Index

Page numbers in bold refer to entries in the Glossary

acceptors, bills of exchange

accrued coupons, 2nd

accrued interest, 2nd

acquisitions, 2nd, 3rd

all-or-nothing options see binary options

American options, 2nd, 3rd, 4th, 5th

American Stock Exchange (ASE)

amortising

amortising bonds, 2nd

amortising swaps

Amsterdam Stock Exchange (ASE)

analytical (arbitrage-free) model

analytical pricing models, 2nd

AND operation see multiplication rule

annual percentage rates (APR), 2nd, 3rd

application developers

appreciation

APR see annual percentage rates

arbitrage

arbitrage-free model, 2nd

arbitrage trades, 2nd, 3rd

arbitrageurs, 2nd

ASE (American Stock Exchange)

ASE (Amsterdam Stock Exchange)

Asia/Pacific region

derivatives exchanges

Asian options, 2nd

asking prices

assessments

credit risks

market risks

asset-backed securities, 2nd, 3rd, 4th, 5th

asset swaps, 2nd

assets

average rate options (Asian options), 2nd

average strike options, 2nd

BA (bankers’ acceptances), 2nd

back office structures

backwardation, 2nd

balance sheet instruments, 2nd

balance sheet securities

bankers’ acceptances (BA), 2nd

bankruptcy

banks, credit derivatives users

barrier options, 2nd

base currencies, 2nd, 3rd

basis

basis curves, 2nd

basis points, 2nd

basis risks

basis swaps, 2nd, 3rd

basket options, 2nd

bear markets

bear spreads, 2nd, 3rd

bearer bonds

bearer form, 2nd

bearer securities

bearish option strategies, 2nd, 3rd

benefits, options contracts

Bermudan options, 2nd, 3rd

betas, 2nd

better performance bond options, 2nd

BGM (Brace–Gaterek–Musiela) model

bid/offer spreads

bid prices

bilateral contracts, credit derivatives

bills of exchange, 2nd

binary options, 2nd, 3rd

binomial distributions, 2nd, 3rd

binomial probability function

binomial trees, 2nd, 3rd, 4th, 5th, 6th

Black and Karasinski model

Black, Derman and Toy model

Black model, 2nd, 3rd, 4th, 5th

Black–Scholes model, 2nd, 3rd

bond options pricing and

convertible bonds

European options

interest rate caps

interest rate floors

options pricing, 2nd, 3rd

single stock options

stock index options

bonds

amortising

asset-backed securities

bearer

callable, 2nd, 3rd

conversion factors

convertible see convertible bonds

credit derivatives

credit risks

definition

deliverable, 2nd

derivatives, 2nd

derivatives markets

domestic

dual currency, 2nd

duration

Eurobonds

fixed-coupon

floating rate notes (FRN)

foreign

forward prices

futures, 2nd, 3rd, 4th

Government-issued

index-linked

longer dated

lower coupon

lower yield

market risks

meaning

notional

options, 2nd, 3rd, 4th

perpetual, 2nd

pricing

accrued coupon

analytical methods

convexity adjustments

coupon dates

duration

ex-dividend or ex-coupon

formulae

at inception

no-arbitrage models

yields and prices relationships

puttable, 2nd, 3rd

repos (repurchase agreements) see repos

risk/return measures

strips

yields, 2nd, 3rd, 4th

zero-coupon

bootstrapping

historical simulation, VAR

swap strips

borrowers

collars

repos

boxes, 2nd

Brace–Gaterek–Musiela (BGM) model

Brennan and Schwartz model

brokers

bull markets

bull spreads, 2nd, 3rd

bullish option strategies, 2nd, 3rd

butterflies, 2nd

buy sides

buyers, protection

CAC 40:

calendar spreads

call options see options

callable bonds, 2nd, 3rd

capital markets (CM)

divisions

instruments, 2nd

see also bonds

products, 2nd

capital performance, equity swaps

caplets

capped floaters, 2nd

caps

energy

interest rate, 2nd, 3rd, 4th, 5th

options on see captions

captions, 2nd

cash deposits

yield curves construction, 2nd, 3rd, 4th, 5th

cash markets

cash settlements, 2nd

cashflow analysis

CBOE (Chicago Board of Options Exchange)

CBOT (Chicago Board of Trade), 2nd

CD see certificates of deposit

cdf (cumulative distributions function)

CDO (collateralised debt obligations), 2nd, 3rd

CDO (credit default options)

CDS see credit default swaps

certificates of deposit (CD), 2nd, 3rd, 4th

cheapest to deliver (CTD), 2nd

chi-square (–2) distribution

Chicago Board of Options Exchange (CBOE)

Chicago Board of Trade (CBOT), 2nd

Chicago Mercantile Exchange (CME), 2nd

chooser options, 2nd

clean prices, 2nd, 3rd

clearing houses

client marketing

cliquet options, 2nd

CLN (credit linked notes), 2nd

CM see capital markets

CMCDS (constant maturity credit default swaps), 2nd

CME (Chicago Mercantile Exchange), 2nd

CMO (collateralised mortgage obligations), 2nd

CMS/CMT (constant maturity swaps/constant maturity treasury) swaps

collared floaters, 2nd

collars

borrowers ’

energy

interest rates, 2nd, 3rd, 4th, 5th

lenders ’

zero-cost, 2nd

collateral

collateral risks

collateralised debt obligations (CDO), 2nd, 3rd

collateralised mortgage obligations (CMO), 2nd

combinations

commercial-backed securities

commercial paper (CP), 2nd

commodities

derivatives

background

credit risks

energy, 2nd, 3rd

product range

market risks

quantitative analytics

futures, exchanged-traded

options, 2nd

swaps, OTC

Compagnie des Agents de Change (CAC 40)

complex trades

compliance

compound interest, 2nd

compounding frequencies

constant maturity credit default swaps (CMCDS), 2nd

constant maturity swaps/constant maturity treasury (CMS/CMT) swaps

constant proportion debt obligations (CPDO)

contango, 2nd

contingent credit default swaps, 2nd

contingent options, 2nd

contingent payments, credit default swaps

continuous compounding, 2nd, 3rd

continuous distributions

contracts

credit derivatives

financial futures

options

control variates, 2nd, 3rd

controls

credit risks

market risks

convenience yields, energy derivatives

conversion factors, 2nd

conversions, 2nd

convertible bonds, 2nd, 3rd

convexity, 2nd, 3rd, 4th

corporate restructurings, 2nd

corporate treasury

cost of carry, 2nd

counterparties

counterparty risks, 2nd

country risks, 2nd

coupon-bearing securities

coupons

accrued, 2nd

dates

fixed

floating

index-linked bonds

swaps, 2nd, 3rd

zero-coupon bonds

covenants, credit risk management

covered calls, 2nd

covered puts, 2nd

Cox, Ingersoll and Ross model

CP (commercial paper), 2nd

CPDO (constant proportion debt obligations)

credit default options (CDO)

credit default swaps (CDS), 2nd, 3rd, 4th, 5th

credit default swaptions

credit defaults

credit derivatives, 2nd

bilateral contracts

credit events applying

credit risks, 2nd

funded, 2nd

hedgers

introduction to

market risks

money market products

OTC

pricing

product range

quantitative analytics

reference entities

speculators

underlyings

unfunded

users, 2nd

see also mortgage derivatives

credit events, 2nd, 3rd

credit exposures

credit insurance

credit limits, 2nd

credit linked notes (CLN), 2nd

credit ratings, 2nd

credit risks, 2nd

assessments

bonds

capital market products

commodity derivatives

controls

counterparty risks

credit derivatives

equity derivatives

exchange-traded products

foreign exchange instruments

forward rate agreements

management, 2nd

money market products

options

OTC financial securities

product risks

recognition

swaps

credit scoring

credit spread options (CSO), 2nd, 3rd

credit spread swaps, 2nd, 3rd

creditworthiness

cross-currency basis swaps

cross-currency coupon swaps

cross-currency options, 2nd, 3rd, 4th

cross-currency securities

cross-rates see foreign exchange

crossover method, convertible bonds

CSO (credit spread options), 2nd, 3rd

CTD (cheapest to deliver), 2nd

cumulative distributions function (cdf)

currency codes

currency options, 2nd, 3rd

currency swaps, 2nd, 3rd, 4th

current yields, 2nd

customer risks, 2nd

cylinders, 2nd, 3rd

database administrators

DAX (Deutsche Aktien Index)

deal origination, 2nd

debt financed acquisitions, 2nd

debt markets, hybrid instruments

debt obligations, 2nd, 3rd

debt structuring, 2nd

delayed options, 2nd

delayed reset floaters, 2nd

deliverable bonds, 2nd

delta, 2nd, 3rd

dependent events, 2nd

deposits

cash see cash deposits

certificates of deposit see certificates of deposit

time, 2nd

depreciation

derivatives

bonds

commodity see commodities

credit see credit derivatives

energy, 2nd, 3rd

equity see equities

exchange-traded

exchanges

interest rate see interest rates

markets, 2nd

multiple settlements

OTC, 2nd

securities

single settlements

users

Deutsche Aktien Index (DAX)

Deutsche Terminbörse (DTB)

DF see discount factors

diagonal bear spreads, 2nd

diagonal bull spreads, 2nd

diagonal spreads, 2nd, 3rd, 4th

digital options see binary options

direct foreign exchange rates, 2nd, 3rd

directional trades, 2nd, 3rd, 4th

dirty prices, 2nd, 3rd

discount factors (DF), 2nd

formulae

interest rate swaps

yield curves, 2nd

discount instruments

formulae

pricing

discounts

bills of exchange

commercial paper

forward exchange rates

treasury bills

discrete distributions

distribution

diversification, credit risk management

divestitures/divestments, 2nd

dividend-paying stock options, 2nd, 3rd, 4th

dividends, 2nd

income, equity swaps

pricing model, convertible bonds

yields

DJIA (Dow Jones Industrial Average)

domestic bonds

Dow Jones Industrial Average (DJIA)

Dow Jones options

drawers, bills of exchange

DTB (Deutsche Terminbörse)

dual currency bonds, 2nd

dual observation issue

duration, 2nd, 3rd

dynamic credit default swaps, 2nd

EDSP (Exchange Delivery Settlement Price), 2nd, 3rd

effective interest rates, 2nd

energy

caps

collars

derivatives, 2nd, 3rd

futures, 2nd, 3rd

options, 2nd

swaps, 2nd

entire yield curve models

equilibrium models

equities

baskets, mathematical models

derivatives

credit risks

formulae

market risks

maturities

motivations for trading

OTC

product range

quantitative analytics

values

futures

indices, 2nd, 3rd

futures, 2nd, 3rd

options, 2nd, 3rd, 4th

swaps, 2nd, 3rd, 4th, 5th

swaptions

markets

financial derivatives

hybrid instruments

options

swaps, 2nd

see also shares; stocks and entries beginning with stock

equity capital markets departments

EUREX (European Derivatives Exchange)

Eurobonds

Eurocurrencies

European Derivatives Exchange (EUREX)

European options, 2nd, 3rd, 4th, 5th

European Union

derivatives exchanges

ex-coupon, bond pricing

ex-dividend, 2nd, 3rd

Exchange Delivery Settlement Price (EDSP), 2nd, 3rd

exchange rates

see also forward exchange rates

exchange-traded

exchange-traded commodity futures

exchange-traded commodity options

exchange-traded derivatives

exchange-traded options

exchange-traded products, credit risks

exchanges, derivatives

exercise

exercise prices

exotic OTC options

exotic products, pricing models

exotic trades

expiry

expiry dates, options

exposures

foreign indices, equity index swaps

interest rate derivatives

limit policies, market risks

extrapolation

face values

fair values, financial futures

financial control

financial derivatives

bond derivatives, 2nd

commodity derivatives see commodities

credit derivatives see credit derivatives

derivatives see derivatives

equity markets

financial futures see financial futures

foreign exchange see foreign exchange

forward rate agreements see forward rate agreements

futures see futures

hybrid securities, 2nd

options see options

OTC derivatives, 2nd

swaps see swaps

financial futures, 2nd, 3rd

contracts

fair values

formulae

forward rate agreements and, differences between

initial margins

margin payments

market

market risks

prices, 2nd

settlement prices, 2nd

stacks

strips

theoretical basis

trading

valuations

variation margins

financial instruments

yield curves construction choice

financial modelling, 2nd, 3rd

financial restructurings

Financial Times Ordinary Shares Index (FT 30)

Financial Times – Stock Exchange 100 Index (FTSE 100)

finite difference methods, 2nd

first to default credit default swaps, 2nd

fixed coupons

fixed–fixed currency swaps

fixed–floating currency swaps

fixed income capital markets departments

fixed legs, swaps, 2nd

fixed rates

flat yields, 2nd

floaters

capped, 2nd

collared, 2nd

delayed reset, 2nd

floating coupons

floating–floating currency swaps

floating legs, swaps, 2nd, 3rd

floating rate notes (FRN), 2nd

reverse see reverse floating rate notes

floating rates

floorptions, 2nd

floors, 2nd

interest rate see interest rates

flotations

foreign bonds

foreign exchange (FX)

base currencies, 2nd, 3rd

cross-rates, 2nd, 3rd

forward swaps, 2nd

forwards, 2nd, 3rd, 4th

derivatives, quantitative analytics

direct rates, 2nd, 3rd

formulae

forward rates see forward exchange rates

indirect rates

instruments, 2nd

options

spot rates see spot rates

swaps

tables

variable currencies, 2nd, 3rd

see also entries beginning with cross-currency, currency and forward

foreign indices exposures, equity index swaps

forward bond prices

forward exchange rates, 2nd

cross-rates, 2nd, 3rd, 4th

direct rates

discounts

outrights, 2nd, 3rd, 4th

premiums

swaps, 2nd, 3rd

forward–forwards

forward rate agreements (FRA), 2nd, 3rd, 4th

credit risks

financial

financial futures and, differences between

interest rate, 2nd, 3rd

market risks

prices, 2nd

rate formula

settlement prices, 2nd

stacks

strips

valuations

forward rates, no-arbitrage models

forward-start swaps, 2nd

forward swaps formulae

forwards

FRA see forward rate agreements

France

derivatives exchanges

equity indices

France Futures and Options Exchange (MATIF)

friendly acquisitions

FRN see floating rate notes

front office structures

FT 30 index

FTSE 100 futures

FTSE 100 Index

FTSE 100 options

FTSE Eurobloc futures

funded credit derivatives, 2nd

future values (FV), 2nd

future volatility, 2nd

futures

bonds, 2nd, 3rd, 4th

definition

discount factors, yield curves

energy, 2nd, 3rd

equity

equity index, 2nd, 3rd

financial see financial futures

FTSE 100:

FTSE Eurobloc

interest rate see interest rates

long

meaning

options on, 2nd

Black–Scholes

formulae, 2nd

margined premiums, 2nd, 3rd

up-front premiums, 2nd, 3rd

prices, 2nd, 3rd

put–call parity

settlements, pricing formulae

stock index

strip rate formula

synthetic long

FV (future values), 2nd

FX see foreign exchange

gamma, 2nd, 3rd

Garman–Kohlhagen model

gearing

geometric interpolation, 2nd

Germany

derivatives exchanges

equity indices

gilts

graphical representations, yield curves

Greeks, 2nd, 3rd

gross redemption yields (GRY), 2nd

guarantees, interest rate, 2nd

Hang Seng Index

Heath-Jarrow and Morton model

hedge ratios, 2nd, 3rd

hedgers

credit derivatives

derivative users

options

swaps

hedging

histograms

historic volatility, 2nd

historical simulation (bootstrapping), VAR

historical VAR measurement

HKFE (Hong Kong Futures Exchange)

Ho and Lee model

holders, options, 2nd

Hong Kong

equity indices

Futures Exchange (HKFE)

horizontal shifts

horizontal spreads, 2nd, 3rd

hostile acquisitions

Hull and White model

humped yield curves

hybrid securities, 2nd

IMM dates

IMM FRAs, yield curves construction

implied volatility, 2nd

in the money (ITM), 2nd, 3rd

inception, bond pricing at

income enhancement, equity index swaps

independent events, 2nd

independent pricing

index-linked bonds

index multipliers, 2nd

index trackers

indices

equities see equities

stocks

indirect rates

initial margins, 2nd

initial public offerings (IPO), 2nd

instantaneous short-term rates

insurance, credit

interest

accrued, 2nd

compound, 2nd

continuous compounding, 2nd, 3rd

rates see interest rates

simple, 2nd

interest only stripped mortgage-backed securities

interest rates

annual percentage rates (APR), 2nd, 3rd

caps see caps

collars see collars

cylinders

derivatives

exposures

maturities

multiple settlements

pricing

product range

quantitative analytics

settlement types

single settlements

effective rates, 2nd

exposure

floating

floors, 2nd, 3rd, 4th, 5th

FRAs, 2nd, 3rd

futures

exposures

yield curves construction, 2nd, 3rd

guarantees, 2nd

high, 2nd

low, 2nd

nominal, 2nd, 3rd

options, 2nd, 3rd, 4th, 5th, 6th

reinvestment, 2nd, 3rd

risk-free

swaps (IRS), 2nd

exposures

fixed legs

floating legs

formulae

long-term

pricing

rates, 2nd

settlement types, 2nd

short-term, 2nd

yield curves construction, 2nd, 3rd

swaptions, 2nd

trees, 2nd

volatile, 2nd

internal rate of return (IRR), 2nd, 3rd

internal VAR models

International Money Market see entries beginning with IMM

International Petroleum Exchange (IPE), 2nd

interpolation, 2nd, 3rd

intrinsic values, 2nd

inverted yield curves

investment banks

divisions

organisational structures

IPE (International Petroleum Exchange), 2nd

IPO (initial public offerings), 2nd

IRR (internal rate of return), 2nd, 3rd

IRS (interest rate swaps) see interest rates

ISO currency codes

IT departments

iteration, 2nd

ITM (in-the-money options), 2nd, 3rd

Japan

derivatives exchanges

equity indices

Japanese gross redemption yields (JGRY)

joint probability, 2nd

kappa see vega

knock-in-out options, 2nd

ladder options, 2nd

legs, swaps see swaps

lenders

collars

repos

leveraged and acquisition finance departments, 2nd

leveraged buyouts, 2nd

liabilities

Libid

Libor (London Interbank Offered Rate), 2nd

Libor in arrears swaps

LIFFE (London International Financial Futures and Options Exchange, 2nd

Limean

liquidity preference theory

LME (London Metal Exchange)

log linear (geometric) interpolation, 2nd

log-normal distribution, 2nd, 3rd, 4th

London Interbank Offered Rate (Libor), 2nd

London International Financial Futures and Options Exchange (LIFFE), 2nd

London Metal Exchange (LME)

long butterflies

long call options see options: call

long futures

long positions

long put options see options: put

long straddles

long strangles

long-term currency swaps, valuation

long-term interest rate swaps

long-term investments, 2nd

longer dated bonds

Longstaff and Schwartz model

look-back options, 2nd

lower coupon bonds

lower yield bonds

M&A divisions

Macaulay duration, 2nd, 3rd

Marché à Terme International de France (MATIF)

margined premiums, 2nd, 3rd

margins, 2nd

market makers

market models

market risks

assessments

balance sheet vs. off-balance sheet instruments

bonds

capital market products

commodity derivatives

controls

credit derivatives

departments

equity derivatives

exposure limit policies

financial futures

foreign exchange instruments

forward rate agreements

management, 2nd

money market products

options

recognition

swaps

value at risk (VAR)

markets

derivatives, 2nd

energy derivatives

equities, 2nd

financial futures

swaps

marking to market, 2nd

Markov models

MATIF (France Futures and Options Exchange)

maturities

equity derivatives

interest rate derivatives

options

MD (modified duration), 2nd

means, 2nd, 3rd

medians, 2nd, 3rd

mergers, 2nd

mergers and acquisitions (M&A) divisions

middle office structures

modes, 2nd, 3rd

modified duration (MD), 2nd

money markets

deposits, pricing, analytical methods

products

calculations, 2nd

cashflow analysis

credit derivatives

credit risks

market risks

nominal and effective rates

overview

pricing calculations

time value of money

Monte Carlo simulation, 2nd

Moody’s credit ratings

mortgage-backed securities, 2nd

mortgage derivatives, 2nd

see also collateralised mortgage obligations

mortgages

motivations for trading

equity derivatives

options

see also arbitrage trades; directional trades; volatility trades

multi-factor options

multiple settlements, 2nd

multiplication rule, probability, 2nd

naked options

NASDAQ

negotiable securities

net present values (NPV), 2nd, 3rd

Netherlands

derivatives exchanges

netting, swaps

network engineers

neutral option strategies, 2nd

New York Mercantile Exchange (NYMEX), 2nd

New York Stock Exchange (NYSE) Composite Index

Nikkei 225 Index

no-arbitrage models, 2nd

nominal amounts

nominal interest rates, 2nd, 3rd

non-Markov models

non-traded market risks

normal distribution, 2nd, 3rd, 4th

normal yield curves

notional

notional bonds

NPV (net present values), 2nd, 3rd

numerical pricing models, 2nd

NYMEX (New York Mercantile Exchange), 2nd

NYSE (New York Stock Exchange) Composite Index

obligation acceleration

off-balance sheet instruments, 2nd, 3rd, 4th, 5th

offers

one-factor pricing models

one-month yield curves, 2nd

one touch options see binary options

open outcry

operations divisions

option pricing model, convertible bonds

Option Greeks, 2nd, 3rd

options

American see American options

Asian, 2nd

at-the-money (ATM), 2nd, 3rd

average rate (Asian options), 2nd

average strike, 2nd

barrier, 2nd

basket, 2nd

Bermudan, 2nd, 3rd

better performance bond, 2nd

binary, 2nd, 3rd

bonds, 2nd, 3rd, 4th

call, 2nd

covered

long, 2nd, 3rd, 4th, 5th

put–call parity

short, 2nd, 3rd, 4th, 5th

synthetic long, 2nd

synthetic short, 2nd

on caps (captions), 2nd

characteristics formulae

chooser, 2nd

cliquet, 2nd

commodity, 2nd

contingent, 2nd

contracts

convertible bonds

credit default

credit risks

credit spread (CSO), 2nd, 3rd

currency see currency options

definition

delayed, 2nd

digital see binary above

on dividend-paying stocks see dividend-paying stock options

Dow Jones

energy, 2nd

equity index see equities: indices

equity

European see European options

exchange-traded

exotic OTC

expiry dates

on floors (floorptions), 2nd

foreign exchange

formulae

FTSE 100:

future volatility

on futures see futures

hedgers

historic volatility

holders, 2nd

implied volatility

in-the-money (ITM), 2nd, 3rd

interest rate see interest rates: options

intrinsic values

knock-in or knock out, 2nd

ladder, 2nd

look-back, 2nd

market risks

maturity

meaning

multi-factor

naked

one touch see binary above

OTC, 2nd

out-of-the-money (OTM), 2nd, 3rd

outperformance, 2nd

path-dependent, 2nd

physically settled see physically settled options

premiums, 2nd, 3rd, 4th, 5th

pricing

binomial trees

Black model, 2nd

Black–Scholes model, 2nd, 3rd

formulae

practical implementation

put–call parity

put, 2nd

covered

long, 2nd, 3rd, 4th, 5th

put–call parity

short, 2nd, 3rd, 4th, 5th

synthetic long, 2nd

synthetic short, 2nd

quanto, 2nd

rainbow, 2nd

ratchet, 2nd

rate spread, 2nd

shout, 2nd

single stock see single stock options

speculators

spread options, 2nd, 3rd

stock, 2nd, 3rd

stock index, 2nd, 3rd

strategies

arbitrage trades, 2nd, 3rd

bearish, 2nd, 3rd

bullish, 2nd, 3rd

directional trades, 2nd, 3rd

neutral, 2nd

volatility trades, 2nd, 3rd

strike prices, 2nd

strike rates

time values, 2nd

trading motivations

trigger

types, 2nd

underlyings, 2nd

value sensitivities, 2nd

variations on standard specifications

volatility

writers, 2nd

OR operation see summation rule

organisational structures

OTC

commodity swaps

credit derivatives

derivatives, 2nd

energy swaps

equity derivatives

financial securities, credit risks

options, 2nd

out-of-the-money (OTM) options, 2nd, 3rd

outperformance options, 2nd

outrights, 2nd, 3rd

over the counter see OTC

par

parametric VAR measurement

path-dependent options, 2nd

payments

contingent, credit default swaps

failures

pdf (probability density function)

perpetual bonds, 2nd

physically settled options, 2nd, 3rd, 4th, 5th

pitch books

Poisson distribution

portfolio beta formulae

portfolio credit default swaps

portfolio duration, 2nd

portfolio management, equity index swaps

preferred habitat theory

premiums

callable bonds

forward exchange rates

margined, 2nd, 3rd

options see options

puttable bonds

up-front, 2nd, 3rd

present values (PV), 2nd

of basis points (PVBP)

PV 01

yield curves

see also net present values

pricing

American options

bond futures

bond options

bonds see bonds

callable bonds

convertible bonds

credit derivatives

currency swaps

energy derivatives

energy options

energy swaps

equity index swaps

European options

financial futures, 2nd

formulae

forward rate agreements, 2nd

independent

interest rate caps

interest rate floors

interest rate swaps

models

analytical, 2nd

binomial trees, 2nd

Black and Karasinski model

Black, Derman and Toy model

Black model

Black–Scholes model

Brace–Gaterek–Musiela (BGM) model

Brennan and Schwartz model

classification

Cox, Ingersoll and Ross model

entire yield curve models

equilibrium models

exotic products

finite difference methods, 2nd

Garman–Kohlhagen model

Heath-Jarrow and Morton model

Ho and Lee model

Hull and White model

interest rate trees, 2nd

Longstaff and Schwartz model

market models

Markov models

Monte Carlo simulation, 2nd

no-arbitrage models

non-Markov models

numerical

one-factor models

Rendleman and Bartter model

Roll–Geske–Whaley model

short rate models

simple pricing equations

trinomial trees, 2nd

two-factor models

vanilla product models

Vasicek model

money market products

options see options

puttable bonds

repos

risk-based, credit risk management

stock index futures

swaps, 2nd

swaptions

tools

formulae

probability and statistics

quantitative analytics

yield curves

see also valuations

primary currency legs

primary markets

principal exposures

principal only stripped mortgage-backed securities

probability

definition

density function (pdf)

dependent events

distributions

binomial, 2nd

binomial trees

chi-square (χ2)

concept of

continuous

cumulative function (cdf)

discrete

formulae

log-normal, 2nd, 3rd, 4th

means, 2nd

medians, 2nd

modes, 2nd

normal, 2nd, 3rd, 4th

options

parameters

Poisson

range

standard deviation, 2nd, 3rd

student’s t

types

formulae

independent events

joint, 2nd

main concepts

model, credit derivatives pricing

multiplication rule, 2nd

summation rule, 2nd

values

weighting, 2nd

product ranges

product risks

properties, duration

proposal pitching

proprietary traders

protection buyers

protection sellers

pull-to-par effect

pure expectation theory, yield curve shapes

put options see options

put–call parity, 2nd, 3rd, 4th

puttable bonds, 2nd, 3rd

PV see present values

PV 01

PVBP (present values of basis points)

qualitative VAR standards

quantitative analysts see quants

quantitative analytics, 2nd, 3rd

quantitative VAR standards

quanto options, 2nd

quanto swaps, 2nd

quants, 2nd, 3rd

rainbow options, 2nd

range, probability distributions

ratchet options, 2nd

rate spread options, 2nd

rates see foreign exchange; forward exchange rates; forward rate agreements; interest rates

ratio back spreads, 2nd

ratio spreads, 2nd

recapitalisations, 2nd

‘redeem’, meaning

redemption, 2nd

reference entities, credit derivatives

reinvestment rates, 2nd, 3rd

Rendleman and Bartter model

replacement risks

repos (repurchase agreements), 2nd, 3rd, 4th, 5th

research departments

reserve policies

restructurings, 2nd

retail price index (RPI) swaps

reversals, 2nd

reverse floating rate notes, 2nd

reverse repos, 2nd

rho, 2nd, 3rd

risk-based pricing

risk-free interest rates

risk-neutral pricing, 2nd, 3rd

risk/return measures, bonds

risks

management

credit risks

market risks

option contracts

Roll–Geske–Whaley model

rollover

rollover dates

RPI (retail price index) swaps

S&P 500 (Standard & Poor’s 500 Index)

sales and trading divisions, 2nd

sales desks

seasonality, energy derivatives

secondary currency legs

secondary markets

bonds

certificates of deposit

interest rate swaps valuations

secured loan credit default swaps

securities

asset-backed see asset-backed securities

bearer

derivatives

hybrid, 2nd

negotiable

securitisation, 2nd, 3rd, 4th

sell sides

sellers, protection

sequential pay tranches

settlement prices

financial futures, 2nd, 3rd

forward rate agreements, 2nd

settlement risks

settlement types, interest rate derivatives

shares, 2nd

portfolios

see also equities; stocks

short butterflies

short call options see options: call

short positions

short put options see options: put

short rate models, 2nd

short selling

short straddles

short strangles

short-term currency swaps, valuation

short-term interest rate swaps, 2nd

short-term investments, 2nd

shout options, 2nd

SIMEX (Singapore International Monetary Exchange), 2nd

simple bond dirty price formula

simple interest, 2nd

simple pricing equations

simple yields to maturity, 2nd

Singapore International Monetary Exchange (SIMEX), 2nd

single settlements, 2nd

single stock options, 2nd, 3rd, 4th

single tranche collateralised debt obligations

special purpose vehicles (SPV)

speculation

speculators

credit derivatives

derivative users

options

swaps

spot rates, 2nd, 3rd, 4th

spread options, 2nd, 3rd

spreads, 2nd

bear, 2nd, 3rd

bull, 2nd, 3rd

diagonal see diagonal spreads

horizontal, 2nd, 3rd

ratio, 2nd

vertical

SPV (special purpose vehicles)

stacks, 2nd, 3rd

Standard & Poor’s

500 Index (S&P 500)

credit ratings

standard deviation, 2nd, 3rd

standard log-normal distribution, 2nd

standard normal distribution

standard yield curves

standardised VAR models

statistics, probability see probability

steep yield curves

stochastic

stochastic simulation, VAR

stock betas, 2nd, 3rd

stock exchange brokers

stock exchanges

stock index futures

stock index options, 2nd, 3rd

stock markets, 2nd

stock options, 2nd, 3rd

see also dividend-paying stock options

stocks

baskets

indices

see also equities; shares

straddles, 2nd

strangles, 2nd

strategic restructurings

strategies, options see options

strategists

strike prices, options, 2nd

strike rates, options

stripped mortgage-backed securities

strips

bonds

financial futures

forward rate agreements

futures rate formula

interest rate caps

interest rate floors

swaps bootstrapping

structured finance products

structuring, 2nd

student’s t distribution

summation rule, 2nd

swap-linked notes, 2nd

swap options see swaptions

swaps

amortising

arbitrageurs

asset, 2nd

basis, 2nd

concepts and applications

constant maturity swaps/constant maturity treasury (CMS/CMT)

coupon, 2nd

credit default see credit default swaps

credit risks

credit spread, 2nd, 3rd

currency see currency swaps

definition

energy, 2nd

equity, 2nd

equity index see equities: indices

foreign exchange

forward exchange rates, 2nd, 3rd

forward-start, 2nd

hedgers

interest rate see interest rates: swaps

legs, 2nd, 3rd, 4th

Libor in arrears

market risks

markets

meaning

netting

pricing, 2nd

quanto, 2nd

retail price index (RPI)

speculators

strips, bootstrapping

total rate of return (TROR), 2nd, 3rd

total return

types

vanilla

swaptions, 2nd, 3rd

credit default

equity index

interest rate, 2nd

pricing

SWIFT currency codes

synthetic collateralised debt obligations

synthetic long calls, 2nd

synthetic long futures

synthetic long puts, 2nd

synthetic longs, 2nd

synthetic short calls, 2nd

synthetic short puts, 2nd

synthetic shorts, 2nd

synthetic stock market investments

synthetic transactions

systems analysts

systems developers

T-Bills, 2nd

t distribution

takeovers, 2nd, 3rd

technology (IT) divisions

tenors

TGE (Tokyo Grain Exchange)

theoretical basis, financial futures

theta, 2nd, 3rd

third parties, credit default swaps

three-month yield curves, 2nd

ticks, 2nd

Tiffe (Tokyo International Financial Futures Exchange)

time deposits, 2nd

time value of money, 2nd, 3rd, 4th

time values, options, 2nd

Tokyo Grain Exchange (TGE)

Tokyo International Financial Futures Exchange (Tiffe)

total rate of return (TROR) swaps, 2nd, 3rd

total return swaps

traders, 2nd, 3rd

trades

arbitrage, 2nd, 3rd

complex

directional see directional trades

exotic

volatility see volatility trades

volume-driven

trading, 2nd

desks

financial futures

motivations for see motivations for trading

options motivations

transfer risks, 2nd

Treasury bills (T-Bills), 2nd

trigger options

trinomial distribution

trinomial trees, 2nd

TROR see total rate of return swaps

two-factor pricing models

underlyings

credit derivatives

options, 2nd

underwriting, 2nd

unfunded credit derivatives

United Kingdom

derivatives exchanges

equity indices

United States

derivatives exchanges

equity indices

up-front premiums, 2nd, 3rd

valuations

convertible bonds

currency swaps

equity index swaps

equity swaps

financial futures

forward rate agreements

interest rate swaps

tools

formulae

probability and statistics

quantitative analytics

yield curves

see also pricing

value at risk (VAR), 2nd

value dates

value sensitivities, options, 2nd

values

equity derivatives

intrinsic, 2nd

probability

vanilla product models

vanilla swaps

VAR (value at risk), 2nd

variable currencies, 2nd, 3rd

variances

variation margins

Vasicek model

vega, 2nd, 3rd

vertical shifts

vertical spreads, 2nd

volatile interest rates, 2nd

volatility, 2nd

volatility trades, 2nd, 3rd, 4th

volume-driven trades

web developers

writers, options, 2nd

yield curves, 2nd

basis curves, 2nd

construction

basis curves

bootstrapping swap strips

cash deposits, 2nd, 3rd, 4th, 5th

financial instruments choice

IMM FRAs

interest rate futures, 2nd, 3rd

interest rate swaps, 2nd, 3rd

interpolation methods, 2nd

log linear (geometric) interpolation, 2nd

methodology

one-month curves

three-month curves

zero-rate linear interpolation

definition

discount factors, 2nd

entire yield curve pricing models

flat

formulae

futures discount factors

graphical representations

humped

inverted

normal

one-month, 2nd

present values

shapes

flat or humped yield curves

inverted yield curves

liquidity preference theory

normal yield curves

preferred habitat theory

pure expectation theory

steep yield curves

standard

steep

three-month, 2nd

yields

bonds see bonds

convenience

current, 2nd

curves see yield curves

dividends

to maturity (YTM), 2nd

zero-cost collars, 2nd

zero coupon bonds, 2nd

zero coupons

zero-rate linear interpolation

zeta see vega

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