Cyber*School

abbr. Cercle Investor Relations Austria

In trading terminology the exchange rate between British pound sterling and U.S. dollar (GBP/USD) is called cable.

see Capital Adequancy Directive

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.

v. payer swaption

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

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.

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.

the measure of the sufficiency of a firm's financial resources to enable it to meet its business and regulatory obligations

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.

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.

(CAPM) A model of capital market theory, which postulates a linear relationship between the expected return and systematic risk of shares.

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.

Financing of a company by an increase in equity. The possible forms depend on the legal form of the company.

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.

mixture of EURIBOR and capital market floater

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.

the minimum ratio of regulatory capital to risk-weighted assets (currently at 8 %)

Reduction of the share capital, for example, to to eliminate losses incurred. Usually performed as part of a reorganization.

Capital risk is the possibility of losing the capital invested.

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.

see market capitalisation

a single option out of a capv. cap

abbr. Capital Asset Pricing Model

Result of the cash flow statement / sum of cash and cash equivalents

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.

An instrument whose value is determined directly in the markets. Stocks, commodities, currencies and bonds are cash instruments.

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.

see also collateralised bond obligation

Chicago Board Options Exchangefounded in 1973 as subsidiary of the CBOTwww.cboe.com

Chicago Board of Tradebiggest futures market in the world, founded in 1848, commodities- as well as financial contracts are tradedwww.cbot.com

abbr. Credit Card or Cost Center

v. Cross Currency Swap

v. certificate of deposit

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.

An international clearing house established at the Bank of England.

The securities depository in the Austrian Control Bank is the central Austrian depositary for securities.

Costs for services of the headquarters Bank, but are directly attributable to customer business.

(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.

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 evidencing the right to participate in the performance of an underlying investment such as a stock, an index, a commodity or a foreign currency.

abbr. Common Equity Tier 1

abbr. Contract for Difference

Share price addendum money and goods

Graphical representation of a price development.

see technical analysis

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.

abbr. ISO Currency code for swiss franc

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

The first options exchange in the United States was founded in 1973. Today especially strong in index derivatives. www.cboe.com

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

abbr. Cost-Income-Ratio

v. US-style repo

see interbank deposits

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.

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.

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.

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.

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.

see also collateralised loan obligation

The last price of the trading day, which was formed for a continuously traded security. Contrary opening price.

closing a position through cancelling the original dealThe party with the positiv present value gets a compansation payment from the counterparty

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

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.

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.

Takes place as the final act of the main trading phase in the market model of continuous trading.

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.

abbr. Contribution margin

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

abbr. Central Money Markets Office international clearing institution established by the Bank of England

v. constant maturity swap

abbr. Cost of Carry

abbr. Contingent convertible

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.

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)

asset pledged as a guarantee for repayment of a granted loan

a multi-tranche debt structure, similar to a collateralised mortgage obligationbut rather than mortgages, low-rated bonds serve as the collateral

a structured bond backed by the loan repayments from a portfolio of pooled personal or commercial loans, excluding mortgages

a type of asset-backed security, in this case backed by mortgage payments

see combined Order

An order that refers to several options series simultaneously.

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.

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.

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

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

Period for which a business or person is bound on predetermined services, such as Payment or collection.

The bound core capital by the legislator is the prescribed minimum capital for limiting market, credit and currency risks.

see European Banking Authority (EBA)

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) 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.

Shares that grant all rights available to a shareholder. These are mainly economic rights and voting rights.

Sets down binding rules of conduct for banks, insurance companies and pension funds, which primarily refer to the prevention of insider trading.

Grouping several portfolios with similar investment strategy or composition. Composites show management performance in the respective segments.

Bond, which is similar in construction to a dual currency bond, however, refers to a basket of currencies

Calculation of the final value that results after a certain time, starting from a present-day capital amount by adding the compound interest.

interest which are charged for the accumulated interest

any single exposure or group of exposures with the potential to produce losses large enough to threaten a bank's health

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 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.

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).

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).

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 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.

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.

see option transaction

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.

Term for the termination unit prescribed in the forward markets for options and futures transactions.

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.

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.

The contract specifications define the contractual arrangements of futures and options (in terms of underlying, maturity, strike price, contract size, delivery, etc.).

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.

Number of contracts traded.

A positive contribution covers all direct costs (centralized and decentralized).

Conversion of a debt security into a new one with modified conditions.

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.

This refers to the corrected conversion price using the current bond price.

Upon exercise of the conversion the executing participant is obliged to pay a premium. (conversion premium)

The price one has to pay for a stock when a convertible bond is purchased, which is subsequently converted into shares.

The right for the investor to exchange a convertible bond into shares.

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 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

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

A bond that is issued by an industrial company. In case of corporate bonds, the issuing company is liable with its assets.

Represents responsible on long-term value creation focused management and control

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).

the correlation of the credit ratings or rating changes of entities in a portfolio

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.

(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.

Costs incurred by the possession of an asset item.

ratio which establishes costs in per cent of gross earnings

in general, a counterparty is any of the participants in a financial contract

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)

The counterparty limit is a credit risk limit that restricts the credit risk for each counterparty.

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.

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).

see also transfer risk

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.

Date on which the payment of interest (the coupon) of an interest-bearing instrument has to be paid.

The coupon sheet consists of individual parts with which certain rights are asserted but which depend on the nature of the security.

interest rate swap in which a fixed interest rate (coupon) is exchanged against a variable interest rate (e.g. EURIBOR, LIBOR) opposite: basis swap

Statistical measure of the relationship or the synchronization of two sizes.

The costs associated with a bond issue voluntary obligations of the issuer.

(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)

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.

combination of being long the underlying and selling the call.

v. commercial paper

abbr. Capital Requirements Directive

percentages set by regulators to convert off-balance sheet items to credit-equivalent assets

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.

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.

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.

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.

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.

A total value of exposure that a bank is exposed to at the time of default

an insurance policy that compensates in the event that a party defaults

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.

the extent to which the credit quality of an obligor or counterparty improves or deteriorates

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.

The counterparty (borrower) are classified according to their probability of default in homogeneous groups of customers (= with similar damage progression).

the risk of a bank or other entity to lose money due to the default of its counterparty

the process of determining the extent of credit risk inherent in a financial instrument or portfolio

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.

a system used by lenders to calculate the statistical probability that a loan they grant will be repaid

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.

The VaR of a loan portfolio is called credit value at risk.

a security with redemption and/or coupon payments linked to the occurrence of a credit event with respect to a specified reference entity

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.

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

a clause in a loan or other debt contract that specifies that an entity is in default if it fails to pay another obligation

abbr. Capital Requirements Regulation

abbr. Central Securities Depository

abbr Cheapest-to-Deliver

see interpolation

the percentage of borrowers who default during the lives of their loans in a given portfolio

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

occurs when, in a hedge, the credit protection is denominated in a currency different from the exposure

Risk of a reduction in bank results due to exchange rate changes.

Current assets / short-term liabilities x 100i

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.

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.

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.

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.

The fee received by a bank or a investment company for custody and administration of fund shares.

Customer transactions are conducted between the Bank and the Customer at the published rate in the quotation list.