بعض مصطلحات سوق تداول العملات باللغة
العربية يتلوها مصطلحات أسواق المال باللغة
الإنجليزية. سوف نطور هذه الصفحة لتصبح شاملة
البيع الذي يعرضه البائع لبيع عملة أو أداة
عملة الأساس، العملة التي يستخدمها البنك أو
المؤسسة المالية لاظهار نتيجة الأعمال.
point : 1 بالمائة من 1 بالمائة أي
1 بالعشرة آلاف (
market : وصف للسوق المالي عندما
تمر عليه فترة طويلة من هبوط الأسعار، الصفة
العامة للسوق هي هبوط الأسعار.
: عند وصف السعر يعني اتجاهه الهبوط. ( عكس Bullish
:Buying Rate سعر
الشراء، السعر الذي يعرضه المشتري لشراء
العملة أو أداة الاستثمار.
Figure : بالعادة يقصد به 1 بالمائة
even point : سعر التساوي ، الذي اذا
أغلق به المستثمر صفقته يحقق لا ربح ولا خسارة.
market : وصف للسوق المالي عندما
تمر عليه فترة طويلة من صعود الأسعار، الصفة
العامة للسوق هي صعود الأسعار
: عند وصف السعر يعني اتجاهه الصعود. ( عكس Barish
Rate : Bidسعر
الشراء، السعر الذي يعرضه المشتري لشراء
العملة أو أداة الاستثمار.
: اصطلاح في سوق تجارة العملات يقصد به زوج
: العمولة التي قد
يتقاضاها الوسيط المالي ( Broker
) لقاء التداول أو نيابة عن المستثمر.
: العقد. في سوق
تداول العملات يقصد به قيمة العقد و يسمى أيضا
: Deutsche Mark المارك
Indicator : المؤشرات الاقتصادية،
تعنى بأحجام النمو والتراجع لاقتصاديات
الدول ، التضخم ، البطالة ، .....الخ.
Currency Unit وحدة
النقد الأوروبية : الآن Euro
Currencies : العملات التي تتداول (
في سوق تداول العملات) بدرجة اقل شعبية.
: اختصار الاحتياطي الفدرالي للولايات
المتحدة ( البنك المركزي ) The United
States Federal Reserve
Exchange : بيع أو شراء عملة مقابل
شراء أو بيع عملة أخرى.
long : شراء العملة بانتظار صعود
short : بيع العملة بانتظار هبوط
Call: لم يعد الاحتياطي ( التأمين
) يغطي الجزء المطلوب من خسارة العقد، يتم
إبلاغ المستثمر لتعزيز تأميناته أو يتم إغلاق
العقد دون الرجوع إلي المستثمر.
Taking : اغلاق أو تسييل عقد
لغايات أخذ الأرباح.
: Point : اقل وحدة قيمة في السعر.
بالعادة = 0.0001 من السعر.
: اكثر اسواق تداول العملات شيوعا. وdate
الى تاريخ استحقاق قيمة العملية الذي يكون
خلال يوما عمل.
: الفرق بين سعر الشراء و سعر البيع.
||GLOSSARY OF FOREX TERMS in English
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- A -
Accrual - The apportionment of premiums
and discounts on forward exchange transactions that relate directly to deposit
swap (Interest Arbitrage) deals, over the period of each deal.
Actualize - The underlying assets or
instruments which are traded in the cash market.
ADB - Abbreviation for African
Development Bank and the Asian Development Bank.
Adjustable Peg - Term for an exchange
rate regime where a country's exchange rate is "pegged" (i.e. fixed)
in relation to another currency , often the dollar or French Franc, but where
the rate may be changed from time to time. This was the basis of the Bretton
Woods system. See peg, and crawling peg.
Adjustment - Official action normally by
either change in the internal economic policies to correct a payment imbalance
or in the official currency rate or.
Agent Bank - (1) A bank acting for a
foreign bank. (2) In the Euro market - the agent bank is the one appointed by
the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods
and services in the economy. It includes private and public sector demand for
goods and services within the country and the demand of consumers and and firms
in other countries for good and services.
Aggregate risk - Size of exposure of a
bank to a single customer for both spot and forward contracts.
Aggregate Supply - Total supply of goods
and services in the economy from domestic sources (including imports) available
to meet aggregate demand.
Agio - Difference in the value between
currencies. Also used to describe percentage charges for conversion from paper
money into cash, or from a weak into a strong currency.
AIBOR - Amsterdam Inter-bank Offered
American Option - An option which may be
exercised at any time prior to expiration. Compared with a European option that
can only be exercised on a specific date.
Answerback - Code name of a telex
subscriber, printed automatically by the telex machine.
Appreciation - Describes a currency
strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and
sale on different markets, of the same or equivalent financial instruments to
profit from price or currency differentials. The exchange rate differential or
Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel - The range of prices
within which there will be no possibility to arbitrage between the cash and
Arcru - A unit of account based on the
movement of 12 Arab currencies against the US dollar.
Around - Used in quoting forward
"premium / discount". "Five-five around" would mean five
point on either side of the present spot value.
Asset Allocation - Dividing instrument
funds among markets to achieve diversification or maximum return.
Article 8 Currency - A senior currency in
IMF terminology, which should be freely convertible.
As you like option - Enables the holder
to convert from one style of option to a different style of option over a preset
period of time. Sometimes referred to as either a "call-or-put option"
or "chooser option".
Asian Monetary Unit - An accounting unit
for the Asian Clearing Union with the same value as an SDR.
Ask - The price at which the currency or
instrument is offered.
Asset - In the context of foreign
exchange is the right to receive from a counterparty an amount of currency
either in respect of a balance sheet asset (e.g. a loan) or at a specified
future date in respect of an unmatched forward Forward or spot deal.
Assignment - Notice to an option holder
usually by the clearing house of an exchange traded option that the option has
Association Cambiste Internationale - The
international society of foreign exchange dealers consisting of national "Forex
clubs" affiliated on a world wide basis.
At best - An instruction given to a
dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a
specific rate or better.
At-the-money - An option whose
strike/exercise price is equal to or near the current market price of the
ATHIBOR - Athens Inter-bank Offered Rate.
Au Jour le Jour - The rate for money lent
from day to day on the French money market.
Auction - Sale of an item to the highest
bidder. (1) A method commonly used in exchange control regimes for the
allocation of foreign exchange. (2) A method for allocating government paper,
such as US Treasury Bills. Small investors are given preferential access to the
bills. The average issuing price is then computed on the basis of the
competitive bids accepted. In some circumstances for government auctions it is
the yield rather than the price which is bid.
Authorized Dealer - A financial
institution or bank authorized to deal in foreign exchange.
Automated Clearing House - A US term for
an organisation set up by financial institutions agreeing to initiate and
receive among themselves electronic transfers of funds authorized by their
Automatic exercise - A procedure for
exchange traded options under which the in the money options are exercised on a
Average Rate Option - A contract where
the exercise price is based on the difference between the strike price and the
average spot rate over the contract period. Sometimes called an "Asian
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- B -
Back Office - Settlement and related
Back to Back - (1) Transaction where all
the obligations and liabilities in one transaction are mirrored in a second
transaction. (2) Transaction where a loan is made in one currency in one country
against a loan in another country in another currency.
Backsee - backwardation.
Backwardation - Term referring to the
amount that the spot price exceeds the forward price.
Balance of Payments - A systematic record
of the economic transactions during a given period for a country. (1) The term
is often used to mean either: (i) balance of payments on "current
account"; or (ii) the current account plus certain long term capital
movements. (2) The combination of the trade balance, current balance, capital
account and invisible balance, which together make up the balance of payments
total. Prolonged balance of payment deficits tend to lead to restrictions in
capital transfers, and or decline in currency values.
Balance of Trade - The value of exports
less imports. Invisibles are normally excluded, and is otherwise referred to as
mercantile or physical trade. Figures can be quoted on FoB/ FaS , customs
cleared, or Fob export, FoB export.
Band - The range in which a currency is
permitted to move. A system used in the ERM.
Bank line - Line of credit granted by a
bank to a customer, also known as a " line".
Bank notes - Bank notes are paper issued
by the central or issuing bank and are legal tender, but are not usually
considered to be part of the FX market. However bank notes can be converted, in
some counties, into FX. Bank notes are normally priced at a premium to the
current spot rate for a currency.
Bank Rate - The rate at which a central
bank is prepared to lend money to its domestic banking system.
Banking day - see trading day and value
Baron Adesi and Whaley - An option model
for valuing American options, an extension of Black Scholes.
Barrier Option - A family of path
dependent options whose pay-off pattern and survival to the expiration date
depend not only on the final price of the underlying currency but also on
whether or not the underlying currency breaks a predetermined price level at any
time during the life of the option. See Down and Out call/put, Down and in
call/put, Up and out call/put, Up and in call/put.
Base currency - The currency in which the
operating results of the bank or institution are reported.
Base Rate - A term used in the UK for the
rate used by banks to calculate the interest rate to borrowers. Top quality
borrowers will pay a small amount over base.
Basis point - One per cent of one per
Basis price - The price expressed in
terns of yield maturity or annual rate of return.
Basis convergence - The process whereby
the basis tends towards zero as the contract expiry approaches.
Basis trading - Taking opposite positions
in the cash and futures market with the intention of profiting from favorable
movements in the basis.
Basis - The difference between the cash
price and futures price.
Basket - A group of currencies normally
used to manage the exchange rate of a currency. Sometimes referred to as a unit
BBA - British Banking AssociationBear
call spread: A spread designed to exploit falling exchange rates by purchasing a
call option with a high exercise price and selling one with a low exercise
Bear put spread - A spread designed to
exploit falling exchange rates by purchasing a put option with a high exercise
price and selling one with a low exercise price.
Bear market - A prolonged period of
generally falling prices.
Bear Squeeze - Any official action in the
market or through regulations which makes it costly or difficult for bears to
stay short of a suspect currency.
Bear - An investor who believes that
prices are going to fall.
Bearer - Refers to instruments in which
ownership can transfer by mere physical delivery, requires no registration as
does not have the name of the holder on its face. Certain stamp duty advantages
arise from this type of instrument.
Best of two Option - Gives the option
holder a payoff based on the independent performance of two different
Best Order - Firm order with no rate
limit stipulated.BetaA measure of relative volatility of the price of the
instrument to the overall performance of the market.
Bid - The price at which a buyer has
offered to purchase the currency or instrument.
Big Figure - Refers normally to the first
three digits of an exchange rate that dealers treat as understood in quoting.
For example a quote of "30/40" on dollar mark could indicates a price
of 1.5530/40BIS: Bank of International Settlement.
Bilateral Clearing - A system used where
foreign currency is limited. Payments are usually routed through the central
banks, and sometimes require that the trade balance is equaled every year.
Binary Options - A binary
"call" (or "step up") is like a standard European call
option except that the pay off at expiry is fixed at one unit of the counter
currency, if the call expires in the money.
Black-Scholes Model - An option pricing
formula initially derived by Fisher Black and Myron Scholes for securities
options and later refined by Black for options on futures. It is widely used in
the currency markets.
Book - The summary of currency positions
held by a dealer, desk, or room. A total of the assets and liabilities. If the
average maturity of the book is less than that of the assets, the bank is said
to be running a short and open book. Passing the Book refers normally to
transferring the trading of the Banks positions to another office at the close
of the day, e.g. from London to New York.
Booked - The recording of a transaction
outside the country where the transaction is itself negotiated.
Boris - Slang for Russian trading.
Box Option - Options are purchased the
gains/losses on which offset positions in the underlying currency.
Box Spread - A combination of a
horizontal, or calendar, call spread and a horizontal put spread. Both spreads
have the same expiration dates on their long and short positions. A bear call
spread with a bull put spread is a credit box. A bull call spread with a bear
put spread is a debit box.
Brady Plan - A plan conceived by Nicholas
Brady US Treasury Secretary to reschedule and restructure third world
debt.BreakA sudden or rapid fall in instrument pricing.
Break even point - The price of a
financial instrument at which the option buyer recovers the premium, meaning
that he makes neither a loss or gain. In the case of a call option, the break
even point is the exercise price plus the premium.
Break out - In the options market,
undoing a conversion or a reversal to restore the option buyer's original
Bretton Woods - The site of the
conference which in 1944 led to the establishment of the post war foreign
exchange system that remained intact until the early 1970s. The conference
resulted in the formation of the IMF. The system fixed currencies in a fixed
exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broad Money - A broad definition of money
supply including long term deposits and corporate lending.
Broken dates or period - Deals that are
undertaken for value dates that are not standard periods e.g. 1 month. The
standard periods are 1 week, 2 weeks, 1, 2, 3, 6 and 12 months. Terms also used
are odd dates, or cock dates, broken period or broken period.
Broker-dealer - See Dealer.
Broker - An agent, who executes orders to
buy and sell currencies and related instruments either for a commission or on a
spread. Brokers are agents working on commission and not principals or agents
acting on their own account. In the foreign exchange market brokers tend to act
as intermediaries between banks bringing buyers and sellers together for a
commission paid by the initiator or by both parties. There are four or five
major global brokers operating through subsidiaries affiliates and partners in
Brokerage - Commission charged by a
BUBA - Bundesbank, the reserve bank of
Bull market - A prolonged period of
generally rising prices.
Bull (call or put) spread - An option
position composed of both long and short options of the same type, either calls
or puts, designed to be profitable in a declining market. An option with a lower
strike price is bought and one with a higher strike price is sold.
Bull - An investor who believes that
prices are going to rise.
Bulldogs - Sterling bonds issued in the
UK by foreign institutions.
Bullion - A term for gold bars, not coin.
Bundesbank - Central Bank of Germany.
Butterfly spread - (1) A futures
butterfly spread is a spread trade in which multiple futures months are traded
simultaneously at a differential. The trade basically consists of two futures
spread transactions with either three or four different futures months at one
differential. (2) An options butterfly spread is a combination of a bear and
bull spread trade in which multiple options months and strike prices are traded
simultaneously at a differential. The trade basically consists of two options
spread transactions with either three or four different options months and
strikes at one differential.
Buy in - Market activity by an option
writer when the writer holds insufficient assets to meet delivery upon
Buy-Back valuation - The valuation of a
forward exchange transaction by applying the current exchange rate that would
apply to the remaining period of the transaction.
Buy-back - see repurchase agreements.
Buyer/taker - The purchaser of an option,
whether a call or put option. The buyer may also be referred to as the option
holder. Option buyers receive the right, but not the obligation, to enter a
futures/securities market position.
Buying Rate - Rate at which the market
and a market maker in particular is willing to buy the currency. Sometimes
called bid rate.
Buying the spread - To buy the nearby
contract and simultaneously sell the deferred contract. Also referred to as a
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- C -
Cable Transfer - Telegraphic transfer of
funds from one centre to another. Now synonymous with inter bank electronic fund
Cable - A term used in the foreign
exchange market for the US Dollar/British Pound rate.
Calendar spread - An option position
comprised of purchase and sale of two option contracts of the same type with
different expiration dates at the same exercise price.
Call Money - Money lent that is repayable
Call option - A call option confers the
right but not the obligation to buy stock, shares or futures at a specified
Call - (1) An option that gives the
holder the right to buy the underlying instrument at a specified price during a
fixed period. (2) A period of trading. (3) The right of an bond issuer to pre
pay debt and demand the surrender of its bonds.
Call money - Overnight (GBP) or Federal
funds (USD) currency lent by banks on a very short term basis which can be
called the same day, at one days notice or at two days notice.
Cambiste - French term for foreign
Cap - An agreement with a counterparty
that sets an upper limit to interest rates for the cap buyer for a stated time.
Capital Account - Juxtaposition of the
long and short term capital imports and exports of a country.
Capital Adequacy - Standards set by BIS
Capital market - The market for medium
and long term securities.
Capital Movements - Short and long term
claims and liabilities, which are entered into vis a vis foreign countries, e.g.
repayment of foreign debt, direct investments, portfolio investments, purchase
of private real estate.
Capital Risk - The risk arising from a
bank having to pay to the counter party with out knowing whether the other party
will or is able to meet its side of the bargain. see Herstatt.
Carry - The interest cost of financing
securities or other financial instruments held.
Cash Delivery - Same day settlement.
Cash market - The market in the actual
financial instrument on which a futures or options contract is based.
Cash - normally refers to an exchange
transaction contracted for settlement on the day the deal is struck. This term
is mainly used in the North American markets and those countries which rely for
foreign exchange services on these markets because of time zone preference i.e.
Latin America. In Europe and Asia, cash transactions are often referred to as
value same day deals.
Cash and Carry - The buying of an asset
today and selling a future contract on the asset. A reverse cash and carry is
possible by selling an asset and buying a future.
Cash Option - An option written on an
underlying cash instrument rather than a futures contract.
Cash Settlement - A procedure for
settling futures contract where the cash difference between the future and the
market price is paid instead of physical delivery.
CBOE - Chicago Board Options Exchange.
CBOT or CBT - Chicago Board of Trade.
CD - Certificate of Deposit.
CEDELA - computerized system for safe
custody, delivery and settlement for Eurobonds and related securities. Also the
name of an instrument coding system.
Central Bank - A bank which is
responsible for controlling a countries monetary policy. It is normally the
issuing bank and controls bank licensing, and any foreign exchange control
Central Rate - Exchange rates against the
ECU adopted for each currency within the EMS.Currencies have limited movement
from the central rate according to the relevant band.
Certificate of deposit (CD) - A
negotiable certificate in bearer form issued by a commercial bank as evidence of
a deposit with that bank which states the maturity value, maturity rate and
interest rate payable.CDs vary in size with maturities ranging from a few weeks
to several years. CDs may normally be redeemed before maturity only by sale on
the secondary market but may also be redeemed back to issuing bank through
payment of a penalty.
CFTC - The Commodity Futures Trading
Commission, the US Federal regulatory agency for futures traded on commodity
markets, including financial futures.
CHAPS - Clearing House Automated Payment
Chartist - An individual who studies
graphs and charts of historic data to find trends and predict trend reversals
which include the observance of certain patterns and characteristics of the
charts to derive resistance levels, head and shoulders patterns, and double
bottom or double top patterns which are thought to indicate trend reversals.
CHIPS - The New York clearing house
clearing system. (Clearing House Interbank Payment System). Most Euro
transactions are cleared and settled through this system.
CIBOR - Copenhagen Interbank Rate, the
rate at which the banks lend the Danish Krone on an unsecured basis. The rate is
calculated daily by the Danmarks Nationalbank (the Danish Central Bank), based
on rules set out by the Danish Banker's Association.
Circuit breaker - Price change limits and
trading halts intended to reduce excessive price fluctuations.
Clean float - An exchange rate that is
not materially effected by official intervention.
Clean price - The price of a bond not
including the accrued interest element.
Clean - In the UK capital market refers
to a price quoted excluding accrued interest.
Clear Day - see trading day.
Clearing house - An exchange-associated,
usually independent organisation through which all contracts are made, offset
and delivered e.g. ICCH.
Clearing member - A member firm of a
Clearing - The process of setting a
number of items against one another and making fund transfers on the net balance
only as part of the settlement process.
Clearing - The process of matching,
registering and guaranteeing transactions.
Client agreement Close - The end of the
business day e.g. London 4.30 p.m.
Closed position - A transaction which
leaves the trade with a zero net commitment to the market with respect to a
Closing purchase transaction - The
purchase of an option identical to one already sold to liquidate a position.
CME - Chicago Mercantile ExchangeCock
Dates (see broken dates).
Coincident Indicator - An economic
indicator that generally moves in line with the general business cycle such as
Collar - A combination of a cap and a
floor. A collar sets a band within which interest rates will apply (e.g.
10%-13.75%), for a given period.
Comex - Commodity Exchange of New York.
Commercial Paper - Promissory notes
usually with up to 270 day maturity, sold by companies or institutions for
working capital. Widely used in the US.
Commission - The fee that a broker may
charge clients for dealing on their behalf.
Compound Option - An option on an option,
the dates and price of such option being fixed.
Comptant - French term for spot
settlement in foreign exchange.
Comptroller of the Currency - US Treasury
Department official with the primary role in bank supervision.
Confirmation - A memorandum to the other
party describing all the relevant details of the transaction.
Consumer Price Index - Monthly measure of
the change in the prices of a defined basket of consumer goods including food,
clothing, and transport. Countries vary in their approach to rents and
Contango - A condition in a futures
market where the more distant delivery months trade at a premium to the term
Contract of differences - A futures
contract which is settled by a cash payment reflecting the monetary difference
between the initial transaction price and the price of the underlying asset on
Contract expiration date - The date on
which a currency must be delivered to fulfill the terms of the contract. For
options, the last day on which the option holder can exercise his right to buy
or sell the underlying instrument or currency.
Contract month - The month in which a
futures contract matures or becomes deliverable if not liquidated or traded out
before the date specified.
Contract - An agreement to buy or sell a
specified amount of a particular currency or option for a specified month in the
future (See Futures contract).
Convergence - The process by which the
futures price moves towards and ultimately equals the price of the underlying
instrument at expiration.
Cover - Forwards or futures taken to
limit or eliminate exposure to currency fluctuations.
Covered Call - Calls are sold on the
underlying currency with strikes which are higher than the market price. The
strike price limits the profit that can be realized from the position.
Conversion Account - A general ledger
account representing the uncovered position in a particular currency. Such
accounts are referred to as Position Accounts.
Conversion premium - The amount by which
the price of a convertible bond exceeds the market price of the underlying
Conversion - The process by which an
asset or liability denominated in one currency is exchanged for an asset or
liability denominated in another currency.
Conversion arbitrage - A transaction
where the asset is purchased and buys a put option and sells a call option on
the asset purchased, each option having the same exercise price and expiry.
Convertible currency - A currency that
can be freely exchanged for another currency (and or gold) without special
authorization from the central bank.
Copey - Slang for the Danish krone.
Correspondent Bank - The foreign banks
representative who regularly performs services for a bank which has no branch in
the relevant centre, e.g. to facilitate the transfer of funds. In the US this
often occurs domestically due to inter state banking restrictions.
Cost of Living Index - Broadly equivalent
to Retail Price Index or Consumer price.
Counterparty - The other organisation or
party with whom the exchange deal is being transacted.
Countervalue - Where a person buys a
currency against the dollar it is the dollar value of the transaction.
Country risk - The risk attached to a
borrower by virtue of its location in a particular country. This involves
examination of economic, political and geographical factors. Various
organisations generate country risk tables.
Coupon value - The annual rate of
interest of a bond.
Coupon - (1) On bearer stocks, the
detachable part of the hide behind nominee status. Certificate exchangeable for
dividends. (2) Denotes the rate of interest on a fixed interest security.
Cours du Change - Exchange rate.
Cours Libre - Free exchange rate.
Cours Officiel - Official exchange rate.
Court - French for "short" as
in une position courte.
Courtier - French term for broker.
Cover - (1) To take out a forward foreign
exchange contract. (2) To close out a short position by buying currency or
securities which have been sold.
Covered Arbitrage - Arbitrage between
financial instruments denominated in different currencies, using forward cover
to eliminate exchange risk.
Covered call write - A strategy of
writing call options against a long position in the underlying asset. A covered
put write being based on a short position in the asset.
Covered Margin - The interest rate margin
between two instruments denominated in different currencies after taking account
of the cost of forward cover.
CPSS - Committee on Payment and
Crawling peg - A method of exchange rate
adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line
with certain economic or market indicators.
Credit Lombard - see Lombard rate.
Credit Risk - The risk that a debtor will
not repay; more specifically the risk that the counterparty does not have the
currency promised to be delivered.
Cross deal - A foreign exchange deal
entered into involving two currencies, neither of which is the base currency.
Cross hedge - A technique using financial
futures to hedge different but related cash instruments based on the view that
the price movements between the instruments move in concert.
Cross rates - Rates between two
currencies, neither of which is the US Dollar.
Cross-trade - A cross-trade transaction
is a transaction where either the buy broker and the sell broker are the same,
or the buy broker and the sell broker belong to the same firm.
Crossed market - The situation which
exists when a broker's bid is higher than the lowest offer of another broker.
Currency Band - see band.
Currency Basket - Various weightings of
other currencies grouped together in relation to a basket currency(e.g. ECU or
SDR). Sometimes used by currencies to fix their rate often on a trade weighted
Currency Cocktail - Colloquial term for a
unit of account or basket of currencies.
Current Account - The net balance of a
country's international payment arising from exports and imports together with
unilateral transfers such as aid and migrant remittances. It excludes capital
Current balance - The value of all
exports (goods plus services) less all imports of a country over a specific
period of time, equal to the sum of trade and invisible balances plus net
receipt of interest, profits and dividends from abroad.
Currency Swaps - See swaps.
Current delivery month - The most current
calendar month in which a futures contract comes to maturity and becomes
deliverable. Also known as the spot month.
CUSIP code - The CUSIP numbering system
is the standard method for identifying securities throughout the US financial
industry. The CUSIP number is permanently allocated to each issue.
Cycle - The set of expiration dates
applicable to different classes of option.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- D -
Day Order - An order that if not executed
on the specific day is automatically canceled.
Day trader - Speculators who take
positions in commodities which are then liquidated prior to the close of the
same trading day.
Daylight exposure limit - see intra day
Deal date - The date on which a
transaction is agreed upon.
Deal Ticket - The primary method of
recording the basic information relating to a transaction.
Dealer - An individual or firm acting as
a principal, rather than as an agent, in the purchase and/or sale of securities.
Dealers trade for their own account and risk.
Dealing Board - The panel of
communications equipment forming part of a dealer's desk.
Debenture - A non-secured loan raised by
a company, paying a fixed rate of interest.
Debt-Service Ratio - The ratio of
interest and capital repayments as a percentage of the country's export
earnings. The treatment of public debt varies.
Declaration date - The latest day or time
by which the buyer of an option must indicate to the seller his intention to the
Default - Generally a breach of contract.
Failure to make timely payment of principal or interest.
Deficit - Shortfall in the balance of
trade, balance of payments, or government budgets.
Defection - French term for default.
Deferred months - Distant actively
trading contract months, also referred to as back months.
Deflator - Difference between real and
nominal Gross National Product, which is equivalent to the overall inflation
Del credere risk - Risk that the
counterparty is either unable or unwilling to fulfill his payment obligations.
Delivery date - The date of maturity of
the contract, when the exchange of the currencies is made This date is more
commonly known as the value date in the FX or Money markets.
Delivery month - The calendar month in
which a futures contract comes to maturity and becomes deliverable.
Delivery points - Those locations
designated by futures exchanges at which the currency represented by a futures
contract may be delivered in fulfillment of the contract.
Delivery Risk - A term to describe when a
counterparty will not be able to complete his side of the deal, although willing
to do so.
Delivery - The settlement of a futures
contract by receipt or tender of a financial instrument or currency.
Delta - The change in the value of the
option premium made fully paid by the capitalisation of reserves and given
relative to the instantaneous change in the value of the; underlying instrument,
expressed as a coefficient.
Delta hedging - A method used by option
writers to hedge risk exposure of written options by purchase or sale of the
underlying instrument in proportion to the delta.
Delta spread - A ratio spread of options
established as a neutral position by using the deltas of the options concerned
to determine the hedge ratio.
Demand pull - Demand led inflation,
commonly referred to as too much money chasing too few goods.
Depo - Deposit.
Deport - French term for discount.
Deposit dealings - Money Market
Deposit money - Bank and other giro
credit balances which can be converted at any time into cash although normally
used for cashless payment.
Deposit Swap - A series of transactions
whereby a deposit for a particular currency 1, and the proceeds converted via
spot currency into currency 2. Currency 2 is then lent. To cover potential
exchange movement a forward sale of currency 2 against currency 1 is entered
into which will return the converted amount plus interest into the original
Deposit Book - The net position arising
from all deposit and loan transactions in a given currency.
Depreciation - A fall in the value of a
currency due to market forces rather than due to official action.
Depth of market - A measure of how much a
price has to move in order to execute larger than normal transactions. The
smaller the price movement and the larger the transaction, the deeper the
Derivatives - A broad term relating to
risk management instruments such as futures, options, swaps, etc.. The contract
value moves in relation to the underlying instrument or currency. The issue of
derivatives and their control following large losses by banks and corporates has
been subject of much debate.
Desk - Term referring to a group dealing
with a specific currency or currencies.
Details - All the information required to
finalize a foreign exchange transaction, i.e. name, rate, dates, and point of
Deutsche Terminboerse - The German
options and futures exchange, a fully computerized system with integrated
trading and clearing.
Devaluation - Deliberate downward
adjustment of a currency against its fixed parities or bands, normally by formal
Devisen, Devises - Foreign exchange in
German and French respectively.
Devisenkassamarkt - German for spot
Devisenterminmarkt - German for forward
Diagonal (bull or bear) spread - The
purchase of a longer maturity option and the sale of a shorter maturity, lower
exercise price option. The choice of calls or puts will determine its bear or
DIBOR - Dublin Inter-bank Offered Rate.
Direct quotation - Quoting in fixed units
of foreign currency against variable amounts of the domestic currency.
Dirty Float - Floating a currency when
the rate is controlled by intervention by the monetary authorities.
Discount - (1) See forward Rate. Forward
rate is lower than spot rate (2) an option that is trading for less than its
Discount Rate - The rate at which a bill
is discounted. Specifically it refers to the rate at which a central bank is
prepared to discount certain bills for financial institutions as a means of
easing their liquidity, and is more accurately referred to as the official
Disposable Income - Earnings after tax.
Discretionary Income - Net of tax and
fixed personal spending commitments.
Divergence indicator - A concept in the
EMS to measure divergence from the central parity of the currency against the
ECU. The thresh-hold for intervention for each currency excludes the currencies
weight in the ECU.
DM, DMark - Deutsche Mark.
Domestic Rates - The interest rates
applicable to deposits domiciled in the country of origin. Value and values may
vary from Eurodeposits due to taxation and varying market practices.
Double - An option either to buy or sell
an instrument or currency at a specified price. The exercise of the right to
sell causes the right to buy to expire and vice versa.
Down and Out call - A call option that
expires if the asset price falls below a predetermined level.
Down tick - The sale of a security at a
price lower than the previous one.
DTB - abbreviation of Deutsche
Due from Balance - US term for "
Due to Balance - US term for "
Dutch Auction - A competitive bidding
technique where the lowest price to sell the entire amount of the offered
instrument is the price at which all instruments are sold. A technique used for
some controlled foreign exchange and sovereign debt.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- E -
Easing - Modest decline in price.
Economic Indicator - A statistics which
indicates current economic growth rates and trends such as retail sales and
ECU - European Currency Unit.
EDI - Electronic Data Interchange.
Effective Exchange Rate - An attempt to
summarize the effects on a country's trade balance of its currency's changes
against other currencies.
EFT - Electronic Fund Transfer.
Either way market - In the Euro Interbank
deposit market where both bid and offer rates for a particular period are the
Emu - Name of currency that is to be the
vehicle for European monetary union under the Maastricht Treaty.
EMS - European Monetary System.
End/end - Indicates that both the spot
and forward maturity, or two forward maturities in a swap transaction, fall due
on the last business day of appropriate calendar months.
Entrepot - A term used for international
trade where goods are shipped to a centre for re-export. Hong Kong engages in
significant amounts of this form of trade.
EOE - European Options Exchange.
Epsilon - The change in the price of an
option associated with a 1% change in implied volatility (technically the first
derivative of the option price with respect to volatility). Also referred to as
eta, vega, omega and kappa.
ERM - Exchange Rate Mechanism.
Euro clear - A computerized settlement
and depository system for safe custody, delivery of, and payment for Eurobonds.
Euro Rates - The rates quoted for
Eurobonds - A long-term loan issued in a
currency other than that of the country or market in which it is issued.
Interest is paid without the deduction of tax.
Eurocurrency - A currency domiciled
outside its country of origin normally held by non residents.
Eurodollars - US dollars deposited in a
bank (US or non US) located outside the USA.
Eurofranc - Swiss French or Belgian
francs traded on the Eurocurrency market. Normally Swiss Francs are the more
Euromark - Deutschmarks traded on the
European Monetary System - A system
designed to stabilize if not eliminate exchange risk between member states of
the EMS as part of the economic convergence policy of the EU. It permits
currencies to move in a measured fashion (divergence indicator) within agreed
bands (the parity grid) with respect to the ECU and consequently with each
European option - An option that can be
exercised only on its expiration date rather than before that date.
European Union - The group formerly known
as the European Community.
Excess Liquidity - The maintenance by
banks of a higher level of funds than is normally desirable, usually arising due
to a drop in demand for funds because of economic conditions or interest rates.
Exchange control - A system of
controlling inflows and out flows of foreign exchange, devices include licensing
multiple currencies, quotas, auctions, limits, levies and surcharges.
Exchange Equalization Account - An
account controlled by the UK Treasury and managed by the Bank of England. Its
assets include the country's gold and foreign exchange reserves. Its objective
is to manage the exchange rate in accordance with government policy.
Exchange of futures for cash - A
transaction in which the buyer of a cash commodity transfers to the seller a
corresponding amount of long futures contracts, or receives from the seller a
corresponding amount of short futures, at a price difference mutually agreed
upon. In this way, the opposite hedges in futures of both parties are closed out
Exercise notice - The formal notification
that the holder of a call (or put) option wishes to buy (or sell) the underlying
security at the exercise price.
Exercise limit - A limit on the number of
options contracts a holder may exercise within a specific period.
Exercise price - See Strike price.
Exercise value - For a call option, this
is the amount by which the strike price is below the underlying investment; for
a put option, it is the amount by which the strike price is above the underlying
Exotic - A less broadly traded currency.
Expiration date - (1) Options - the last
date after which the option can no longer be exercised. (2) Bonds-the date on
which a bond matures.
Expiration month - The month in which an
Expiry date - The last date on which an
option can be bought or sold.
Exposure - see position and mismatch.
Various methods of calculating an exposure exist (i) Net working capital - The
current assets in a foreign currency minus current liabilities in the currency;
(ii) Net financial method The current assets in a foreign currency minus current
liabilities and long term debt in the currency; (iii) Monetary/non-monetary
method - Monetary assets and liabilities in the foreign currency are valued at
present exchange rates, while non-monetary items are entered at the relevant
Extrinsic value - See Time value.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- F -
Fair value - An option value derived from
a mathematical option valuation model.
Fast market - Rapid movement in a market
caused by strong interest by buyers and/or sellers. In such circumstances price
levels may be omitted and bid and offer quotations may occur too rapidly to be
Fat tail distribution - A graph that
predicts a greater probability of a very large price movement than that
predicted by normal distribution.
Fed Fund Rate - The interest rate on Fed
funds. This is a closely watched short term interest rate as it signals the Feds
view as to the state of the money supply.
Fed Funds - Cash balances held by banks
with their local Federal Reserve Bank. The normal transaction with these fund is
an inter bank sale of a Fed fund deposit for one business day. Straight deals
are where the funds are traded overnight on a unsecured basis.
Fed - The United States Federal Reserve.
Federal Deposit Insurance Corporation Membership is compulsory for Federal
Reserve members. The corporation had deep involvement in the Savings and Loans
crisis of the late 80s.
Federal National Mortgage Association - A
privately owned but US government sponsored corporation that trades in
residential mortgages. Its activities are funded by the sale of instruments
commonly known as Fannie Maes.
Federal Open Market Committee - See FOMC.
Federal Reserve Board - The board of the
Federal Reserve System, appointed by the US President for 14 year terms, one of
whom is appointed for four years as chairman.
Federal Reserve System - The central
banking system of the US comprising 12 Federal Reserve Banks controlling 12
districts under the Federal Reserve Board. Membership of the Fed is compulsory
for banks chartered by the Comptroller of Currency and optional for state
Feste Schuld - A long term debt
consolidated in the form of bonds, mortgages etc.
Fest Geld - Money on fixed term deposit
FIBOR - Frankfurt Inter-bank Offered
Fill or Kill - An order which must be
entered for trading, normally in a pit three times, if not filled is immediately
Financial future - A futures contract
based on a financial instrument.
Financial Rand - Introduced in 1979 it is
part of the dual currency exchange rate system operated in South Africa. It is
the proceeds of disposal of South African securities and includes the purchase
of plant and equipment by foreign investors.
Fine Rate - (1) A quote with a narrow
spread. (2) The most favorable rate charged to a high quality borrower.
Firm quotation - The price given in
response to a request for a rate at which the quoting party is willing to
execute a deal for a reasonable amount for spot settlement. Screen quotes are
indicative. Quotes on matching systems are normally firm depending on systems
requirement to reconfirm rate prior to completing matching.
First notice day - The first day on which
notices of intention to deliver actual currencies against futures market
positions can be received.
Fiscal Policy - Use of taxation as a tool
in implementing monetary policy.
Fisher Effect - The relationship that
exists between interest rates and exchange rate movements, so that in an ideal
situation interest rate differentials would be exactly off set by exchange rate
movements. See interest rate parity.
Fixed dates - The monthly calendar dates
similar to the spot. There are two exceptions. For detailed description see
Fixed exchange rate - Official rate set
by monetary authorities. Often the fixed exchange rate permits fluctuation
within a band.
Fixing - A method of determining rates by
normally finding a rate that balances buyers to sellers. Such a process occurs
either once or twice daily at defined times. Used by some currencies
particularly for establishing tourist rates . The system is also used in the
London Bullion market.
Flexible exchange rate - Exchange rates
with a fixed parity against one or more currencies with frequent revaluation's.
A form of managed float.
Float - (1) see Floating exchange rate.
(2) Cash in hand or in the course of being transferred between banks (3) Federal
Reserve Float arises from the system where cheques sent to the Federal Reserve
Banks are credited sometimes in advance of the depositing bank loosing the
Floating exchange rate - An exchange rate
where the value is determined by market forces. Even floating currencies are
subject to intervention by the monetary authorities. When such activity is
frequent the float is known as a dirty float.
Floor - (1) An agreement with a
counterparty that sets a lower limit to interest rates for the floor buyer for a
stated time. (2) A term for an exchanges trading area (cf. screen based
trading), normally the trading area is referred to as a pit in the commodities
and futures markets.
FOMC - Federal Open Market Committee, the
committee that sets money supply targets in the US which tend to be implemented
through Fed Fund interest rates etc.
Foreign Exchange - The purchase or sale
of a currency against sale or purchase of another.
Forex - Foreign Exchange.
Forex Club - Groups formed in the major
financial centers to encourage educational and social contacts between foreign
exchange dealers, under the umbrella of Association Cambiste International.
Forward book - Various net exposures for
forward contracts which the bank has incurred as a result of dealing activities.
Forward Contract - Sometimes used as
synonym for "forward deal" or "future". More specifically
for arrangements with the same effect as a forward deal between a bank and a
Forward Cover Taking - forward contracts
to protect against movements in the exchange rate.
Forward Deal - A deal with a value date
greater than the spot value date.
Forward Forward - A forward / forward
deal is one where both legs of the deal have value dates greater than the
current spot value date.
Forward margins - Discounts or premiums
between spot rate and the forward rate for a currency. Normally quoted in
Forward maturities - Trading days on
which days contracts can be transacted later than the spot date.
Forward Operations - Foreign exchange
transactions, on which the fulfillment of the mutual delivery obligations is
made on a date later than the second business day after the transaction was
Forward Outright - A commitment to buy or
sell a currency for delivery on a specified future date or period. The price is
quoted as the Spot rate minus or plus the forward points for the chosen period.
Forward Rate Agreements - The FRA is an
agreement between two parties that determine the interest rate that will apply
to a notional future loan or deposit of an agreement.
Forward Rate - Forward rates are quoted
in terms of forward points, which represents the difference between the forward
and spot rates. In order to obtain the forward rate from the actual exchange
rate the forward points are either added or subtracted from the exchange rate.
The decision to subtract or add points is
determined by the differential between the deposit rates for both currencies
concerned in the transaction. The base currency with the higher interest rate is
said to be at a discount to the lower interest rate quoted currency in the
forward market. Therefor the forward points are subtracted from the spot rate.
Similarly, the lower interest rate base currency is said to be at a premium, and
the forward points are added to the spot rate to obtain the forward rate.
FRAS - Forward Rate AgreementFranc zoneA
grouping of currencies which are pegged to the French Franc and are supported by
the activities and resources of the Bank of France. The main currency is the CFA
which is administered by the communal central banks in West and Central Africa
BEAC and BCEAO. The zone also includes the Pacific Franc used in the Pacific
over seas departments like New Caledonia.
FRN - Floating rate note; see floating
FRCD - Floating rate CD; see floating
Free Reserves - Total reserves held by a
bank less the reserves required by the authority.
Freeze - Legislation or agreement to keep
prices or wages at current levels.
Front Office - The activities carried out
by the dealer , normal trading activities.
Frozen Assets - Normally funds that are
temporarily blocked normally either due to court order or government regulation
often arising from war or major international dispute, e.g. Iran, Iraq, and
Fundamentals - The macro economic factors
that are accepted as forming the foundation for the relative value of a
currency, these include inflation, growth, trade balance, government deficit,
and interest rates.
Funds - A term for USD/CAD/FungiblesInstruments
that are equivalent, substitutable and interchangeable in law. May apply to
certain exchange traded currency contracts offered on a number of exchanges.
Furthest month - The month that is
furthest away from settlement of a futures or options contract.
Futures contract - A contract traded on a
futures exchange which requires the delivery of a specified quality and quantity
of a commodity, currency or financial instruments a specified future month, if
not liquidated before the contract matures.
FX - Foreign Exchange.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- G -
G5 - The Group of Five. The five leading
industrial countries, being US, Germany, Japan, France, UK.
G7 - The seven leading industrial
countries, being US , Germany, Japan, France, UK, Canada, Italy.
G10 - G7 plus Belgium, Netherlands and
Sweden, a group associated with IMF discussions. Switzerland is sometimes
Gamma - The rate at which a delta changes
over time or for one unit change in the price of the underlying asset.
Gap - A mismatch between maturities and
cash flows in a bank or individual dealers position book. Gap exposure is
effectively interest rate exposure.
Garman Kohlhagen - An option model.
Gearing - A company's debts expressed as
a percentage of its equity capital.
Gilt edged - In the UK, loans issued on
behalf of the government to fund its spending. Longs are gilts with a redemption
date greater than 15 years. Mediums are those with a redemption date between 5
and 15 years. Shorts are those with a redemption date within 5 years.
Ginnie Mae - Securities issued by the
Government National Mortgage Association (GNMA) of the USA.
GLOBEX - A system for global after hours
electronic trading in futures and options developed by Reuters for CME and CBOT
for use in conjunction with various exchanges around the world.
GNMA - Government National Mortgage
Association . The government owned entity that was established to take over some
of the FNMA functions. Unlike the FNMA its paper bears a government guarantee.
Going long - The purchase of a stock or
commodity for investment or speculation.
Going short - The selling of a currency
or instrument not owned by the seller.
Gold Clause - A clause in a financial
agreement linking a monetary payment to the value of gold.
Gold Franc - Several gold francs are
minted. The Swiss gold franc is used in BIS's balance sheet The value of these
Francs is now expressed in terms of SDRs.
Gold Standard - The original system for
supporting the value of currency issued. The was that where the price of gold is
fixed against the currency it means that the increased supply of gold does not
lower the price of gold but causes prices to increase.
Gold Tranche - Part of the country quota
for IMF members that had to be paid in gold. This was normally 25% of the quota,
the remainder being in domestic currency. The Gold Tranche was automatically
available to members without condition.
Good until canceled - An instruction to a
broker that unlike normal practice the order does not expire at the end of the
trading day, although normally terminates at the end of the trading month.
Green Currency - A notional currency used
in the EU's Common Agricultural Policy to keep agricultural prices at the same
level throughout the EU to ensure a unified market.
Grid - Fixed margin within which exchange
rates are allowed to fluctuate.
Gross Settlement - A process where full
payment of each transaction is made rather than clearing a group of transactions
as currently occurs in the FX market. A method designed to eliminate capital
Gross - Before deduction of tax.
Gross Domestic Product - Total value of a
country's output, income or expenditure produced within the country's physical
Gross National Product - Gross domestic
product plus " factor income from abroad" - income earned from
investment or work abroad.
GNP Deflator - Removes inflation from the
GNP figure. Usually expressed as a percentage and based on an index figure.
GNP Gap - The difference between the
actual real GNP and the potential real GNP. If the gap is negative an economy is
Gramm Rudman - The Gramm Rudman Hollings
Act is the US law imposing a gradual reduction in the Federal budget deficit.
Grossing-up - Calculating a gross or
pre-tax rate of interest or dividend by adding a notional amount of tax to the
net, or post-tax amount received.
Group of Five etc. - See G5, G7, G10.
GTC - See Good until canceled.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- H -
Hard currency - A currency whose value is
expected to remain stable or increase in terms of other currencies.
Head and Shoulders - A pattern in price
trends which chartist consider indicates a price trend reversal. The price has
risen for some time, at the peak of the left shoulder, profit taking has caused
the price to drop or level. The price then rises steeply again to the head
before more profit taking causes the the price to drop to around the same level
as the shoulder. A further modest rise or level will indicate a that a further
major fall is imminent. The breach of the neckline is the indication to sell.
Hedge - The purchase or sale of options
or futures contracts as a temporary substitute for a transaction to be made at a
later date. Usually it involves opposite positions in the cash or futures or
Hedge ratio - The number of futures or
options required to hedge a given exposure in the cash market.
HEIBOR - Helsinki Inter-bank Offered
Herstatt - Relates to the exposure to the
counterparty to a foreign exchange transaction defaulting which could trigger
widespread default in the market due to the netting system of settlement. The
name derives from a German bank involved in a bank failure that resulted in
default in settling a FX transaction in the 70s.
HIBOR - Hong Kong Inter-bank Offered
Historical volatility - The annualized
standard deviation of percentage changes in futures prices over a specific
period. It is an indication of past volatility in the marketplace.
Hit the bid - Acceptance of purchasing at
the offer or selling at the bid.
Holder - Same as buyer.
Hold Account - Current Accounts in the UK
in a currency other than sterling.
Horizontal spread - A calendar or time
Hot money - Short term international
capital movements, motivated by interest rate differentials or expectation of
exchange rate movements.
Hots - In the UK treasury bills on the
day of issue.
Hyperinflation - Very high and self
sustaining inflation levels. One definition being the period while inflation
exceeds 50% until it has drops below that level for 12 months.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
ICCH - International Commodities Clearing
House Limited, a clearing house based in London operating world wide for many
IFEMA - International Foreign Exchange
IMF - International Monetary Fund,
established in 1946 to provide international liquidity on a short and medium
term and encourage liberalization of exchange rates. The IMF supports countries
with balance of payments problems with the provision of loans.
IMM - International Monetary Market part
of the Chicago Mercantile Exchange that lists a number of currency and financial
futures Implied volatilityA measurement of the market's expected price range of
the underlying currency futures based on the traded option premiums.
Implied volatility skews - The implied
volatility varies for different strikes of an option.
Implied Rates - The interest rate
determined by calculating the difference between spot and forward rates.
In-the-money - A call option is
in-the-money if the price of the underlying instrument is higher than the
exercise/strike price. A put option is in-the-money if the price of the
underlying instrument is below the exercise/strike price. See Out-of-the-money.
Inconvertible currency - Currency which
cannot be exchanged for other currencies, either because this is forbidden by
the foreign exchange regulations.
Index linking - The process of linking
wages, social benefits payments, prices, interest rates or loan values to an
economic index, usually of prices.
Indicative quote - A market-maker's price
which is not firm.
Indirect quote - See reciprocal currency.
Industrial Production Index - A
coincident indicator measuring physical output of manufacturing, mining and
Inflation - Continued rise in the general
price level in conjunction with a related drop in purchasing power. Sometimes
referred to as an excessive movement in such price levels.
Info Quote - Rate given for information
Initial margin - The margin is a
returnable deposit required to be lodged by buyers and sellers with the clearing
house to secure a new futures or options position.
Instruction - The specification of the
banks at which funds shall be paid upon settlement.
Inter-bank rates - The bid and offer
rates at which international banks place deposits with each other. The basis of
the Interbank market.
Inter-dealer broker - A specialist broker
who acts as an intermediary between market-makers who wish to buy or sell
securities to improve their book positions, without revealing their identities
to other market-makers.
Interest Arbitrage - Switching into
another currency by buying spot and selling forward, and investing proceeds in
order to obtain a higher interest yield. Interest arbitrage can be inward, i.e.
from foreign currency into the local one or outward, i.e. from the local
currency to the foreign one. Sometimes better results can be obtained by not
selling the forward interest amount. In that case some treat it as no longer
being a complete arbitrage, as if the exchange rate moved against the
arbitrageur, the profit on the transaction may create a loss.
Interest parity - One currency is in
interest parity with another when the difference in the interest rates is
equalized by the forward exchange margins. For instance, if the operative
interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the
Japanese Yen against sterling would bring about interest parity.
Interest rate Options - An agreement
permitting a party to obtain a particular interest rate, issued both OTC and by
Interest rate Cap - An agreement that
provides the buyer of a cap with a maximum interest rate for future borrowing
Interest rate Collar - A combination of a
cap and a floor to provide maximum and minimum interest rates for borrowing or
Interest rate Floor - An agreement which
provides the buyer of the floor with a minimum interest rate for future lending
Interest rate Swaps - An agreement to
swap interest rate exposures from floating to fixed or vice versa. There is no
swap of the principal. It is the interest cash flows be they payments or
receipts that are exchanged.
Internationalization - Referring to a
currency that is widely used to denominate trade and credit transactions by non
residents of the country of issue. US dollar and Swiss Franc are examples.
Intervention - Action by a central bank
to effect the value of its currency by entering the market. Concerted
intervention refers to action by a number of central banks to control exchange
In the money - A call option is in the
money when the strike price is less than the current price of the underlying
instrument. A put is when the strike price is greater.
Intra Day limit - Limit set by bank
management on the size of each dealer's Intra Day Position.
Intra day position - Open positions run
by a dealer within the day. Usually squared by the close.
Intrinsic value - The amount by which an
option is in-the-money. The intrinsic value is the difference between the
exercise/strike price and the price of the underlying security.
Inverted Market - Where near months are
trading at premiums to longer dates.
Invisible Balance - Comprises
transportation services, income and expenditure on travel services, insurance's,
licensees, earnings and interest income from international capital movements.
IOM - Index and Options Market part of
the Chicago Mercantile Exchange.
ISIN code - The International Securities
Identification Number. The structure of the ISIN code is two-digit alpha country
code (ISO 3166) or XS for securities numbered by CEDEL or Euroclear; nine-digit
Alpha-numeric code based on the national securities code or the common CEDEL/Euroclear
code; a check digit computed according to the modulus 10 'double-add double'.
Islamic Banking - Banking operations
carried on in line with Islamic principles which prohibit usury. Interest is
therefore often replaced by involvement in the venture by temporarily owning the
out put from the business and onselling it at a predetermined profit. Referred
to as Sharia Law.
Islamic Development Bank - (IDB)Established
in 1976 to assist in financing development in countries with a substantial
Investment Currency - An exchange control
system under which currency needed for foreign investment must be acquired
through the investment currency market. Such systems are liable to create wide
disparities between this and the actual market rate.
Invisibles - A term for exports and
imports of services as distinct from merchandise (visibles).
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- J -
J Curve - A term describing the expected
effect of a devaluation on a country's trade balance. It is anticipated that
import bills rise before export orders and receipts increase.
Jawbone - Announcements and statements by
politicians or monetary authorities to influence decisions by business,
consumer, or trade union sectors, often associated with forecasts and policy
Jurisdiction Risk - (1) the risk inherent
in placing funds in the centre where they will be under the jurisdiction of a
foreign legal authority. (2) the risk in making a loan subject to the laws of
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- K -
Kappa - A measure of the sensitivity of
the price of an option to a change in its implied volatility.
Kassenobligation - German financial
instrument traded on the Euromarkets.
Key currency - Small countries, which are
highly dependent on exports, orientates their currencies to their major trading
partners, the constituents of a currency basket.
Kiwi - Slang for the New Zealand dollar.
Kondratieff Cycle - Long term economic
cycles , named after an economist who identified 50-60 year economic cycles.
Knock in - A process where a barrier
option (European) becomes active as the underlying spot price is in the money.
Knock out - has a corresponding meaning
although the option may permanently cease to exist.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- L -
Ladder - Dealers analysis of the forward
book or deposit book showing every existing deal by maturity date, and the net
position at each future date arising.
Lagging Indicator - A measure of economic
activity which tends to change after change has occurred in the overall economy
Lapsed rights - Rights for which call
payments have not been made by the acceptance date.
Last notice day - The final day on which
notices of intent to deliver on futures contracts may be issued.
Last trading day - The day on which
trading ceases for an expiring contract.
Lay off - To carry out a transaction in
the market to offset a previous transaction and return to a square position.
LDC -Less developed countries, often used
with respect to secondary debt market.
Leading Indicators - Statistic that are
considered to precede changes in economic growth rates and total business
activity, e.g. factory orders.
Leads and Lags - The effect on foreign
trade payments of an anticipated move in the exchange rate normally a
devaluation. Then payment of imports is faster and export receipts is slowed
Left-hand side - Taking the left hand
side of a two way quote i.e. selling the quoted currency.
Leverage - In options terminology, this
expresses the disproportionately large change in the premium in terms of the
relative price movement of the underlying instrument.
Levy - An option model.
Liability - In terms of foreign exchange
, the obligation to deliver to a counterparty an amount of currency either in
respect of a balance sheet holding at a specified future date or in respect of
an un-matured forward or spot transaction.
LIBID - The London Interbank Bid Rate.
The rate charged by one bank to another for a deposit.
LIBOR - The London Interbank Offered
Rate, the rate charged by one bank to another for lending money.
BlueAN -Calculated from the mean average
of LIBOR and LIBID.
Liee - French term for a swap.
Life of contract - The period between the
beginning of trading in a particular future and the expiration of trading.
LIFFE - London International Financial
BlueAN - The average of the LIBOR and
Limit down - The maximum price decline
from the previous trading day's settlement price permitted in one trading
Limit move - A price that has advanced or
declined the permissible limit permitted during one trading session.
Limit order - An order to buy or sell a
specified amount of a security at a specified price or better.
Limit up - The maximum price advance from
the previous trading day's settlement price permitted in one trading session.
Limit - (1)The maximum price fluctuation
permitted by an exchange from the previous session's settlement price for a
given contract. (2) In international banking the limit a bank is willing to lend
in a country. (3) the amount that one bank is prepared to trade with another.
(4) the amount that a dealer is permitted to trade in a given currency.
Limited convertibility - When residents
of a country are prohibited from buying other currencies even though
non-residents may be completely free to buy or sell the national currency.
Lines - An arrangement by which a bank
agrees to lend to the line holder during some specified period any amount up to
the full amount of the line.
Liquidation - Any transaction that
offsets or closes out a previously established position.
Liquidity - The ability of a market to
accept large transactions.
Local - A futures trader who normally
trades on an exchange on his/her own account.
Locked market - A market is locked when
the bid price equals the asked price.
Lombard Rate - One of the key commercial
interest rates normally referring to Germany although such rates exist in
France, Belgium, and Switzerland. An interest rate for a loan against the
security of pledged paper.
Long dated shorts - A forward purchase
and sale with a brief uncovered position between them. This may also be referred
to as long short dates.
Long - The holding of an excess of a
Long Hedge - The purchase of futures
contracts for price protection purposes, as a defensive position against an
increase in cash prices, or falling interest rates.
Look Back - An option that permits
exercise at any rate that existed during the option period but only exerciseable
after the option period.
Louvre Accord - The 1987 agreement
between the G5 calling for a halt in the dollars decline, re-establish balanced
trade and non inflationary growth.
LXBOR - Luxembourg Inter-bank Offered
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- M -
M0 - cash in circulation . Only used by
M1 - cash in circulation plus demand
deposits at commercial banks. There are variations between the precise
definitions used by national financial authorities.
M2 - Includes demand deposits time
deposits and money market mutual funds excluding large CDs.
M3 - In the UK it is M1 plus public and
private sector time deposits and sight deposits held by the public sector.
M4 - In the US it is M2 plus negotiable
Maintenance margin - The minimum margin
which an investor must keep on deposit in a margin account at all times in
respect of each open contract.
Make a market - A dealer is said to make
a market when he or she quotes bid and offer prices at which he or she stands
ready to buy and sell.
Make up day - The day when banking
figures need to be compiled for central bank reporting.
Managed float - When the monetary
authorities intervene regularly in the market to stabilize the rates or to aim
the exchange rate in a required direction.
Margin call - A demand for additional
funds to be deposited in a margin account to meet margin requirements because of
adverse future price movements.
Margin - (1)Difference between the buying
and selling rates, also used to indicate the discount or premium between spot or
forward. (2)For options the sum required as collateral from the writer of an
option. (3)For futures a deposit made to the clearing house on establishing a
futures position account. (4) The percentage reserve required by the US Federal
Reserve to make an initial credit transaction.
Marginal Risk - The that a customer goes
bankrupt after entering into a forward contract. In such an event the issuer
must close the commitment running the risk of having to pay the marginal
movement on the contract.
Mark to market - The daily adjustment of
an account to reflect accrued profits and losses often required to calculate
variations of margins.
Mark up - Premium.
Market amount - The minimum amount
conventionally dealt for between banks.
Market maker - A market maker is a person
or firm authorized to create and maintain a market in an instrument.
Market if Touched - An order that becomes
a market order if the specified price is reached.
Market order - An order to buy or sell a
financial instrument immediately at the best possible price.
Marshall - Lerner - A model that states
that if the sum of the elasticity's of demand for a country's and that of the
imports exceed one, then devaluation will have a positive effect upon the trade
Marry - Where a dealer is able to match
two customer deals which off set one another.
MAS - Monetary Authority of Singapore.
Matched book - If the distribution of the
maturities of a banks liabilities equal that of its assets , it is said to be
running a matched book.
Matching - The process of ensuring that
purchases and sales in each currency and deposits given and taken in each
currency are in balance , by amount and maturity.
MATIF - Marche a Terme International de
Maturity date - (1) The last trading day
of a futures contract. (2) Date on which a bond matures, at which time the face
value will be returned to the purchaser. Sometimes the maturity date is not one
specified date but a range of dates during which the bond may be repaid.
MIBOR - Madrid Inter-bank Offered Rate.
Micro economics - The study of economic
activity as it applies to individual firms or well defined small groups of
individuals or economic sectors.
Mid Office - The control of the trading
activity including position keeping.
Mid-price or middle rate - The price
half-way between the two prices, or the average of both buying and selling
prices offered by the market makers.
Milliard - European term for 1,000
Mine - Expression used to indicate that
the contacting party is willing to buy at the rate offered by the quoting bank.
Minimum price fluctuation - The smallest
increment of market price movement possible in a given futures contract.
Minimum Reserve - Reserves required to be
deposited at central banks by commercial banks and other financial institutions.
Sometimes referred to as Registered Reserves.
Mio - Million.
Mismatch - (1) A mismatch between the
interest rate maturities of a banks assets and liabilities. (2) Forward
purchases differ in the value date from the forward sales in a given currency.
MITI - Japanese ministry of International
Trade & Industry.
MM - Money Markets.
Monetarism - A school of economics which
believes that strict control of money supply is the principal tool for
implementing monetary policy, especially against inflation. Policies include
cuts in public spending and hopefully temporary high interest rates.
Monetary Base - Currency in circulation
plus banks' required and excess deposits at the central bank.
Monetary Easing - A modest loosening of
monetary constraint by changing interest rate, money supply, deposit ratios etc.
Monetary Union - An agreement between
countries to maintain a fixed exchange rate between their currencies. A process
which the EMS is intended to lead to, especially after the Maastricht Treaty.
Moneyness - The extent to which an option
is in or out of the money, expressed as a percentage of the current spot,
forward or future depending upon the nature of the underlying asset. Positive
moneyness is in the money.
Money Market - A market consisting of
financial institutions and dealers in money or credit who wish to either borrow
Money Market Operations - Comprises the
acceptance and re-lending of deposits on the money market.
Money Stock - A measure of German money
supply, being cash and banks' minimum reserves on domestic liabilities (sight,
statutory notice, and time deposits). Used by the Bundesbank until 1987 as its
Money Supply - The amount of money in the
economy, which can be measured in a number of ways. See definitions of M0-M4.
Moral Suasion - When monetary authorities
and governments try to influence the markets by persuasion rather than
regulation or the its threat.
Most Favored Nation (MFN) - An
undertaking to give the rate of tariff concession offered to members of the
GATT. More concessionaire rates can exist.
Moving Average - A way of smoothing a set
of data, widely used in price time series.
Multiple Exchange Rates - Different
exchange rates for different types of transaction. The South African Rand is an
Mutual fund - An open-end investment
company. Equivalent to unit trust.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- N -
Naked writing - Issuing contracts without
any asset to back the contract or any hedging or covering of positions.
Narrow Money - Limited definition of
money to include cash or near cash, i.e.
M1 or M0Nearby contracts - The closest
active futures contracts, i.e. those that expire the soonest.
Nearby month - The nearest actively
traded delivery month, a.k.a. current delivery month, lead month.
Negative Sloping Yield Curve - A yield
curve where interest rates in the shorter dates are above those in the longer
Net Liquidity Balance - US Department of
Commerce term for the overall balance of payments.
Netting - The method of settling under
which only the differences in the traded currencies is settled at the close.
Net Position - The number of futures
contracts bought or sold which have not yet been offset by opposite
NIBOR - Norway Inter-bank Offered Rate.
Nickel - US term for five basis points.
Nominal quotation - Futures. An estimated
price for a future month or date for which there is no bid, ask or trade price.
Nominee name - Name in which a security
is registered and held in trust on behalf of the beneficial owner.
Nostro Account - A foreign currency
current account maintained with another bank. The account is used to receive and
pay currency assets and liabilities denominated in the currency of the country
in which the bank is resident.
Note - A financial instrument consisting
of a promise to pay rather than an order to pay or a certificate of
Notice day - Any day on which notices of
intent to deliver on futures contracts may be issued.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- O -
Odd Lot - A non standard amount for a
Odd Maturity or date - see broken dates.
OECD - Organisation of Economic
Co-operation and Development, membership is the more than developed countries.
Offer - The price at which a seller is
willing to sell. The best offer is the lowest such price available.
Offered market - Temporary situation
where offers exceed bid.
Offset - The closing-out or liquidation
of a futures position.
Official Settlements Account - A US
balance of payments measure based on movement of dollars in foreign official
holdings and US reserves. Also referred to as reserve transaction account.
Off-shore - The operations of a financial
institution which although physically located in a country, has little
connection with that country's financial systems. In certain countries a bank is
not permitted to do business in the domestic market but only with other foreign
banks. This is known as an off shore banking unit.
Old Lady - Old lady of Threadneedle
Street, a term for the Bank of England.
Omnibus Account - An account maintained
by one broker with another in which all of the accounts of the former are
combined and carried only in its name, rather than designated separately.
Open interest - The total number of
outstanding option or futures contracts that have not been closed out by offset
or fulfilled by delivery.
Open outcry - A public auction method of
trading conducted by calling out bids and offers across a trading ring or pit
and having them accepted.
Open Market Committee - See Federal Open
Open Market Operations - Central Bank
operations in the markets to influence exchange and interest rates.
Open position - The difference between
assets and liabilities in a particular currency. This may be measured on a per
currency basis or the position of all currencies when calculated in base
Option class - All options of the same
type - calls or puts -listed on the same underlying instrument.
Option series - All options of the same
class having the same exercise/strike price and expiration date.
Option - A contract conferring the right
but not the obligation to buy (call) or to sell (put) a specified amount of an
instrument at a specified price within a predetermined time period.
Optionspreis - German for premium. The
price a put or call buyer must pay to a put or call seller for an option
Original Margin - see Initial Margin.
OTC - Over the Counter, the term used to
describe futures and options not traded on an exchange. Trade is directly
between buyers and sellers and there is no standardization of strikes or
Out-of the money - A put option is
out-of-the-money if the exercise/strike price is below the price of the
underlying instrument. A call option is out-of-the money if the exercise/strike
price is higher than the price of the underlying instrument. See In-the-money.
Outright deal - A forward deal that is
not part of a swap operation.
Over bought or over sold - See long and
Overhang - A holding of foreign exchange
that is temporarily unable to be converted from the reserve currency into other
Overheated (Economy) - Is an economy
where high growth rates placing pressure on production capacity resulting in
increased inflationary pressures and higher interest rates.
Overnight limit - Net long or short
position in one or more currencies that a dealer can carry over into the next
dealing day. Passing the book to other bank dealing rooms in the next trading
time zone reduces the need for dealers to maintain these unmonitored exposures.
Overnight - A deal from today until the
next business day.
Over the counter - See OTC
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- P -
Package deal - When a number of exchange
and /or deposit orders have to be fulfilled simultaneously.
Par - (1) The nominal value of a security
or instrument. (2) The official value of a currency.
Parallel rate of exchange - The
unofficial rate of exchange operating in a parallel market which may or may not
be officially condoned.
Paris - A term for USDFRF Spot Rate.
Paris Club - Informal grouping of
governments run by the Bank of France which meets on an ad hoc basis to seek
agreement on measures to be taken when a country is unable to repay its foreign
government to government borrowings on time.
Parity - (1) Foreign exchange dealer's
slang for your price is the correct market price. (2) Official rates in terms of
SDR or other pegging currency.
Parities - The value of one currency in
terms of another.
Parity Grid - A term used in the context
of the European Monetary System which consists of the upper, central and lower
intervention points between member currencies.
Payment date - The date on which a
dividend or bond interest payment is scheduled to be paid.
Plaza Accord - The 1985 Plaza Hotel
agreement by the G5 to lower the dollar.
Pegged - A system where a currency moves
in line with another currency, some pegs are strict while others have bands of
Petrodollars - Foreign exchange reserves
of oil producing nations arising from oil sales.
PIBOR - Paris Inter-bank Offered Rate.
Pip - See point. (0.0001 of a unit).
Pit - See Ring.
Point - (1) 100th part of a per cent,
normally 10,000 of any spot rate. Movement of exchange rates are usually in
terms of points. (2) One percent on an interest rate e.g. from 8-9%. (3) Minimum
fluctuation or smallest increment of price movement.
Portfolio insurance - An option hedging
strategy to protect long cash market positions.
Position Account - See Conversion
Position Clerk - A clerk who assist the
dealer in recording a dealers position and ensures that all deal tickets are
completed and transferred to the back office or input into the books in a
position keeping system.
Position limit - The maximum position,
either net long or net short, in one future or in all futures of one currency or
instrument combined which may be held or controlled by one person.
Position - The netted total commitments
in a given currency. A position can be either flat or square (no exposure),
long, (more currency bought than sold), or short ( more currency sold than
Producer Price Indices - See wholesale
Pre-Spot Dates - Quoted standard periods
that fall between the transaction date and the current spot value date. See
Premium - (1) The amount by which a
forward rate exceeds a spot rate (2) The amount by which the market price of a
bond exceeds its par value. (3) Options, the price a put or call buyer must pay
to a put or call seller for an option contract. (4) The margin paid above the
normal price level.
Primary Reserves - Gold related monetary
reserves, being gold, SDR, etc.
Prime Rate - (1) The rate from which
lending rates by banks are calculated in the US. (2) The rate of discount of
prime bank bills in the UK.
Principal - A dealer who buys or sells
stock for his/her own account.
Profit Graph - A graphical representation
of the profits to a given options strategy for different underlying asset
Profit Taking - The unwinding of a
position to realize profits.
Proxy Hedge - A term to describe when it
is necessary to hedge against a currency where there is no market but it follows
a major currency, the hedge is entered against the major currency.
Put option - A put option confers the
right but not the obligation to sell currencies,instruments or futures at the
option exercise price within a predetermined time period.
Put call parity - The equilibrium
relationship between premiums of call and put options of the same strike and
Pyramiding - The use of cash generated by
positive variation margins on a futures position to increase the size of the
position, each reinvestment in successively smaller increments.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- Q -
Quote - An indicative price. The price
quoted for information purposes but not to deal.
Quanto option - An option in which the
foreign exchange risk in the underlying instrument has been removed.
Quota - (1) A limit on imports or
exports. (2) A country's subscription to the IMF.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- R -
Rally - A recovery in price after a
period of decline.
Range - The difference between the
highest and lowest price of a future recorded during a given trading session.
Rate - (1) The price of one currency in
terms of another, normally against USD. (2) Assessment of the credit worthiness
of an institution.
Ratio Spread - Buying a specific quantity
of options and selling a larger quantity of out of the money options.
Ratio Calendar spread - Selling more
near-term options than longer maturity options at the same strike price.
Reaction - A decline in prices following
Real - A price, interest rate or
statistic that has been adjusted to eliminate the effect of inflation.
Realignment - Simultaneous and mutually
co-ordinated re- and devaluation of the currencies of several countries. An
activity that mostly refers to EMS activity.
Recession - A decline in business
activity. Often defined as two consecutive quarters with a real fall in GNP.
Reciprocal currency - A currency that is
normally quoted as dollars per unit of currency rather than the normal quote
method of units of currency per dollar. Sterling is the most common example.
Reinvestment rate - The rate at which
interest earned on a loan can be reinvested. The rate may not attract the same
level of interest as the principal amount.
Report - French term for premium.
Reporting Dealer - Term for US Primary
Repo rate - See Repurchase Agreement.
Repurchase Agreement - Agreements by a
borrower where they sell securities with a commitment to repurchase them at the
same rate with a specified interest rate.
Reserve Currency - A currency held by a
central bank on a permanent basis as a store of international liquidity, these
are normally US dollar, Deutschemark and sterling.
Reserves - Funds held against future
contingencies., normally a combination of convertible foreign currency, gold,
and SDRs. Official reserves are to ensure that a government can meet near term
obligations. They are an asset in the balance of payments.
Reserve requirement - The ratio of
reserves to deposits, expressed as a fraction prescribed by national banking
authorities including USA.
Reserve Tranche - The 25% of its quota to
which a member of the IMF has unconditional access, and for which there is no
obligation to repay.
Resistance Point or Level - A price
recognized by technical analysts as a price which is likely to result in a
rebound but if broken through is likely to result in a significant price
Rescheduling - The renegotiation of the
terms of existing debts. The term is usually used with reference to LDC debt.
The term rescheduling is considered to be refinancing to avoid any implication
of default. Major sovereign debt rescheduling for Brazil, and Mexico have been
undertaken in recent years.
Retail Price Index - Measurement of the
monthly change in the average level of prices at retail, normally of a defined
group of goods.
Reuter Dealing - A system for screen
based trading that has been in operation since the early 1980s now has a
matching optional enhancement known as Dealing 2000-2.
Reversal - Process of changing a call
into a put.
Reversal arbitrage - Selling an asset
short writing a put and buying a call on the asset with the same terms.
Revaluation - Increase in the exchange
rate of a currency as a result of official action.
Revaluation rate - The rate for any
period or currency which is used to revalue a position or book.
Revolving credit - Upon repayment by the
borrower the credit becomes automatically available.
Right hand side - To do a deal on the
right hand side of a two way quote, normally to buy the currency and sell
dollars. See Left hand side.
Ring - An area on a trading floor where
futures or equities are traded.
Risk factor - The risk factor (delta)
indicates the risk of an option position relative to that of the related futures
Risk management - The identification and
acceptance or offsetting of the risks threatening the profitability or existence
of an organisation. With respect to foreign exchange involves among others
consideration of market, sovereign, country, transfer, delivery, credit, and
Risk Position - An asset or liability,
which is exposed to fluctuations in value through changes in exchange rates or
Risk Premium - Additional sum payable or
return to compensate a party for adopting a particular risk.
Risk reversal - A combination of
purchasing put options with the sale of call options. The put limits downside,
while the call limits the upside.
Rolling over - The substituting of a far
option for a near option of the same underlying stock at the same
Rollover - An overnight swap,
specifically the next business day against the following business day (also
called Tomorrow Next, abbreviated to Tom-Next).
Rollover credit - Medium term credit with
a variable interest rate, which is governed by the currently prevailing rates on
Round trip - Buying and selling of a
futures or options contract.
Round tripping - When a non financial
company can borrow at lower than current short term rates and therefore can
borrow and on lend at a profit.
RTStandard - Reuter Terminal for quote
Running a position - Keeping open
positions in the hope of a speculative gain.
A B C
D E F G H
I J K L M
N O P Q R
S T U V Y
- S -
Same day transaction - A transaction that
matures on the day the transaction takes place.
Sandwich spread - Same as a butterfly
Savings ratio - The percentage of
disposable income that is saved or used for debt repayment.
Scalping - A strategy of buying at the
bid and selling at the offer as soon as possible.
SDR - Special Drawing Right. A standard
basket of five major currencies in fixed amounts as defined by the IMF.
Seasonally Adjusted - A method of dealing
with statistics to adjust for regular annual fluctuations in figures normally
caused by non economic factors, e.g. school leavers' impact on unemployment, or
rise in food prices in winter. The months data is divided by the percentage of
the average monthly figure. As a simple arithmetic adjustment it does not deal
with exceptional seasonal factors such as extreme winters.
Selling rate - Rate at which a bank is
willing to sell foreign currency.
Seller/grantor - Also known as the option
Serial expiration - Options on the same
underlying futures being contract which expire in more than one month.
Series - All options of the same class
which share a common strike price and expiration date.
Settlement date - The date by which an
executed order must be settled by the transference of instruments or currencies
and funds between buyer and seller.
Settlement price - The official closing
price for a future set by the clearing house at the end of each trading day.
Settlement Risk - Risk associated with
the non settlement of the transaction by the counter party.
Short / Short Position - A shortage of
assets in a particular currency. See short sale.
Short Contracts - Contracts with up to
six months to delivery.
Short Covering - Buying to unwind a
shortage of a particular currency or asset.
Short forward date/rate - The term short
forward refers to period up to two months, although it is more commonly used
with respect to maturities of less than one month.
Short sale - The sale of a currency
futures not owned by the seller at the time of the trade. Short sales are
usually made in expectation of a decline in the price.
Short-term interest rates - Normally the
90 day rate.
Shorts - see Short forward date/rate.
SIBOR - Singapore Inter-bank Offered
Sidelined - A major currency that is
lightly traded due to major market interest being in another currency pair.
SIMEX - Singapore International Monetary
SITC - Standard International Trade
Classification. A system for reporting trade statistics in a common manner.
SOFFEX - Swiss Options and Financial
Futures Exchange, a fully automated and integrated trading and clearing system.
Soft Market - More potential sellers than
buyers, which creates an environment where rapid price falls are likely.
Sovereign immunity - Legal doctrine which
means that the state cannot be sued or have its assets seized.
Sovereign risk - (1) Risk of default on a
sovereign loan; (2) Risk of appropriation of assets held in a foreign country.
Split Date - See broken date.
Spot - (1) The most common foreign
exchange transaction. (2) Spot or Spot date refers to the spot transaction value
date that requires settlement within two business days, subject to value date
Spot next - The overnight swap from the
spot date to the next business day.
Spot month - The contract month closest
Spot price/rate - The price at which the
currency is currently trading in the spot market.
Spot week - A standard period of one week
swap measured from the current value date of the currency spot rate.
Spread - (l)The difference between the
bid and ask price of a currency. (2) The difference between the price of two
related futures contracts. (3) For options, transactions involving two or more
option series on the same underlying currency.
Square - Purchase and sales are in
balance and thus the dealer has no open position.
Squawk Box - A speaker connected to a
phone often used in broker trading desks.
Squeeze - Action by a central bank to
reduce supply in order to increase the price of money.
Stable market - An active market which
can absorb large sale or purchases of currency without major moves.
Standard - A term referring to certain
normal amounts and maturities for dealing.
Standard and Poors - A US firm engaged in
assessing the financial health of borrowers. The firm also has generated certain
stock indices i.e. S&&P 500.
Stand by Credit - An arrangement with the
IMF for draw downs on a "need " basis. The term is sometimes more
Sterilization - Central Bank activity in
the domestic money market to reduce the impact on money supply of its
intervention activities in the FX market.
Sterling Index - A index based on the
movement of sterling against the major currency.
Sterling - British pound, otherwise known
STIBOR - Stockholm Inter-bank Offered
Stocky - Market slang for Swedish Krona.
Stop loss order - Order given to ensure
that , should a currency weaken by a certain percentage, a short position will
be covered even though this involves taking a loss. Realize profit orders are
Stop out Price - US term for the lowest
accepted price for Treasury Bills at auction.
Straddle - The simultaneous purchase/sale
of both call and put options for the same share, exercise/strike price and
Stagflation - Recession or low growth in
conjunction with high inflation rates.
Straight - A bond with unquestioned right
to repayment of principal and interest at the specified dates with no additional
further rights or bonuses.
Straight date - See fixed dates.
Strap - A combination of two calls and
Strike price - Also called exercise
price. The price at which an options holder can buy or sell the underlying
Strip - A combination of two puts and one
Structural Unemployment - Unemployment
levels inherent in an economic structure.
Supply side economics - The concept is
that tax cuts will boost investment leading to an increase in the supply of
goods in the economy. To be compared with demand led Keynesian economics.
Support levels - When an exchange rate
depreciates or appreciates to a level where (1) Technical analysis techniques
suggest that the currency will rebound, or not go below; (2) the monetary
authorities intervene to stop any further down ward movement. See resistance
Swap as a percentage - Swaps expressed as
an annualized percentage.
Swap margin - See forward margin.
Swap price - A price as a differential
between two dates of the swap.
Swap rate - See forward margin.
Swap - The simultaneous purchase and sale
of the same amount of a given currency for two different dates, against the sale
and purchase of another. A swap can be a swap against a forward. In essence,
swapping is somewhat similar to borrowing one currency and lending another for
the same period. However, any rate of return or cost of funds is expressed in
the price differential between the two sides of the transaction.
Swaption - An option to enter into a swap
SWIFT - Society for World-wide Interbank
Telecommunications is Belgian based company that provides the global electronic
network for settlement of most foreign exchange transactions.
Swissy - Market slang for Swiss Franc.
Switch - See Deposit Swap.
Synthetics - Options or futures that
create a position that able to be achieved directly but is generated by a
combination of options and futures in the relevant market. In foreign exchange a
SAFE combines two forward contracts into a single transaction where settlement
only involves the difference in values.
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T-Bill - see Treasury Bill.
Tagesgeld - German term for money lent
until the following day and automatically repaid on the day.
Taegliches geld - automatically rolls
Talking up - Statements made normally by
the central bank or government minister designed to bolster market sentiment
with respect to the currency.
Tail - (1) In US Treasury cash auctions,
refers to the differences between the average " issue price" and the
"stop out price". (2) In the repo market, a dealer establishes a tail
when it deliberately makes the reverse repo for longer than the repo in the hope
that the interest rates will fall, lowering the cost of the remaining part of
the reverse repo.
Tap - UK term for a supply of Government
stock available for sale through the Government broker at a stated price.
Tau - Expresses the price change of a
option for a percentage change in the implied volatility. Technical AnalysisIs
concerned with past price and volume trends - often with the help of chart
analysis - in a market, in order to be able to make forecasts about future price
developments of the commodity being traded.
Technical Correction - An adjustment to
price not based on market sentiment but technical factors such as volume and
Temporal Accounting - Method of
determining accounting exposure which translates all balance sheet items at the
current rate of exchange, not the one at the time the cost was incurred.
Tender - (1) a formal offer to supply or
purchase goods or services. (2) In the UK the term for the weekly Treasury Bill
Tenor - Maturity or number of days to
maturity normally on bills of exchange.
Terme - French for period.
Terme sec - French for outright in
forward foreign exchange transaction.
Termingeld - German term for money market
operations of over one month.
Terms of Trade - The ratio between export
and import price indices.
Theta - A measure of the sensitivity of
the price of an option to a change in its time to expiry.
Thin market - A market in which trading
volume is low and in which consequently bid and ask quotes are wide and the
liquidity of the instrument traded is low.
Thursday/Friday Dollars - A US foreign
exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday
delivery. If the bank leaves the funds overnight and transfers them on Friday by
means of a clearing house cheque then clearance is not until Monday, the next
working day. Higher interest rates for this period are thus available.
TIBOR - Tokyo Inter-bank Offered Rate.
Tick - A minimum change in price, up or
Ticket - See Deal Slip.
Tier One - A measure of a banks financial
strength used by the BIS being the shareholders' equity available to cover
actual or potential irredeemable and non-cumulative preference shares. It
excludes, hybrid forms of capital such as fixed term stock, goodwill, and
revaluation reserves. BIS has a minimum requirement of 4% on risk weighted
Tight Money - A condition where there is
a shortage of credit as a result of monetary policy restricting the supply of
credit normally through raising interest rates.
TIFFE - Tokio International Financial
Time decay - The decline in the time
value of an option as the expiry approaches.
Time deposit - Interest bearing deposits
at a savings institution that has a specific maturity.
Time value - That part of an option
premium which reflects the length of time remaining in the option prior to
expiration. The longer the time remaining until expiration, the higher the time
Today/Tomorrow - Simultaneous buying of a
currency for delivery the following day and selling for the spot day, or vice
versa. Also referred to as overnight.
Tombstone - Colloquial term for
announcement in a publication that a loan or bond has been arranged.
Tomorrow next (Tom next) - Simultaneous
buying of a currency for delivery the following day and selling for the spot day
or vice versa.
Trade date - The date on which a trade
Trade deficit/Surplus - The difference
between the value of imports and exports. Often only reported in visible trade
Trade weighted Exchange rate - The
changes in the exchange rate against a trade weighted basket including the
currencies of the county's principal trading partners.
Traded options - Transferable options
with the right to buy and sell a standardized amount of a currency at a fixed
price within a specified period.
Tradeable amount - Smallest transaction
Trade Ticket - See deal ticket.
Transaction date - The date on which a
Tranche - A portion of, specifically used
for borrowings from the IMF.
Transaction - The buying or selling of
securities resulting from the execution of an order.
Translation loss/profit - The calculation
of loss or profit resulting from the valuation of foreign assets and liabilities
for balance sheet purposes, when consolidating into the base currency.
Treasury bills - Short-term obligations
of a Government issued for periods of one year or less. Treasury bills do not
carry a rate of interest and are issued at a discount on the par value. Treasury
bills are repaid at par on the due date. In the UK they are normally for 91
days, and are offered at weekly tenders. In the US they are auctioned.
Treasury bonds - Government obligations
with maturities of ten years or more.
Treasury notes - Government obligations
with maturities more than one year but less than ten years.
Treasury stock - Previously issued stock
that has been repurchased by, or donated to, or otherwise are acquired by the
issuing firm. Treasury stocks pay no dividends and have no voting privileges.
Treaty of Rome - Founding treaty of the
EU, most recently modified by the Maastricht Treaty.
Troc, troquer - French FX term for swap.
Turnover - The total money value of
currency contracts traded is calculated by multiplying size by the number of
Two Tier market - A dual exchange rate
system where normally only one rate is open to market pressure, e.g. South
Two-Way quotation - When a dealer quotes
both buying and selling rates for foreign exchange transactions.
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Ultimo - Continental term for month or
Uncovered - Another term for an open
Under reference (Order) - Before
finalizing a transaction all the details should be submitted for approval to the
order giver, who has the right to turn down the proposal.
Under-valuation - An exchange rate is
normally considered to be undervalued when it is below its purchasing power
Undo - A colloquial term for reversing a
transaction. e.g. a spot sale by means of a forward purchase or if done in error
a spot purchase.
Uniform Price Auction - See Dutch
Unit of Account - A device designed to
provide a consistent value with varying currencies. e.g. ECU and SDR.
Unload - Term for sale of assets or
unwinding positions either to limit loss or to undermine other market
Unmatched Book - If the average maturity
of a banks liabilities is less than that of its assets, it said to be running an
Unwind - Selling of assets and or
instruments to square a position.
Up tick - A transaction executed at a
price greater than the previous transaction.
US Quote - Exchange rate quotation on a
reciprocal basis. See domestic quote.
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Valeur Compensee - Payments are said to
be " valeur compensee" when payment by one party in one centre and
settlement by the other party in another centre takes place on the same day.
Value Date - For exchange contracts it is
the day on which the two contracting parties exchange the currencies which are
being bought or sold. For complete description see the chapter on trading. For a
spot transaction it is two business banking days forward in the country of the
bank providing quotations which determine the spot value date. The only
exception to this general rule is the spot day in the quoting centre coinciding
with a banking holiday in the country(ies) of the foreign currency(ies). The
value date then moves forward a day. The enquirer is the party who must make
sure that his spot day coincides with the one applied by the respondent. The
forward months maturity must fall on the corresponding date in the relevant
calendar month If the one month date falls on a non-banking day in one of the
centers then the operative date would be the next business day that is common.
The adjustment of the maturity for a particular month does not effect the other
maturities that will continue to fall on the original corresponding date if they
meet the open day requirement. If the last spot date falls on the last business
day of a month, the forward dates will match this date by also falling due on
the last business day. Also referred to as maturity date.
Value Spot - Normally settlement for two
working days from today. See value date.
Value Today - Transaction executed for
same day settlement; sometimes also referred to as "cash transaction"
Vanilla - A simple option whose terms and
conditions do not include any provisions other than exercise style, expiry and
strike. To compare with exotic options which have additional terms.
Variation margin - Profits or losses on
open positions in futures and options contracts which are paid or collected
Vega - Expresses the price change of an
option for a one per cent change in the implied volatility.
Velocity of Money - The speed with which
money circulates or turnover in the economy. It is calculated as the annual
national income: average money stock in the period.
Vertical (bear or bull) spread - The sale
of an option with a high exercise price and the purchase (in the case of a bull)
or the sale (in the case of a bear) of an option with a lower exercise price.
Both options will have the same expiration date.
VDU1 - Video display unit, sometimes a
computer terminal or vendor screen.
VIBOR - Vienna Inter-bank Offered Rate.
Visible Trade - Trade in merchandise
goods as compared with capital flows and invisible trade.
Volatility - A measure of the amount by
which an asset price is expected to fluctuate over a given period. Normally
measured by the annual standard deviation of daily price changes (historic). Can
be implied from futures pricing, implied volatility.
Vostro Account - A local currency account
maintained with a bank by another bank. The term is normally applied to the
counterparty's account from which funds may be paid into or withdrawn, as a
result of a transaction.
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Wage drift - The difference between the basic
wage and actual earnings including overtime and bonuses.
Wash trade - A matched deal which
produces neither a gain nor a loss.
Whipsaw - Term for where a trader takes a
position, then has to move against it triggering stop loss limits and
liquidation of positions, then having to move in the original direction.
Normally occurs in volatile markets.
Wholesale Money - Money borrowed in large
amounts from banks and institutions rather than from small investors.
Wholesale Price Index - It measures
changes in prices in the manufacturing and distribution sector of the economy
and tends to lead the consumer price index by 60 to 90 days. The index is often
quoted separately for food and industrial products.
Window-dressing - Where financial
institutions or companies raise funds for specific reporting dates such as year
ends to give the appearance of high liquidity.
Working balance - Discretionary element
in the monetary reserves of a central bank.
Working day - A day on which the banks in
a currency's principal financial centre are open for business. For FX
transactions, a working day only occurs if the bank in both (all relevant
currency centers in the case of a cross are open).
World Bank - A bank made up of members of
the IMF whose aim is to assist in the development of member states by making
loans where private capital is not available.
Writer - The seller of a call or put
option in connection with an opening position who receives a premium and who is
required to perform if it is exercised.
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Yard - Slang for milliard, one thousand
Yield Curve - The graph showing changes
in yield on instruments depending on time to maturity. A system originally
developed in the bond markets is now broadly applied to various financial
futures. A positive sloping curve has lower interest rates at the shorter
maturities and higher at the longer maturities. A negative sloping curve has
higher interest rates at the shorter maturities.
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Z-Certificate - Certificate issued by the
Bank of England to "discount houses" in lieu of stock certificates to
facilitate their dealing in the short dated gilt edge securities.
Zero coupon bond - A bond
that pays no interest. The bond is initially offered at a discount to its
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