A
ADR : American
Deposit Receipt represents shares of a non-US company deposited with a US custodian
(a bank or a depository institution) and are traded in US exchanges – the traded
price of ADR closely resembles issuer’s domestic stock price. Indian companies issue
ADRs to raise equity in USD.
American option: An option contract that
can be exercised on or before the expiry date.
Anonymous Trading : The herein orders are matched in screen based trading system,
without revealing the identity of buyer or seller, till price is settled
Appreciation:
An increase in the value of one currency in terms of another, resulting from an
increase in market demand.
Arbitrage: It is the benefit accruing to
traders who play in different markets, simultaneously, without assuming any risk
– arbitrage profits accrue, as markets are imperfect. The act of simultaneous buying
and selling in two different markets, with the aim of taking advantage of the temporary
differential that exists between the two prices.
Ask: The price/rate at which the market maker is willing to sell a currency or lend
money .It is the higher of the two rates in case of a two way quote. (Also called
"offer" rate)
At-the-money option:
An option whose strike price is equal to the current market price of the underlying,
either at the money spot or at-the-money-forward.
Aussie: A commonly used market term for the
Australian Dollar.
B
Balance of Trade:
Monetary difference between export and import trade flows of a country for a specific
time period
Balance Sheet Management: Managing the maturity
and interest rate mismatches of assets and liabilities, present in the balancesheet
of a company or bank
Basis point: One hundredth of one percentage
point is a basis point. Used mostly in relation to interest rates.
Bear: A person who expects a decline in prices
or in the value of a currency. A person who has a pessimistic view on the market.
A bear market observes declining prices, with a general sentiment for further weakening
of prices to occur.
Benchmark rates: These are interest rates
prevailing in a liquid, risk free market which are generally accepted by lenders
and borrowers as a reference rate. All floating interest rates have a clearly defined
benchmark rate.
Bid: The price / rate at which the market
maker is willing to buy a currency or borrow money.
Bid-offer spread: The difference between
the price quoted by a market maker for buying and selling a currency or security.
For Eg: USD/INR: 46.82/86 – the spread in this case is 4 paise.
Bull: A person with an optimistic view on
the market, who expects the value of a currency to rise. A bull market observes
rising prices, with a general sentiment for further strengthening of prices to occur.
C
Cable: The
commonly used market term for sterling/dollar exchange rate.
Call option: An option which gives the holder
the right, but not the obligation, to buy a specified amount of foreign currency
(or any other asset) at a specific price on or before a specific maturity date.
Call Rate: Overnight rate of interest prevailing
in the interbank market
Cap: An option agreement that puts an upper
limit on interest rates. A cap provides borrowers interest rate risk protection
in case of floating rate loans. The borrower is compensated for any rise in the
rate, beyond the cap. Caps allow borrowers to take advantage of falling rates but
do not expose them to high rates.
Carry: Refers to interest cost of funds locked
in a trading position.
Cash market: A market where deal and delivery
of the transaction is done on the same day.
Collar: A transaction, which combines both
the purchase of a cap and sale of a floor. This establishes a desired band in which
buyer of the collar wants to operate in. If interest rates rise above the cap, the
buyer of collar will be compensated for the difference and if the rate falls below
the floor, he in turn pays the difference amount.
Confirmation: Treasury deals are normally
done over phone or over a dealing screen. The Deal terms are confirmed in writing
from back office to back office of counterparties, to facilitate verification.
Contingent option: A kind of knock-in option,
in which the premium (higher than for a plain vanilla option) is paid only when
the underlying asset reaches a specific level, before the expiry of the option.
E.g. a put on the Euro at $0.8800, but exercisable only if Euro LIBOR is more than
say 5.50%.
Contract month: The month in which futures
contract may be settled by making or accepting a delivery.
Convertible currency: A currency is called convertible in a country when it can
be exchanged for other currencies or gold without any special authorization from
the central bank of that country or any other government authority.
Counter party risk: The risk that a party in a transaction is exposed
to, arising from the possibility that the counter party may default or fail to deliver
his or her obligation.
Country risk:
It comprises of a wide range of risks, associated with lending or depositing funds,
or doing other financial transaction in a particular country. It includes economic
risk, political risk, currency blockage, expropriation, and inadequate access to
hard currencies.
Covered Interest Arbitrage: The process of
borrowing in one currency, converting it to another currency at spot, where it is
invested, and selling this second currency forward against the initial currency.
A market player does this series of transactions, with the aim of making riskless
profits from discrepancies between interest differentials and the percentage discount
or premium between currencies, in the forward transaction.
Credit default Spread (CDS):
The annual fee the credit protection buyer must pay the protection
seller over the length of the contract, expressed as a percentage of the notional
amount.
Credit Default Swaps: These are traded credit
derivatives, which offer protection against specific credit risk (default in payment
obligations) to holder of a financial asset (a loan, or a bond or any other investment)
Credit risk: The risk that a counter-party may not meet his/her obligation
in a contract. Same as counter-party risk
Cross rate:
A cross currency rate is an exchange rate between two currencies, neither of which
is the USD. For e.g. EUR/JPY, GBP/CHF. In the Indian forex market, the cross rate
is loosely referred to the rate for any currency pair which excludes the Indian
rupee. For e.g. USD/JPY
Currency Option: A currency option gives
the buyer, the right but not the obligation, to buy or sell, a specific amount of
currency at a specified exchange rate, on or before a future date.
Currency Risk: It is the risk of adverse
change in the value of an asset or liability denominated in foreign exchange, in
terms of domestic currency, resulting from fluctuations in exchange rates. Also
refers to potential gains / losses resulting from currency mismatch of cash flows.
Generally expressed in terms of currency volatility.
D
Delivery: The act of settlement
of a financial transaction.
Depreciation: Decrease in the value of one
currency in terms of another, resulting from a decline in market demand.
Derivative: The generic term used to categorize
a wide variety of financial instruments whose value is ‘derived from’ or ‘depends
on’ the value of the underlying instrument, reference rate or index. A Derivative
means an instrument, to be settled at a future date, whose value is derived from
change in interest rate, foreign exchange rate, credit rating or credit index, price
of securities (also called “underlying”), or a combination of more than one of them
and includes interest rate swaps, forward rate agreements, foreign currency swaps,
foreign currency-rupee swaps, foreign currency options, foreign currency-rupee options
or such other instruments as may permitted by a regulatory authority from time to
time. The price of a derivative varies with the price of underlying commodity or
financial asset (spot price). The derivatives are always net settled or are capable
of net settlement.
Direct rate: An exchange rate quote in which
one unit of foreign currency is quoted in terms of x units of home currency. In
India the USD/INR is a direct quote. $1 = Rs. 53.95
Dirty float: A floating currency which is
regularly subject to intervention, usually by the central bank, and therefore does
not freely respond to market pressures.
Down-and-in option: An option which comes
into existence only when the price of the underlying security moves below a predefined
level.
Down-and-out option: An option that expires
if the price of the underlying moves below a predefined level.
E
Early exercise: The exercise of
an American style option before its expiry date.
Economic Fundamentals: Macro-economic indicators
such as GDP growth rate, rate of inflation, employment level, index of industrial
production etc. indicating the overall health of economy.
Economic risk: The risk that a change in
rates may affect the competitiveness of the company, and it’s profitability in the
longer time span.
Electronic Trading: Trading in financial
products, including securities, currencies and derivative products in electronic
or digitalised form without physical exchange
Embedded Options: Options inbuilt in a product,
e.g. a bond with put option or a prepayment option in a mortgage / term loan
Euro market: A collective term used to describe
a series of offshore money and capital market operations of the international bankers.
Euro market comprises of euro currency, euro credit and euro bond markets. The predominant
centre of these markets is London except for the Euro sterling market, which is
centred in Paris.
Euro: The common currency of the Eurozone,
which comprises 11 countries.
Eurocurrency: A currency borrowed or deposited
outside the country of origin or the home country. A US Dollar deposit outside the
US is called a Eurodollar deposit while sterling deposit held outside UK would be
Eurosterling deposit. Eurocurrency is different from the Euro, the common currency
of the Eurozone and the latest currency in the international foreign exchange markets.
European Option: An option that can be exercised
only on the date of expiry and not prior to that.
Exchange control: Monetary authority’s rules
and regulations used to protect or preserve the value of any country’s currency.
These rules may restrict imports, investments abroad, travel, or other activities
involving foreign exchange transaction.
Exchange rate futures: A futures contract
for currencies. Also see futures.
Exchange rate risk: Risk arising from the
possibility of adverse movement in the exchange rates.
Exchange rate: It is the rate of conversion
of one currency into another. The number of units of one currency expressed in terms
of a unit of another currency.
Exchange traded contract (ETC): A generic
term used to describe all the derivative instruments that are traded on the floor
of an organized exchange.
Exposure: In foreign exchange related transactions,
the potential gain or loss, because of movements in foreign exchange rates. There
are three types of exposure –transaction, translation and economic.
F
Fed funds rate (Federal fund rate):
It is the overnight rate of interest at which Fed funds are traded
among financial institutions. Fed Funds are non-interest bearing deposits held by
member banks with the Federal Reserve. It is regarded as a key indicator of all
US domestic interest rates.
Fixed exchange rate: When the value of a
currency is fixed against another major currency, such as US dollar, Euro etc.,
the exchange rate is said to be fixed or pegged. Fluctuations in the exchange rate
around this parity are managed by official intervention and by internal regulations
limiting exchange transactions. In most cases, there is a narrow band of 1 or 2%,
within which the exchange rate is allowed to fluctuate on either side of the fixed
rate. Eg: Malaysian Ringgit, Chinese Yuan and the Saudi Riyal. Also called pegged
exchange rate.
Fixed-date forward: Forward contract where
delivery must occur on a single day as opposed to delivery within an option period.
Floating exchange rate: When exchange rate
is not fixed by the government but fluctuates depending on the demand and supply
of the currencies in the market.
Floating rate loan: Loans on which the interest
rates are periodically reset. In the international financial markets, the LIBOR
related loans are the most common of the floating rate loans.
Floor: An option agreement that puts a lower
limit on the interest rate .It provides lenders/investors with interest rate risk
protection in case the rate goes below the floor rate. The lender/investor is compensated
for any fall in rate below the floor rate.
Foreign currency reserves (Forex reserves):
The official foreign currency reserves maintained by the central bank of a country.
The reserves are used to meet current and other liabilities of a country. The central
bank could use these reserves for intervention purposes also.
FOREX: Commonly used term for foreign exchange.
Forward contract: An agreement between two
parties to exchange a specific amount of a currency at a specific date/period in
the future. The rate at which the exchange is to be made, the delivery date/period
and the amounts involved are fixed at the time of the agreement.
Forward rate: The rate quoted today for delivery
of a specified amount of currency on a specific date/period in the future.
Fundamental Analysis: A branch of analysing
future price trends based on the study of economic factors affecting demand and
supply of the underlying. Also see technical analysis.
Futures: Any contract to buy or sell a standard
financial instrument, currency or index, at a predetermined future date and at a
price agreed through a transaction on an exchange.
GDR: Global Depository Receipts, similar
to ADRs, are issued by global custodian banks / depository institutions representing
equity issued by Indian companies and are traded in global exchanges.
H
Hedge fund: The collective investment
fund that takes large and often leveraged risk, with the aim of earning high return.
Hedge ratio: The percentage/portion of cover taken, in relation to the
total exposure.
Hedge: The generic term describing the risk
management concept of taking suitable action to either reduce or eliminate risk
using various instruments such as forward contracts, futures, options or swaps etc.
It Refers to protection against market risk (exchange rate, interest rate and price
fluctuations), usually obtained from derivative products.
Hedger: A person who uses hedging instruments
to protect his exposures is called a hedger.
Historic volatility: The volatility for a
particular time period measured from past behaviour. This is done by means of standard
deviation of a sample of daily movements. Historical volatility may not be a true
indicator of the future behaviour of price.
I
Implied volatility: The volatility derived from actual price quoted
in the market. Given the quoted price, the volatility is obtained by working the
model backward.
Inflation: Reduction in the purchasing power of a currency.
Initial margin: The amount of cash or security that has to be kept
by a party in a clearinghouse before entering into an options or futures contract.
It is an estimated amount that would help the clearing member to meet its obligations
in the event of default by the party in question.
Interest rate parity theorem: The theorem holds that under normal
conditions, the difference between the forward exchange rate and spot rate of a
currency pair depends on the difference between the interest rates of the currencies.
For e.g. If the 6 month interest rate in the US is 6.5% and that for Swiss Franc
is 3.5%, the US Dollar six month forward rate against the Swiss franc will be at
a discount of 3% (6.5 - 3.5) on the spot $/CHF rate.
Interest Rate Risk: risk of adverse impact
of changes in market rates of interest on net interest income. Also refers to potential
gains / losses resulting from maturity mismatch of assets and liabilities. Generally
measured as sensitivity to interest rate changes.
Interest Rate Sensitivity: A measure of change
in the price of a financial asset in response to a change in the market rate of
interest. In the context of asset-liability management, it is the ratio of interest
rate sensitive assets to rate sensitive liabilities.
In-the-money option: An option whose strike price is favorable
in comparison to the current price. Eg: A Yen call option at 110 strike when the
current price is 108.00 or a Euro call option at 0.8200 strike when the current
price is .8500
Intrinsic value: The positive difference between the strike price
and the current market price of an option is the intrinsic value of the option.
It is measured by the present value of the amount by which it is in the money.
Investor: Investors are those who purchase financial instruments
with a long-term objective of earning a profit. An investor is different from a
speculator who enters the market with the sole objective of making quick, short-term
profits.
K
Kiwi: A commonly used market term for the New Zealand Dollar.
Knock out options: An option that expires
when the underlying reaches a predetermined level.
Knock-in-options: An option that comes to life only after the underlying
reaches a predetermined level.
L
Leads & lags: Lags refer to gap in time or interval between initiation
of policy changes (e g monetary policy) and their impact on real economy (e g price
level): lead is when the changes in real economy precede the policy changes.
Leverage: Refers to the ability of a business
concern to borrow or build up assets, on the basis of a given capital. In case of
companies it is expressed as debt/equity ratio; in case of banks it conforms to
capital adequacy as expressed by CRAR (capital to risk weighted asset ratio).
Leveraging: implies building up large volumes
of business on relatively small capital – like buying and selling USD 10 million,
with capital just adequate to meet possible loss on exchange, say, 3% of the transaction
value.
LIBID: London Interbank bid rate. It is the
rate at which prime banks bid for funds. It can also be described as the rate at
which prime banks can place money.
LIBOR: London Interbank offered rate. It is the rate at which the
prime banks are willing to offer money. It can also be described as the rate at
which prime banks can borrow from each other.
LIBOR: LONDON INTERBANK OFFERED RATE, QUOTED
FOR MAJOR CURRENCIES, AT 11 A M LONDON TIME
LIMEAN: The mean of the LIBOR and LIBID of
a currency for a particular period.
Liquidity: This refers to holdings of cash
or cash equivalent assets. Assets which can be converted in to cash quickly without
materially affecting the market price are liquid or liquifiable assets – particularly
important for banks to meet regulatory requirements. Liquidity also indicates the
ability of a business entity to meet its obligations without default
Loonie: A commonly used market term for the Canadian Dollar.
M
Macro-hedging: Hedging duration gap (difference between
the duration of assets and the duration of liabilities, generally in the context
of a Bank - instead of hedging individual assets and liabilities)
Margin call: The amount of margin requirement
for depositing additional money or securities based on mark-to-market value of a
trading position, or a liability; generally used in the context of exchange traded
derivatives, where additional margin is called for with a dead line to meet potential
MTM losses. Banks may also call for additional margin from a borrower to meet increased
credit risk.
Margin: A portion of underlying principal
amount – notional or actual – which needs to be maintained in cash or near-cash
instruments under lien to the bank / exchange, as security for the credit risk.
Also referred to as a hair-cut, in relation to value of securities pledged.
Market lot: The standard amount for which prices are quoted in
the inter-bank market.
Market maker: An entity who makes the two-way quotes providing
both a bid and an offer in the market.
Marking to market (MTM): is the process of
valuing any financial asset or liability at current market rates – MTM value is
current market value of a tradable instrument.
Mark-to-market: The valuation of the portfolio with reference to
the current market prices.
Maturity: The date on which a contract is due to be settled.
Money market: Money market is the market for dealing in monetary
assets of short term nature., short-term being referred to tenor of remaining maturity
of less than one year. Money market instruments include call money, term money,
certificates of deposit, commercial paper and money market mutual funds.
N
NEER (Nominal effective exchange rate): NEER is the weighted average
of bilateral nominal exchange rates. It measures the appreciation/depreciation of
a currency against the weighted basket of currencies whose countries are the main
trading partners or competitors of the country of the currency under study. Nominal
exchange rate is the actual exchange rate quote in the market at a given time.
Net Position: In financial markets, a position
is a binding commitment to buy or sell a given amount of financial instruments,
such as securities, currencies or commodities, for a given price. Net position is
the difference between expected cash inflows and outflows.
Netting: Calculating the net exposure of a party, by offsetting
the receivables in a currency with the payables in the same currency, for the same
dates.
Nostro account: A bank’s account with his correspondent banker
abroad, ordinarily in the home currency of that country. E.g. An Indian bank having
a Swiss franc account with a bank in Switzerland or in any other international financial
centre.
O
Odd date forward: When the forward contract is for a non-standard
date. Typical standard dates are 1, 2, 3, 6 and twelve months from the spot date.
Off-balance sheet: Items such as interest
rate swaps and guarantees which may not appear on balance sheet.
Offer rate: The price/rate at which the market maker is ready to
sell the currency or lend money.
Offset: Liquidation of a long or short position by an opposite
transaction. A sale transaction offsets a long position and a purchase transaction
offsets a short position.
Offshore Banking Units: Overseas Offices
of banks, or designated domestic offices rendering special banking services only
to overseas customers, with a stand-alone accounting system.
Open position: The net amount of foreign currency payable or receivable
is an open position. In case of a net payable, it is a short position, a net receivable
is a long position.
Options: A derivative, where the option buyer
has a right with no obligation, and the option seller has only obligation, to buy
or sell an underlying financial product (currency, interest rate, price index or
a commodity) at strike price, as per terms of the contract. The buyer of a put option
has a right to sell, and the buyer of a call option has a right to buy, the underlying
asset of notional value, at the agreed strike price on the exercise date.
Out- of-the-money: An option whose strike price is unfavorable
in comparison to the current price. E.g. a Yen put option at 110 strike when the
current price is 108.00 or a Euro put option at 1.2800 strike
when the current price is 1.3200.
Overbought: Perception that the price of
an asset is pushed to levels that do not support the fundamentals, by excessive
demand from speculators
Oversold: Perception that the price of an
underlying asset has fallen sharply, to a level below its true value, due to a bearish
sentiment
Over- the-Counter (OTC): A decentralized
market of securities not listed on an exchange where market participants trade over
telephone, facsimile or electronic network instead of a physical trading floor and
there is no central exchange or meeting place for this market. Generally refers
to derivatives and other financial products offered by banks to their customers,
on one-to-one basis.
Overvalued: A stock with a current price
that is not justified by its earnings outlook or price/earnings (P/E) ratio and,
therefore, is expected to drop in course of time
P
Pegged Exchange rate: See Fixed Exchange rate
Physical settlement: In a futures contract, the actual receipt
or delivery of the underlying.
PIP: The smallest price change that a given
exchange rate can make. Since most major currency pairs are priced to four decimal
places, the smallest change is that of the last decimal point - for most pairs this
is the equivalent of 1/100 of one percent, or one basis point. The most junior digit in a currency quotation. In most currencies,
it denotes the fourth decimal place.
Plain vanilla: A simple derivative with standard features is termed
as a plain vanilla.
Price risk: The risk of adverse movements
in prices.
Price Transperency: The price quoted in a
deep and liquid market, accessible to the public
Prime rate: The interest rate charged by major banks to their most
creditworthy customers.
Producer Price Index: A family of indexes
that measures the average change in selling prices received by domestic producers
of goods and services over time usually covering three areas of production: industry-based,
commodity-based, and stage-of-processing-based companies.
Put option: An option which gives the holder
the right, but not the obligation, to sell a specific amount of foreign currency
at a specific price on or before a specific maturity date.
R
Rally: A period of sustained increases in the prices of
stocks bonds or indexes and is caused by a large amount of money entering the market,
bidding up the prices.
Range: The range of a set of data is the
difference between the largest and smallest values.
Rating: A grading of a security’s investment quality.
Recession: A period of decline in the overall economic activity
of a country. It is measured by the decline in real GDP for two consecutive quarters.
REER (Real effective exchange rate): REER is the nominal effective
exchange rate(NEER) adjusted for inflation. In other words, the REER is calculated
by dividing the home country’s nominal effective exchange rate by an index of the
ratio of average foreign prices to home prices. REER may change even without any
change in the exchange rate.
Repo: A simultaneous sale and repurchase of a security. It is a
structure devised to borrow money at fine rates on a secured basis. The institution
borrows money by selling a security for one delivery date with a simultaneous repurchase
of the same security for a different delivery date. Commonly, this type of transaction
is used to fund bond trading activities. It is a financial tool often used by Central
banks in their open market operations to drain liquidity from the System.
Resistance: An area of resistance or resistance
level indicates that the currency, stock or index is finding it difficult to break
through it, and may head lower in the near term.
Retracement: A temporary reversal in the
direction of the price of stock or exchange rate that goes against the prevailing
trend.
Return: The return consists of the income
and capital gains relative to an investment.
Reverse repo: The transaction undertaken by the counterparty to
a repo. It involves the purchase of security for a particular delivery date with
a simultaneous sale of the same security for a different delivery date. Central
banks use this to pump liquidity into the System.
Risk: The probability of loss on account
of fluctuation in market rates such as exchange rates, interest rates and security
prices.
Risk appetite: Capacity and willingness to
absorb losses on account of market risk.
Risk Aversion: It is the reluctance of investors
to invest, owing to lack of confidence in asset classes, except in relatively risk-free
assets.
S
Speculation: It is buying or selling an asset only for the
purpose of making profit from movement of the asset price over a period of time
(e g short sale)
Speculator: A person who buys and sells in a market with the sole
aim of profiting from the subsequent price movements.
Spread: The difference between the bid and
the ask price of a currency or a security. A narrow spread indicates a liquid market.
SROs: Self-Regulatory Agencies, such as FIMMDA
and FEDAI, representing the market players in specific segments (debt market, foreign
exchange, mutual funds etc.) for determining market related code of conduct, and
other standard practices.
Standard Deviation: – is a statistical measure,
showing dispersion from mean of a set of data, usually a time series, as a measure
of volatility.
Sterilization: The process followed by a central bank to increase
or decrease the money supply in order to offset a money-supply change caused by
intervention in the foreign exchange market.
Swap: An exchange of future cash flows, or
of assets generating cash flows; swap value is the present value of future cash
flows.
Systemic risk: is the risk of any financial
crisis spreading across markets globally, due to interlinking of markets.
T
T-bill (Treasury bill): Short-term government debt instrument normally
issued at a discount.
Technical Analysis: An analysis of market data over a period of time
to study and arrive at behavioral pattern of price / exchange rate movements, generally
ignoring economic fundamentals. A branch of market analysis that studies the
historical price movements and forecasts the future movements based on past behaviour.
Tradable assets: These are financial assets, such as govt. securities,
bonds, commercial paper, currencies as also derivative contracts (swaps, futures,
etc.) which can be bought and sold, almost entirely in d-mat form in the market.
Transaction: The effect of exchange rate changes on contracted foreign
currency receivables and payables associated with trade flows and capital flows.
This is a cash flow exposure.
Translation: The exposure arising from translating overseas investment
and subsidiaries’ account to parent company financial statement in home currency.
This is an accounting exposure and not a cash flow exposure.
Trend: The general direction of a market or of the price of an asset
which can vary in length from short, to intermediate, to long term. When the market is heading in a particular direction- up
or down
Two Way Price: A type of quote giving both the bid and the ask price
of a security and informs the current price at which one could buy or sell the security.
Undervalued: A financial security or other
type of investment that is selling for a price presumed to be below the investment's
true intrinsic value.
V
Value date: The date of actual exchange of currency. It is the
date on which the contract is affected. For a spot contract, the value date is the
second working day from the date of the transaction. the date from which a financial transaction
becomes effective, as opposed to trade date when the terms of transaction are negotiated
– some times wrongly interpreted as maturity date of a contract
VaR : Probable worst case scenario for a position calculated using
a statistical model, to a given confidence level , typically 95% over a specified
holding period. Value at risk (VaR) is a single, summary, statistical measure that
provides a reading of the worst possible scenario for a particular exposure, or
set of exposures. VaR is calculated by using the distribution of returns from a
particular asset, finding its standard deviation (volatility), and taking certain
number of standard deviations to give the 95% confidence level.
Volatility: It is a measure of movement of
market rates with reference to variables such as interest rates and exchange rates;
measured as standard deviation from mean of the variable.
Vostro account: The local currency account of a foreign bank/branch.
E.g. Indian rupee account maintained by a bank in London with a bank in India. .
W
Writer: A seller of an option.
Y
Yield curve:
The diagrammatic representation of the yield on money market instruments and their
respective maturity.
Yield: The Internal rate of return of an investment, where it is assumed that
the interest is also reinvested at the original coupon rate, and a compounded rate
of return is calculated on the investment. Yield to maturity (YTM) is expressed
as a percentage of current market value of a bond.
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