Cyber*School

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 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).

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)

see strike price

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.

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.)

The risk that prices of similar, but not identical instruments do not fully correlate.

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

1/100 of one percentage point i.e. 0,01 %

abbr. of British Bankers Association

An investor with pessimistic market expectation, unlike a bull.

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.

security which entitles the bearer to claim the certified rights

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.

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.

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.

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.

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.

see also basic indicator approach

v. bid-rate