Long Position Refers to an investor or trader’s account in which he
has purchased and is holding open a bought position.
The position may be created as a result of the combin-
ation of several trades and therefore can increase of
decrease. If the position is sold off in its entirety then
the position would become flat.
Lot A common term used to describe the standard unit of
trading for futures and options but equally it is also
often referred to as a ‘contract’.
Managed Fund A unit-linked policy where the managers decide on
the allocation of premiums to different unitised funds.
Mandatory Event A corporate action that affects the securities with-
out giving any choice to the security holder. Likely
to affect the contract specification of any related
derivative.
Margin (i) Initial margin is collateral placed by one party
with a counterparty or clearing house at the time
of a deal, against the possibility that the market
price will move against the first party, thereby
leaving the counterparty with a credit risk.
(ii) Variation margin is a payment made, or collateral
transferred, from one party to the other because
the market price of the transaction of collateral
has changed. Variation margin payment is either
in effect a settlement of profit/loss (for example,
in the case of a futures contract) or the reduction
of credit exposure.
(iii) In a loan, margin is the extra interest above a
benchmark such as LIBOR required by a lender
to compensate for the credit risk of that particular
borrower.
(iv) Money or assets that must be deposited by
participants in securities lending, repo’s or OTC
derivatives markets as a guarantee that they will
be able to meet their commitments at the due
date.
Mark-to-Market The process of revaluing an OTC or exchange-traded
product each day. It is the difference between the
closing price on the previous day against the current
closing price. For exchange-traded products this is
referred to as variation margin.
Market Description of any organisation or facility through
which items are traded. All exchanges are markets.
190 Glossary of derivatives terms