Cyber*School

abbr. Spot/Next

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).

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.

a type of foreign bondindicates a bond which is issued from a foreign entity in Japan denominated in JPY

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.

abbr. special drawing right A measure of a countrys reserve assets in the international monetary system. also called paper gold

The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market.

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.

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.

Statistical measurement number (index), which displays the performance of certain sectors. (eg mechanical engineering, pharmaceuticals, etc.)

The Securities Identification Number (german WKN) is a unique national identification, which is awarded by the Austrian Control Bank.

(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

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.

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 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.

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.

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..

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.

Consists of the stock market and the bond market.

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.

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.

Delivery and payment of transactions

Settlement date for all of securities transactions on a regulated exchange. On that day delivery and payment for the securities takes place.

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.

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 of a corporation. It corresponds numerically to the nominal value of all shares issued and must be at least EUR 70,000.

Owner of the stocks to which property rights and rights to vote are entitled.

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.

Increase the company's value is at the heart of corporate strategy.

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.

bonds issued by foreign entities in Japan which are not denominated in JPY, the issuer needs a permission by the Japanese ministry of finance

shortcut for short position

Sold or written put.

Sell an underlying asset without corresponding physical coverage. It creates a short position.

abbr. (Domestic) Systemically Important Banks. Describes banks which would be dangerous for the national financial system if they collapse. (see also 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.

Singapore International Monetary Exchange merged 1999 with SES (Stock Exchange of Singapore) to SGX (Singapore Exchange)

cp. duration

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)

(international) securities idenfitication number

(SGX) The SGX was formed in 1999 from the merger of SIMEX (Singapore International Monetary Exchange) and SES (Stock Exchange of Singapore).

money, either cash or eligible securities,periodically set aside by the borrower to redeem all or parts of its long-term deptopposite: purchase fund

cp. smile

Small and medium enterprises (SMEs) are defined as companies that belong to a group with consolidated annual turnover of less than € 50 million.

The shares of the smaller and lesser known companies are called small caps.

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.

abbr. Sterling Overnight Index Average reference rate of overnight GBP comparable to EONIA

GBP interest rate swap where a variable rate (SONIA) is exchanged against a fixed rate see also: OIS

The at an investment company invested capital against the issue of share certificates and the associated fixed assets of the investement company are linked.

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.

see SDR

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.

Represent values in certain industries.

A legal entity that is established for a clearly defined purpose. After reaching its purpose, the company may be dissolved again.

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.

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.

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.

Market for businesses that need to be fulfilled immediately or shortly after the completion.

In contrast to the continuous quotation, the rate is established only once during the trading session.

see Zero Coupon Rate

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.

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

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

Method which allows the majority shareholder, force out small shareholders by means of a cash settlement from the company.

The abbreviation SSR stands for Single Supervisory Mechanism that is build up together by the ECB together with the national supervisory authorities.

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.

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.

see combined order

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 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.

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.

v. normal yield curve

bond with a coupon that increases during maturity in fixed steps

coupon swap at which the fixed interest rate rises during maturity in an agreed magnitude

(SONIA) reference rate for overnight money in GBP.

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 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.

(Basket) Any arrangement of stocks which is based, e.g., on basis of a share index.

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

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.

The market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets.

(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.

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.

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.

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.

An option whose underlying is a stock.

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.

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.

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.

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.

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.

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.

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.

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)

v. fixed rate bond

an interbank-deposit with a straight maturity, i.e. with entire months

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 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

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.

(Exercise price, exercise price, strike price) the price at which the underlying may be bought or sold upon exercise of the option.

Strong BUY recommendation of an analyst who expects a significantly better price development for a share than for an (industry)index .

Strong SELL recommendation of an analyst who expects a significantly worse price development for a share than for an (industry)index .

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.

Period in which securities may be acquired under the terms of issue of the primary market.

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.

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.

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).

JPY-bond of Japanese companies in the Euro-market,The number of permitted company is limited by the Japanese ministry of finance.

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.

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

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.

see underwriting syndicate

Banks that form an emission syndicate together.

v. SAFE

combination of a fixed rate bond and an interest-rate swap, which changes the fixed coupons into variable interest income

A simulated position by combining underlying, futures and / or options positions. Long Call combined with short put synthesized Long Underlying. + C = P + S

Part of the overall risk in equities, which is induced by fluctuations in the overall market.