FOREX (Foreign Exchange Market) is a global currency market that exchanges currency from one country to the currency of another at a changing rate, subject to the date of exchange.
FOREX is a virtual network of currency dealers connected among themselves by means of telecommunications. FOREX currency dealers are connected to leading world financial centres, and round the clock workers. As a result, FOREX forms a united and very efficient system.
The foreign exchange market owes its existence to the 1971 abandonment of the Bretton Woods accord and the subsequent unwinding of the regime of universal fixed exchange rates.The history of stock exchanges can be traced to 12th century France, when the first brokers are believed to have developed, trading in debt and government securities. Unofficial stock markets existed across Europe through the 1600s, where brokers would meet outside or in coffee houses to make trades. The Amsterdam Stock Exchange, created in 1602, became the first official stock exchange when it began trading shares of the Dutch East India Company. These were the first company shares ever issued.
The main participants of a foreign exchange market are:
Commercial banks
Exchange markets
Central banks
Firms that conduct foreign trade transactions
Investment funds
Broker companies
Private persons
ROLE OF THE EXCHANGE RATE
The exchange rate is a price—the number of units
of one nation’s currency that must be surrendered
in order to acquire one unit of another nation’s
currency. There are scores of “exchange rates”
for the U.S. dollar. In the spot market, there is an
exchange rate for every other national currency
traded in that market, as well as for various
composite currencies or constructed monetary
units such as the International Monetary Fund’s
“SDR,” the European Monetary Union’s “ECU,”
and beginning in 1999, the “euro.” There are
also various “trade-weighted” or “effective” rates
designed to show a currency’s movements against
an average of various other currencies (see
Box 2-1). Quite apart from the spot rates, there
are additional exchange rates for other delivery
dates, in the forward markets. Accordingly,
although we talk about the dollar exchange rate in
the market, and it is useful to do so, there is no
single, or unique dollar exchange rate in the
market, just as there is no unique dollar interest
rate in the market.
of one nation’s currency that must be surrendered
in order to acquire one unit of another nation’s
currency. There are scores of “exchange rates”
for the U.S. dollar. In the spot market, there is an
exchange rate for every other national currency
traded in that market, as well as for various
composite currencies or constructed monetary
units such as the International Monetary Fund’s
“SDR,” the European Monetary Union’s “ECU,”
and beginning in 1999, the “euro.” There are
also various “trade-weighted” or “effective” rates
designed to show a currency’s movements against
an average of various other currencies (see
Box 2-1). Quite apart from the spot rates, there
are additional exchange rates for other delivery
dates, in the forward markets. Accordingly,
although we talk about the dollar exchange rate in
the market, and it is useful to do so, there is no
single, or unique dollar exchange rate in the
market, just as there is no unique dollar interest
rate in the market.
Етикети:
Foreign Exchange Market
WHAT “FOREIGN EXCHANGE” MEANS
“Foreign exchange” refers to money denominated
in the currency of another nation or
group of nations. Any person who exchanges
money denominated in his own nation’s
currency for money denominated in another
nation’s currency acquires foreign exchange.
That holds true whether the amount of the
transaction is equal to a few dollars or to
billions of dollars; whether the person
involved is a tourist cashing a traveler’s check
in a restaurant abroad or an investor
exchanging hundreds of millions of dollars for
the acquisition of a foreign company; and
whether the form of money being acquired
is foreign currency notes, foreign currencydenominated
bank deposits, or other shortterm
claims denominated in foreign currency.
A foreign exchange transaction is still a shift
of funds, or short-term financial claims, from
one country and currency to another.
Thus, within the United States, any money
denominated in any currency other than the
U.S. dollar is, broadly speaking, “foreign
exchange.”
Foreign exchange can be cash, funds available
on credit cards and debit cards, traveler’s checks,
bank deposits, or other short-term claims. It is
still “foreign exchange” if it is a short-term
negotiable financial claim denominated in a
currency other than the U.S. dollar.
But, in the foreign exchange market described
in this book—the international network of major
foreign exchange dealers engaged in high-volume
trading around the world—foreign exchange
transactions almost always take the form of an
exchange of bank deposits of different national
currency denominations. If one bank agrees to
sell dollars for Deutsche marks to another bank,
there will be an exchange between the two parties
of a dollar bank deposit for a DEM bank deposit.
In this book, “foreign exchange” means a bank
balance denominated in a foreign (non-U.S.
dollar) currency.
in the currency of another nation or
group of nations. Any person who exchanges
money denominated in his own nation’s
currency for money denominated in another
nation’s currency acquires foreign exchange.
That holds true whether the amount of the
transaction is equal to a few dollars or to
billions of dollars; whether the person
involved is a tourist cashing a traveler’s check
in a restaurant abroad or an investor
exchanging hundreds of millions of dollars for
the acquisition of a foreign company; and
whether the form of money being acquired
is foreign currency notes, foreign currencydenominated
bank deposits, or other shortterm
claims denominated in foreign currency.
A foreign exchange transaction is still a shift
of funds, or short-term financial claims, from
one country and currency to another.
Thus, within the United States, any money
denominated in any currency other than the
U.S. dollar is, broadly speaking, “foreign
exchange.”
Foreign exchange can be cash, funds available
on credit cards and debit cards, traveler’s checks,
bank deposits, or other short-term claims. It is
still “foreign exchange” if it is a short-term
negotiable financial claim denominated in a
currency other than the U.S. dollar.
But, in the foreign exchange market described
in this book—the international network of major
foreign exchange dealers engaged in high-volume
trading around the world—foreign exchange
transactions almost always take the form of an
exchange of bank deposits of different national
currency denominations. If one bank agrees to
sell dollars for Deutsche marks to another bank,
there will be an exchange between the two parties
of a dollar bank deposit for a DEM bank deposit.
In this book, “foreign exchange” means a bank
balance denominated in a foreign (non-U.S.
dollar) currency.
Етикети:
Foreign Exchange Market
Foreign Exchage Market
Almost every nation has its own national
currency or monetary unit—its dollar, its peso,
its rupee—used for making and receiving
payments within its own borders. But foreign
currencies are usually needed for payments
across national borders. Thus, in any nation
whose residents conduct business abroad or
engage in financial transactions with persons in
other countries, there must be a mechanism for
providing access to foreign currencies, so that
payments can be made in a form acceptable to
foreigners. In other words, there is need for
“foreign exchange” transactions—exchanges of
one currency for another.
currency or monetary unit—its dollar, its peso,
its rupee—used for making and receiving
payments within its own borders. But foreign
currencies are usually needed for payments
across national borders. Thus, in any nation
whose residents conduct business abroad or
engage in financial transactions with persons in
other countries, there must be a mechanism for
providing access to foreign currencies, so that
payments can be made in a form acceptable to
foreigners. In other words, there is need for
“foreign exchange” transactions—exchanges of
one currency for another.
Етикети:
Foreign Exchange Market
Forex Dictionary
Actualise
Financial instrument traded on the cash market
Adjustable peg
A system, where countries manage their exchange rates around par values. This allows countries to intervene in the foreign exchange markets to keep their exchange rates within a margin, ie. the peg.
Adjustment
Policy-based measures designed to solve balance-of-payment problems. Curing balance-of-payment problems requires decreasing absorption relative to production, ie usually cutting government spending and increasing taxation levels.
Agent bank
A bank that has been authorized by an individual to act as his/her agent. An agent bank would typically provide services such as back-office operations, processing of credit applications, and verification services.
Aggregate risk
Total exposition risk to a single bank client, including spot and forward contracts.
Aggregate supply
The total supply of goods and services produced within an economy at a given overall price level in a given time period. It is represented by the aggregate-supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally, there is a positive relationship between aggregate supply and the price level. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand. Also known as "total output".
Agio
It is the difference in the currencies values. It is used to calculate and withdraw taxes, held in money transfer operation when cash the checks and from no liquid to liquids money.
Arbitrage channel
Price channel where the arbitrage between cash and futures markets are not available.
Asset allocation
Asset allocation is a term used to refer to how an investor distributes his investments among various classes of investment vehicles (e.g., stocks and bonds
Ask
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.
Asset
1. A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
2. A balance sheet item representing what a firm owns.
At best
Instruction – given to dealer to buy or to sell on determined price or better.
Authorised dealer
Authorized financial institution to carry out for deals calculated in foreign currency.
Account
1. An arrangement by which an organization accepts a customer's financial assets and holds them on behalf of the customer at his or her discretion.
2. A statement summarizing the record of transactions in the form of credits, debits, accruals and adjustments that have occurred and have an affect on an asset, equity, liability or past, present or future revenue.
3. A relaying of happenings from one party to another.
All or None - AON
A condition used on a buy or sell order to instruct the broker to fill the order completely or not at all.
American Option
An option that can be exercised anytime during its life. The majority of exchange-traded options are American.
At - The - Market
Kind of market order
At the Money
Option is at the money if the strike price is equal on the current market price.
............................................................................
Back office
Administration and support personnel in a financial services company. They carry out functions like settlements, clearances, record maintenance, regulatory compliance, and accounting. When order processing is slow due to high volume, it is commonly referred to as "back office crunch."
Backwardation
A theory developed in respect to the price of a futures contract and the contract's time to expire. Backwardation says that as the contract approaches expiration, the futures contract will trade at a higher price compared to when the contract was further away from expiration. This is said to occur due to the convenience yield being higher than the prevailing risk free rate.
Balance of Payments
A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa.
Base currency
The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. For accounting purposes, a firm may use the base currency to represent all profits and losses. It is sometimes referred to as the "primary currency".
Bundesbank
Refers to the central bank of Germany. This is the U.S. equivalent of the Federal Reserve
Bid
1. An offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the price at which the buyer is willing to purchase the security and the quantity to be purchased.
2. The price at which a market maker is willing to buy a security. The market maker will also display an ask price, or the amount and price at which it is willing to sell.
Break-Even Point - BEP
1. In general, the point at which gains equal losses.
2. In options, the market price that a stock must reach for option buyers to avoid a loss if they exercise. For a call, it is the strike price plus the premium paid. For a put, it is the strike price minus the premium paid.
Also referred to as a "breakeven".
Broker
1. An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
2. The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.
3. A licensed real estate professional who typically represents the seller of a property. A broker's duties may include: determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.
Bull Market
financial market of a certain group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used in respect to the stock market, but really can be applied to anything that is traded, such as bonds, currencies, commodities, etc.
Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. Of course, no bull market can last forever, and sooner or later a bear market (in which prices fall) will come. It's tough if not impossible to predict consistently when the trends in the market will change. Part of the difficulty is that psychological effects and speculation can sometimes play a large (if not dominant) role in the markets. The extreme on the high end is a stock-market bubble, and on the low end a crash.
Basket of goods
A relatively fixed set of consumer products and services valued and used on an annual basis to track inflation in a specific market or country. The goods in the basket are often adjusted periodically to account for changes in consumer habits The basket of goods is used primarily to calculate the Consumer Price Index (CPI).
back
up
.......................................................................
Cable
In the context of the forex market, the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term.
"Cable" can also be used to refer simply to the British pound sterling
Cash delivery
1. The same-day settlement of a currency trade in the forex market. This means that delivery and settlement of the transaction occur on the same date that the currency trade is made. In order for this to occur, the forex position must be opened and closed within the same trading day.
Also referred to as "same-day settlement".
2. In the context of futures contracts, a settlement term in a contract that stipulates that the underlying asset of the contract will not be delivered on the delivery date - rather, the net cash value of the position will be transferred to the applicable party instead
Cash settlement
A settlement method used in certain future and option contracts whereby, upon expiry or exercise, the seller of the financial instrument does not deliver the actual but transfers the associated cash position
Central bank
The entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities - from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort
Commission
A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security. Most major, full-service brokerages derive most of their profits from charging commissions on client transactions. Commissions vary widely from brokerage to brokerage
Confirmation
1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend.
2. The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade
Conversion
The exchange of a convertible type of asset into another type of asset, usually at a predetermined price, on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security
Counterparty
The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa
Cover
The act of completing a transaction in order to remove any obligations
Credit risk
The possibility of a loss occurring due to the failure to meet contractual debt obligations
Call Option
An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period
Candlestick Chart
A price chart that displays the high, low, open, and close for a security each day over a specified period of time.
Cash Market
The market for a cash commodity or actual, as opposed to the market for its futures contract
Chartist
Another name for a technical analyst. This is a person who uses charts to identify patterns that can suggest future activity
Close Position
To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.
Commodity
1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity exchange
Contango
When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date
Counter party
The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa
Country Risk
The risk that a country will not be able to honor its financial commitments
Cross Rates
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.
CPI - Consumer Price Index
A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.
Sometimes referred to as "headline inflation
.........................................................................
Day trader
stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day.
Deal ticket
A ticket that records all the terms, conditions and basic information of a trade agreement. A deal ticket is created after the transaction of shares, futures contracts or other derivatives. Also referred to as a "trading ticket".
Deflator
An economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level. Also known as the "GDP implicit price deflator".
Delivery date
1. The final date by which the underlying commodity for a futures contract must be delivered in order for the terms of the contract to be fulfilled.
2. The maturity date of a currency forward contract.
Delivery risk
The risk that occurs as a result of conducting transactions between different time zones. More specifically, this refers to how the receiving party may not necessarily know whether the other party fulfilled its obligations until the next trading day.
Direct quotation
A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other words, it involves quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Day Order
Any order to buy or sell a security that automatically expires if not executed on the day the order is placed.
Dealer
1. An individual or firm willing to buy or sell securities for their own account.
2. One who purchases goods or services for resale to consumers.
Delta
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the "hedge ratio".
Deficit
A situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports, or losses exceed profits.
Discount
The condition of the price of a bond that is lower than par. The discount equals the difference between the price paid for a security and the security's par value.
Discount Broker
A stockbroker who carries out buy and sell orders at a reduced commission, compared to a full-service broker, but provides no investment advice.
Derivatives
In finance, a security whose price is dependent upon or 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.
..................................................
Fast market
High liquidity market determined with sharp movement as a reason of strong interest from buyers and sellers.
Fed fund rate
The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Federal Reserve system
The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States
Fill or Kill
An order to fill a transaction immediately and completely or not at all.
Fisher effect
A theory describing the long-run relationship between inflation and interest rates.
FOMC
The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the Board of Governors, which has seven members, and five reserve-bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate in their service of one-year terms
Front office
The sales personnel and corporate finance employees in a financial services company. It's in the front office where revenues are generated.
FX
Foreign exchange market
Flat (Square)
1. A price that is neither rising nor declining.
2. In forex, the condition of being neither long nor short in a particular currency. Also referred to as 'being square'.
3. A bond that is trading without accrued interest.
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.
Forward price
The predetermined delivery price for an underlying commodity, currency or financial asset decided upon by the long (the buyer) and the short (the seller) to be paid at predetermined date in the future. At the inception of a forward contract, the forward price makes the value of the contract zero.
Forward contract
A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date.
...............................................................
G7
Seven of the world's leading countries that meet periodically to achieve a cooperative effort on international economic and monetary issues
Gap
A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release
Gold standard
A monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The gold standard was mainly used from 1875 to 1914 and also during the interwar years
Good until cancelled
An order to buy or sell a security at a set price that is active until the investor decides to cancel it or the trade is executed. If an order does not have a good-'til-canceled instruction then the order will expire at the end of the trading day the order was placed
Gross Domestic Product (GDP)
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
Gross National Product (GNP)
An economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents
.......................................
Hard currency
A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market
Head and shoulders
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.
Hit the bid
A buzzword used to describe an event where a broker agrees to sell at a bid price quoted by another broker. The broker is ultimately agreeing to sell a given stock at the highest price that another broker is willing to buy at.
Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract
......................................................
International Monetary Fund
An international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade.
3. Assisting in the establishment of a multilateral system of payments for current transactions
Implied rates
An interest rate that is determined by the difference between the spot rate and the forward/futures rate. The degree of relative costliness of a future rate can be assessed by comparing the implied rate with the spot rate
Indicative quote
In forex trading, a currency quote that is provided by a market maker to a trading party but that is not firm. In other words, when a market maker provides an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price to a trader up to the maximum quantity specified in the quote
Interest parity
A theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates
Interest rate swaps
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). A company will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap
Inflation
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling
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.
Also called the "initital margin requirement".
In The Money
1.For a call option, when the option's strike price is below the market price of the underlying asset.
2. For a put option, when the strike price is above the market price of the underlying asset
...............................................
Leverage
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value
Liability
A company's legal debts or obligations that arise during the course of business operations. These are settled over time through the transfer of economic benefits including money, goods or services
Liquidity
1.The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.
2. The ability to convert an asset to cash quickly. Also known as "marketability”
Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate
LIFFE
A futures and options exchange in London, England that was modeled after the Chicago Board of Trade and the Chicago Mercantile Exchange. Similar to its American counterparts, this exchange used to deal with futures, options and commodities contracts. However, in 2002, LIFFE was acquired by Euronext as part of its strategy to increase its presence as a derivatives market. LIFFE has been renamed Euronext.liffe.
Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled
Liquid Market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads, and low volatility
Liquidation
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders.
2. Any transaction that offsets or closes out a long or short position
Liquid Assets
An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market
.......................................
Maintenance margin
The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%
Mark to market
1.The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.
Monetary base
The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies.
Also known as the "money base".
Moving average
An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance
Margin
1.Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.
Margin Call
A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is sometimes called a "fed call" or "maintenance call".
Market Maker
A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.
Market Order
An order to buy or sell a stock immediately at the best available current price.
A market order is sometimes referred to as an "unrestricted order".
Market Risk
The day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away.
Also referred to as "systematic risk".
Maturity
1. The length of time until the principal amount of a bond must be repaid.
2. The end of the life of a security.
Money Market
The securities market dealing in short-term debt and monetary instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.
Mortgage
A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses wishing to make large value purchases of real estate without paying the entire value of the purchase up front.
Mortgages are also known as liens against property, or claims on property.
..............................
Net Worth
The amount by which a company or individual's assets exceed their liabilities
New York Stock Exchange
A corporation, operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist
................................
Odd lot
An amount of a security that is less than the normal unit of trading for that particular security
Offshore
Located or based outside of one's national boundaries
Offset
1. To liquidate a futures position by entering an equivalent, but opposite, transaction which eliminates the delivery obligation.
2. To reduce an investor's net position in an investment to zero, so that no further gains or losses will be experienced from that position
One-Cancels-the-Other Order -
An order stipulating that if one part of the order is executed, then the other part is automatically canceled.
Open
1. An unexecuted order that is still valid.
2. The start of trading on a securities exchange
Open Order
An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed
Option
A financial derivative which 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 (excercise date).
Order
The instruction, by a customer to a brokerage, for the purchase or sale of a security with specific conditions
Out of the money
1. For a call, when an option's strike price is higher than the market price of the underlying asset.
2. For a put, when the strike price is below the market price of the underlying asset.
Overbought
1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.
2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.
Oversold
1. A condition in which the price of an underlying asset has fallen sharply, and to a level below which its true value resides. This condition is usually a result of market overreaction or panic selling.
2. A situation in technical analysis where the price of an asset has fallen to such a degree - usually on high volume - that an oscillator has reached a lower bound. This is generally interpreted as a sign that the price of the asset is becoming undervalued and may represent a buying opportunity for investors.
....................................
Parities
1.In general, a situation of equality. Parity can occur in many different contexts, but it always means that two things are equal.
2. The official value.
3. In an exchange market, when all brokers bidding for the same security have equal standing due to identical bids
Pip
The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100th of one percent, or one basis point.
Pegging
1. A method of stabilizing a country's currency by fixing its exchange rate to that of another country.
2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.
Political Risk
The financial risk that a country''s government will suddenly change its policies.
Also known as "geopolitical risk
Premium
1.The total cost of an option.
2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.
3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement's coverage be required.
Prepayment
1. The payment of a debt obligation prior to its due date.
2. The excess payment over a scheduled debt repayment amount
Put Option
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. This is the opposite of a call option, which gives the holder the right to buy shares.
........................................................
Quote
1. The last price at which a security or commodity traded, meaning the most recent price on which a buyer and seller agreed and at which some amount of the asset was transacted.
2. The bid or ask quotes are the most current prices and quantities at which the shares can be bought or sold. The bid quote shows the price and quantity at which a current buyer is willing to purchase the shares, while the ask shows what a current participant is willing to sell the shares for.
This is also known as an asset's "quoted price".
............................................
Reaction
The typical downward movement in the price of a security after the price had previously risen
Revaluation
A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. Contrast to "devaluation".
Revaluation rate
Market currency rates from a specific point in time that are used as a base value by currency traders to assess whether a profit or a loss has been realized for the day. In most cases, the revaluation rate is the closing rate for the previous trading day.
Risk management
The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance.
Rollover
1.The process of reinvesting funds from a mature security into a new issue of the same or a similar security.
2. The process of transferring the holdings of one retirement plan to another without suffering tax consequences.
3. A charge that is incurred by Forex investors who roll over their positions to the following delivery date.
Round trip
An action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. Round-trip trading can be used to refer to the practice of a business selling an unused asset to another company while agreeing to buy back the same asset for about the same price (which has been seen in the energy and telecom business).
Rally
A period of sustained increases in the prices of stocks, bonds or indexes. This type of price movement can happen during either a bull or a bear market, when it is known as either a bull market rally or a bear market rally, respectively. However, a rally will generally follow a period of flat or declining prices.
Range
A stock's low price and high price for a particular trading period, such as the close of a day's trading, the opening of a day's trading, a day, a month, or a year
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
Resistance
The price at which a stock or market can trade, but not exceed, for a certain period of time.
Often referred to as "resistance level".
Risk Capital
The money that a person allocates to investing in high-risk securities
................................................
Settlement risk
The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. This type of risk can lead to principal risk
Short sale
A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal amount of shares at some point in the future.
The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up. The profit that the investor receives is equal to the value of the sold borrowed shares less the cost of repurchasing the borrowed shares.
Soft Market
A market that has more potential sellers than buyers. A soft market can describe an entire industry, such as the retail market, or a specific asset, such as lumber. This is often referred to as a buyer's market, as the purchasers hold much of the power in negotiations
Squawk box
An intercom speaker often used on brokers' trading desks in investment banks and stock brokerages. A squawk box allows a firm's analysts and traders to communicate with the firm's brokers.
Squeeze
1.In financial terms, a period of time when borrowing is difficult.
2. In general business terms, times when increasing costs cannot be passed onto consumers. The decrease in profits is said to be caused by a "squeeze" on profit margins
Sterilization
A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.
Stop loss order
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position.
Also known as a "stop order" or "stop-market order".
Swap
Traditionally, the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed. Recently, swaps have grown to include currency swaps and interest rate swaps
Swissy
A slang term for the Swiss franc. The Swiss franc, or Swissie, has often been considered a safe-haven currency during times of geopolitical unrest. This is mainly due to the country's neutral stance in global conflicts
Scalper
A person trading in the equities or options and futures market who holds a position for a very short period of time, attempting to make money off of the bid-ask spread
Seller
1.An individual or entity that exchanges any type of good or service in return for payment.
2. In the option market, the seller is the investor who collects a premium from the buyer in return for taking on the risk associated with holding a short position in an option. The seller of an option is also known as a "writer".
Settlement Date
1.The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller.
2. The payment date of benefits from a life insurance policy
Stop Order
An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.
Also referred to as a "stop" and/or "stop-loss order".
Spot Price
The current price at which a particular commodity can be bought or sold at a specified time and place
Spread
1.The difference between the bid and the ask price of a security or asset.
2. An options position established by purchasing one option and selling another option of the same class but of a different series.
Support
The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock.
Often referred to as the "support level".
.............................................
Technical correction
A decrease in the market price of an asset or entire market after extensive price increases. A technical correction occurs even when there is no evidence that the increasing price trend should cease. It is often caused when investors temporarily slow down their purchases of securities, which commonly leads to a pullback toward a short-term support level
Thin market
A market with a low number of buyers and sellers. Since few transactions take place in a thin market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also typically result in a larger spread between the two quotes.
Also known as a "narrow market
Tomorrow next (Tom next)
In currency transactions, the purchase and sale of a currency made to avoid taking actual delivery of the currency. The current position is closed out at the daily close rate and re-entered at the new opening rate the next trading day. Also referred to as "tomorrow next procedure".
Trade date
The date on which a security trade occurs
Transaction
An agreement between a buyer and a seller for the exchange of goods or services for payment
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
Theta
A measure of the rate of decline in the value of an option due to the passage of time. Theta can also be referred to as the time decay on the value of an option. If everything is held constant, then the option will lose value as time moves closer to the maturity of the option.
Theta is part of the group of measures known as the "Greeks" (other measures include delta, gamma and vega) which are used in options pricing
Tick
The minimum upward or downward movement in the price of a security
Ticker
A computerized device that relays financial information to investors around the world, including the stock symbol, the latest price and the volume on securities as they are traded.
Time Decay
The ratio of the change in an option price to the decrease in time to expiration. Since options are a wasting asset, their value declines over time. As an option approaches its expiry date without being in the money, its time value declines since the probability of that option being profitable (in the money) is reduced. Also known as "theta" and "time-value decay".
Time Value
The portion of the option premium that is attributable to the amount of time remaining until the expiration of the option contract.
Trader
An individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.
Two-Way Quote
A type of quote that gives both the bid and the ask price of a security, informing would-be traders of the current price at which they could buy or sell the security. The two-way quote also shows the spread between the bid and the ask, giving traders an idea of the current liquidity in the security (a smaller spread indicates more liquidity).
..................................................
Uncovered
A stock or other security that is trading below its true value
Uptick
A transaction occurring at a price above the previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. This term is commonly used in reference to stocks, but it can also be extended to commodities and other securities
.......................................
Vostro account
The account a correspondent bank, usually U.S. or UK, holds on behalf of a foreign bank. Also known as a loro account
Value Date
A future date used in determining the value of a product that fluctuates in price. Typically, you will see the use of value dates in determining the payment of products and accounts where there is a possibility for discrepancies due to differences in the timing of valuation. Such products include forward currency contracts, option contracts, and the interest payable or receivable on personal accounts. Also referred to as "valuta".
Variation Margin
A variable margin payment that is made by clearing members to their respective clearing houses based upon adverse price movements of the futures contracts that these members hold
Volatility
1.A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
2. A variable in option-pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used
Volume
The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction
.....................
Wash trade
An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers
Warrant
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors
Whipsaw
A condition where a security's price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origins of term is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name
............................
Financial instrument traded on the cash market
Adjustable peg
A system, where countries manage their exchange rates around par values. This allows countries to intervene in the foreign exchange markets to keep their exchange rates within a margin, ie. the peg.
Adjustment
Policy-based measures designed to solve balance-of-payment problems. Curing balance-of-payment problems requires decreasing absorption relative to production, ie usually cutting government spending and increasing taxation levels.
Agent bank
A bank that has been authorized by an individual to act as his/her agent. An agent bank would typically provide services such as back-office operations, processing of credit applications, and verification services.
Aggregate risk
Total exposition risk to a single bank client, including spot and forward contracts.
Aggregate supply
The total supply of goods and services produced within an economy at a given overall price level in a given time period. It is represented by the aggregate-supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally, there is a positive relationship between aggregate supply and the price level. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand. Also known as "total output".
Agio
It is the difference in the currencies values. It is used to calculate and withdraw taxes, held in money transfer operation when cash the checks and from no liquid to liquids money.
Arbitrage channel
Price channel where the arbitrage between cash and futures markets are not available.
Asset allocation
Asset allocation is a term used to refer to how an investor distributes his investments among various classes of investment vehicles (e.g., stocks and bonds
Ask
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.
Asset
1. A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
2. A balance sheet item representing what a firm owns.
At best
Instruction – given to dealer to buy or to sell on determined price or better.
Authorised dealer
Authorized financial institution to carry out for deals calculated in foreign currency.
Account
1. An arrangement by which an organization accepts a customer's financial assets and holds them on behalf of the customer at his or her discretion.
2. A statement summarizing the record of transactions in the form of credits, debits, accruals and adjustments that have occurred and have an affect on an asset, equity, liability or past, present or future revenue.
3. A relaying of happenings from one party to another.
All or None - AON
A condition used on a buy or sell order to instruct the broker to fill the order completely or not at all.
American Option
An option that can be exercised anytime during its life. The majority of exchange-traded options are American.
At - The - Market
Kind of market order
At the Money
Option is at the money if the strike price is equal on the current market price.
............................................................................
Back office
Administration and support personnel in a financial services company. They carry out functions like settlements, clearances, record maintenance, regulatory compliance, and accounting. When order processing is slow due to high volume, it is commonly referred to as "back office crunch."
Backwardation
A theory developed in respect to the price of a futures contract and the contract's time to expire. Backwardation says that as the contract approaches expiration, the futures contract will trade at a higher price compared to when the contract was further away from expiration. This is said to occur due to the convenience yield being higher than the prevailing risk free rate.
Balance of Payments
A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa.
Base currency
The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. For accounting purposes, a firm may use the base currency to represent all profits and losses. It is sometimes referred to as the "primary currency".
Bundesbank
Refers to the central bank of Germany. This is the U.S. equivalent of the Federal Reserve
Bid
1. An offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the price at which the buyer is willing to purchase the security and the quantity to be purchased.
2. The price at which a market maker is willing to buy a security. The market maker will also display an ask price, or the amount and price at which it is willing to sell.
Break-Even Point - BEP
1. In general, the point at which gains equal losses.
2. In options, the market price that a stock must reach for option buyers to avoid a loss if they exercise. For a call, it is the strike price plus the premium paid. For a put, it is the strike price minus the premium paid.
Also referred to as a "breakeven".
Broker
1. An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
2. The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.
3. A licensed real estate professional who typically represents the seller of a property. A broker's duties may include: determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.
Bull Market
financial market of a certain group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used in respect to the stock market, but really can be applied to anything that is traded, such as bonds, currencies, commodities, etc.
Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. Of course, no bull market can last forever, and sooner or later a bear market (in which prices fall) will come. It's tough if not impossible to predict consistently when the trends in the market will change. Part of the difficulty is that psychological effects and speculation can sometimes play a large (if not dominant) role in the markets. The extreme on the high end is a stock-market bubble, and on the low end a crash.
Basket of goods
A relatively fixed set of consumer products and services valued and used on an annual basis to track inflation in a specific market or country. The goods in the basket are often adjusted periodically to account for changes in consumer habits The basket of goods is used primarily to calculate the Consumer Price Index (CPI).
back
up
.......................................................................
Cable
In the context of the forex market, the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term.
"Cable" can also be used to refer simply to the British pound sterling
Cash delivery
1. The same-day settlement of a currency trade in the forex market. This means that delivery and settlement of the transaction occur on the same date that the currency trade is made. In order for this to occur, the forex position must be opened and closed within the same trading day.
Also referred to as "same-day settlement".
2. In the context of futures contracts, a settlement term in a contract that stipulates that the underlying asset of the contract will not be delivered on the delivery date - rather, the net cash value of the position will be transferred to the applicable party instead
Cash settlement
A settlement method used in certain future and option contracts whereby, upon expiry or exercise, the seller of the financial instrument does not deliver the actual but transfers the associated cash position
Central bank
The entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities - from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort
Commission
A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security. Most major, full-service brokerages derive most of their profits from charging commissions on client transactions. Commissions vary widely from brokerage to brokerage
Confirmation
1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend.
2. The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade
Conversion
The exchange of a convertible type of asset into another type of asset, usually at a predetermined price, on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security
Counterparty
The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa
Cover
The act of completing a transaction in order to remove any obligations
Credit risk
The possibility of a loss occurring due to the failure to meet contractual debt obligations
Call Option
An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period
Candlestick Chart
A price chart that displays the high, low, open, and close for a security each day over a specified period of time.
Cash Market
The market for a cash commodity or actual, as opposed to the market for its futures contract
Chartist
Another name for a technical analyst. This is a person who uses charts to identify patterns that can suggest future activity
Close Position
To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.
Commodity
1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity exchange
Contango
When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date
Counter party
The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa
Country Risk
The risk that a country will not be able to honor its financial commitments
Cross Rates
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.
CPI - Consumer Price Index
A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.
Sometimes referred to as "headline inflation
.........................................................................
Day trader
stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day.
Deal ticket
A ticket that records all the terms, conditions and basic information of a trade agreement. A deal ticket is created after the transaction of shares, futures contracts or other derivatives. Also referred to as a "trading ticket".
Deflator
An economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level. Also known as the "GDP implicit price deflator".
Delivery date
1. The final date by which the underlying commodity for a futures contract must be delivered in order for the terms of the contract to be fulfilled.
2. The maturity date of a currency forward contract.
Delivery risk
The risk that occurs as a result of conducting transactions between different time zones. More specifically, this refers to how the receiving party may not necessarily know whether the other party fulfilled its obligations until the next trading day.
Direct quotation
A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other words, it involves quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Day Order
Any order to buy or sell a security that automatically expires if not executed on the day the order is placed.
Dealer
1. An individual or firm willing to buy or sell securities for their own account.
2. One who purchases goods or services for resale to consumers.
Delta
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the "hedge ratio".
Deficit
A situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports, or losses exceed profits.
Discount
The condition of the price of a bond that is lower than par. The discount equals the difference between the price paid for a security and the security's par value.
Discount Broker
A stockbroker who carries out buy and sell orders at a reduced commission, compared to a full-service broker, but provides no investment advice.
Derivatives
In finance, a security whose price is dependent upon or 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.
..................................................
Fast market
High liquidity market determined with sharp movement as a reason of strong interest from buyers and sellers.
Fed fund rate
The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Federal Reserve system
The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States
Fill or Kill
An order to fill a transaction immediately and completely or not at all.
Fisher effect
A theory describing the long-run relationship between inflation and interest rates.
FOMC
The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the Board of Governors, which has seven members, and five reserve-bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate in their service of one-year terms
Front office
The sales personnel and corporate finance employees in a financial services company. It's in the front office where revenues are generated.
FX
Foreign exchange market
Flat (Square)
1. A price that is neither rising nor declining.
2. In forex, the condition of being neither long nor short in a particular currency. Also referred to as 'being square'.
3. A bond that is trading without accrued interest.
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.
Forward price
The predetermined delivery price for an underlying commodity, currency or financial asset decided upon by the long (the buyer) and the short (the seller) to be paid at predetermined date in the future. At the inception of a forward contract, the forward price makes the value of the contract zero.
Forward contract
A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date.
...............................................................
G7
Seven of the world's leading countries that meet periodically to achieve a cooperative effort on international economic and monetary issues
Gap
A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release
Gold standard
A monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The gold standard was mainly used from 1875 to 1914 and also during the interwar years
Good until cancelled
An order to buy or sell a security at a set price that is active until the investor decides to cancel it or the trade is executed. If an order does not have a good-'til-canceled instruction then the order will expire at the end of the trading day the order was placed
Gross Domestic Product (GDP)
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
Gross National Product (GNP)
An economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents
.......................................
Hard currency
A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market
Head and shoulders
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.
Hit the bid
A buzzword used to describe an event where a broker agrees to sell at a bid price quoted by another broker. The broker is ultimately agreeing to sell a given stock at the highest price that another broker is willing to buy at.
Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract
......................................................
International Monetary Fund
An international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade.
3. Assisting in the establishment of a multilateral system of payments for current transactions
Implied rates
An interest rate that is determined by the difference between the spot rate and the forward/futures rate. The degree of relative costliness of a future rate can be assessed by comparing the implied rate with the spot rate
Indicative quote
In forex trading, a currency quote that is provided by a market maker to a trading party but that is not firm. In other words, when a market maker provides an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price to a trader up to the maximum quantity specified in the quote
Interest parity
A theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates
Interest rate swaps
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). A company will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap
Inflation
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling
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.
Also called the "initital margin requirement".
In The Money
1.For a call option, when the option's strike price is below the market price of the underlying asset.
2. For a put option, when the strike price is above the market price of the underlying asset
...............................................
Leverage
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value
Liability
A company's legal debts or obligations that arise during the course of business operations. These are settled over time through the transfer of economic benefits including money, goods or services
Liquidity
1.The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.
2. The ability to convert an asset to cash quickly. Also known as "marketability”
Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate
LIFFE
A futures and options exchange in London, England that was modeled after the Chicago Board of Trade and the Chicago Mercantile Exchange. Similar to its American counterparts, this exchange used to deal with futures, options and commodities contracts. However, in 2002, LIFFE was acquired by Euronext as part of its strategy to increase its presence as a derivatives market. LIFFE has been renamed Euronext.liffe.
Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled
Liquid Market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads, and low volatility
Liquidation
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders.
2. Any transaction that offsets or closes out a long or short position
Liquid Assets
An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market
.......................................
Maintenance margin
The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%
Mark to market
1.The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.
Monetary base
The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies.
Also known as the "money base".
Moving average
An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance
Margin
1.Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.
Margin Call
A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is sometimes called a "fed call" or "maintenance call".
Market Maker
A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.
Market Order
An order to buy or sell a stock immediately at the best available current price.
A market order is sometimes referred to as an "unrestricted order".
Market Risk
The day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away.
Also referred to as "systematic risk".
Maturity
1. The length of time until the principal amount of a bond must be repaid.
2. The end of the life of a security.
Money Market
The securities market dealing in short-term debt and monetary instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.
Mortgage
A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses wishing to make large value purchases of real estate without paying the entire value of the purchase up front.
Mortgages are also known as liens against property, or claims on property.
..............................
Net Worth
The amount by which a company or individual's assets exceed their liabilities
New York Stock Exchange
A corporation, operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist
................................
Odd lot
An amount of a security that is less than the normal unit of trading for that particular security
Offshore
Located or based outside of one's national boundaries
Offset
1. To liquidate a futures position by entering an equivalent, but opposite, transaction which eliminates the delivery obligation.
2. To reduce an investor's net position in an investment to zero, so that no further gains or losses will be experienced from that position
One-Cancels-the-Other Order -
An order stipulating that if one part of the order is executed, then the other part is automatically canceled.
Open
1. An unexecuted order that is still valid.
2. The start of trading on a securities exchange
Open Order
An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed
Option
A financial derivative which 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 (excercise date).
Order
The instruction, by a customer to a brokerage, for the purchase or sale of a security with specific conditions
Out of the money
1. For a call, when an option's strike price is higher than the market price of the underlying asset.
2. For a put, when the strike price is below the market price of the underlying asset.
Overbought
1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.
2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.
Oversold
1. A condition in which the price of an underlying asset has fallen sharply, and to a level below which its true value resides. This condition is usually a result of market overreaction or panic selling.
2. A situation in technical analysis where the price of an asset has fallen to such a degree - usually on high volume - that an oscillator has reached a lower bound. This is generally interpreted as a sign that the price of the asset is becoming undervalued and may represent a buying opportunity for investors.
....................................
Parities
1.In general, a situation of equality. Parity can occur in many different contexts, but it always means that two things are equal.
2. The official value.
3. In an exchange market, when all brokers bidding for the same security have equal standing due to identical bids
Pip
The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100th of one percent, or one basis point.
Pegging
1. A method of stabilizing a country's currency by fixing its exchange rate to that of another country.
2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.
Political Risk
The financial risk that a country''s government will suddenly change its policies.
Also known as "geopolitical risk
Premium
1.The total cost of an option.
2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.
3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement's coverage be required.
Prepayment
1. The payment of a debt obligation prior to its due date.
2. The excess payment over a scheduled debt repayment amount
Put Option
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. This is the opposite of a call option, which gives the holder the right to buy shares.
........................................................
Quote
1. The last price at which a security or commodity traded, meaning the most recent price on which a buyer and seller agreed and at which some amount of the asset was transacted.
2. The bid or ask quotes are the most current prices and quantities at which the shares can be bought or sold. The bid quote shows the price and quantity at which a current buyer is willing to purchase the shares, while the ask shows what a current participant is willing to sell the shares for.
This is also known as an asset's "quoted price".
............................................
Reaction
The typical downward movement in the price of a security after the price had previously risen
Revaluation
A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. Contrast to "devaluation".
Revaluation rate
Market currency rates from a specific point in time that are used as a base value by currency traders to assess whether a profit or a loss has been realized for the day. In most cases, the revaluation rate is the closing rate for the previous trading day.
Risk management
The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance.
Rollover
1.The process of reinvesting funds from a mature security into a new issue of the same or a similar security.
2. The process of transferring the holdings of one retirement plan to another without suffering tax consequences.
3. A charge that is incurred by Forex investors who roll over their positions to the following delivery date.
Round trip
An action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. Round-trip trading can be used to refer to the practice of a business selling an unused asset to another company while agreeing to buy back the same asset for about the same price (which has been seen in the energy and telecom business).
Rally
A period of sustained increases in the prices of stocks, bonds or indexes. This type of price movement can happen during either a bull or a bear market, when it is known as either a bull market rally or a bear market rally, respectively. However, a rally will generally follow a period of flat or declining prices.
Range
A stock's low price and high price for a particular trading period, such as the close of a day's trading, the opening of a day's trading, a day, a month, or a year
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
Resistance
The price at which a stock or market can trade, but not exceed, for a certain period of time.
Often referred to as "resistance level".
Risk Capital
The money that a person allocates to investing in high-risk securities
................................................
Settlement risk
The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. This type of risk can lead to principal risk
Short sale
A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal amount of shares at some point in the future.
The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up. The profit that the investor receives is equal to the value of the sold borrowed shares less the cost of repurchasing the borrowed shares.
Soft Market
A market that has more potential sellers than buyers. A soft market can describe an entire industry, such as the retail market, or a specific asset, such as lumber. This is often referred to as a buyer's market, as the purchasers hold much of the power in negotiations
Squawk box
An intercom speaker often used on brokers' trading desks in investment banks and stock brokerages. A squawk box allows a firm's analysts and traders to communicate with the firm's brokers.
Squeeze
1.In financial terms, a period of time when borrowing is difficult.
2. In general business terms, times when increasing costs cannot be passed onto consumers. The decrease in profits is said to be caused by a "squeeze" on profit margins
Sterilization
A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.
Stop loss order
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position.
Also known as a "stop order" or "stop-market order".
Swap
Traditionally, the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed. Recently, swaps have grown to include currency swaps and interest rate swaps
Swissy
A slang term for the Swiss franc. The Swiss franc, or Swissie, has often been considered a safe-haven currency during times of geopolitical unrest. This is mainly due to the country's neutral stance in global conflicts
Scalper
A person trading in the equities or options and futures market who holds a position for a very short period of time, attempting to make money off of the bid-ask spread
Seller
1.An individual or entity that exchanges any type of good or service in return for payment.
2. In the option market, the seller is the investor who collects a premium from the buyer in return for taking on the risk associated with holding a short position in an option. The seller of an option is also known as a "writer".
Settlement Date
1.The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller.
2. The payment date of benefits from a life insurance policy
Stop Order
An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.
Also referred to as a "stop" and/or "stop-loss order".
Spot Price
The current price at which a particular commodity can be bought or sold at a specified time and place
Spread
1.The difference between the bid and the ask price of a security or asset.
2. An options position established by purchasing one option and selling another option of the same class but of a different series.
Support
The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock.
Often referred to as the "support level".
.............................................
Technical correction
A decrease in the market price of an asset or entire market after extensive price increases. A technical correction occurs even when there is no evidence that the increasing price trend should cease. It is often caused when investors temporarily slow down their purchases of securities, which commonly leads to a pullback toward a short-term support level
Thin market
A market with a low number of buyers and sellers. Since few transactions take place in a thin market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also typically result in a larger spread between the two quotes.
Also known as a "narrow market
Tomorrow next (Tom next)
In currency transactions, the purchase and sale of a currency made to avoid taking actual delivery of the currency. The current position is closed out at the daily close rate and re-entered at the new opening rate the next trading day. Also referred to as "tomorrow next procedure".
Trade date
The date on which a security trade occurs
Transaction
An agreement between a buyer and a seller for the exchange of goods or services for payment
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
Theta
A measure of the rate of decline in the value of an option due to the passage of time. Theta can also be referred to as the time decay on the value of an option. If everything is held constant, then the option will lose value as time moves closer to the maturity of the option.
Theta is part of the group of measures known as the "Greeks" (other measures include delta, gamma and vega) which are used in options pricing
Tick
The minimum upward or downward movement in the price of a security
Ticker
A computerized device that relays financial information to investors around the world, including the stock symbol, the latest price and the volume on securities as they are traded.
Time Decay
The ratio of the change in an option price to the decrease in time to expiration. Since options are a wasting asset, their value declines over time. As an option approaches its expiry date without being in the money, its time value declines since the probability of that option being profitable (in the money) is reduced. Also known as "theta" and "time-value decay".
Time Value
The portion of the option premium that is attributable to the amount of time remaining until the expiration of the option contract.
Trader
An individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.
Two-Way Quote
A type of quote that gives both the bid and the ask price of a security, informing would-be traders of the current price at which they could buy or sell the security. The two-way quote also shows the spread between the bid and the ask, giving traders an idea of the current liquidity in the security (a smaller spread indicates more liquidity).
..................................................
Uncovered
A stock or other security that is trading below its true value
Uptick
A transaction occurring at a price above the previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. This term is commonly used in reference to stocks, but it can also be extended to commodities and other securities
.......................................
Vostro account
The account a correspondent bank, usually U.S. or UK, holds on behalf of a foreign bank. Also known as a loro account
Value Date
A future date used in determining the value of a product that fluctuates in price. Typically, you will see the use of value dates in determining the payment of products and accounts where there is a possibility for discrepancies due to differences in the timing of valuation. Such products include forward currency contracts, option contracts, and the interest payable or receivable on personal accounts. Also referred to as "valuta".
Variation Margin
A variable margin payment that is made by clearing members to their respective clearing houses based upon adverse price movements of the futures contracts that these members hold
Volatility
1.A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
2. A variable in option-pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used
Volume
The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction
.....................
Wash trade
An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers
Warrant
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors
Whipsaw
A condition where a security's price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origins of term is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name
............................
Етикети:
Forex Dictionary
Subscribe to:
Posts (Atom)
