn: index swapinterest rate swap in which two variable interest rates are exchanged e.g. 3-months USD LIBOR against US-CP composite rateopposite: coupon swapv. interest rate swap |
basispoint:1/100 of one percentage point i.e. 0,01 % |
BBA:abbr. of British Bankers Association |
Bear:An investor with pessimistic market expectation, unlike a bull. |
Bear Spread:Combined option strategy that is implemented in anticipation of a price decrease. It can be based on both the simultaneous purchase and sale of call options and put options. Accordingly, a distinction is made between a Bear Call Spread and a Bear Put Spread. |
bearer security:security which entitles the bearer to claim the certified rights |
bearer share:An equity security that is wholly owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock, nor does it track transfers of ownership. The company disperses dividends to bearer shares when a physical coupon is presented to the firm. Unless the articles of the corporation provides otherwise, each share is a bearer share. |
bearish:Stock market jargon for the expectation of declining prices. The bear is that animal, which is hitting the prices lower with his paws. Contrast: bullish. |
benchmark:The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy. |
beta:A coefficient measuring a stocks relative volatility to a market index, such as the S&P 500 Index. A manager with a Beta greater than 1.0 is more volatile than the market, while a manager with a Beta less than 1.0 is less volatile than the market. |
beta (Basel II - operational risk):A fixed percentage for calculation of the regulatory capital charge under the standardised approach for operational risk. The beta relates the level of required capital to the level of the gross income for each of eight business lines. |
BIA:see also basic indicator approach |
Bid:v. bid-rate |
bid ask spread:It is the difference between bid and ask price of a financial instrument. |
bid rate:price at which the quoting bank is prepared to purchase a financial instrument (foreign exchange, securities etc.),opposite: ask |
big figure:Rates in foreign exchange markets are usually quoted in 5 digits (e.g. EUR/USD 1.0125; USD/JPY 120.50). The first 3 digits are called big figure and the last 2 digits pips. Professional FX-market participants usually quote just the pips of an FX-Rate, whereas the big figure is assumed to be known. |
bilateral netting:An agreement between two counterparties where the value of all in-the-money contracts is offset by the value of all out-of-the-money contracts. This results in a single net exposure amount owed by one counterparty.Bilateral netting can be multi-product and encompass portfolios of swaps, interest rate options and forward foreign exchange. |
bill of exchange:written order by which one party instructs another party to pay a specified sum to a third party |
black funds:Are all other foreign funds (no white or white blossoms) without a tax representative in the domestic country. If investors can adduce the tax statement (distributed income) from a foreign capital investment company, the fund will turn white! |
Black&Scholes model:Mathematical model for the calculation of option prices, named after the Americans Fischer Black and Myron Scholes. It is the international standard and most widely used model, which calculates a fair option price. |
Blackout Period:An approximately two-week period before the publication of the issue prospectus. During this period, no research data will be published by the issuer or the issuing bank. |
Blankoexposure:see open exposure |
blocking minority:Term for the minority stake in a company, by which, however important corporate decisions such as the amendment of articles of association of the company, can be prevented. The blocking minority for public limited companies is situated at 25%. |
blockorder:Limit order, which can only be executed at certain minimum quantities (blocks). |
Blue Chips:Term used to describe equities from large, first-class companies whose price is expected to develop positively and continually because of their corporate size and performance. |
Bond:A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. |
bond conditions:The essential data of a bond printed in the bond prospectus. |
Bond Futures:Futures contracts whose underlying is a bond. |
bond market:Market for fixed-income securities. The bond market is measured by revenues and the number of listed securities and new issues of greater significance than the stock market (securities markets). |
bond rating:an evaluation of the possible risk of credit losses due to a bond issuer's default, based on an analysis of the issuer's financial condition as well as the structure and terms of the debt instrument |
bond with warrant:similar to convertible bondin contrast to convertible bonds the option can be segregated from the bond and traded seperately |
bonus share:(Bonus shares) Term for shares issued in connection with capital increases from retained earnings. |
book money:Money used in cashless payment transactions, eg for transfers from one account to another. |
book profit:Accounting profit that has already been made but not yet realized by a transaction. e.g. in connection with a stock whose price has increased, but is still held. |
book value:Carrying amount corresponds the equity capital divided by the number of shares. If the carrying value is considerably higher than the price of a stock, it is regarded as a potential buy signal. See also: value at which an asset is disclosed in the balance sheet. |
Bootstrapping:Bootstrapping is the procedure which is used for the calculation of a zero curve out of the given yield structure of financial instruments. |
borrower grade:defined as an assessment of borrower risk on the basis of a specified and distinct set of rating criteria, from which estimates of the probability of default are derived |
bottom-up approach:An investment approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual stocks. In bottom-up investing, therefore, the investor focuses his or her attention on a specific company rather than on the industry in which that company operates or on the economy as a whole. |
bp:abbr. for basispoint 1/100 of one percentage point i.e. 0,01 % |
BPV:abbr. Basis Point Value |
Break-Even-Point:The point at which revenues and costs of a product are equal and therefore neither loss nor gain is generated. For simplification it can be said that the contribution of all products sold is identical to the fixed costs at the breakeven point. If the profit threshold is exceeded, one makes profits and vice versa. |
bridge:an information service company, Bridge was instructed with the execution of the EURIBOR-fixings. In September 2001 bridge was took over by reuters. |
British Bankers Association:conducts the LIBOR fixing (BBA LIBOR) and developed a master agreement for FRAs (FRABBA) |
broader market:In this market, buy or sell orders can not cause a price fluctuation in either direction, because enough of the respective shares are traded every day. |
Broker:Professional security dealers and advisors. Brokers have the right to accept and execute trading orders from banks and privat investors. In England they are the contact point for jobbers or dealers. |
BTP:abbr. Buoni del Tesoro Poliennali |
Bull:Bullish investors i.e. optimistic market expectations. Contrary to bear. |
Bull Spread:Combined option strategy that is constituted by buying a call with a lower strike price and shorting a call with a higher strike price. Both options have the same maturity. |
Bulldog:a type of foreign bondindicates a bond which is issued from a foreign entity in UK denominated in GBP |
bullet:bond which is redeemed entirely at the end of the maturity |
bullet bond:Bullet bonds refer to a debt security that is repaid by a certain date at the end of the term in total. |
bullet loan:The entire principal is repaid at the end of the term. During runtime, only the interest is paid. |
Bullish:Investors who expect rising market rates. |
business cycle:see economic cycle |
butterfly:options strategy consisting of four options long butterfly: purchase of call and put at the money (= long straddle) and sale of call and put out of the money (short strangle) short butterfly: sale of call and put at the money (= short straddle) and purchase of call and put out of the money (= long strangle) |
Buy:Analytical classification of a financial instrument as a buy. |
buy option:see Call |
Buy-and-Hold-Strategie:Passive investment strategy that involves no active buying and selling activity after the composition of the portfolio until the end of the investment horizon. |
buying power:ability to purchase goods and services for money |
buying price:see ask rate |
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C.I.R.A.:abbr. Cercle Investor Relations Austria |
cable:In trading terminology the exchange rate between British pound sterling and U.S. dollar (GBP/USD) is called cable. |
CAD:see Capital Adequancy Directive |
call option:A call option gives the holder the right to purchase a specified quantity of the underlying at a specified strike price by a specified expiration date. |
call swaption:v. payer swaption |
call/put parity:the relation between the prices of call and put options with the same strike price As it is possible the create a synthetic call option by buying a put and buying the underlying, arbitrage opportunities wouls arise, if the prices of the options would not comply with the call/put parity. Call=Put + (Underlying - Strike)/(1+interest rate*days/360) Put=Call + (Strike - Underlying)/(1+interest rate*days/360 |
cap:A cap is an interest rate ceiling for a variable interest rate, and consists of a series of call options on a fixed reference interest rate (e.g. 6-months EURIBOR) with the same strike. A single option of this series is called caplet. The purchaser of the cap receives a compensation from the seller, if the reference interest rate exeeds the strike at the expiry date. |
capital adequacy:According to Basel II. The measure of the adequacy of the financial resources of a company in terms of the coverage of business risks and regulatory requirements. |
capital adequacy (Basel II):the measure of the sufficiency of a firm's financial resources to enable it to meet its business and regulatory obligations |
Capital Adequancy Directive (CAD):directive about the adequate equity a bank is obliged to hold The amount of equity depends on the extent of risk adjusted assets and the market risk that a bank holds. |
capital adjustment:Increase the share capital of the Company's assets (ie, from its own resources). Disclosed reserves are converted into dividend-bearing capital, ie the capital shall be corrected. Shareholders will receive bonus shares without additional payment, which are often referred to as bonus shares. The term bonus shares is misleading because the shareholder gets nothing for free at a capital adjustment: He has a proportion of the reserves from which the share capital is increased. |
Capital Asset Pricing Model:(CAPM) A model of capital market theory, which postulates a linear relationship between the expected return and systematic risk of shares. |
capital gains tax:Interest and dividends from Austrian securities are subject to 25% capital gains tax. Thus, the income tax is paid. In respect of shares and debt securities also the inheritance tax. |
capital increase:Financing of a company by an increase in equity. The possible forms depend on the legal form of the company. |
capital market:market for a long-term fund raisingOften capital market is used as a synonym of the market for securities, which is devided into bond market and stock market. |
capital market floater:mixture of EURIBOR and capital market floater |
capital market initiative:Main focus of the capital market initiative is to create confidence in the Austrian market. This is done by an Austrian Corporate Governance Code. Furthermore measures to increase the volume of securities traded are proposed. |
capital ratio (Basel II):the minimum ratio of regulatory capital to risk-weighted assets (currently at 8 %) |
capital reducation:Reduction of the share capital, for example, to to eliminate losses incurred. Usually performed as part of a reorganization. |
capital risk:Capital risk is the possibility of losing the capital invested. |
capital writedown:Capital reduction and subsequent capital increase, often to the original amount. In the case of reorganization funds about the amount of the capital reduction will be supplied by the shareholders. |
capitalisation:see market capitalisation |
caplet:a single option out of a capv. cap |
CAPM:abbr. Capital Asset Pricing Model |
cash equivalent:Result of the cash flow statement / sum of cash and cash equivalents |
Cash flow (CF):A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance. |
cash instrument:An instrument whose value is determined directly in the markets. Stocks, commodities, currencies and bonds are cash instruments. |
cash settlement:Compliance mechanism that replaces the physical delivery and payment of the underlying. Differential gains or losses on futures and option positions are directly paid or demanded for cash settlement. |
CBO:see also collateralised bond obligation |
CBOE:Chicago Board Options Exchangefounded in 1973 as subsidiary of the CBOTwww.cboe.com |
CBOT:Chicago Board of Tradebiggest futures market in the world, founded in 1848, commodities- as well as financial contracts are tradedwww.cbot.com |
CC:abbr. Credit Card or Cost Center |
CCS:v. Cross Currency Swap |
CD:v. certificate of deposit |
Central Clearing Counterparty (CCP):A clearinghouse acts as a Central Clearing Counterparty if it takes over the role of the partner in a deal for both sides. Thus the Clearing House is taking the credit risk of both partners. |
Central Money Markets Office:An international clearing house established at the Bank of England. |
central securities depository:The securities depository in the Austrian Control Bank is the central Austrian depositary for securities. |
centralised unit costs:Costs for services of the headquarters Bank, but are directly attributable to customer business. |
Cercle Investor Relations Austria:(CIRA) The Cercle Investor Relations Austria was founded in 1991 as a voluntary community of interest and advocacy of listed companies. The members are primarily composed of the investor relations executives of a firm as well as from CFOs and CEOs. The member companies are responsible for approximately 85% of total capitalization and roughly 90% of the total turnover of the Vienna Stock Exchange. |
certificate of deposit:a certificate issued by a bank that indicates a specified sum of money has been deposited. A CD has a maturity date (usually up to one year) and a specified interest rate, and can be issued in any denomination.CDs are tradable in the secondary market |
certificates:Certificates evidencing the right to participate in the performance of an underlying investment such as a stock, an index, a commodity or a foreign currency. |
CET 1:abbr. Common Equity Tier 1 |
CFD:abbr. Contract for Difference |
charge:Share price addendum money and goods |
Chart:Graphical representation of a price development. |
chart analysis:see technical analysis |
cheapest to deliver:In a futures contract, the cheapest security that can be delivered to the long position to satisfy the contract specifications. The cheapest to deliver security is relevant only for contracts which provide that a variety of slightly different securities may be delivered. This is common in treasury bond futures contracts, which typically specify that any treasury bond can be delivered, so long as it is within a certain maturity range and has a certain coupon rate. |
CHF:abbr. ISO Currency code for swiss franc |
Chicago Board of Trade:A commodity exchange established in 1848 that today trades in both agricultural and financial contracts. The CBOT originally traded only agricultural commodities such as wheat, corn and soybeans. Now, the CBOT offers options and futures contracts on a wide range of products including gold, silver, U.S. Treasury bonds and energy. www.cbot.com |
Chicago Board Options Exchange:The first options exchange in the United States was founded in 1973. Today especially strong in index derivatives. www.cboe.com |
Chicago Mercantile Exchange:Founded in 1898 as a not-for-profit corporation, the CME was called the Chicago Butter and Egg Board until 1919. In November 2000, CME became the first U.S. financial exchange to demutualize and become a shareholder-owned corporation. The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and a small amount on agricultural products. www.cme.com |
CIR:abbr. Cost-Income-Ratio |
classic repo:v. US-style repo |
Clean Deposit:see interbank deposits |
clean price:price of an bond without accrued interests,The quotes of bond prices are clean prices. If the bond is purchased the buyer has to pay accrued interest in addition to the clean price. The clean price plus accrued interests result in the dirty price, that price which has to be paid at the purchase of a bond. |
Clean-up Call:A buy-back option is an option that permits the buyer to buy back the securitization exposures (eg. asset-backed securities) before all outstanding receivables or securitization exposures have been repaid. |
Clearing:The procedure by which an organization acts as an intermediary and assumes the role of a buyer and seller for transactions in order to reconcile orders between transacting parties. Clearing is necessary for the matching of all buy and sell orders in the market. It provides smoother and more efficient markets, as parties can make transfers to the clearing corporation, rather than to each individual party with whom they have transacted. |
clearing house:An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery, and reporting trading data. |
clearing price:The in the auction determined price at which the highest order volume and the lowest surplus in the order book consists at the end of the call phase. |
CLO:see also collateralised loan obligation |
Close:The last price of the trading day, which was formed for a continuously traded security. Contrary opening price. |
close out:closing a position through cancelling the original dealThe party with the positiv present value gets a compansation payment from the counterparty |
Close Out Netting:The netting of all outstanding receivables and payables between two parties. The summation is only done in the case of specified events (eg, bankruptcy, late payments, etc.). Contrary Novation Netting |
close-and-reprice:the premature termination of a deal with compensation of the market value and simultaneous closing of a deal for the duration of the remaining maturity of the original deal at actual marktet data. Close and reprice full fill the same purpose as the variation margin, namely the adaption of the security service by the accrued profits or losses, and is set in, where margin calls are legal not possible e.g. at sell and buy backs. |
closed-end funds:Particularly in the Anglo-Saxon countries - but also in Germany in the form of closed real estate funds - occurring funds of an investment company whose funds are raised through the sale of a certain limited of shares. If the planned volume is reached the fund is closed and the issue of shares is stopped. |
closing auction:Takes place as the final act of the main trading phase in the market model of continuous trading. |
Closing Transaction:Transaction in which an existing position is liquidated on the futures market, by taking a contrary position. The owner of a long position thus acquires a short position and vice versa. Gain or loss is resulting from the difference between the purchase prices of the two positions. |
CM:abbr. Contribution margin |
CME:Chicago Mercantile ExchangeThe CME consists of three divisions:the actual CME, at which agricultural products are tradedthe IMM (International Money Market), at which interest-rate- and currency-instruments are traded, and IOM (Index and Option Market), at which index-instruments are traded.www.cme.com |
CMO:abbr. Central Money Markets Office international clearing institution established by the Bank of England |
CMS:v. constant maturity swap |
COC:abbr. Cost of Carry |
COCO:abbr. Contingent convertible |
collar:combination of a cap and a floorwhereas one is bought and the other is sold in order to reduce prmium cost. If the premium of both options are equal , it is called zero cost collar. |
collared FRN:floating rate note with a fixed floor and cap, From the view of the investor this position corresponds to a straight FRN plus a purchased floor and a sold cap (= FRN + collar) |
collateral:asset pledged as a guarantee for repayment of a granted loan |
collateralised bond obligation (CBO):a multi-tranche debt structure, similar to a collateralised mortgage obligationbut rather than mortgages, low-rated bonds serve as the collateral |
collateralised loan obligation (CLO):a structured bond backed by the loan repayments from a portfolio of pooled personal or commercial loans, excluding mortgages |
collateralised mortgage obligation:a type of asset-backed security, in this case backed by mortgage payments |
Combination Order:see combined Order |
combined order:An order that refers to several options series simultaneously. |
combined stategies:The act of combining two or more financial instruments or businesses. In the financial context, the term "combination" generally refers to an option trading strategy that involves the purchase and/or sale of both call and put options on the same asset. Option combinations are popular with experienced traders and investors because they can be tailored to provide specific risk-reward payoffs that suit the investor's individual risk tolerance and preferences. Examples of combined strategies are bear spread, bull spread, straddle and strangle. |
Commercial Code:After the amendment of company law in Austria on 1 January 2007, the private law is only based on a common entrepreneurial concept. This is found in § 1 Commercial Code, which states: "An entrepreneur is someone who runs a company." A company on the other hand is any stable organization with an independent economic activity, which may be not directed at profit. |
commercial paper:short-term unsecured promissory notes issued by a corporation. The maturity of CP is typically less than 270 days, the most common maturity range is 30 to 50 days or lesswidely used in the USA (USCP, US commercial paper, but also in the Euro-market (ECP, Euro commercial paper |
commercial real estate exposure (Basel II):defined as a loan or other financing for the purpose of funding construction or acquisition of commercial real estate, where the prospects of repayment and recovery depend primarily on the cash flows generated by that asset |
commitmend period:Period for which a business or person is bound on predetermined services, such as Payment or collection. |
committed core capital:The bound core capital by the legislator is the prescribed minimum capital for limiting market, credit and currency risks. |
Committee ot European Banking Supervisors (CEBS):see European Banking Authority (EBA) |
Commodity:Goods, raw materials. Anglo American term for most exchange-traded commodity products such as cereals, meat products and metals. |
Common Equity Tier 1 (CET 1):(Common Equity Tier 1 - CET 1) Describes the deposited capital of the bank and has no fixed period by definition. It is the most subordinate debt in the case of bankruptcy. |
Common share:Shares that grant all rights available to a shareholder. These are mainly economic rights and voting rights. |
Compliance Code:Sets down binding rules of conduct for banks, insurance companies and pension funds, which primarily refer to the prevention of insider trading. |
Composite:Grouping several portfolios with similar investment strategy or composition. Composites show management performance in the respective segments. |
Composite currency bond:Bond, which is similar in construction to a dual currency bond, however, refers to a basket of currencies |
compound:Calculation of the final value that results after a certain time, starting from a present-day capital amount by adding the compound interest. |
compound interest:interest which are charged for the accumulated interest |
concentration risk:any single exposure or group of exposures with the potential to produce losses large enough to threaten a bank's health |
condor:option strategy consisting of four options (similar to butterfly long condor: purchase of call and put out of the money (= long strangle) and sale of call und put with strikes more out of the money (= short strangle) short condor: sale of call and put out of the money (= short strangle) and purchase of call and put more out of the money (= long strangle) |
confidence interval:confidence interval is a notion from probability. For a given confidence level, it represents an interval such a specified random variable will fall within that interval with the given level of confidence. Confidence intervals are often used to define statistical risk measures. For example, the 95% one-month value at risk (VAR) for a portfolio is just the amount of money such that there is a 95% probability that the portfolio will lose less than that amount over the next month. |
consolidated supervision (Basel II):Under bank regulatory regimes, firms are obligated to calculate capital requirements for an entire financial group rather than for an individual firm or business unit (see also sub-consolidation). |
constant maturity swap:basis swap in which one variable interest rate is a short-term one e.g. 6-months LIBOR and the other is a long-term e.g. 5-years IRS-rate. Depending on the shape of the interest rate curve the long-term interest rate is quoted at premium (if yield curve is inverse) or at a discount (if yield curve is normal). |
consumer protection act:Law for the protection of consumers. This Act shall usually be applicable if a lay person acquires something from an expert. E.g. A customer buys securities from a financial services provider. |
contango:Contango is a market condition where forward rates exceed spot rates. The term is common in commodity markets and corresponds with the term premium in FX-markets. In the energy markets, the prevailing condition may reflect supply and demand. For example, if the crude oil market is contango, it may indicate a glut of immediately available supply. Backwardation is the opposite. |
Contingent Convertible Bonds (CoCo):A security similar to a traditional convertible bond in respect of there is a strike price (the cost of the stock when the bond converts into stock). What differs is the price, even higher than the strike price, which the company's stock price must reach before an investor has the right to make that conversion (known as the "upside contingency"). Issuing contingent bonds is more advantageous to companies than issuing regular convertibles. Until an investor exercises the option, the company does not need to count shares in its calculation of diluted earnings. |
contingent forward transaction:see option transaction |
continuous market:Continuous fulfillment of all orders that match price and quantity. i.e. during the entire trading time orders can be granted and transactions can be completed. |
contract:Term for the termination unit prescribed in the forward markets for options and futures transactions. |
Contract for Difference (CFD):An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities. This is generally an easier method of settlement because losses and gains are paid in cash. CFDs provide investors with the all the benefits and risks of owning a security without actually owning it. Trading with CFDs as an alternative to actual trading with the underlying basic values become increasingly popular. |
contract size:The minimum size prescribed for an option contract. The contract size from stocks traded on the Vienna Stock Exchange stock options is 50 pieces of the underlying. For options on the ATX 100 index points are the minimum size. |
contract specifications:The contract specifications define the contractual arrangements of futures and options (in terms of underlying, maturity, strike price, contract size, delivery, etc.). |
contract value:The contract value of a forward contract describes the actual underlying values. The contract value is calculated as follows: Number of contracts multiplied by the contract size and the price of the underlying. |
contract volume:Number of contracts traded. |
Contribution margin:A positive contribution covers all direct costs (centralized and decentralized). |
conversion:Conversion of a debt security into a new one with modified conditions. |
conversion factor:Factor, which will be announced for each deliverable bond and the conversion of the bond's price on the ideal type of the underlying and vice versa is used. |
conversion parity:This refers to the corrected conversion price using the current bond price. |
conversion premium:Upon exercise of the conversion the executing participant is obliged to pay a premium. (conversion premium) |
conversion price:The price one has to pay for a stock when a convertible bond is purchased, which is subsequently converted into shares. |
conversion right:The right for the investor to exchange a convertible bond into shares. |
Convertible bond:A bond that can be converted into a predetermined amount of the company's equity , usually at the discretion of the bondholder. Convertible bonds correspond to bonds with an embedded call option on the shares. For this additional option right, the buyer of the bond is willing to accept a lower coupon. |
convexity:convexity expresses the non-linearity of a financial instrument (e.g. bond, future, option) bonds: c. is a measure of the change of the modified duration if interest rate changes options: c. is called gamma which is a measure of the change of delta if the price of the underlying changes |
core market participant (Basel II):a counterparty recognised by supervisors as not requiring 'haircuts' in calculation regulatory capital for repo-style transactions.Counterparties that qualify for this treatment include sovereigns, central banks and public-sector entities, regulated pension funds and recognised clearing organisations |
corporate bond:A bond that is issued by an industrial company. In case of corporate bonds, the issuing company is liable with its assets. |
Corporate Governance:Represents responsible on long-term value creation focused management and control |
correlation:Correlation is a measure of the degree to which changes in two variables are related to each other. It is usually expressed as a coefficient between plus one (perfectly correlated) and minus one (perfectly negatively correlated). |
correlation of credit quality:the correlation of the credit ratings or rating changes of entities in a portfolio |
Cost Average Effect:The regular deposit of constant amounts in a mutual fund has the advantage that the investor buys the shares at different issue prices at a lower average price than the regular purchase of a constant number of shares in the same period. In equal monthly payments into a fund, the investor receives more shares with falling share value and fewer shares with an increasing share value. The positive effect of dollar-cost averaging is particulary profitable with fluctuating rates, as they usually occur in equities and equity funds. |
Cost Center:(CC) All agencies or departments of the Bank who are not involved in the administration of the daily business, not used in direct support of a profit center in the daily business and can not be directly attributed to a single performance. These include, for example, Auditing, Accounting, Controlling, Human Resources department or board of directors. |
Cost of Carry (COC):Costs incurred by the possession of an asset item. |
Cost/Income Ratio (CIR):ratio which establishes costs in per cent of gross earnings |
counterparty:in general, a counterparty is any of the participants in a financial contract |
counterparty credit risk:The risk of financial loss arising out of holding a particular contract as a result of one or more parties to the relevant contract failing to fulfil its financial obligations under the contract.Counterparty credit risk can be managed through the use of an ISDA Master Agreement, which allows netting of all exposures between two counterparties (see also settlement risk) |
counterparty limit:The counterparty limit is a credit risk limit that restricts the credit risk for each counterparty. |
country and region funds:Equity funds that invest only in a particular country or in specially combined groups of countries (eg. Southern Europe or Latin America). They have a different risk profile than funds that diversify their investments across many investment countries. |
country risk:Risk of domestic creditor that his claim to a foreign borrower, despite willingness to pay is not paid on time and for the full amount because government intervention prevent the trade and payment system. (eg foreign exchange controls or remittance locks in the country of the buyer of the goods). |
country transfer risk:see also transfer risk |
coupon:security which certifies the claim of the bearer to receive a payment of interest or dividendcoupon is also used as a term for a interest payment resp. for the interest rate of a financial instrument. |
coupon date:Date on which the payment of interest (the coupon) of an interest-bearing instrument has to be paid. |
coupon sheet:The coupon sheet consists of individual parts with which certain rights are asserted but which depend on the nature of the security. |
coupon swap:interest rate swap in which a fixed interest rate (coupon) is exchanged against a variable interest rate (e.g. EURIBOR, LIBOR) opposite: basis swap |
covariance:Statistical measure of the relationship or the synchronization of two sizes. |
Covenants:The costs associated with a bond issue voluntary obligations of the issuer. |
covered:(covered) A writer is covered if he either owns the shares for the written call or the money for the written put. Contrary uncovered (naked) |
Covered bond:This form of bonds issued by credit institutions includes a further addition to the liability of the issuer. e.g. a state guarantee fund or by a cover pool. |
Covered Call Writing:combination of being long the underlying and selling the call. |
CP:v. commercial paper |
CRD:abbr. Capital Requirements Directive |
credit conversion factor (Basel II):percentages set by regulators to convert off-balance sheet items to credit-equivalent assets |
credit default:Under Basel II, credit default applies in respect of a specific debtor, if one or both of the following events have occurred: 1) the Bank believes that the debtor is unable to meet his full credit obligations with high probability 2) a substancial liability of the debtor is more than 90 days overdue. |
credit default swap:A bilateral financial contract in which one counterparty (the protection buyer or buyer) pays a periodic fee in return for a contingent payment by the other counterparty (the protection seller or seller) upon the occurrence of a credit event. |
credit derivative:A bilateral financial contract that isolates credit risk from an underlying instrument and transfers that credit risk from one party to the contract (the protection buyer) to the other (the protection seller).There are two main categories: credit default swaps and credit spread options. |
Credit Enhancement:A contractual agreement under which the bank retains or takes a securitization exposure and (thereby) from an economic point of view provides other parties involved in the transaction with an additional protection against loss up to a certain amount. |
credit event:Any one of a specified set of events (for example bankruptcy, moratorium, restructuring) that, if occurring with respect to an obligation, will trigger contingent payments. |
credit exposure:A total value of exposure that a bank is exposed to at the time of default |
credit insurance:an insurance policy that compensates in the event that a party defaults |
credit line:The line of credit or credit scale is the financial framework, to which a bank promised the borrower to give him a loan. A credit line is a so-called revolving credit, he can be used again after reclaiming in the meantime until maturity or until termination. |
credit migration:the extent to which the credit quality of an obligor or counterparty improves or deteriorates |
credit rating:An assessment of the credit worthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, state or provincial authority, or sovereign government. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor’s or Moody’s. |
credit rating categories:The counterparty (borrower) are classified according to their probability of default in homogeneous groups of customers (= with similar damage progression). |
credit risk:the risk of a bank or other entity to lose money due to the default of its counterparty |
credit risk assessment:the process of determining the extent of credit risk inherent in a financial instrument or portfolio |
credit risk control (Basel II):Banks must have independent credit control units that are responsible for the design or selection, implementation and performance of their internal rating systems. The unit(s) must be functionally independent from the personnel and management functions responsible for originating exposures. |
credit scoring:a system used by lenders to calculate the statistical probability that a loan they grant will be repaid |
credit spread:The difference in yield between two instruments of similar maturity and duration. The credit spread is often quoted as a spread to a benchmark floating-rate index such as Libor and used as a measure of relative creditworthiness. |
Credit Value at Risk (CreditVaR):The VaR of a loan portfolio is called credit value at risk. |
credit-linked note:a security with redemption and/or coupon payments linked to the occurrence of a credit event with respect to a specified reference entity |
creditor:An entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real." Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan. |
Cross Currency Swap:swap in which the notional amount is exchanged at the beginning and at the end of the term as well as interim interest payments, the main difference to FX-swap is the interim payment of interest. Types:par value swap: initial- and final-transaction are effected at the same rate (usually the spot price at the conclusion of the swap)forward outright swap: the initial transaction is done at the spot rate, the final transaction is done at the forward rate |
Cross-default clause:a clause in a loan or other debt contract that specifies that an entity is in default if it fails to pay another obligation |
CRR:abbr. Capital Requirements Regulation |
CSD:abbr. Central Securities Depository |
CTD:abbr Cheapest-to-Deliver |
Cubic Spline:see interpolation |
cumulative default rate:the percentage of borrowers who default during the lives of their loans in a given portfolio |
Cumulative Return:The aggregate amount that an investment has gained or lost over time, independent of the period of time involved. Presented as a percentage, the cumulative return is the raw mathematical return of the following calculation: (Current price of security - orignial price of security)/orignial price of security |
currency mismatch (Basel II):occurs when, in a hedge, the credit protection is denominated in a currency different from the exposure |
currency risk:Risk of a reduction in bank results due to exchange rate changes. |
current asset ratio:Current assets / short-term liabilities x 100i |
current P/E ratio:A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as: Market Value per Share / Earnings per Share (EPS); EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters. |
current yield:Income (interest or dividends) divided by the current price of the security. This measure looks at the current price of a bond instead of its face value and represents the return an investor would expect. |
custodian bank:A custodian bank manages the fund's assets in trust, holds the equity securities and deals with the settlement of the fund company and the transactions of the fund manager on instruction. |
custody account:The financial institution books all securities purchases and sales to this account and the related account statement reflects the value of all the client's investments. |
custody fee:The fee received by a bank or a investment company for custody and administration of fund shares. |
customer transactions:Customer transactions are conducted between the Bank and the Customer at the published rate in the quotation list. |
D |
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Daily Settlement:Daily adaptation of the deposited margin (safety requirements) on the basis of market risk. |
DAVE:abbr. Delta Added Value on Equity |
DAX:A stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The prices used to calculate the DAX Index come through Xetra, an electronic trading system. DAX member companies represent roughly 75% of the aggregate market cap that trades on the Frankfurt Exchange. |
Day-Trader:Market participants who try to identify and exploit daily trends. Often, the positions are held only for minutes or hours, or are at least closed out on the same day by offsetting transactions. |
daylight limit:see intraday limit |
debenture:A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture. |
debt capital:In the balance sheet of a company's reported debt of a company with varying maturities. Extensive borrowing, increasing the risk of liquidity problems and repayment difficulties. |
debt discount:(Disagio) The debt discount gives the difference between the issue rate and the higher nominal value or repayment course of a loan (issue discount). An issue of shares with discount is not allowed in Germany, with fixed-interest securities it is usual. Opposite: Premium |
debt securities:Debt securities include the right to regain a certain amount after a certain time from the issuer and earn interest during the term. |
decentralised unit costs:They arise in the profit centers (home and corporate customer business, branch offices) and are directly attributable to customer business. |
default correlation:According to the Basel Committee, a default is considered to have occurred when either or both of the two following events have taken place:1) The bank considers that the obligor is unlikely to pay its credit obligation in full2) The obligor is past due more than 90 days |
deliverable bonds:Government bonds, which can be delivered in fulfillment of the bond futures. |
delivery:Fulfilling the obligations in the allocation of a particular call option writer. For certain options (index options) delivery and payment are replaced by cash settlement. |
delivery day:Day on which, in fulfillment of a futures contract, the actual delivery of the underlying takes place. |
delivery month:That month in which the last day of trading for a particular future is situated and where it finally comes to the settlement of the future transaction . |
delta:risk factor of options expresses, how much the price of an option changes, if der value of the underlying increases by one unit e.g.: call EURUSD with delta of 0.35 (resp. 35%) meaning: if EURUSD increases by 1 USD ct the price of the option increases by 0.35 USD ct the value of delta is always between 0 and 1 (resp. -1) |
Delta Added Value on Equity:The change in operating excess profit. Therefore it is the value created in a given period. |
demand deposits:Balances for which the maturity or notice period is not fixed. |
deposit facility:Monetary policy instruments of the ESCB, which offers banks the possibility of assessing central bank money overnight at the national central bank at a predetermined interest rate. The interest rate on this constant facility provides the lower limit for the overnight rate, and is therefore one of the key interest rates of the ESCB. As part of the money market operations by the federal bank, this function was taken over from the discount rate earlier. |
deposit-taking business:Deposit-taking businesses are all deposits of the bank. The customer leaves his money to the bank. In return the bank will pay him interest. These transactions are recorded on the liabilities side of the bank's balance sheet. |
Depositary Receipt:abbr. American Depository Receipt (ADR) |
deposits at notice:Deposits at notice funds have a fixed period of notice. A disposition of the funds is therefore possible only after cancellation and expiry of the notice period. In case of deposits at notice the interest rate is variable, unless stipulated otherwise. Interest will be credited after termination or maturity. |
derivative instruments:A contract where the price is depends on or is derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage. |
derivatives:an instrument which is derived from underlying instruments,basically there are two types: forward contracts and option contracts |
dilution risk (Basel II):The term is used under Basel II's discussion of purchased receivables. Dilution risk refers to the possibility that the receivable amount is reduced through cash or non-cash credits to the obligor |
direct costs:Direct costs represent decentralized and centralized unit costs. |
direct placement:In a self-emission the issuing entity is independent endeavor to place the securities in the market. |
Directive:Legislation (eg the European Community), which is addressed to the Member States and the obligation to achieve certain goals. Example: EU directives on capital adequacy |
dirty price:price of a bond which contains accrued interests,The dirty price is that price which has to be paid if a bond is purchased.opposite: clean price |
disagio:Amount by which an instrument sells under par. |
Discount:Calculation of the present value of a future amount is done in reverse direction as the discounting. |
discount factor:by means of the discountfactor a future value can be converted into a present value,This can be done, by multiply the future value by the discountfactor. The discountfactor can be derived from the zero-coupon rates. |
discount instrument:instruments issued at a discount and redeemed at the nominal valueThe yield results from the difference between purchase price and redemption. Discont instruments are t-bills, bill of exchange, commercial papersper contra: couponinstruments are issued at the nominal value and paid off at nominal value plus interest |
discount rate:A disocunt rate is a rate where the interest payments are calculated - in contrast to normal interest rates - on the basis of the repayment value. The term discount rate is also often used in conjunction with the rate at which commercial banks may sell bills of exchange to the central bank |
disposable equity capital:Equity, which is not bound by fixed assets, or the risks in the banking book and trading book. |
distributing securities:The payment of dividends, bonuses, liquidation proceeds, etc. to the shareholders. For distributing securities, the income is collected until the date of payment and then (usually once a year) distributed. On the day of distribution the value of the underlying security decreases by the distribution amount. |
distribution:Investment income (long and short-term nature), interest or dividends paid to bond and equity holders. The distribution may be paid in cash (cash dividend) or in shares (stock dividend). |
diversification:a simple risk management technique that mixes a wide variety of investments within a portfolio, thus minimising the impact of any one security on overall portfolio performance |
dividend:Periodic distribution of a company to its shareholders. The indication of the amount is generally done as a dividend per share. Dividends are income components, which are not reinvested by the company. |
dividend markdown:see Ex-dividend |
dividend yield:A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows: Annual dividends per share/Price per share. This ratio can be calculated either on the basis of the currently paid dividend or on the basis of expected future dividends. |
DJ:abbr. Dow Jones Index |
Dollar repo:a repo at which the purchaser is allowed to return another paper at maturity (but with agreed qualitiy) |
domestic bond:a bond which is issued by a domestic issuer in his home country under domestic law in domestic currency |
domestic loan:A bond that is issued by a domestic issuer in the home country under domestic law in domestic currency. |
Doubble Dipping:Repeated use of a security as collateral in a repo. This practice is not allowed and is only possible if the seller fails to deliver the securities to the buyer. |
Dow Jones Index:The Dow Jones Industrial Average (Index) contains the 30 largest industrial companies of the New York Stock Exchange and was first published in 1897. It was designed as a price index and is computed continuously (real-time). |
downgrade:the process of an issuer's debt securities' ratings being lowered by a rating agency (see also rating, upgrade) |
Downturn Probability of Default (PD):(Probability of failure during economic downturn) is the highest observable PD over a predetermined period of time (either on the class level or portfolio level). |
draft:cp. bill of exchange |
Dual Currency Bond:This bond has the particularity that the issuer is a foreigner, but the bond is acquired with the domestic currency (eg EUR), the interest is paid in EUR, but repayment has to be made in the currency of the issuer. |
duration:also called: simple duration, Macauley durationpoint in time, when the loss of a bond, due to an increase of interest rates, is offset by the higher return of the re-investment of coupon payments and vice versathe simple duration is distinct from the modified duration |
dutch-style tender:method of allocation at interest tenders, where all bids are allocated at the same interest rate This interest rate is called marginal interest rate (=lowest accepted bid) opposite: american-style tender |
DV01:abbr. Dollar value of a 01 same meaning as BVBP |
E |
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EAD:see also exposure at default |
early amortisation:Early repayment clauses include the possibility of repayment of the securities issued to investors before the originally stated maturity, when a certain event occurs. |
earning:The income of a security includes interest and dividend payments (dividends) and other distributions and capital gains resulting from price increases (course). |
Earning before interest and taxes (EBIT):Earnings before interest and taxes (EBIT = earnings before interest and taxes). Bank earnings before assessment of risk business in the field of securities and loans (= before individual value adjustment). |
earning per share:The annual profit of a company divided by the number of outstanding common shares. |
earning yield:Net earnings per share over the previous 12 months as a percentage of the share price. Inverse of the price-earnings ratio. |
earnings risk:Income risk is the possibility of losing the income from the invested capital. |
EBIT:abbr. Earnings Before Interest and Taxes. This is the operating profit. |
ECAI (Basel II):see also external credit assessment institution |
ECB:abbr. for European Central Bank |
economic capital:The amount of capital allocated and held internally by an organisation as a result of its own risk assessment methodology |
economic cycle:a cycle of economic activity around a trend growth rate typically characterised by a trough, upswing, peak and downswing |
economical cost of equity capital:Costs which incurre through the holding of equity beyond regulativ capital which is economically necessary to cover unexpected losses. The economic capital may therefore differ from the legally required equity. |
ECP:v. Euro commercial paper |
ED:abbr. Ex dividend |
EDF:abbr. Expected Default Frequeny |
EDSP:abbr. Exchange Delivery Settlement Price, the price at which futures contracts are settled upon delivery. The EDSP is determined by the exchange, and is often an average of traded prices over a set period or linked to certain fixing (e.g. LIBOR) |
effective annual rate:The annual interest rate of an amount of capital with time consideration of all cost and revenue factors that lead to payments. |
Effective Duration:The Effective Duration is a measure of sensitivity, which indicates how much the total return of a bond changes if the paid market interest rate changes. (= spot rates). |
effective maturity (M) (Basel II):under the Basel II agreement, banks are required to use standard values for M or to measure M using a specified definition |
effective rate:The effective interest rate can not be obtained from the bond conditions. It depends on the nominal interest rate, the issue price of the bond, the redemption price of the bond, the majurity and the incidental costs. |
effective yield:revenue gained by an investment over several periods of interest payments in consideration of compound interest |
effects:Term for the tradable securities on the capital market. |
efficient portfolio:Also optimal portfolio. A portfolio, which corresponds to the risk attitude of the investor and ensures the highest income starting from a given risk level or includes the lowest risk with an expected yield. |
efficienty curve:Known range from portfolio theory of those portfolios in which risk and return are not dominated by other portfolios. |
Eligible Bills:Cashable bills of exchange at the Bank of England. An Eligible Bill is a discount instrument and is trading with a discount. |
eligible ECAI (external credit assessment institution):In order to be handled as a recognized credit rating agency under Basel II, a CRA must meet six criteria: objectivity, independence, International access / Transparency, publication, resources, credibility. |
eligible equity capital:The Banking Act requires banks to back up at least 8% of their basis of assessment with own funds. (ie, 0% of the volume of loans to federals, states and municipalities, 20% for interbank loans, 50% for housing loans 100% for other assets) Own funds include in particular registered capital, disclosed reserves, liability reserves, valuation reserves and profit after dividends and taxes (net income). Meaning of the provision is to build up sufficient risk capital for risks from the lending business, with which a corresponding depositor and shareholder protection should be achieved. |
emission:release of securities at the primary market with the objective of raising funds in terms of equity capital (shares) or bonded capital (bonds, CD, CP, etc.) |
emphasis:The value of a security as measured by the portfolio. The weight of a particular asset class, an industry or sector. |
employee share:To an employee of a company's issued share, often at a discounted price. The employee usually has to wait for a lock-up period prior to the sale |
end/end:a transaction with a term starting and ending at the last days of the month (mainly deposit, forward contract, FX-swap)example: A two-months deposit, which starts on the 31. March and would end on the 31. May. If the 31. May would be a weekend or a holiday, the muturity date would be the last bank day in the month May, not as usual the next working day, i.e. the 29. or 30. |
English interest rate method:see interest method actual/365 |
EONIA:abbr. for Euro Overnight Index Average,is the benchmark for overnight EUR and is calculated as a weighted average of all unsecured overnight-transactions of the banks which participate in the fixing,www.euribor.org |
EONIA swap:EUR interest rate swap where the floating rate is linked to EONIA see also: OIS |
epsilon:risk factor of options, also called rho expresses how much the price of an option changes if the level of interest rates changes |
equity capital:Regulatory term. Own funds include, in particular registered capital, disclosed reserves, liability reserves, valuation reserves as well as profit after dividends and taxes (net income). It serves to cover the risks from the lending business with which a corresponding depositor and shareholder protection should be achieved. |
equity cost:calculative return, which is assumed that the equity of a bank should bear equity cost is the result of the aimed return on equity (ROE) target, set by the board, minus the risk free interest rate (e.g. government bonds) |
equity exposure (Basel II):Under the Basel II agreement, equity exposures are defined on the basis of the economic substance of the instrument. They include both direct and indirect ownership interests and must meet a set of requirements to be classified as such |
equity fund:A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed. The owner of shares of such a fund has the possibility to be involved indirectly in the substance and the yields of public limited companies. |
equity paper:A Security which represents a share of the company itself usually, for example for shares. In the case of funds you are not involved in the company itself, but in the special assets of the capital investment company. |
equity securities:Securities which normally represent a share of the company. Shares are equity securities. In the case of Investment fund certificates, one is not involved in the company itself, but in the special assets of the capital investment company. |
equity security:Securities, which include membership rights in a company or ownership interests in a pool of assets. In investment companies: A Note representing joint ownership of the fund assets (investment certificate). |
ERA:v. SAFE |
ESCB:abbr. European System of Central Banks |
ESMA (European Securities and Markets Authority):abbr. BWA(german) means federal securities and market authority. |
ETF:abbr. Exchange Traded Funds |
EUR:abbr. ISO currency code for Euro |
EUREX:Futures market which is arisen from the merger of the German DTB and the Swiss SOFFEX. www.eurexchange.com |
EURIBOR:EURo Interbank Offered Rate, average rate which is formed by 57 reference banks from Euro-countries and non Euro-countries.It has replaced the national reference rates (e.g. Fibor) on 1.1.99. In many market segments the EURIBOR has replaced the LIBOR as an important reference rate. The calculation is executed by the information service company Bridge. (www.euribor.org) |
Euro:(EUR) Official name of the common European currency. One Euro is divided into 100 cents. In 1999 the exchange rates of the currencies of the participating countries were irrevocably fixed to the euro and the listing of the Securities switched to euro (1 euro = 13.7603 ATS). |
euro bond:A bond issued in a currency other than the currency of the country or market in which it is issued. |
Euro commercial paper:CP issued in the Euro market |
euro dollar:USD which are traded in the euro-money market, i.e. outside of the United States e.g. in Tokyo in general, a currency is called euro-currency if it is traded outside the country where it is the legal tender |
Euro Interbank Offered Rate:previously |
Euro interest method:see actual/360 |
Euro Overnight Index-Average:(EONIA) The weighted average of overnight Euro Interbank Offer Rates for inter-bank loans. EONIA is the standard interest rate for Euro currency deposits. The European Central Bank is responsible for calculating the EONIA every day. www.euribor.org |
Euro-bond:Bond which is issued outside the home country of the issuer in the international capital market, normally not in the home currency of the issuer. It is common practise that the legal basis is English or US law. |
Euro-LIBOR:the LIBOR for EUR calculated by the BBA,as the most important benchmark for the EUR replaced by EURIBOR |
euro-market:market for credits and deposits in euro-currenciesa currency becomes an euro-currency when it is dealt outside the country where it is legal tender |
Euro-USD:USD which are traded in the euro money market, ie outside of the home market. For example, USD traded in Tokyo. |
Euronext:see Euronext |
European Banking Authority (EBA):The EBA acts as network of the EU and national authorities and is responsible for safeguarding public values such as the stability of the financial system, the transparency of markets and financial products and the protection of depositors and investors and is equipped with wide-ranging competences. |
European Central Bank (ECB):The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union. The European Central Bank has been responsible for the monetary policy of the European Union since January 1, 1999, when the euro currency was adopted by the EU members. The responsibilities of the ECB are to formulate monetary policy, conduct foreign exchange, hold currency reserves and authorize the issuance of bank notes, among many other things. |
European economic and monetary union:The successor to the European Monetary System (EMS), the combination of European Union member states into a cohesive economic system, most notably represented with the adoption of the euro as the national currency of participating members. |
european option:An option in which the holder is entitled to exercise its option right only and exclusively on the expiration day. |
european style option:see european option |
European System of Central Banks (ESCB):the ESCB is composed of the ECB and of the national central banks. Its primary objective is to maintain price stability. Its basic tasks are to define and implement the monetary policy of the European currency area, to hold and manage the official reserves of the participating Member States and conduct foreign exchange operation, to promote the smooth operation od payment systems in the EUR-area |
Eurosystem:Consists of the European Central Bank (ECB) and the national central banks of the current 13 EU Member States which have adopted the euro in the third stage of the Economic and Monetary Union. The national central banks of the Member States which have not yet joined the euro area are amongst the European System of Central Banks (ESCB), but not to the euro system. The euro system perceives the sovereign rights in the field of monetary policy for the member states of the monetary union. |
evaluation:The valuation of the fund's assets is important, since this determines the value of each share. Therefore, the valuation principles are given in any prospectus, according to the which the value of each share, or any portion of the fund's assets are determined. Basically a domestic investment fund may only acquire values for which there are regularly and objectively measurable values (prices) and which are traded on certain stock exchanges or organized markets (according to the fund rules). The acquisition of unlisted securities is only permitted if this is provided in the fund regulations and only to the specified amount. |
ex dividend:The current rate is reduced by the amount of the dividend. On payday the dividend, the stock is equipped with the share price addendum "ex-dividend". |
ex dividend day:The day on which shares are traded ex. i.e. without a specific right, for example, to receive dividends, subscription right or bonus shares (capital adjustment) |
ex subscribtion right:An addition to the price which indicates that on this day the value of subscription rights was deducted from the price of the stock (at the ex-date). |
excercise:Declaration of an option holder that he buys (call) or sells (put) the underlying accordance with the agreed conditions. |
excess spread (Basel II):defined as gross finance charge collections and other income received by a trust or special-purpose entity, minus certificate interest, servicing fees, charge-offs, and other senior trust or special-purpose entity expenses |
exchange:A marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange - such as a stock exchange - is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public. |
Exchange Delivery Settlement Price:Settlement price of the futures contract at which will be settled on the last trading day upon delivery. It shall be determined by the Exchange. It is often calculated as average of the prices of a particular period or is it tied to a specific fixing (eg LIBOR). |
exchange price:The determined price by supply and demand of the traded value. (securities, currency, etc.) It is operated by an exchange corporation. |
Exchange Rate Agreement:v. SAFE |
Exchange Traded Fund:An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. |
execution confirmation:Is the immediate information of the trading participant on an order specifying the execution time, the price and the executed volume. |
execution restrictions:Execution limits are designed for the specifications of market orders and are configured as either Fill Or Kill or Immediate Or Cancel. |
executive board:By the supervisory board of a public limited company ordered Management Board of a PLC. |
exercise peroid:Period during which exercise can be made in the clearing system. |
exotic option:Those option variants which are not attributable to the traditional options (call or put), because they have additional properties. Contrary plain vanilla options |
expected loss:The estimate of the average expected loss on a portfolio. In case of a finance company value adjustments should cover the expected loss. |
Expected Positive Exposure (EPE):It iIt is the expected positive exposure in respect of a counterparty.s the expected positive exposure amount to a counterparty |
expiration:Expiration occurs when an option can not be exercised, ie the maturity is over. |
expiration day:The date on which the option will expire if not exercised early. Always Saturday following the third Friday of the month. |
expiration month:Month in which the option on the day following the last trading day, expires if it has not been exercised before. See maturity |
Exposure:The amount that is lost in the case of the lowest possible realization proceeds from the liquidation or bankruptcy of the borrower. See also probability of default, loss given default, liability in case of failure. |
Exposure at Default (EAD):The expected amount of the claims for a particular bond / debt securities at the time of the failure. |
exposure limits:a common risk management tool on both the trading desk and in loan portfoliosExposure limits are predictive, and therefore indicate risk before its financial consequences occur (see also exposure). |
Exposure-at-default (EAD) (Basel II):the expected exposure of a credit institution for a given debt instrument upon the default of the counterparty |
exposures to banks:Asset class of the Basel II framework. Covers receivables from banks and investment firms that are subject to Basel II comparable regulatory requirements. The asset class further includes other public bodies, which are treated as receivables to banks under the standardized approach and multilateral development banks that reach no 0% risk-weight in the standard approach. |
external audit:(External Audit) The goal of external financial audit is to get an independent opinion about whether the accounts of a bank were prepared in accordance with the relevant accounting standard. |
external credit assessment institution (ECAI) (Basel II):a credit rating agency.to qualify for treatment as an ECAI, a firm must satisfy six criteria: objectivity, independence, international access/transparency, disclosure, resources, credibility |
external data:These data are collected according to Basel II outside of the institution and used to model a specific risk. |
Extrinsic Value:The time value is the option price minus the intrinsic value of the option. It is influenced by the volatility of the underlying asset, the remaining term of the option, the money market interest rates and the option type. If the option is at-the-money the time value is the highest. |
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face value:cp. nominal value |
Fair Value:Value of a future or option which is calculated based on a theoretical pricing model (eg Black & amp; Scholes model) taking into account price determining factors. |
FDIC:abbr. Federal Deposit Insurance Corporation |
FED:see Federal Reserve System |
fed funds rate:The interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed funds rate, as it is called, often points the direction of U.S. interest rates. The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate. |
fed funds swap:USD interest rate swap, where the floating rate is linked to the Federal Funds effective rate see also: OIS |
federal bonds:Federal bonds are issued by the state. They serve the state to borrow capital in the long term. |
Federal Deposit Insurance Corporation (FDIC):an independent agency that promotes public confidence in the US financial system by insuring deposits in US banks and thrift institutions |
Federal Open Market Committee (FOMC):the basic task of the FOMC is to define the open market policy of the Federal Reserve System (FED), that means it sets the key interest rate for the USD. It is composed of seven members of the Board of Governors und five members of Federal Reserve Banks. |
Federal Reserve System (FED):the central bank system of the United States The FED consits of 12 Federal Reserve Banks. The basic tasks are: price stability, high rate of employment, longterm equilibrium in the balance of payments and reasonable economic growth The most important instrument in monetary policy is the open market policy which is defined by the Federal Open Market Committee (FOMC) |
Federal Securities and Markets Authority:(Federal Securities and Markets Authority). Public institution, which was established under the Securities Supervision Act of 1996 for the supervision of the securities market (stock exchange) and the financial services business. (since 1998). The tasks of the Federal Securities and Markets Authority include the elimination of illegal business practices, monitoring of disclosure requirements, the licensing of investment services companies and the exchange of international information and experience. |
FIBOR:abbr. of Frankfurt Interbank Offered Rate,replaced by the EURIBOR 1.1.99 |
fill-or-kill:(FOK) This is an order form in which it is executed immediately and completely or not at all. If an execution is not possible, the fill-or-kill order is immediately deleted and not included in the order book. |
final settlement:Either the settlement in cash or units upon the exercise of options or the expiry. |
financial analysis:Investigation of companies in respect of their economic situation, future success and financial solvency (liquidity). The financial analysis provides the basis for investment decisions. |
financial futures:see futures |
Financial instrument (Basel II):any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity |
Financial Market Supervision Act:The FMA Act came into force on 01.04.2002 and regulates the supervision of the Austrian financial market by the Financial Market Authority (FMA). |
Financial Markets Authority:The FMA monitors the adequacy operated by the Vienna stock markets in Austria as an independent authority on the basis of the Financial Market Supervision Act (FMA Act). Their responsibilities among others are set out in the Stock Exchange Act and the Securities Supervision Act and have to focus on the national economic interest in a functioning capital market and in particular on the interests of investors. The tasks of the FMA are divided into banking supervision, insurance supervision, securities supervision and pension institutions supervision. |
financial plan:Plan that contains the current financial situation and investment objectives. |
Financial Services Authority:Financial Services Authority in the United Kingdom of Great Britain and Northern Ireland. www.fsa.gov.uk |
Financial Stability Institute:The Financial Stability Institute (FSI), is one of the bodies hosted by the Bank of International Settlements (BIS) at its headquarters in Basel. Established in 1999 by the BIS and the Basel Committee on Banking Supervision, its primary role is to improve the co-ordination between national Bank Regulators through holding seminars and acting as a clearing house for information on regulatory practice. |
Financial-Futures:A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets. |
fixed interest rate:The holder receives predetermined interest at regular intervals by the issuer. (usually annual). |
fixed rate bond:also straight bondbond with a fixed couponopposite: floating rate note |
fixed swap rate:Exchange of fixed against variable interest rates. |
fixed term deposit:A deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice. By having the money tied up you'll generally get a higher rate with a term deposit compared with a demand deposit. |
fixed-interest bond:Bond with a fixed coupon. Contrary floating rate note |
fixed-interest securities:A debt instrument such as a bond, debenture or gilt-edged bond that investors use to loan money to a company in exchange for interest payments. A fixed-interest security pays a specified rate of interest that does not change over the life of the instrument. The face value is returned when the security matures. |
fixed-interest-rate-payer-swap:couponswap in which a fixed interest rate (coupon) is paid, and a variable interest rate (e.g. EURIBOR, LIBOR) is received |
fixed-interest-rate-receiver-swap:coupon swap in which a fixed interest rate (coupon) is received, and a variable interest rate (e.g. EURIBOR, LIBOR) is paid. |
fixing:price- resp.rate-fixing, e.g. LIBOR, EURIBOR, goldfixing, foreign exchange fixing, etc. |
flat yield curve:yield curve with the same interest rate level for all periods |
flex repo:a US-style repo in which the purchaser redeems the cash in fixed installments. |
Floater:abbr. Floating Rate Note |
Floating Rate Note:A bond with a variable coupon that is linked to an index (eg, 6-month EURIBOR). |
floating rate repo:a repo with a variable interest rate (e.g. EONIA) |
floor:A floor is an interest rate floor for a variable interest rate, and consists of a series of put options on a fixed reference interest rate (e.g. 6-months EURIBOR) with the same strike. A single option of this series is called floorlet. The purchaser of the cap receives a compensation from the seller, if the reference interest rate is fixed below the strike at the expiry date. |
floor exchange:Classic stock exchange type in which the trade takes place physically in a trading room. |
floorlet:a single option out of a floorv. floor |
Flow Management:Central optimization of treasury transactions |
FOK:abbr. fill-or-kill |
FOMC:abbr. Federal Open Market Committee |
Footsie:another designation for FT-SE 100 |
foreign bond:bond issued by a foreign entity in one singular national market denominated in the currency of this countryopposite: domestic bond and Euro-bond |
foreign currency bond:A bond which is listed in a foreign currency. |
foreign currency loan:An outstandning loan that has been granted in a foreign currency and has to be paid back in that currency. Using foreign currency loans may decrease the interest expenses but involves foreign exchange risk. |
Foreign exchange (FX, Forex):The global foreign exchange market is by far the largest financial market. The exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX." |
Forex (FX):abbr. Foreign Exchange |
formation:Characteristic price curves that should enable to predict future price movements in the context of technical analysis. Among the most famous formations are flags, pennants and wedges, the head and shoulders pattern and the M & amp; W formation. |
forward derivative instruments:Generic term for instruments whose price is is derived from the price of other securities or financial products (the so-called underlying assets or underlyings). Examples of derivatives: futures, options and swaps. |
Forward Exchange Agreement:v. SAFE |
forward foreign exchange transaction:A forward contract is a fixed agreement between two parties to conduct a foreign exchange transaction at a fixed rate with a later date than the spot transaction day. |
forward outright swap:v. Cross Currency Swap |
forward rate:Interest rate fixed today on a loan to be made at some future date |
Forward Rate Agreement:v. FRA |
Forward Spread Agreement:(FSA) This variation of a forward rate agreement is used to hedge the spread between interest rates of similar maturity in different currencies. |
forward start repo:a repo with a start date later than spot i.e. in the future |
forward transaction:A customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging. Unlike standard futures contracts, a forward contract can be customized to any commodity, amount and delivery date. A forward contract settlement can occur on a cash or delivery basis. Two types: unconditional contracts (futures, forwards) and conditional financial instruments (options). Contrary spot transaction |
forward/forward:a transaction in which two parties agree to exchange two currencies in the future and to do a reverse transaction with a value date later than the first exchangein fact is a FX-swap with a short leg with a value date later than spot, e.g. buy EUR/USD in 3 month and sell simultaneously EUR/USD in 6 month |
foundation internal ratings-based approach (Basel II):One of two types of internal ratings-based approaches. It allows banks to calculate their regulatory capital requirement by using banks# internally generated estimate of the probability of default and, in some cases, the effective maturity (see also internal ratings-based approach, foundation internal ratings-based approach) |
FRA:abbr. for Forward Rate AgreementThe agreement between two parties to pay the difference between the agreed interest rate and the interest rate at a certain point of time (reference rate). The FRA is an OTC-instrument and is used in the money market for the management of the interest risk |
FRA amount due:The amount due is the only cash-flow at an FRA. It is the difference between the agreed interest rate and the reference interest rate, based on the agreed term and the nominal value. |
FRA fixing:Determination of the reference interest rate, which is the basis for the calculation of the FRA-amount due.The fixing occurs normally two working days before the settlement (exception GBP: on the same day)As reference rate serves mainly LIBOR or EURIBOR. |
FRA-settlement:A FRA is settled by the amount due. The settlement-date is at the beginning of the maturity of the FRA-period. Therefore a discounting is applicable at the calculation of the amount due. |
FRA-strip:FRA-strip indicates a series of short-term FRAs, with which a long-term FRA is produced. For example a 3/6 and a 6/9 FRA respond to a 3/9 FRA. |
FRABBA:abbr. for Forward Rate Agreement British Bankers Association, master agreement for FRAs |
Frankfurt Interbank Offered Rate:(FIBOR) Was a reference rate on the money market for "Deutsche Mark"time deposit and was replaced on 01.01.1999 by the EURIBOR. |
French interest rate method:another designation for actual/360 |
frequency of payment of interest:e.g. annually, semi-annually, quarterly, etc.markets with annually payment of interest: Germany, France, Netherlands, Austria, Switzerland, Euro-bonds, etc.markets with semi-annually payment of interest: USA (only domestic), UK, Japan, Canada, Australia |
FRN:Floating Rate Note, A bond with a variable coupon which is bound to an index e.g. 6-months EURIBOR |
front month (futures-contract):the contract of a futures (e.g. bund-futures) with the nearest settlement day |
FSA:1. abbr. for Forward Spread Agreement2. abbr. for Financial Services Authority,the FSA is an independent financial market supervision in UK, www.fsa.org.uk |
FSB:abbr. Financial Stability Board ;Part of the Bank for International Settlement (BIS) in Basel |
FSI:see also Financial Stability Institute |
FT-SE 100:(Footsie) The Financial Times Stock Exchange index includes the top 100 stocks traded on the LSE (London Stock Exchange). It is calculated by FTSE Group, which emerged from a joint venture of the London Stock Exchange with the Financial Times. The Footsie exists since 1984 and is calculated in real time. |
fund assets:The total assets of the investment fund. It consists of securities and other rights, bank credit balances and deposits, return requirements (income adjustment), but may also include derivativ financial market instruments (such as options, futures, swaps, and many others). These assets are reduced at most by borrowings or obligations under derivative financial instruments. The fund's assets is the exclusive property of the shareholders and the investment company only manages it. Therefore it can not be lost in a liquidation of the investment company or custodian bank. |
Fund management:The fund manager has the responsibility of managing the fund's assets, ie The money to invest as well as possible, taking into account the opportunities and the risks taken. |
fundamental analysis:A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management). |
Funds:Special funds, which are managed by an investment company. The investor(Buyer) has the opportunity to participate in the development of all the fund's assets. |
Future Rate Agreement:v. FRA |
future value:the future value contains capital and interest and can be calculated from the present value by adding accrued interest |
futures: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 |
futures contract: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. |
futures market: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 |
futures strip: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. |
Futures-Funds: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. |
FX:abbr. |
FXA:v. SAFE |
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GAAP:see Generally Accepted Accounting Principle |
gamma: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 |
Gap-Analysis: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. |
GARCH:Generalized Auto-Regressive Conditional Heteroskedasticity A mathematical model to forecast future variances on the basis of past variances. GARCH is widely used in riskmanagement. |
GBP:ISO currency code for British pound sterling |
GDP:abbr. for gross domestic product, measure for the performed work of an economy during a certain period |
general collateral: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 |
Generalized Auto-Regressive Conditional Heteroskedasticity:Method for modeling time series. Among other things, future volatilities are forecasted with that. The results are often used in the assessment of risk. |
Generally Accepted Accounting Principles: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. |
german insterst method:another designation for 30/360 |
GFD:abbr. Good-for-Day |
Gilt:bonds issued by the UK treasury |
gilt-edged:Describes a largely risk-free asset. In some areas it is prescribed by law or bound by contract. |
GIPS:abbr. Global Investment Performance Pesentation Standards |
given deposit:see interbank deposit |
global certificate:Certificate representing a larger number of securities. Global certificates simplify administration and custody. |
Global Depository Receipt:A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches. A GDR is very similar to an American Depositary Receipt. |
Global Investment Performance Pesentation Standards:International standards for the performance presentation in the investment industry to ensure a fair and complete representation of the motivation of portfolio managers. |
GNP:abbr. gross national product . Unit of measure for the performance of national economic units during a period. |
Going-Concern:In the going concern perspective the continuation of a proper operative business activity (going concern) should be ensured. The bank can individually specify what is meant by proper operative business activity. Typically, a zero result or even using up an unneeded share of open equity capital is considered acceptable for going concern. The minimum regulatory capital requirement has to be regarded as a strict lower limit for the going concern. |
Gomex-Rate:another designation for open market rate |
Gone-Concern:corresponds to the liquidation of the company / bank |
good-for-day:(GFD) Validity constraint for an order, which is only valid for the current trading day |
good-till-cancelled:(GTC) Provides a temporal validity constraint. The order remains valid until it is canceled by the customer or automatically deleted from the system (the maximum period of validity is one year). |
good-till-date:(GTD) Provides a temporal validity constraint. The order is valid up to a predefined date. (max. 90 days from the date of entry). |
good-till-Expiration:(GTE) Temporary validity determination for unrestricted limit orders: Valid to maturity. |
Goodwill:Goodwill is an intangible asset of fixed assets. It is calculated as the difference between the value of the company and the value of the capitalizable individual goods. The goodwill mainly expresses factors such as reputation of the company, organization, customers, etc. |
Government Bonds:Term for bonds issued by the federal government, such as Government bonds, federal obligations and treasury bills. |
granularity (Basel II):The granularity of a bank portfolio describes the extent to which there remain significant single borrower concentrations. |
granularity criterion (Basel II):According to the Basel Committee, a firm's supervisor must be satisfied that the regulatory retail portfolio is diversified to a sufficient degree to reduce the risks in the portfolio warranting the 75% risk weight. |
greatest benefit:Term for the highest increase in percentage value that is accounted by a fund within a certain period of time. The calculation is based on a period of 3 years. |
greatest loss:Term for the highest loss in percentage value that is accounted by a fund within a certain period of time. The calculation is based on a period of 3 years. |
Greenshoe:(Greenshoe) In the case of over-subscription of the issue there is the possibility that the issuer grants an additional allotment of shares to the subscribers of the emission. |
gross amount loans:engl. gross amount loans |
gross income (Basel II):the net interest income plus net non-interest income of a bank (as defined by national supervisors and/or national accounting standards) |
gross margin:turnover minus costs of manufacture |
gross up:v. grossing up clause |
grossing-up clause:the obligation of an issuer to offset the withholding tax, if such a tax is introduced during the term of the bondgrossing-up clauses are frequently used in eurobonds |
growth funds:(growth funds) A mutual fund whose primary focus is on a steady increase in the intrinsic value of the investment funds. There is less attention to current income than to a price increase of the applied fund's securities (income funds). |
GTC:abbr. Good-till-Cancelled |
GTD:abbr. Good-till-Date |
GTE:abbr. Good-till-expiration |
guarantee funds:Funds that guarantee the return of a predetermined (at issue) amount at a specified time. Guaranty funds are usually fixed-term funds. The advantage of the guarantee fund is that besides benefiting from additional income the risk of loss is limited (by the guaranteed return), their disadvantage is that the participation from the income is usually limited because of the guarantee. |
guaranteed bond:see covered bond |
guarantor:a third party that accepts a contractual or statutory commitment for repayment of another entity's obligation |
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haircut:the margin of the seller (=cash borrower) in the repo, The haircut corresponds to the initial margin at futures. It represents an over collateralisation for the purchaser in the repo (= cash lender). Additional to the haircut margin calls (variaton margins) are common as well. |
Hausse:A financial market of a group of securities in which prices are rising or are expected to rise. The term "hausse" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities. Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. Contrary Baisse |
head and shoulder formation:A technical analysis term used to describe a chart formation in which a stock's price: 1. Rises to a peak and subsequently declines. 2. Then, the price rises above the former peak and again declines. 3. And finally, rises again, but not to the second peak, and declines once more. The first and third peaks are shoulders, and the second peak forms the head. |
hedge accounting:the practice of deferring accounting recognition of gains and losses on financial market hedges until the corresponding gain or loss of the underlying exposure is recognised |
hedge funds:An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. |
Hedge-Ratio:A ratio comparing the value of a position protected via a hedge with the size of the entire position itself. The hedge ratio is important for investors in futures contracts, as it will help to identify and minimize basis risk. |
hedging:safeguarding of positions against risks, The basic idea of this is getting a compensatory effect through taking an opposite position. |
HIC repo:abbr. for Hold In Custody Repo a repo at which the seller of the security does not deliver to the purchaser, but holds it in custody of the buyer, The repo rate is normally higher than at the classic repo, because the buyer has got less flexibility and a higher risk. The seller must not use the security in another repo again (so called double dipping. |
High:Designation for the maximum price of a security. Contrary Low |
High liquid assets (HLA):(High Liquid Assets - HLA) Represent the numerator of the LCR and are composed of cash, minimum reserve with the central bank and securities with the highest credit ratings (excluding securities of financial institutions.) |
high volatility commercial real estate (HVCRE) (Basel II):the financing of commercial real estate that exhibits higher loss rate volatility compared with other types of specialised lending |
High Yield Bond:Risky loans with high interest rates, usually lower credit quality of debtors. |
historical data:Information concerning the history of a company, historical data, such as the historical course, the historical price-earnings ratio, revenue and revenue growth, earnings and earnings growth are used for the creation of forecasts for the company's future. |
historical simulation:statistical method to compute value at risk (var) The historical simulation evaluates the changes of the value of a portfolio using historical market data. The highest change in the portfolios value which is within the confidence interval represents the risk measure. other methods: monte carlo simulation and variance/covariance method |
historical volatily:measure of the observed past fluctuation of an instrument contrary to the implied volatility the h.v. is applied in risk measurement |
hold-in-custody repo:v. HIC repo |
holder:The holder has the right but not the obligation to buy or sell the underlying at the strike price until the expiration date. |
holding peroid:Period in which a share remains in the hands of the same owner. |
home country supervisor:another designation for home country supervisor |
horizontally spread:see Time Spread |
hybrid capital:It is formed by the issue of participation certificates or subordinated bonds. In Basel 3 it is accepted as equity if it has a term of five years or more. Hybrid capital is thus actually borrowing, which has equity-like characteristics. |
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IAS:abbr. International Accounting Standards |
ICAAP:abbr. Internal Capital Adequacy Assessment Process. It is the regulatory process to comply with the capital requirements. |
ICMA:abbr. International Capital Markets Association |
IFRS:abbr. Internal Capital Adequacy Assessment Process. It is the regulatory process to comply with the capital requirements. |
IMF:abbr. International Monetary Fund (IMF) |
IMM:International Monetary MarketThe IMM is the part of the CME where interest-rate- and currency-contracts are traded.v. CME |
IMM FRA:a FRA with a settlement-day that corresponds to the standard-settlement days futures traded at the IMM,i.e. the third Wednesday in the last month of each quarter (March, June, September, December). |
IMM swap:swap with a start date, that is equal to a standard settlement date of IMM (International Monetary Market) futures. I.e. the third Wednesday of the last month of each quarter. |
immediate-or-cancel:(IOC) order which must be executed wholly or partly, if it is entered. Unexecuted order parts are canceled. |
implied volatility:measure of expected future fluctuation of an instrumentthe i.v. is an important input factor of options pricing modells from the statistical point of view the i.v. is the annualised standard deviation opposite: historical volatility |
imputed costs:A cost that is incurred by virtue of using an asset instead of investing it or undertaking an alternative course of action. An imputed cost is an invisible cost that is not incurred directly. Often it involves opportunity costs, which are costs of lost opportunities, interests or rewards. In financial accounting only interests are recognized which are paid to lenders. In business accounting the total capital will be calculated for the interest costs, including the equity capital, which is why an imputed interest rate (capital cost) is recognized for the operating assets. |
in arrears swap:coupon swap in which the variable side is fixed at the end of the interest period |
in the money (ITM):Description of an option that has an intrinsic value. A call is in the money if the price of the underlying is above the strike price. A put is in the money if the price of the underlying is below the strike price. |
in-the-money:A call is in-the-money if the spot price of the underlying is above the strike price. A put is in-the-money if the spot price of the underlying is below the strike price. |
Index:(Stock index) Statistical measure which shows the changes in relation to an earlier time (price and cyclical movements). A stock index is a price index or a performance index, which represents the average price of the equity basket, a country, a region as a whole or of individual sectors. The starting point is the price level on a given day. Among the most famous stock indexes are the Dow Jones Industrial, S & P 500, MSCI, Nikkei 225 and the DAX. |
Index capitalization:The value of all companies included in a particular index. The value of the company is calculated by multiplying the price by the number of shares included in the index. |
Index funds:A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower management expense ratio on an index fund. |
index option:An option whose underlying is an index. |
index swap:v. basis swap |
indicative net asset value (NAV):(indicative NAV Net Asset Value) The sum of all assets held by an investment fund (Exchange Traded Funds), ie the value of all securities, cash balances cash deposits and other rights. The indicative NAV is determined continuously during the trading day. |
indirect costs:Indirect costs are overheads. |
indraday hedging:short-term hedging of a bond- or swap-portfolio against the market risk with futures,The advantage of this pratice is the high liquidity, the low spread and the lower costs in the future market. The remaining risk is called basis risk. |
inflation:Continued price level increase or loss of purchasing power of money. It is given when the supply of goods is below the monetary aggregate demand. |
inflation risk:Risk that the return on an investment is negatively affected by the inflation trend. |
Initial Margin:The percentage of the purchase price of securities (that can be purchased on margin) that the investor must pay for with his or her own cash or marginable securities. It ensures that no under- or over-collateralization occurs due to market movements. |
initial position:On the cash market, there are two basic positions: Long equity (buying) and short equity (sales). On the futures market, there are six: Long futures and short futures, long call and short call and long put and short put. |
initial public offering (IPO):The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. |
Insider:One may distinguishe between 2 types of insiders: Primary & secondary insiders. Primary insiders are those who have access to inside information, because of either their profession or capital investment. Secondary insiders are persons who received or have searched inside information. |
insider information:A non-public fact regarding the plans or condition of a publicly traded company that could provide a financial advantage when used to buy or sell shares of the company's stock. Insider information is typically gained by someone who is working within or close to a listed company. If a person uses insider information to place trades, he or she can be found guilty of insider trading. Insider trading is illegal when the material information has not been made public and has been traded on. |
institutional investors:Institutional investors are referred to as financial intermediaries with high investment amounts. e.g. Banks, insurance companies, pension funds, investment companies and building societies. |
inter spread:The simultaneous purchase and sale of futures on different underlyings but mostly with same delivery months. |
interbank deposit:money market deal between banks |
interbank deposits:Money market transaction between two banks. In case of a given depot you have invested money and in case of a taken depot you have taken money. |
interest:Price for the loaning of capital. |
interest gap contribution:The portion of the interest margin which is derived by juxtaposing reference interest rates from investments / refinancing. Under the market interest method, the difference between interest income (= the sum total of all investment transactions, valued at the respective reference interest rates) and interest expenditure (= the sum total of all refinancing transactions valued at the respective reference interest rates). |
interest margin:Result of interest income and interest expenditure |
interest maturity gap:In the interest maturity gap assets and liabilities volume (on- and off-balance) are adjusted according to their respective interest adjustement and the corresponding reference rate in the maturity band. |
interest method:another designation for interest calculation method |
interest payment in advance:An interest payment that is made at the beginning of the Interest Period. Contrary interest payment in arrears |
interest payment in arrears:An interest payment that is made at the end of the Interest Period. Contrary interest payment in advance |
Interest Rate Guarantee (IRG):see IRG |
interest rate method:v. methods of interest calculation |
Interest rate profile:the respective interest rate qualities agreed upon (e.g. fixed interest) |
interest rate risk:a type of market risk the risk, that a bank suffers losses from a unfavourable developement in interest rates |
Interest Rate Swap (IRS):An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). In Interest rate swaps notionals are never exchanged but only used to calculate the interest payments. IRS may be or so called coupon swaps (fixed against variable) or bais swaps (variable against variable) |
interest rate usance:the method of interest rate calculation applied in certain market resp. at a certain instrument, e.g. act/360, 30/360, act/365 etc. |
interest terms contribution:The portion of the intreest margin generated by the customer business. This is calculated by establishing the difference between external conditions (= customer's interest rate, effective interest rate) and the reference interest rate for the individual transaction concerned. |
Internal Capital Adequacy Assessment Process:(ICAAP) The English name for the internal procedure with which banking institutions have to internally ensure that sufficient capital to cover all material risks is available. |
Internal Rate of Return:abbr.: IRRthe calculated interest rate, at which the sum of the discounted cash-flows of an investment corresponds to the capital expenditure (dirty price)The method of the Internal Rate of Return assumes the re-investment of interim cash-flows at the Internal Rate of Return. |
Internal Rate of Return (IRR):(Internal rate of return, IRR) That financialmathematically determined interest rate at which the sum of the discounted cash flows of an investment matches the capital outlay (dirty price). In the internal rate of return method, the reinvestment or refinancing of cash flows in the meantime for internal rate of return is assumed. |
internal ratings based approach (IRB-approach):Under Basel II banks may use their own internal estimates of risk components to determine the capital requirement for an asset. This risk components include measures of the probability of default (PD), loss given default (LDG), the exposures at default (EAD) and the effective maturity (M). To be approved for the IRB approach, banks must meet certain minimum requirements and disclosure requirements. |
internal ratings-based (IRB) approach (Basel II):This approach relies heavily upon the internal assessment of a bank of its counterparties and exposures. Risk weights are not standardised anymore but will be calculated via risk weight functions.Risk parameters are probability of default, exposure-at-default, loss-given default and effective maturity. Banks must meet a set of minimum requirements in order to be eligible for IRB treatment of their exposures. |
International Accounting Standards:(IAS) International Accounting Standards, compliance enables a better international comparability of enterprise data. |
International Capital Markets Association:A self-regulatory organization and trade association originally located in Zürich, Switzerland, that encourages systematic and compliant trading in the international securities market. It also promotes the development of the Euromarkets and is acknowledged as a designated investment exchange by the Financial Services Authority, which regulates the financial services industry in the U.K. In July 2005, the ISMA and International Primary Market Association merged to become the International Capital Market Association. |
International Financial Reporting Standards:A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. The goal with IFRS is to make international comparisons as easy as possible. |
International Monetary Fund (IMF):The IMF was created in 1945 at the Bretton Woods conference and has currently 185 member countries (2007). The IMF plays three major roles in the global monetary system. The Fund surveys and monitors economic and financial developments, lends funds to countries with balance-of-payment difficulties, and provides technical assistance and training for countries requesting it. www.imf.org |
International Monetary Market:(IMM) The International Monetary Market is the marketplace of the Chicago Mercantile Exchange on which interest rate and currency contracts are traded. |
International Monetary Market Forward Rate Agreement:(IMM FRA) A forward rate agreement whose settlement date corresponds to the standard data of the International Monetary Market of the Chicago Mercantile Exchange traded contracts. This is the third Wednesday of the last month of each quarter (March, June, September, December). |
International Monetary Market Swap:(IMM swap) swap whose term beginning matches a default expiration date on the IMM. (International Monetary Market) This is the third Wednesday of each last month of the quarter. |
International Securities Identification Number:(ISIN) 12-digit letter-number combination to identify securities on an international level. |
International Securities Market Association:(ISMA) umbrella organization of institutions and traders operating on the euro bond market, with the main task of creating practices for the regulation of the Euro market transactions (eg. the ISMA method). |
International Swaps and Derivatives Association:(ISDA) International economic organizations of operators for OTC trading of swaps and derivatives. The ISDA has developed a standardized contract that is signed by market participants prior to the trading of swaps and derivatives (= ISDA Master Agreement). www.isda.org |
interpolation:a mathematical method to derive a value, which lies between two known values, the most simple method is called linear interpolatione.g. following rates are given:1 mo 3.50 % (31 days)3 mo 3.75 % (92 days)What is the interpolated rate for 1.5 months (46 days)?r = 0.035 + [(0.0375 - 0.035) / (92 - 31)] * (46 - 31) = 3.56148 %more sophisticated methods are logarithmic interpolation and cubic spline |
intra-contract spread:the simultaneous purchase and sale of futures on the same underlying but with different delivery months (therefore also called time-spread) |
intra-day trading:Purchase and sale of securities or foreign exchange position within one trading day. Thus, the day trader tries to take advantage of the daily fluctuations of the prices and to buy positions and sell it again within a day. |
intraday limit:maximum extent of a risk position which a trader is permitted to hold during the day, also called: daylight limit opposite: overnight limit |
intrinsic value:The intrinsic value of an option is calculated from the difference between the exercise price and the price of the Underlying. Call: spot price of the underlying minus the exercise price. Put: exercise price minus spot price of the underlying. If the result is negative, is the intrinsic value is zero. |
inverted yield curve:yield curve with higher short term rates than long term rates |
investment certificate:A security that represents a co-ownership of the assets of an investment fund. |
investment company:An institution for the administration of investment funds (securities fund or property fund). The shares are called investment fund certificates and are distributed publicly. |
investment contract:Agreement between the investment company and investment savers to the purchase of shares of a company. |
investment fund:A supply of capital belonging to numerous investors that is used to collectively purchase securities while each investor retains ownership and control of his or her own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange traded funds, money market funds and hedge funds. |
investment fund share:see investment certificate |
investment horizon:Period for which to invest. |
investment objective:A client information form used by registered investment advisors and other asset managers that aids in determining the optimal portfolio mix for the client. An investment objective survey may come in the form of a questionnaire, where the investor will be asked things such as:Current liquid and net worth; Risk aversion; Investing time horizon; Income levels; Expense levels; Planned bequeathments and/or charitable contributions; Restrictions on security selection |
investment philosophy:Principle position to the question of the market efficiency and of the asset and liability management |
investment process:Chronological order of the investment process from target identification up to performance analysis. |
Investment Services Directive:The directive regulates the mutual recognition of the supervision of securities firms. It allows domestic subsidiarys of securities firms which are registered in a member state of the EEA to do business without special approvals. |
investment style:Investment methodology that will help to achieve the portfolio objectives should be ensured. |
investment trust:another designation for investment company |
Investor Relations:(IR) Term for the communication of a company with its current and potential shareholders. Investor relations are important for a company. |
IOC:abbr. Immediate or Cancel |
IPO:abbr. Initial Public Offering |
IPS (Institutional Protection Scheme):The IPS is a loss-sharing agreement of banks in a cross-gaurantee system with the objective of reducing capital adequacy requirements and not having to substract participations within the IPS from Tier 1. The same risk management with the possibility of exertion of influence in the stress case is a requirement. |
IR:abbr. Investor Relations |
IRB (Basel II):see also internal ratings-based approach |
IRG (Interest Rate Guarantee):an option on an FRA. IRGs are used to fix a future money market interest rate (libor, euribor)In caps and floors IRGs are called caplet resp. floorlet. |
IRR:abbr. interest reference rate |
IRS:v. interest rate swap |
ISDA:abbr. for International Swap and Derivatives Association,(formerly: International Swap Dealer Association)www.isda.org |
ISDA Master Agreement:see International Swaps and Derivatives Association |
ISIN:abbr. International Securities Identification Number |
ISMA:abbr. for International Securities Market Association, till 1992 AIBD largest organisation in the international security-marketwww.isma.co.uk |
ISMA-method:formula for the calculationof the bond price by ISMAIn contrast to the Moosmüller-method interest for periods shorter than the full interest period are calculated on an exopantial basis |
ISO-currency code:Three-digit alphanumeric number of international currencies developed by the International Organization for Standardization as ISO 4217. The first two letters represent the country or supranational entity (eg EU European Union) and the last letter is usually the first letter of the currency name. These abbreviations do not replace the officially fixed national currency symbols and abbreviations, such as USD but are used in international money transfers. Examples of ISO currency codes: CHF, EUR, USD, GBP and JPY. |
issue:Issue of securities in the primary market with the aim of raising money in the form of equity capital (stocks) or loan capital (bonds, CD, CP, etc.). |
issue price:The issue price of a newly launched bond is set by the issuer who has to take the market conditions into consideration. A bond can first be purchased for the issue price. |
issue prospectus:The issue prospectus is the publication of the most important details of the issuer and the planned emission. It gives the investors the possibility to inform themselves about the rights and risks of the bond and the current and future situation of the issuer. |
issue surcharge:The issue surcharge has to cover the distribution costs and is expressed as a percentage of the redemption price. If you increase the redemption price by the issue surcharge, you get the issue price. The issue surcharge has to be clearly defined by the directions of the fund. It can reduce the yield of an short-term investment drastically. |
issuer:The issuer of a security is the one that provides a paper on the market for sale. Normally, this function is performed by commercial banks. Their function is particularly important in the new issue of shares or warrants, since the issuer decides the price at which, for example, the stock is tradeable. |
issuing bank:Financial institution which has taken over the placement of newly issued securities. |
issuing price:see issuing price |
ITM:abbr. in the money |
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Jensens Alpha:Ratio that indicates how much the performance of a Fund is above the benchmark, taking into account the level of risk. The higher the value, the more positive and the better the fund has performed compared to its benchmark. |
Junk Bonds:High-risk loans with high interest rates, usually by borrowers with lower credit ratings. |
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kappa:cp. vega |
key figures:The key figures are used for assessing investment funds and go beyond the pure analysis of the performance . These include, for example, the terms volatility, Sharpe ratio, Jensen's alpha. |
Key Rate Duration:The Key Rate Duration describes the overall interest rate risk of interest rate derivative on individual maturity spectrum. Using the Key Rate Duration manages to calculate the consequences of a turn or curvature of the yield curve for the present value of the portfolio. |
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last trading day:Last day before the expiration date on which a particular option may be traded. Very often the third Friday of each calendar month. |
lending:Lending operations are all credit operations of the Bank. The Bank lends money to the customer and receives interest by the customer for that service. These transactions are recorded on the asset side of banks' balance sheets. |
letter to shareholders:A shareholder letter is a letter written by a firm's top executives to its shareholders to provide a broad overview of the firm's operations throughout the year. The letter generally covers the firm's basic financial results, its current position in the market, and some of its future plans. The shareholder letter is generally written once per year and is included in the beginning of the firm's annual report. |
leverage effect:The leverage effect is the increased profitability of equity capital caused by soft loans bonded to profitable investments. If a company borrows more, any profits or losses are shared among a smaller base and are proportionately larger as a result. Options dealings: The leverage effect indicates how the price of the option changes in relation to the base value. |
Leverage Ratio:An indicator that measures the level of debt of a financial institution. The core capital (Tier 1 capital) will be compared with the (unweighted) balance sheet positions and the off-balance sheet asset positions. |
LGD:abbr. Loss Given Default |
liability:Equity and all liabilities (obligations) of a company that are included in the balance sheet of the Company and which are compared with the assets. |
liability management:On the theory of efficient capital markets based approach that attempts to map a given benchmark in terms of their risk-return profile as closely as possible. |
liability swap:Interest Rate Swap or currency swap which is related to a liability,by means of a liability swap the type of the interest expense is changed from fixed into variable or vice versa |
LIBID:abbr. of London Interbank Bid Rate, LIBID is usually 1/8% below LIBOR |
LIBOR:abbr. for London Interbank Offered RateThe LIBOR is the rate offerd by London banks for deposits with other banks in the eurocurrency markets. (1 week - 12 month). It is calculated by the BBA (British Bankers Association) and announced daily at 11:00 in London. |
liduidity reserve:Is the capital, which banks keep as reserve in their central institution. |
LIFFE:London International Financial Future and Options Exchange, most important european futures market, founded in 1982, www.liffe.com |
LIMEAN:abbr. of London Interbank Mean Rate, average rate of LIBOR and LIBID |
Limit:If the limit is set either a maximum limit or a minimum limit is set on the purchase or on the sale of securities. |
Limit Order:An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Because the limit order is not a market order, it may not be executed if the price set by the investor cannot be met during the period of time in which the order is left open. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled. |
linear interpolation:see interpolation |
liquid assets:Cash also available. Amount of funds that can be withdrawn by cash or used to purchase additional securities without causing a negative balance. |
liquidity:Ability to satisfy all liabilities due on time. The term Liquidity also is used in the content of a classification of different instruments. They may be more or less liquid, depending on how quickly they may be transferred to cash. Liquid assets are cash, checks and bank balances without notice. Fixed income securities are also relatively liquid because they can usually be sold at any time. |
liquidity buffer:Assets and refinancing commitments from which liquidity inflows can be generated in a stress scenario. |
liquidity costs:The cost of longterm refinancing because of their own creditworthiness. |
Liquidity Coverage Ratio (LCR):Describes a liquidity ratio which shows the short-term (1 month) liquidity potential of the bank in terms of net cash outflows assuming a predetermined short-term stress situation (combined market and rating stress). |
liquidity facility:The established credit line in a securitization structure is called liquidity line. The purpose of the liquidity facility is to be able to continue serving already issued asset-backed securities in the case of refinancing bottlenecks in the money market. |
liquidity providers:Liquidity providers in Germany are called "Designated Sponsors", in Austria "Specialists" and "Market Makers". They are specialized traders who balance the differences between supply and demand and provide bid and ask prices. |
liquidity risk:risk of a deterioration of a banks profit, due to higher refinancing costs, which are traced back to a worsening of the own creditworthiness |
LMV:abbr. Long-Market-Value |
logarithmic interpolation:see Interpolation |
London Interbank Bid Rate:(LIBID) The London Interbank Bid Rate is usually 1/8% below LIBOR. |
London Interbank Mean Rate:(LIMEAN) The mean rate of London Interbank Offered Rate (LIBOR) and London Interbank Bid Rate (LIBID). |
London Interbank Offered Rate:(LIBOR) The international banks in London identified ask price (ask) of the money market (ie for the borrowing of funds). |
London International Financial Futures and Options Exchange:(LIFFE) Major European derivatives exchange, originally founded in London in 1982. 2001 acquired by Euronext (now NYSE Euronext Group). www.liffe.com |
Long:short cut for Long |
Long Market Value:(LMV) Current market value of a stock or bond portfolio, calculated on a daily basis. |
long term growth investments:They are bonds with the long term potential of increase in value (time horizon: one year and more). Typically they are more stable and their value is not increasing fast. |
Loss given Default (LGD):The LGD is the percentage measure for the average expected loss per debt claim given a loan default. It is the loss of a receivable in a ratio to the receivable. |
Low:Designation for the lowest price of a security Contrary: High |
LRMV:Austrian liquididity risk management act (Liquiditätsrisikomanagementverordnung); regulation of the Austrian Financial Markets Authority (FMA) to operationalise the EBA recommendations on liquidity management in Austria. |
M |
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M1:sum of cash and sight deposits v. money supply |
M2:M1 plus deposits with a maturity up to two years as well as deposits with an agreed period of notice up to three monthsv. money supply |
M3:M2 plus repos, money market funds and debentures up to two years maturity, deposits with a maturity up to two years as well as deposits with an agreed period of notice up to three monthsv. money supply |
Macauley duration:cp. duration |
Macro-hedge-funds:They are benchmark and index orientated funds which are using the top-down principle. Real bonds, ressources, currencys and futures form the basis of the investment techniques. The objective of the funds is to surpass the market/the benchmark index. |
magic triangle:The magic triangle of asset investment illustrates the conflict between safety, liquidity and yield. Investors try to achieve an optimum amount of coordination of these three factors. |
main refinancing operation:Regular open market transaction of the ESCB for providing short-term bank liquidity. They are issued as weekly standard tenders with an agreed period of 14 days. They are the most important monetary instrument of the ESCB which controls interest rates and liquidity at the monetary market. |
Maintenance Margin:Lower limit of the margin account, which must not be exceeded, otherwise an additional payment will be required. |
mandatory convertible bond:in german nother designation for mandatory convertible bond |
manufactured dividend:In US-style repos interim coupon payments have to be transmitted to the seller of the security by the buyer. This is called manufactured dividend. |
maple leaf:Canadian coin |
margin:deposit which has to be made at the conclusion of certain deals, margins are applicable mainly at exchange-traded futures and options and in repo marketstypes: initial margin and variation margin |
margin call:call for settlement of a variation margincommon at: futures and repos |
marginal lending facility:A standing facility of the Eurosystem which counterparties may use to receive overnight credit from a national central bank at a pre-specified interest rate against eligible assets. Comparable to earlier Lombard loan. Often the upper limit of the call rate. Therefore it is the key interest rate. |
marginal revenue:Highest yield which is accepted by the Federation that leads to an allocation to individual banks at the yield tender process. |
marginal risk:Is the additional risk that arises when assigning a further loan to a given portfolio. Since the commitments of a loan portfolio among themselves not perfectly correlated, the sum of the individual risks are much higher than the portfolio risk itself. |
mark-to-the-market:evaluation of a financial instrument or an entire portfolio on the basis of the current market prices |
market capitalisation:Market price of a listed company. Calculated from the price of the stock multiplied by the number of shares of a company. |
market depth:Takes place in a financial market where - due to an offer (and vice verca) - buying and selling prices are provided in short time intervals |
Market interest rate method:This method is based on the opportunity cost principle, which means that every balance sheet item is assessed at a market interest rate, as if a corresponding transaction at the same interest rate were carried out on the money or capital markets. |
Market Maker:(Market makers) Market participants (mostly banks), which provide during the entire trading hours bid and offer prices. This ensures sufficient liquidity in the market. |
Market order:(Market order) order without giving a price limit. The entire order is executed as soon as possible at the best price. The top order can also be provided with the execution restrictions Fill-or-Kill or immediate-or-cancel. |
market participants:Everyone who buys and/or sells financial instruments on their own or third party account by means of the exchange companies operated markets. |
market price change risk:another designation for market risk |
market price risk:another designation for market risk |
market risk:risk of deterioration of a banks profits, due to a unfavourable developement of market prices (e.g. securities, foreign exchange, interest rates etc.) |
Market-Performer:(keep, hold, or neutral) Opinion of an analyst that a share will develop parallel to an (sectoral) index. |
Matador:a type of foreign bondindicates a bond which is issued from a foreign entity in Spain denominated in EUR |
Matching:This is the matching of supply and demand, corresponding to the pricing rules. |
Maturity (M):another designation for maturity period |
maturity funds:Funds with limited runtime from the outset. Investors can only buy these funds during a tight subscription period. Afterwards the issue of the shares is set. Invested capital remains in the fund until the end of the term. However, investors can sell their fund shares during the term on each trading day. At the expiration date of the entire fund is dissolved and invested capital including accrued income is distributed to the shareholders. |
Maturity Mismatch:Liquidity / maturity matching |
Maturity profiles:are defined as arrangements concerning capital payment flows (e.g. the capital redemption profiles of a loan, such as final maturity or annuity) |
maturity transformation:Result of different interest sensitivities of lending business and deposit-taking business of a bank. For example a bank is not refinancing its receivables with liabilities of the same period. That is increasing profits if long-term bonds are purchased and short-term refinanced if the interest rate curve is normal and short-term money is cheaper than long-term. Risk: Interest rate curve gets inverse. |
Maturity-Date:another designation for end of the term or due date |
maximal drowdown:Largest temporary decline in value after reaching a peak until the next positive counter movement. Tells how much the fund has dropped at its largest downward movement. |
maximal period loss:Maximum monthly or annual loss which the Fund has experienced so far. |
maximal period profit:Maximum monthly or annual appreciation which the Fund has experienced so far. |
medium term bond:Medium-term bonds are the counterpart of the banks to the Federal Treasury bills. They are used for short-term capital increase. |
merchants:Dealer transactions between banks are conducted at the same rate. |
methods of interest calculation:the effective yield depends on:- how the days of the interest period are calculated and- what is assumed concerning the number of days of a yearthe most frequent methods are:- act/360 (= money market method, actual calendar days, 360 days a year)- act/365 (365 days a year)- act/act- 30/360 (30 days a month, 360 days a year)- 30E/360 |
Mid Cap:designation for Companies with a medium market capitalization |
Mid Cap Funds:Funds that invest their funds primarily in medium-sized listed companies. |
MiFID:The abbreviation MiFID stands for Markets in Financial Instruments Directive. Directive on markets in financial instruments or short MiFID. MiFID is a European Union directive on the harmonization of the financial markets in the European internal market. The primary objective is transparency towards the private investors. |
MIM:abbr. Market interest method |
minimum investment amount:Investments in funds are usually only possible if the investment specified minimum amount is invested, which is set by the investment company. For further payments minimum amounts may be required by as well. Also for the periodic payments in savings plans a certain amount is usually prescribed by the investment companies. |
minimum reserve:The minimum amount of reserves a credit institution is required to hold with a central bank. The minimum reserve policy is one of the monetary instruments which regulate the money supply. An increase or a decrease has a direct effect on the liquidity of the banking sector. The minimum reserve is determined as percentage of customer deposits of a bank. |
MM-futures:v. money market futures |
modern portfolio theory:It is called the theoretical model of the relationships between risk and return and how their relation can be optimized throught diversification. |
modified duration:expresses the estimated decrease of a bond price, if interest rate increases by 100 bp, and vice versa e.g.:bond price 103, modified duration 3.7 if the interest rate increases by 100 bp the bond price decreases by 3,7 % i.e. 3.81 new bond price: 99.19 (103 - 3.81) |
money market:Characterizes the market where short term interest instruments are traded (usually up to one year) (e.g. clean deposits, CDs, CPs, T-bills etc.)Market participants are domestic and international banks as well as Central Banks. |
money market funds:Funds that invest up to 100 percent of their assets in bank deposits, money market securities or securities with short maturities or regular yield adjustments. Money market funds are authorized in Germany since August 1, 1994. |
money market futures:futures with a money market-instrument as underlying, e.g. 3-months LIBOR-futures, alike an FRA there is no physical delivery of underlyings, i.e. the deposit, but only a compensation |
money supply:sum of monetary claims of non-banks vs. banks which exercise currency-functionconsists of cash and sight deposits. Differnet definitions of money supply: M1, M2, M3 |
monte carlo simulation:statistical method to compute value at risk (var) The monte carlo simulation computes a huge number of portfolio valuation using random data. other methods used in var: variance/covariance method and historical simulation |
Moosmüller-method:formula for the calculation of the bond price by Moosmüller,In contrast to ISMA-method interest for periods shorter than the full interest period are calculated on a linear basis (ISMA: exponential) |
mortgage bond:Tax-advantaged bond. Housing projects financed by the emission proceeds. |
municipal bond:Municipal bonds are used to grant loans to states and municipalities with the money of investors. |
mutual fund:An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share. |
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Naked Position:(Naked position). A position is uncovered if it is neither secured by the underlying securities nor money. Contrary covered |
NASDAQ Composite Index:The NASDAQ Composite Index is a measure of the price movement of all listed NASDAQ stocks. The index is weighted according to the market capitalization of the companies. The NASDAQ Composite Index includes over 5,000 companies and is one of the most highly publicized indices. |
NAV:abbr. Net Asset Value |
NDF:abbr. of Non Delivery Forward, a FX forward contract, which is not physically settled, At maturity a compensation in the amount of the difference between the agreed price and the fixing-price is paid. NDFs exist mainly in currencies with market restrictions. |
Net Asset Value (NAV):(Net Asset Value NAV) The sum of all assets held by an investment fund, ie the value of all securities, cash balance, cash deposits as well as other rights. The net asset value is calculated on daily basis. |
net assets:Total assets minus all liabilities and obligations |
Net Stable Funding Ratio (NSFR):Net stable funding ratio is a liquidity ratio and shows the medium-term (1 year) liquidity available with respect to the medium-term cash outflows. |
Netting:Netting of all outstanding receivables and payables between two parties |
new shares:Shares which are issued due to a capital raising. As soon as they are equal to old shares they are no longer called new shares. |
New York Stock Exchange:(Wall Street, NYSE), the New York Stock Exchange is the largest stock exchange in the world and is part of the NYSE Euronext group. Because of their address at 11 Wall Street in New York, the NYSE is often also known as Wall Street. |
Nikkei:short cut for Nikkei 225 |
Nikkei 225:(Nikkei) The Nikkei is Asia's most important stock index and since 1971 it is calculated by the Japanese business newspaper Nihon Keizai Shimbun (short: Nikkei). It is a price-weighted index designed to track the performance of the 225 most important companies on the Tokyo Stock Exchange. |
nominal:see face value |
nominal interest:It is governed by the bond conditions and you can see how many percent of the nominal value will be annually paid in interest. |
nominal interest rate:the absolute return on an investment without considering an inflationary impactopposite: real interest rate |
nominal value:value of a financial instrument (bond, note, mortgage or other security) given on the certificate or instrumentsyn: nominal value |
Non Deliverable Forward:v. NDF |
non par value share:Expressed in no particular face value. They certify a share of the assets of the Company. |
Non-negotiable instruments:Non-negotiable instruments are those order instruments pursuant to commercial law, which contain no order clause. |
Non-official brokers:They arrange security transactions among members (banks) at markets which are operated by the exchange operating company. |
non-systematic risk:Part of the overall risk in stocks, which is not induced by fluctuations in the overall market (title specific risk). |
normal yield curve:yield curve with lower short term rates than long term ratesalso called: positive yield curve, steep yield curve |
notional value:see fair price |
Novations-Netting:In case of novation netting the assets and liabilities of two transactions are netted on the day of recognition by a novation agreement. |
NYSE:abbr. New York Stock Exchange |
NYSE Euronext:A cross-border European stock exchange, originally created in 2000 from the merger of the Amsterdam, Brussels and Paris stock exchanges. In 2001 and 2002, respectively, Euronext acquired the London International Financial Futures and Options Exchange (LIFFE) and the Portuguese stock exchange, Bolsa de Valores de Lisboa e Porto (BVLP), in order to become one of the world's largest exchanges. 2006 Euronext completed their agreed merger with the NYSE Group, resulting in the formation of NYSE Euronext. |
O |
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O/N:v. overnight |
obligation:v. bond |
OECD:abbr. Organization for Economic Cooperation and Developement |
Offer:v. Ask-rate |
OIS:abbr. Overnight Indexed Swap interest rate swap where the floating rate is linked to an overnight index, available for short terms (up to 1 year) and used in money markets contrary to regular IRS, the floating rate is not paid at every fixing date, but at maturity date as an effective interest rate, i.e. considering compound interest types of OIS: EUR: EONIA swap USD: Fed Funds swap GBP: SONIA Swap CHF: TOIS |
open exposure:(Unsecured exposure) The unsecured part of loans. |
Open Interest:Sum of all received in an underlying futures contracts that have not been closed out or exercised yet. |
open market operation:The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite. |
open market rate:Interest rate for refinancing of commercial banks by the Austrian National Bank. Commercial banks sell securities to the Austrian National Bank. After an agreed period the commercial banks have to buy back the securities increased by the GOMEX rate. |
open repo:a repo with unspecified maturity, i.e. with a maturity until further notice,It can be ceased both by the buyer and the seller |
opening:Transaction which creates a new long or short position. |
opening price:The price at which a security first trades upon the opening of an exchange on a given trading day. (in contrast to the closing price) |
operational risk:The term operational risk is refered to risks within the company that may cause damage in a company. Under Basel II, in addition to the credit risk and market risk, operational risk is used to calculate the required equity capital for the first time. |
option:An option is an agreement between two parties whereby one party (the option holder, buyer) has the right to perform a specified transaction having specified terms with the other party (the option issuer, seller). In finance, options are a type of derivative instrument. They are traded on exchanges as well as over the counter. They are linked to a variety of underliers including stocks, baskets of stocks, bonds, currencies, futures, swaps and commodities. While financial options come in many forms, there are two basic types: A call option gives the holder the right to purchase a specified quantity of the underlying at a specified strike price by a specified expiration date. A put option gives the holder the right to sell a specified quantity of the underlying at a specified strike price by a specified expiration date. |
option bond:similar to convertible bond with the distinction, that the option can be traded apart from the bond |
option category:Options that are exercisable on each trading day during the entire term are American style options. Options that can only be exercised on the last trading day, are called European style options. |
option class:All options of the same type with the same underlying. |
option coefficients (Greeks):(Greeks) Indicate in absolute terms, how much the option price or a part of the option price changes when the influencing factors on the option price change by one unit. There are five sensitivity factors, which are marked with the Greek letter Delta, Gamma, Theta, Vega and Rho. |
option price:(Premium) Price, which is paid for an option. |
option pricing model:Model for calculating the standard risk costs that considers a loan as a short put (= sold put option). |
option series:Identical options belong to one option series. ie type, underlying, strike price and expiration date are the same. |
option transaction:A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). Call options give the option to buy at certain price, so the buyer would want the stock to go up. Put options give the option to sell at a certain price, so the buyer would want the stock to go down. Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset. |
option type:There are two types of options: calls and puts; Buy options and sell options |
Order:Statement of intent by a customer to buy or sell securities. An order can be specified according to specific criteria: Composition of the order (single / combined) and treatment in the order book (period of validity of limit orders; execution restrictions of market orders). |
Order book:In the central order book of a stock exchange (with the exception of market orders) are all orders stored, examined for their feasibility and finally carried out. Therefore, the current order book is visible at any time. |
order instrument:An order document contains the name of the owner. The transmission of the order papers takes place by means of endorsement and delivery. |
order type:specified order type |
Organisation for Economic Co-operation and Development:The OECD was founded in 1961 and has its headquarters in Paris. It is a group of 30 member countries that discuss and develop economic and social policy. OECD countries are democratic countries that support free market economies. Over the years, it has dealt with a range of issues, including raising the standard of living in memeber countries, contributing to the expansion of world trade and promoting economic stability. |
Originate to Distribute (OtD):Was translated around 2005 in the German financial language. Designation will for a deal in which loans are issued to an independent company and eventually sold to investors in tranches. |
OTC:abbr. for over the counterindicates a non exchange traded deal,typical for OTC-contracts is that all contractspecifications (e.g. maturity, volume etc.) can be fixed individually by the participating parties.opposite: exchange traded contracts at which the contractspecifications are fixed by the stock market. |
OTC-Markt:abbr. over-the-counter Market |
OTM:abbr. out-of-the-money |
out of the money:A call is out of the money when the price of the underlying is below the strike price. A put is out of the money when the price of the underlying is above the strike price. |
Outperformer:Securities or mutual funds whose performance exceeds the market performance. |
over the counter:v. OTC |
over the counter market (OTC-market):A decentralized market, without a central physical location, where market participants trade with one another through various communication modes such as the telephone, email and proprietary electronic trading systems. An over-the-counter (OTC) market and an exchange market are the two basic ways of organizing financial markets. In an OTC market, dealers act as market makers by quoting prices at which they will buy and sell a security or currency. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was effected. In general, OTC markets are therefore less transparent than exchanges and are also subject to fewer regulations. It is typical for OTC transactions that all contract specifications (eg duration, volume, etc.) can be determined individually by the parties involved. |
over the counter trading:over the counter trading |
overnight:indicates a period which starts on trading day and ends on the following bank dayexample: on Tuesday the 15.03. O/N indicates the period from 15.03. to 16.03. |
Overnight Indexed Swap:An interest rate swap involving the overnight rate being exchanged for a fixed interest rate. This short-term swap is used in the money market. Unlike normal IRS the variable part is not paid at every fixing but at the end of the period with compound interest. Different OIS: EUR: EONIA Swap, USD: Fed Funds Swap, GBP: SONIA Swap, CHF: TOIS. |
overnight limit:maximum extent of a risk position which a trader is permitted to hold from one day to the next day (overnight) opposite: intraday limit |
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P&L:abbr. PnL or P&L (Profit&Loss) |
P/E:abbr. price earnings ratio |
P/E R:Price Earnings Ratio |
paper of identity:Papers of identity are a mix of bearer and order documents. In case of papers of identity the debtor is not obliged to pay to the bearer. |
par value:Price of a security which corresponds to the nominal value. i.e. 100%. |
par value share:A stock with the indication of a particular denomination, which refers to a particular interest in the share capital of the company. Contrary non par value share |
par value swap:v. Cross Currency Swap |
Participating Bond:A security which represents a right to a variable share of the net profit of the company in addition to the fixed interest rate. This variable interest rate is linked to the dividend and shall enter into force in case a defined level of the dividend is achieved. |
participation certificate:(PS) participation certificates are bearer instruments through which the investor takes a holding in the assets of a company and his return is additionally linked to the commercial success of the company. They are very similar to the preferred shares, as not all, but some of the rights of the shareholder are also entitled to the holder of a participation certificate. |
participation right:The participation right entitles to a certain share of the net profit and / or the proceeds of liquidation of a company. The enjoyment right is guaranteed in the so-called participation certificate and does not include a right to vote nor any other rights in the company. |
participatory certificate:Securities which have an intermediate position between stocks and bonds. It certifies the holder rights of various kinds towards the company. Usually it involves a share of the net income and / or the proceeds of liquidation, but never a partnership in the company. Therefore, the owner has no right to vote at the annual general meeting. |
Partly paid shares:Shares, which were only partly paid. |
payer swaption:corresponds to a call option on an interest rate swap,The purchaser of the payer swaption has got the right but not the obligation to buy an exact specified interest rate swap at the strike price on the expiry date, i.e. he concludes a swap in which he pays a fixed interest rate in exchange of a variable one (e.g. EURIBOR). A payer swaption can be used for hedging against raising interest rates.v. swaption |
PD:abbr. Propability of Default |
pension funds:Funds that invest primarily or exclusively in fixed income securities. |
pension value:another designation for bonds |
percentage quotation:Indication of the price as a percentage of the declared in the security nominal value. Common for debt securities. Contrary Unit Quotation |
performance:The rate of return of an investment. Investment funds: Change of share value in per cent in a period of time (distribution, balance of corporate tax taken into account). Only funds with similar assets and strategy of investment are comparable. |
performance index:A performance Index takes into account (as opposed to a price index), the dividend payments of the companies contained in it and provides indications of the total return of a portfolio (eg ATX50 performance and DAX). |
performance measurement:This refers to the review of the liquidity provider (= market maker) whether they fulfill their underwritten commitments. |
period:Period from the date of issue of a security until the maturity (last trading day). The period in which the option is valid. |
perpetual bond:Bond with an infinite maturity |
pips:Rates in foreign exchange markets are usually quoted in 5 digits (e.g. EUR/USD 1.0125; USD/JPY 120.50). The first 3 digits are called big figure and the last 2 digits pips Professional FX-market participants usually quote just the pips of an FX-Rate, whereas the big figure is assumed to be known. |
placement:Placement of securities in the investment-seeking audience. |
Plain Vanilla:Plain Vanilla is often used in context with financial products that have no special configuration. Example: Plain vanilla options are called options (call or put) which have no additional properties. Contrary Exotic Options |
Plain Vanilla Bond:another designation for straight bond |
PLC:abbr. public limited company |
Pool method:The pool method is a calculation method in the value range of a bank. The customer interest of a particular contract is compared to the average customer interest rate for all liabilities (or assets) page. |
Portefeuille:another designation for portfolio |
portfolio:All investments in securities held by a customer, a company or a mutual fund. |
portfolio manager:The person who makes the decisions for the purchase and sale of securities for a portfolio on its own responsibility and in accordance with the agreed guidelines. |
Position:The specific involvement in the financial market, ie the rights and obligations of a market participant after a transaction. A position is created by an opening transaction and is terminated by a closing transaction again. |
positive interest rate curve:(normal yield curve steep yield curve) A yield curve in which long-term maturities have a higher interest rate than short-term maturities. |
post-trading:see over the counter market (OTC-market) |
PPI (Producer Price Index):The PPI is a weighted average of selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. This measure can be used for estimating the future inflation rate. |
Prague Interbank Offered Rate:(PRIBOR) interest rate which is determined in Czech crowns and at which banks lend money to each other. |
pre-trade:over the counter trading before market opening |
preference share:A stock with a preferred treatment for the dividend payment (dividend) but which has also some disadvantages. e.g. no voting rights |
premature exercise:Exercise before the expiration date (only possible for American options). |
premium:another designation for option price |
present value (PV):Current value of future cash flows, which are based on the observation date by discounting. |
present value of a basispoint:see PVBP also called: DV01 (Dollar value of 01) |
PRIBOR:abbr. of Prague Interbank offered Rate |
price determinant:see conversion factor |
Price Earnings Ratio:(PER) Specifies how often the earnings per share is included in the course. It is used for the valuation of shares. The higher the PER, the more expensive the security. |
price fluctuation:Change in value of a share |
price index:In contrast to the performance index a price index does not consider any dividends paid by the companies contained in it and is primarily used as a benchmark for the underlying market development (eg ATX). |
Price Sales Ratio:Ratio at which the current stock price is divided by revenue per share. Sales per share are calculated: Revenue of the past 12 months divided by the number of shares outstanding. |
Price Spread:(Vertical spread) Combined option strategy in which options of the same type are bought and sold at the same time and with the same maturities, but with different strike prices. One differentiates between bull spread, which is designed for increasing prices, and bear spread, which is designed for falling prices of the base value. |
Pricing:Determining the issue price |
primary market:market for newly issued securitiesopposite: secondary market |
primary market yield:From the individual returns of circulating debt securities in the primary market an average primary market return is calculated on a regular basis. |
prime rate:short-term interest rate charged by US-banks on borrowers with best creditworthiness |
principle of the largest best execution:Identifies the sequence for price determination of the market price,in which buy and sell orders are collected up to a specified date. Thereafter, the rate is established, in which the largest turnover is generated. |
private investor:The wide range of investors. Small investors who invest on their own account capital. |
probability distribution:the probability distribution of a variable describes the probability of the variable attaining a certain value |
Probability of Default (PD):The degree of likelihood that the borrower of a loan or debt will not be able to make the necessary scheduled repayments. Should the borrower be unable to pay, they are then said to be in default of the debt, at which point the lenders of the debt have legal avenues to attempt obtaining at least partial repayment. Generally speaking, the higher the default probability a lender estimates a borrower to have, the higher the interest rate the lender will charge the borrower (as compensation for bearing higher default risk). |
Producer Price Index (PPI):PPI (Producer Price Index) The producer price index is a weighted average of the industrial producer prices. An increase of this index can be used as an indicator of the rise in inflation |
profit:Surplus of revenue over expenses during the fiscal year |
Profit and loss (P&L):In the profit and loss account in accordance with IAS scheme, income and expenses are recognized. The aim is to determine the annual results. |
Profit Center:Positions or departments of a bank, which are in direct contact with the customer, to conclude business and therefore earn income on the market or from customers. These include, for example, Branches, customer service departments, securitie trading or treasury .. |
profit margin:Return on sales. Profit as a percentage of sales. Net profit after tax divided by revenue from a particular 12-month period. Expressed as a percentage. |
profitability:The profitability of a security investement is calculated by dividing the return of the investemtn with the capital invested. |
project finance:investments |
prolongation bond:In case of prolongation bonds it is possible that the duration of the bond is extended. However, this must be explicitly stated in the Terms and Conditions. |
proprietary trading:(prop trading) This is the trading of securities in its own name and for its own account. |
prospectus:The prospectus informs the public about the business, the company's development, the directors and the members of the Supervisory Board and must include the last balance sheet of the corporation. It also includes the publication of an issue in the authorized journal for the publication of mandatory stock exchange announcements . |
prospectus liability:Liability of the issuer, the auditor and the responsible bank for the accuracy and completeness of all information in the prospectus. |
prospectus requirement:Legal obligation prior to the issuance of securities to publish a prospectus. |
Protective Put:Covered purchase of a put. Purchase of a put to hedge an underlying asset, for which the total risk corresponds with the risk of the put premium paid. The result is the position of a synthetic long call. |
PSA:abbr. Public Securities Association, today: TBMA (The Bond Market Association)www.bondmarkets.com |
Public limited company:The standard legal designation of a company which has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares. |
purchase fund:kind of amortization of a bond, at which the issuer commits himself to buy back a certain part of the issue in the secondary market within a stipulated period, if the price is below a certain level (normally below par). In contrast to sinking fund the bearer of the bond may rely, that there does no amortization take place at prices above par. |
purchasing power:ability to purchase goods and services for money |
Put:An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. The writer of a put is committed to buy the underlying asset within a specified period of time at an agreed price. This is the opposite of a call option, which gives the holder the right to buy shares. |
put swaption:v. receiver swaption |
put/call parity:v. call/put parity |
Put/Call-Ratio:Number of traded put options in relation to the number of traded calls. |
PVBP:abbr: Present Value of a Basispoint The PVBP expresses the change of the value of a financial instrument or an entire portfolio, if the interest rate level changes by 1 basispoint (1/100 of one percentage point) also called: DV01 (Dollar value of 01) |
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Quantitative Impact Study (QIS):Examines the impact of new regulations in the financial system |
quantity tender:a tender procedure of central banks applied for open market transactions. In q.t. the interest rate is fixed by the central bank. If the demanded amount exceeds the central banks supply, the central bank allocates just a certain portion (e.g. 40 %) of all bids. opposite: interest tender |
quanto swap:interest rate swap, where a variable rate of one currency is swapped against the variable rate of another currency,typically the settlements are made in only one currency |
quotation limit:the maximum amount, for which a trader is permitted to quote prices |
Quote:A binding quotation from a liquidity provider (specialist or market maker) entered into a trading arrangements at which buy and sell orders are placed simultaneously. |
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Ralley, Rally:On the stock market a name for strongly rising prices. Often referred to as stock market rally or rally. |
ratched swap:interest rate swap in which the change of the variable interest rate is limited, in respect of the previous period |
Rate Differential Swap:another designation for differetial swap |
rate/quotation:see exchange price |
rating:creditworthiness of a spedific security issue or a particular borrower as evaluated by a rating agency |
rating agency:Rating agencies rate the creditworthiness of an issuer and debt instruments using a standardized procedure on short- and long-term periods. The credit rating is expressed in combinations of letters, the highest one is AAA. The best-known rating agencies are Standard & Poor's, Moody's and Fitch. |
rating class:An assessment of the risk of an obligor on the basis of a specified set of rating criteria. From this assessment, an estimate of the probability of default (PD) is derived. |
real estate funds:Funds that do not invest in securities but primarily in real property (land and buildings). |
real interest rate:provides information about changes in purchasing power of the capital employedIt is the nominal interest rate after deduction of the rate of inflation |
Real-Time-Index:An indication whose value is recalculated after each price event without delay. |
recapitalise:If earnings are reinvested all the income earned is invested again. Therefore investors will not receive any distributions during the year. |
recapitalised funds:see recapitalised securities |
recapitalised securities:For reinvesting all the income earned by securities is invested again. The investor thus receives no dividends during the year. However, he is involved in the appreciation of the re-invested income of the security. |
receiver swaption:corresponds to a put option on a interest rate swap,The purchaser of the receiver swaption has got the right but not the obligation to sell an specified interest rate swap at the strike price on the expiry date, i.e. he concludes a swap in which he receives a fixed interest rate in exchange of a variable one (e.g. EURIBOR). A receiver swaption can be used in order to hedge against falling interest rates.v. swaption |
Recovery Rate (RR):The recovery rate is that proportion of the unsecured exposure, which is still repaid in a credit default. |
redemption:Repayment of the outstanding capital. (borrowed) |
redemption price:The redemption price is that price at which a security is amortized at maturity. |
reduce:(reduce) Analysts estimate for a stock that it will performe worse than the comparable (industry) index in the coming months. Short-term price increases will be used to sell or to reduce position. |
Reference interest rate:risk-free interest rate for the same fixed-interest period for an alternative investment or refinancing on the interbank market. |
reference price:The price which has been most recently determined in an auction or during continuous trading for a particular security |
Refi:abbr. refinancing |
refinancing:Banks borrow to be able to lend. They can either borrow at the money market or the capital market. Cost of refinancing is determined by the uncertainty of the future interest rate development. |
registered share:Name shares are registered in the name of a natural or legal person, which is the name of the shareholder. The name is recorded in the share register of the Company. Opposite: bearer shares |
remaining term:Remaining maturity of debt securities from a transaction date or another date until maturity. |
replacement risk:The replacement risk is the risk of the bank that additional costs in replacing the same position in the market occur when a partner defaults. |
repo:abbr. for repurchase agreement,sale of securities with an simultaneous agreement, to repurchase them on a future date,A repo corresponds de facto to a security callateralized credit-taking.Basically there are two types US-style repo (classic repo) and sell and buy back.The PSA/ISMA Repurchase master agreement serves usually as the legal basis. opposite of repo: reverse repo |
reporting funds:White flowers Fund (so-called reporting funds) is treated for tax purposes as a domestic fund. Distribution income be verified by a tax representative in Germany (bank or public accountants) annually and the distribution and income equivalent returns are reported on an annual basis. The proportion of interest income is reported daily. |
representative for the capital market:Short for Special Government Representative for the capital market. |
Repurchase Agreement (Repo):A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement. Fundamental distinction is made between US-style repo (classic repo) and sell and buy back. The legal basis is the ISMA Purchase Master Agreement (ISMA Framework Agreement) |
repurchase of stocks:A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. Share repurchase is usually an indication that the company's management thinks the shares are undervalued. The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price. |
Resecuritization:see Securitization |
Reservekonto:(reserve account) account at the central bank on which a business partner maintains reserve balances. |
Residential Mortgage Backed Securities (RMBS):A type of mortgage-backed debt obligation whose cash flows come from residential debt, such as mortgages, home-equity loans and subprime mortgages. A residential mortgage-backed security is comprised of a pool of mortgage loans created by banks and other financial institutions. The cash flows from each of the pooled mortgages is packaged by a special purpose entity into classes and tranches, which then issues securities and can be purchased by investors. |
resistance line:A chart point or range that caps an increase in the level of a stock or index over a period of time. An area of resistance or resistance level indicates that the stock or index is finding it difficult to break through it, and may head lower in the near term. The more times that the stock or index has tried unsuccessfully to break through the resistance level, the more formidable that area of resistance becomes. On an interesting note, resistance levels can often turn into support areas once they have been breached. Resistance and support levels are widely used by experienced traders to formulate trading strategies. |
rest-of-day:(ROD) Temporary validity determination for unrestricted limit orders: rest-of-day |
restrictedly transferable share:These shares can only be transferred to other owners with the consent of the corporation. |
Result from ordinary activities:german abbr. Result from ordinary activities |
Retail Basel 2:In order that loans may be assigned as retail exposure, the following criteria must be met: borrowers criterion (borrower is a physical person or SME); Product criterion (revolving credit and credit lines, private loan or lease receivable or loans and lines of credit to SMEs); low loan amount (less than 1 million €) |
Retail Price Index (RPI):the retail price index is a measure for the average development of the prices of a basket of retail goods (incl. VAT) |
retirement arrangement:The entirety of all measures after leaving the working life of saved assets or accrued benefits to cover the further livelihood without restrictions in living standards. The pension system consists of three pillars: statutory pension scheme, company pension schemes and private pension plans. |
Return on Capital Employed:Operating income in relation to the sum of the fixed assets and current assets minus current liabilities |
return on equity:Earnings after taxes / equity x 100 |
return on investment:Percentage value change of an investment in a certain period. |
Return On Risk Adjusted Capital (RORAC):A metric that measures the yield in relation to that part of the equity that is necessary to cover banking risks and to cover the fixed assets. |
return on total assets:(ROTA) A ratio that measures a company's earnings before interest and taxes (EBIT) divided by its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. (EBIT/Total net assets) The greater a company's earnings in proportion to its assets , the more effectively that company is said to be using its assets. To calculate ROTA, you must obtain the net income figure from a company's income statement, and then add back interest and/or taxes that were paid during the year. |
Reuters:an information service company |
revenue from ordinary activities:Equivalent to the profit before tax and movements in reserves. |
reversal:closing a position through an opposite deal |
reverse repo:purchase of securities with a simultaneous agreement to re-sell them to the original seller on a future date,A reverse repo corresponds de facto a security callateralized credit lending. The PSA/ISMA Repurchase master agreement serves usually as the legal basis. opposite: repo |
reverse to maturity repo:a repo which has got the same final maturity as the security (collateral) |
rho:cp. epsilon |
right of access:Rights of shareholders to ask questions about to the company, the operating results and to the Executive Board at the General Meeting. In exceptional cases, the Board may refuse to provide information. |
right of application:Right of shareholders to make proposals at the General Meeting. |
risk bearing capacity:It indicates the extent of the risks, a credit institution is able to take due to its equity base. It is used as a incurred risk buffer for emerging risks. Several scenarios striking expected risks: going concern, stress case or liquidation |
risk business:Entering into banking risks such as interest rate risk, currency risk, liquidity risk and credit risk. |
risk category:Risk levels are a measure for determining the risk of an investment |
risk costs:Imputed risk premium to cover the expected credit losses. |
risk funnel (mifid):Provides opportunities and risks of an investment in graphical form. |
Risk protection:Hedging |
risk reversal:options strategy, where a out of the money call is purchased and a out of the money put is sold (or vice versa)smiles resp. skews are usually traded by means of risk reversals, the quotes usually refer to options with a delta of 25 %; e.g.:the quotation of a risk reversal is: calls are over 0,5meaning: the volatility of calls delta 25% (resp. puts delta 75%) is traded 0,5% higher than the volatility of puts with delta 25% (resp. calls delta 75%) |
risk-diversification:A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated. |
risk-free rate:Interest income by investing in so-called risk-free assets. (Debt securities) eg german federal loans. |
risk-free return:The theoretical rate of return attributed to an investment with zero risk. The risk-free rate represents the interest on an investor's money that he or she would expect from an absolutely risk-free investment over a specified period of time. In practice, however, the risk-free rate does not technically exist; even the safest investments carry a very small amount of risk. Thus, investors commonly use the interest rate on a three-month U.S. Treasury bill as a proxy for the risk-free rate because short-term government-issued securities have virtually zero risk of default. |
ROCE:abbr. Return on Capital Employed |
ROD:abbr. Rest-of-Day |
ROE:abbr. Return on equity |
ROI:abbr. Return on Investment |
roll-over credit:medium- or long-term credit with an agreement, that the interest rate is adjusted to a stipulated reference rate (e.g. EURIBOR or LIBOR) |
Rollercoaser swap:interest rate swap with an irregular nominal structure. The nominal structure is fixed at the beginning. |
rolling reference rate:A calculation method for a reference rate that allows the controllability of the interest rate and margin results in transactions without direct repricing and maturity structure (baw). Adjustment is calculated with a time delay from the average of the past months or years. |
RORAC:abbr. Return On Risk Adjusted Capital |
Round-Trip:Designation for the opening and an associated closing transaction at a Future Exchange. The total transaction costs are often calculated on a so-called round-trip basis. |
RPI (Retail Price Index):The RPI is an inflationary indicator that measures the change in the cost of a fixed basket of retail goods. |
RWA:abbr. Risk Weighted Assets |
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S/N:abbr. Spot/Next |
SAFE:abbr. for Synthetic Agreements for Forward Exchange, Types:1) ERA (Exchange Rate Agreement) Agreement between two parties to level off the difference between an agreed, future swap rate and the actual swap rate prevailing two days before the start of the swap term2) FXA (Forward Exchange Agreement): In FXAs the difference between an agreed outright-price and the spot price at the beginning of the swap period are leveled off additionally.Purpose of SAFEs is the fixing of future swap rates resp. outright prices, without settlement risk (at FX-swap deals). |
safety:The preservation of the assets invested. The safety of an investment depends on the risks to which it is subjected. This includes, for example, the creditworthiness of the borrower, the price risk, currency risk and the political stability of the country of investment. |
Samurai:a type of foreign bondindicates a bond which is issued from a foreign entity in Japan denominated in JPY |
saving plan:Regular payment of a certain investment amount for the purchase of investment units. The purchase of fund shares through a savings plan offers the advantage of cost averaging and also the possibility to flexibely design the amount and duration of the payments. Saving plans also reduce the difficulty of finding the ideal time to make an investment. |
SDR:abbr. special drawing right A measure of a countrys reserve assets in the international monetary system. also called paper gold |
secondary market:The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market. |
secondary market yield:Volume-weighted average return of all fixed-rate bonds of the federation (SMY-Bund) or all issuers (SMY issuers total) with a remaining maturity of more than one year. |
sector funds:A mutual fund that specializes in investing in selected industrial and economic activities, which can be particularly benefits from growth stocks. Examples are technology, software, pharmaceuticals, energy. |
sector index:Statistical measurement number (index), which displays the performance of certain sectors. (eg mechanical engineering, pharmaceuticals, etc.) |
Securities identification number:The Securities Identification Number (german WKN) is a unique national identification, which is awarded by the Austrian Control Bank. |
Securities Industry and Financial Markets Association:(SIFMA) International representation of interests of capital market participants, emerged from the merger of The Securities Industry Association (SIA) and The Bond Market Association (TBMA). www.sifma.org |
securities lending:With a securities lending, for example, of the Austrian Control Bank (OeKB) market participants can borrow securities for a period of time. e.g to cover existing short positions. |
Securities Supervision Act:Contains provisions relating to the supervision of investment services, defined rules of conduct and determines the authority for supervision on securities trading. Financial Market Authority (FMA). |
Securitization:Securitization of assets in an SPV (Special Purpose Vehicle), which shares may be sold to customers. Thus, the entire cash flow passes (incl. losses) of credit exposures to the buyers of the securitized loans. |
security:A financial instrument that represents: an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer. |
security lending:exchange of two securtities for a certain period, whereby one is a general collateral and the other is a special collateral. The recipient of the specials pays a premium which is quoted in % p.a.. |
security price:The price of a security is the price at which it can be bought or sold on the stock exchange. The price of a security that is traded on the stock market, depends on supply and demand. |
secutities market:Consists of the stock market and the bond market. |
sell and buy back:a type of repo,In contrast to the US-style repo the purchase- and sale-transaction are closed in two seperated contracts. Interim coupon payments are netted with the repo interest payment and considered in the price of the closing-transaction.Through the design in two seperated deals the substitution, margin calls and open repos are not possible in sell and buy backs. |
Service Center:Centers or departments of a bank, which serve to settle the affairs of any profit center. These include, for example, Domestic and foreign payment transactions, securities and treasury settlement or electronic banking departments. |
settlement:Delivery and payment of transactions |
settlement day:Settlement date for all of securities transactions on a regulated exchange. On that day delivery and payment for the securities takes place. |
Settlement price:A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. |
SGX:Singapore Exchange Entstand established in 1999 as a result of the merger between SIMEX (Singapore International Monetary Exchange) and SES (Stock Exchange of Singapore) |
share capital:Share capital of a corporation. It corresponds numerically to the nominal value of all shares issued and must be at least EUR 70,000. |
Shareholder:Owner of the stocks to which property rights and rights to vote are entitled. |
Shareholder Value:The asset (value), the owner of a share-holder of a public company owns consists of the (market) value of the stock multiplied by the sum of the shares held. A corporate policy focused on shareholder value will seek to maximize the market value of the shares and therefore the market value of the entire company. |
shareholder value concept:Increase the company's value is at the heart of corporate strategy. |
Sharpe-Ratio:The Sharpe Ratio is the a measure for calculating risk-adjusted return and this ratio has become the industry standard for such calculations. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. Generally, the greater the value of the Sharpe ratio, the more attractive the risk adjusted return. The Sharpe ratio is often used to compare the change in a portfolio's overall risk-return characteristics when a new asset or asset class is added to it. |
Shogun:bonds issued by foreign entities in Japan which are not denominated in JPY, the issuer needs a permission by the Japanese ministry of finance |
Short:shortcut for short position |
Short Put:Sold or written put. |
short selling:Sell an underlying asset without corresponding physical coverage. It creates a short position. |
SIB (D-SIB):abbr. (Domestic) Systemically Important Banks. Describes banks which would be dangerous for the national financial system if they collapse. (see also SIFI) |
SIFI (G-SIFI):abbr. (Global) Systemically Important Financial Institutions. Describes financial institutions whose insolvency / bankruptcy would have a serious effect on the financial markets and would lead to a collapse of the financial system. |
SIMEX:Singapore International Monetary Exchange merged 1999 with SES (Stock Exchange of Singapore) to SGX (Singapore Exchange) |
simple duration:cp. duration |
simple interest calculation:the general formula is: I = N * R * D/B whereI = interest amountN = nominal amountR = interest rateD = number of days of the interest periodB = assumed number of days of a year (360, 365 or actual calendar days) |
SIN (ISIN):(international) securities idenfitication number |
Singapore Exchange:(SGX) The SGX was formed in 1999 from the merger of SIMEX (Singapore International Monetary Exchange) and SES (Stock Exchange of Singapore). |
sinking fund:money, either cash or eligible securities,periodically set aside by the borrower to redeem all or parts of its long-term deptopposite: purchase fund |
skew:cp. smile |
small and medium-sized enterprises (CME):Small and medium enterprises (SMEs) are defined as companies that belong to a group with consolidated annual turnover of less than € 50 million. |
small caps:The shares of the smaller and lesser known companies are called small caps. |
smile:The smile-effect (or skew-effect) refers to the fact, that options with different strikes have a different implied volatility. Options pricing models usually assume equal volatilities for all strikes, which is frequently not true in financial markets. |
SONIA:abbr. Sterling Overnight Index Average reference rate of overnight GBP comparable to EONIA |
SONIA swap:GBP interest rate swap where a variable rate (SONIA) is exchanged against a fixed rate see also: OIS |
special assets:The at an investment company invested capital against the issue of share certificates and the associated fixed assets of the investement company are linked. |
special collateral:Used in contrast to general collateral to refer to specific securities required in a repo transactionAs the cash lender has a special interest in a specific security he is ready to accept a interest rate which is frequently significantly below the interest rate of general repos. |
special drawing rights (SDR):see SDR |
special funds:Are only available to institutional investors (max. 10) and can not be purchased by private investors. They are used mainly for accruals and pensions or for an individual fund management of a financially strong institution. |
special values:Represent values in certain industries. |
special-purpose entity:A legal entity that is established for a clearly defined purpose. After reaching its purpose, the company may be dissolved again. |
Specialist:The Specialist is a special type of liquidity provider, in comparison with the market maker, he is a kind of super-market-maker. He agrees on quotes towards higher volumes and tighter spreads. |
specific valuation allowances:The specific valuation allowance is used for the revaluation of a company's receivables. Thereby recognized foreseeable risks of default on individual exposures in the balance sheet will be taken into account. For banks valuation allowances have special significance because in case of banks loans and advances to customers account for a large share of the assets. The (threatened) failure of a borrower leads to form a specific valuation allowance at the lending bank. |
spot deal:a deal which has to be ful filled immediately, whereby -immediately- can be defined differently depending on the market,in foreign exchange market the spot-value is two working days after the trade date. |
spot market:Market for businesses that need to be fulfilled immediately or shortly after the completion. |
spot price:In contrast to the continuous quotation, the rate is established only once during the trading session. |
Spot Yield:see Zero Coupon Rate |
spot/next:indicates a period which starts on spot-day and ends on the following bank day example: on Tuesday the 15.03. S/N indicates the period from 17.03. Until 18.03. |
spread:1. difference between Bid and Ask of a quote2. often used in interest-rate-, futures- and stock market to express the differece in the price of two instruments |
spread margin:a margin-type which is applied by the EUREX at time-spreads,It is lower than the margin at non-spread-positions, because the risk of such a position is lower due to the simultane long and short position |
Squeeze-out:Method which allows the majority shareholder, force out small shareholders by means of a cash settlement from the company. |
SSR:The abbreviation SSR stands for Single Supervisory Mechanism that is build up together by the ECB together with the national supervisory authorities. |
Stable Deposits:Stable deposits are a part of retail exposures which are completely covered by an effective deposit insurance system or by public guarantees, which provide an equivalent level of protection and further either have close relationships with the bank (which makes a withdrawal of funds unlikely) or it concerns giro accounts, onto which, for example, salaries are deposited automatically. |
Standard & Poor's 500:An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor's. The S&P 500 is a market value weighted index - each stock's weight is proportionate to its market value. The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. |
standard combination:see combined order |
Standard Compliance Code (SCC):Matched minimum behavioral and organizational rules that govern the use of capital market-related information within the meaning of fairness to all market participants and adequate internal organization. |
standard deviation:standard deviation is a measure of the dispersal or uncertainty in a random variable. For example, if a financial variable is highly volatile, it has a high standard deviation, indeed, standard deviation is frequently used as a measure of the volatility of a random financial variable. |
standardised approach (Basel II Credit risk):The most basic approach to credit risk in the new Basel framework. Capital requirements are calculated by multiplying the value of a the exposure of a firm by an appropriate risk weight. The risk weights are calculated by using external credit ratings. |
steep yield curve:v. normal yield curve |
step up bond:bond with a coupon that increases during maturity in fixed steps |
step up swap:coupon swap at which the fixed interest rate rises during maturity in an agreed magnitude |
Sterling Overnight Index Average (SONIA):(SONIA) reference rate for overnight money in GBP. |
stock:A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. The quote of the share arises from offer and demand on the stock exchange and represents the value of the enterprise. |
stock analyses:Stock analysis is a term that refers to the evaluation of a particular trading instrument, an investment sector or the market as a whole. Stock analysts attempt to determine the future activity of an instrument, sector or market. There are two basic types of stock analysis: fundamental analysis and technical analysis. Fundamental analysis concentrates on data from sources including financial records, economic reports, company assets and market share. Technical analysis focuses on the study of past market action to predict future price movement. |
stock basket:(Basket) Any arrangement of stocks which is based, e.g., on basis of a share index. |
stock forum (Austrian Association of Share Issuers and Investors):The share forum is a platform for the promotion of equity financing in Austria and a partner of the Industrial Association. By continuing an active dialogue with and between all groups in the capital market and by means of active public relations and information work the share forum is supporting further developments of the Austrian capital markets. www.aktienforum.org |
stock index:A statistical measure of changes in a stock market. An index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value. |
stock market:The market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets. |
stock market act:(Stock Exchange Act), the Stock Exchange Act regulates the relationship between exchange members/traders/customers on the one hand and the exchange operating company on the other hand. The Stock Exchange Act contains further provisions concerning the approval of transport items to regulated markets, the duties of issuers and partly the Financial Services Authority. |
stock market capitalisation:Also, market capitalization. Expresses the total value of all securities traded and operated on a stock exchange, ie the value of the total market. The market capitalization of each company will be added. |
stock market crash:As a stock market crash is referred to a particularly strong decline of an entire group of securities (not just a single share) in only one trading day. |
stock market usages:The implementation of commercial practices which incurred in the habitual carrying out of exchange transactions and have finally been formed to business conditions in the securities markets. |
stock option:An option whose underlying is a stock. |
stock price:Price of traded shares on the stock exchanges. The price (market price) is determined by the current relationship between supply and demand. Important influencing factors are the economic expectations which are expected for a listed company, but also economic conditions (especially interest), political expectations, speculation and interest purchases. |
stock split:A corporate action in which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split did not add any real value. The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares for every share held earlier. |
Stop Limit Order:An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better. |
Stop Market Order:There are basically two types of Stop Orders: Stop limit orders and stop market orders. Stop orders are placed in the general order book after exceeding or falling below the desired stop limit as a market order or a limit order. Stop orders are additional instruments to limit risks. |
Stop Orders:There are basically two types of Stop Orders: Stop limit orders and stop market orders. Stop orders are placed in the general order book as a market order or a limit order if the spot rate exceedes or falls below below the desired stop limit. Stop orders are additional instruments to limit risks. |
Stop-Loss-Limit:A stop-loss limit defines the maximum loss that a bank is willing to accept for a position. If the stop-loss limit is reached, the dealer must close the position immediately, and thus realize the loss. |
STOXX-Indizes:A series of market indexes that are representative of the European and global markets. These indexes cover a wide range of market segments including the broad market, blue chips, individual sectors and global indexes. While there are global STOXX indexes, the majority of the focus is placed on the European market. The STOXX indexes were created out of a venture between Dow Jones, Deutsche Boerse AG, and the SWX group. These indexes are tradable on the futures and options market and are also used as benchmarks for funds that trade in the European and global markets. The Dow Jones Industrial Average in the U.S. is similar to the Dow Jones STOXX 50 Index. |
straddle:options strategy long straddle: purchase of a call and a put option with identical strikes short straddle: sale of a call and a put option with identical strikes (usually at the money) |
straight bond:v. fixed rate bond |
straight deposit:an interbank-deposit with a straight maturity, i.e. with entire months |
strangle:options strategy long strangle: purchase of a call and a put with different strikes, both out of the money short strangle: sale of a call and a put with different strikes, both out of the money |
stress testing:stress testing methods are used in order to check the reliability of value at risk calculation methods (e.g. variance/covariance method, monte carlo simulation, historical simulition) in extreme market conditions stress testing methods as well as back testing methods are essential supplements to value at risk models |
Stresstest:A simulation technique used on asset and liability portfolios to determine their reactions to different financial situations. Stress tests are also used to gauge how certain stressors will affect a company or industry. They are usually computer-generated simulation models that test hypothetical scenarios. Stress testing is a useful method for determining how a portfolio will fare during a period of financial crisis. The Monte Carlo simulation is one of the most widely used methods of stress testing. |
strike price:(Exercise price, exercise price, strike price) the price at which the underlying may be bought or sold upon exercise of the option. |
Strong-buy:Strong BUY recommendation of an analyst who expects a significantly better price development for a share than for an (industry)index . |
Strong-sell:Strong SELL recommendation of an analyst who expects a significantly worse price development for a share than for an (industry)index . |
structure contribution:Part of the result from the market interest rate method, which represents the profit / loss of a bank from the structure of the fixed interest rates of all transactions entered (balance sheet items). Mathematically, the structural contribution shall be determined by the respective asset and liability volumes are measured at the corresponding reference rates from the interbank market. |
subscription period:Period in which securities may be acquired under the terms of issue of the primary market. |
subscription right:It defines a right to purchase shares. They are offered to the shareholders, if the corporation intends to increase its capital stock and therefore it places new shares on the stock exchange. |
substitution:agreement in a repo that allows the seller to replace the bond during the maturity by another bond with similar quality (only in repos with general collateral. |
supervisory board:Corporate body of the corporation, which appoints, dismisses and monitores the Executive Board. The Supervisory Board is elected at the Annual General Meeting and represents the interests of the owners (shareholders). |
Sushi:JPY-bond of Japanese companies in the Euro-market,The number of permitted company is limited by the Japanese ministry of finance. |
Swap:English term for exchange. Three basic types can be distinguished: interest rate swaps, currency swaps and combined interest rate and currency swaps. The partners will exchange payment obligations, in which fixed interest payments are swapped for floating ones or loans in different currencies are exchanged. |
swapnote:futures contract at the LIFFE, where the underlying instrument is an interest rate swap introduced in 2001 with terms of 2, 5, and 10 years denominated in EUR similar contracts in USD are available at CBOT and CME |
swaption:Option on an interest rate swap. Types:payer swaption: corresponds to a call option on an interest rate swap,The purchaser of the payer swaption has got the right but not the obligation to purchase a specified interest rate swap at the strike price, i.e. he concludes a swap in which he pays a fixed interest rate in exchange of a variable one (e.g. EURIBOR).Receiver swaption corresponds to a put option on a interest rate swap, The purchaser of the receiver swaption has got the right but not the obligation to sell a specified interest rate swap at the strike price on expiry date, i.e. he concludes a swap in which he receives a fixed interest rate in exchange of a variable one. |
syndicate:see underwriting syndicate |
syndicate banks:Banks that form an emission syndicate together. |
Synthetic Agreements for Forward Exchange:v. SAFE |
synthetic FRN:combination of a fixed rate bond and an interest-rate swap, which changes the fixed coupons into variable interest income |
synthetic position:A simulated position by combining underlying, futures and / or options positions. Long Call combined with short put synthesized Long Underlying. + C = P + S |
systematic risk:Part of the overall risk in equities, which is induced by fluctuations in the overall market. |
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T+3:arrangement |
T-Bill:v. Treasury Bill |
T-bond:abbr. of Treasury Bondsecurity issued by the US-american ministry of finance (treasury) with a maturity of at least ten years and semiannual coupon payments |
T-Note:v. Treasury Note |
T/N:v. tom/next |
taken deposit:see interbank deposit |
tap issuance:A debt security that is offered with the same terms over a longer period in the primary market for the initial purchase. Most bond issues are tap issues today. |
tap issue:method of issuing securities, the full amount is issued in several parts, depending upon the cash demand of the borrower |
taxable profit:It refers to the portion of the total increase in value, derived from interest, dividends and rental income. (Ordinary income) The taxable income proportion is the highest for classic bond and the lowest equity funds funds. |
taxation at source:Due to the investment income tax of 25% in the payment of interest income, income tax is already settled. |
TBMA:The Bond Market Association,formerly PSAwww.bondmarkets.com |
technical analysis:A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. |
tender procedure:Auction system of central banks to provide liquidity to commercial banks or withdraw liquidity from the market; most important monetary policy instrument of the central banks in the context of open market policy. Variants: main tender; Base Tender; Fine-tuning operations |
term repo:a repo with fixed maturityopposite: open repo |
TFX:abbr. Tokyo Financial Exchange |
The Bond Market Association:(TBMA) Merged in the Securities Industry and Financial Markets Association. www.sifma.org |
theta:risk factor of options expresses the decrease in an options price if the time passes by (usually one day) |
third-party issue:A bank or a bank consortium takes over the placement of the shares. |
Through the Cycle (TTC):external rating regarding the probability of default calculated beyond a business cycle |
TIBOR:abbr. for Tokio Interbank Offered Rate |
tick:the smallest possible price movement of a future,The size of a tick is determined by the stock exchange and is usually between 0.5 and 1 base points. |
tick value:The tick value is the profit or loss which emerges from a change of the futures-prices by one tick based upon one contract. |
TIFFE:The Tokyo International Financial Futures Exchange |
tight market:This is a market in which a security is traded irregularly or in small numbers. |
time deposit:Term money or time deposits are deposits that are invested for a limited time. There are two types of time deposits: fixed term deposits and call money |
Time Spread:(Horizontal spread) Combined option strategy, in which options of the same type are bought and sold simultaneously with the same strike prices but with different maturities. Time spreads are usually traded to earn on volatility and/or volatility curve views |
TOIS:abbr. Tomnext Overnight Index Swap CHF interest rate swap where the floating rate is linked to the reference rate of tomnext CHF see also: OIS |
Tokio Interbank Offered Rate:(TIBOR) money market interest rate for short-term loans in YEN. |
Tokyo Financial Exchange:(TFX) The Tokyo Financial Exchange was founded in 1989 as the Tokyo International Financial Futures Exchange (TIFFE) and changed its name in 2005. www.tfx.co.jp |
Tokyo International Financial Futures Exchange:(TIFFE) Since 2005, the former TIFFE is now called Tokyo Financial Exchange (TFX). |
tom/next:indicates a period which starts one day after the trading day and ends on the following bank dayexample: on Tuesday the 15.03. T/N indicates the period from 16.03. to 17.03. |
Tomnext Overnight Indexed Swap:(TOIS) CHF interest rate swap where the variable side for CHF TomNext money is tied to the reference rate. see also: Overnight Indexed Swap. |
Top:Description of the technical stock analysis for the summit (top) of a bull market movement. The end of a bull market movement can have several tops side by side. One of the most important is the head and shoulders pattern. |
top-down approach:In the top-down approach, the fund management picks stocks on the basis of economic analysis, according to which country quotas then be determined. Contrary bottom-up approach. |
Topping out:Anglo American phrase which means a market or a stock which / that has reached the end of a bull market and which is expected, that he / it will maintain the level or will be declining. Contrary bottoming out. |
Total-Expense-Ratio:(TER) The Total Expense Ratio indicates which costs incurred (as a percentage of the fund's assets) in the fund during the last fiscal year. These costs include the management fee, custodian fees, consultant fees, auditing costs as well as possible costs that incurred. The lower the number, the less costs were billed to the Fund. |
Tracking-Error:Deviation of a portfolio on the performance of a chosen benchmark index. |
trade balance:Part account balance of payments and the current account of an economy. It records imported and exported goods. A trade surplus (so-called trade balance.) Means that more goods are exported than imported (contrary trade deficit). |
trade monitoring:Supervisory body of the stock market, which monitors the trading and business transactions. It ensures the regularity of the price fixing and records all data on exchange trading. |
Trader, Trading:Anglo American term for a securities dealer to carry out transactions on behalf of others but also (as opposed to a broker) for their own account. |
trading book:The trading book consists of all transactions of the Bank, which are used for generating trading results and to apply their own legal regulations. (see Capital Adequacy Directive). |
trading day:Day on which trading on regulated exchanges takes place. On Saturdays, Sundays and public holidays, the markets remain closed. |
trading session:A period of time consisting of one day of business in a financial market, from the opening bell to the closing bell. Within the time frame of the trading session, all orders for the day must be placed, and buyers and sellers both participate in setting current market prices. |
trading suspension:A stoppage in the trading of a security for an extended period of time that normally occurs when there is a lack of material financial information on the security. Once the security is suspended, shares of that security cannot be traded on the market until the suspension is lifted or lapses. The exact amount of time for the suspension will be determined on on a case-by-case basis. The most common reason for suspension is due to a lack of publicly available, relevant and current financial information. |
trading system:Computer systems that enable electronic trading of securities. |
trading unit:see contract size |
transaction costs:Expenses incurred when buying or selling securities. Transaction costs include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price the buyer pays). The transaction costs to buyers and sellers are the payments that banks and brokers receive for their roles in these transactions. There are also transaction costs in buying and selling real estate. These fees include the agent's commission and closing costs such as title search fees, appraisal fees and government fees. For the securities account custodian fees have to be paid at the bank. |
transfer price:Internal transfer prices of interest rate risk, liquidity risk, foreign exchange risk and credit spread risk |
transfer price system:That price which will be charged between different areas of a company or between companies in a group for internally exchanged services based on market observable reference rates. |
transfer risk:see country transfer risk |
treasury bill:short-term security issued by the US-Treasury (ministry of finance), T-bills exist in other countries too. |
treasury note:A debt security is issued by the federal government to cover the short to medium-term capital requirement (up to 5-year term). Treasury notes are usually bought by institutional investors. |
treasury-bond:v. T-bond |
Trend:Direction of development. In the chart analysis it is assumed that future price movements follow certain trends. Distinction is made between long-term primary trend (more than one year), medium-term secondary trend (up to several months three weeks), short-term tertiary trend (less than three weeks) as well as uptrend and downtrend. |
trend-channel:A trend channel consists of two trend lines. Of an upper and a lower trend line. |
Treynor Ratio:A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. In other words, the Treynor ratio is a risk-adjusted measure of return based on systematic risk. It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility. |
troy ounce:The ounce is a measure of weight that is commonly used for precious metals. A troy ounce is 31.10348013 grams. |
true yield:Annualized return on a security calculated taking into account the compounding effect. |
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ufn:abbr. Until further notice |
umbrella funds:Funds that invest their funds in sub-funds, ie in shares of other funds. They thus serve as a form of standardized asset management. |
unconditional forward transaction:see Futures and Forwards |
underlying:Instrument on which an derivative (option, forward contract) is based |
underlying instrument:v. underlying |
Underperformer:(sell) analyst expects a significantly worse price development for a share than for the (industry)index. |
underwriting syndicate:(Consortium) merger of banks to perform a security issue (emission) for a customer. The greatest possible range of interested parties should be addressed and their own risk should be minimized. |
Unexpected Loss (UL):(Unexpected Loss - UL) defines the possible loss amount of credit risk exposures, which exceeds the expected loss in the context of risk management. This unexpected loss must be backed with equity by financial institutions. (economic capital). |
unit quotation:In case of equities usual indication of the price in euros per security. Contrary percent quotation |
until further notice:Commonly used terms in the agreement of deposit and lending business. It is a condition agreed with the customer, but the interest rate adjustment (time scale, indicator) remains open. |
US commercial paper:in the US-domestic market issued commercial paper,traded on a discountbasis i.e. at a discount to face value (in contrast to ECP) |
US Generally Accepted Accounting Principles:(US GAAP) International accounting standards that enable international comparisons of enterprise data. |
US-GAAP:abbr. US Generally Accepted Accounting Principles |
US-style repo:also classic repo,a repo at which the purchase and sale of the security are concluded in a single agreement (in contrast to sell and buy back),interim coupon payments are transmitted to the seller (=manufactured dividend). The advantage compared to sell and buy backs is the possibility of open repos and substitutions-agreements. |
Usancen:stock market usages |
USCP:v. US commercial paper |
USD:abbr. ISO currency code for US-Dollar |
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V-formation:Price movement in a graph whose history looks like the letter V. Technical analysts, it is usually referred to as a positive indicator. |
value at risk (VAR):value at risk (VAR) is a statistical risk measure which is used extensively for measuring the market risk of portfolios of assets and/or liabilities.Value at risk is defined as follows: The amount of money such that a portfolio is expected to lose less than that amount of money 99 days out of 100. The above definition is for 1-day value at risk measured at the 99% confidence level. |
value range:In the value range of banking, the composition of the success rate of the bank is determined. |
Value-Fund:A stock mutual fund that primarily holds stocks that are deemed to be undervalued in price and that are likely to pay dividends. The premise of value investing is that the market has inherent inefficiencies that enable companies to trade at levels below what they are actually worth. In theory, once the market corrects these inefficiencies, the value investor will see the share price rise. Value funds are one of three main mutual fund types; the other two are growth and blend (a mix of value and growth stocks) funds. |
VAR:see value at risk |
variable interest:The interest rate is periodically adjusted to current interest rates. |
variable price quotation:In the variable quotation, prices change constantly during a trading day. |
variable rate tender:A tender procedure whereby the counterparties bid both the amount of money they want to transact with the central bank and the interest rate at which they want to enter into the transaction. When making the allocation the bids with the higher interest rates are handled with priority until completion of the procedure proposed by the Central Bank total amount reached. The allocation can be done either by the Dutch method defined at the lowest interest rate level accepted (also called marginal rate) or after the American method to the individual bid rates. Contrary to variable rate tender: fixed rate tender |
variable return:The yield is dependent on the amount of generated profit for the company. |
variance/covariance method:statistical method to calculate value at risk (var) The variance/covariance method employs historical volatilities and correlations between the risk categories. Due to the fact that only the linear relation between a price change and the change of the value of the portfolio is considered, it is not possible to show the risk of options precisely. Other methods: monte carlo simulation and historical simulation |
variation margin:daily settlement of profits or losses, Thus it is guaranteed that there is no under- resp. over-securitisation of an open position. |
vega:risk factor of options, also called kappa expresses how much the price of an option changes if volatility increases by one percentage point e.g.: call EURUSD, premium 3.50 USD Ct, vega 0.25 meaning: if volatility increases by one percentage point (e.g. from 11% to 12%) the price of the option changes from 3.50 USD Ct to 3.75 USD Ct |
Venture Capital:(Venture Capital) equity capital that unlike a loan does not depend on collateral, but rather from the estimated return potential of the financed company. |
vertical spread:see price spread |
Vola:abbr. Volatility |
volatility:measure of uncertainty for a random variable such as stock prices, FX-rates, interest rates etc. Volatility is similar to the statistical term standard deviation. |
volatility interruption:This is a protective mechanism to increase price continuity in both during the auction and during the continuous trading. A volatility interruption is triggered if the potential execution price of an order is outside the static price range or the dynamic price range. |
voting right:The right of shareholders in the Annual General Meeting to vote for or against applications submitted. A share is usually a right to vote, but there are also non-voting preferred shares. |
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Wall Street:Wall Street is the name of a street that runs through the New York financial district and where the New York Stock Exchange (NYSE) is located. Wall Street is therefore a synonym for both the NYSE itself, as well as the economic heart of the US, the financial center of New York. |
Warrant:(Warrant). Like options warrants securitize the right to buy within or at the end of a certain period of time a specific underlying asset at a price known in advance or to sell. However, while options are strictly standardized, the warrants of each provider have different characteristics. |
weighted risk assets:sum of counterparty risk weighted and instrument weighted assets |
white funds:Similar dividend returns are calculated once a year and proved to the BMF, by a tax representative in the domestic country (bank or chartered accountant) |
Wholesale deposits:A deposit at a bank made by an institutional investor, a large business, another bank or an investment vehicle such as a mutual fund or pension. Wholesale deposits are usually large amounts of money, and wholesale clients are sometimes prioritized more highly than individual customers. |
widely held stock:Proportion of shares, which is located at the systems operated by an exchange company markets in circulation and is divided into a number of investors. |
writer:The writer holds a short position in a particular option series. With a call, he has the obligation to sell the underlying at a fixed exercise price until the expiry date if the holder exercises the option. With a put he must buy the underlying asset to the expiration date if the holder exercises the option. |
writing:Issuance of an option by the writer. Leads to a short position. |
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XAG:ISO code for troy ounce of silver |
XAU:ISO code for troy ounce of gold |
XBA:ISO code for Bond Markets Units European Composite Unit (EURCO) |
XDR:ISO code for Special Drawing Right |
Xetra:Bonds can thereby be traded. (In Vienna are thereby equities and bonds traded) |
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Yankee:a type of foreign bondindicates a bond which is issued from a foreign entity in the USA denominated in USD |
Year-to-Date:(YTD) Identifies the total return on a given date (present value). |
YEN:abbr. ISO currency code for japanese yen |
yield:annual percentage return on an investment |
yield curve:A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth. There are three main types of yield curve shapes: normal, inverted and flat (or humped). A normal yield curve is one in which longer maturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time. An inverted yield curve is one in which the shorter-term yields are higher than the longer-term yields. A flat (or humped) yield curve is one in which the shorter- and longer-term yields are very close to each other. The slope of the yield curve is also seen as important: the greater the slope, the greater the gap between short- and long-term rates. |
YTD:abbr. Year-to-Date |
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zero coupon bond:v. zero-bond |
Zero Coupon Rate:see zero-coupon rate |
zero coupon yield curve:v. zero-curve |
zero-bond:bond without interim payments of interest,Zero-bonds are issued at a discount to the principal amount. The yield results from the difference between the issue price and the redemption value. |
zero-coupon rate:the yield which result from the investment in a zero-bond, if one holds it till maturity (yield-to-maturity),The advantage of investing in a zero-bond is that the calculated yield can be reached in reality because there is no re-investment-risk, due to the absence of interim coupon payments |
zero-curve:The zero-curve shows the relation between the maturity and the zero-coupon rate.The zero-curve can be derived from the normal interest curve, by eliminating the interim interest payments. |