B2B Business to Business; A strategy of dealing directly with businesses, rather than consumers

BACK OFFICE Clerical operations that support settlement of trades and related processes

BACK TESTING Creating a hypothetical performance history by applying current selection criteria to prior time periods

BALANCE OF PAYMENTS Business to Business; A strategy of dealing directly with businesses, rather than consumers

BALANCE OF TRADE The value of exports less imports of an economy. There are visible and invisible balance figures. The visible balance represents the physical goods while the invisible represents the service economy

BANK NOTES Bank notes are paper issued by the central bank and are legal tender

BANK RATE The rate at which a central bank is prepared to lend money to its domestic banking system

BANK WIRE A computer message system linking major banks that is used as a mechanism to advise the receiving bank of some action that occurred

BANKRUPTCY Inability to pay debts

BARRIER OPTION A path dependent option that has a knock-in or knock-out feature that causes the option to become effective or terminate if a specified barrier level is reached

BASE CURRENCY In Foreign exchange markets, the base currency is the first currency in a currency pair. The second currency is named the quote currency or secondarys

BASIS POINT One hundredth of a percentage point (0.01%)

BASIS The difference between the cash price and futures price

BEAR (PUT) SPREAD BA spread designed to exploit falling exchange rates by purchasing a put option with a high strike price and selling one with a low strike price

BEAR MARKET A substantial drop in prices over a prolonged period of time

BEAR An investor who believes that prices are going to fall

BENEFICIAL OWNER Person who enjoys the benefits of ownership even though title is in another name

BETA The measure of an asset's risk in relation to the market. A security with a beta of 1.5, will move about 1.5 times the market return

BID The highest price a dealer will pay at any given time to purchase a currency pair or a financial instrument

BIG FIGURE Refers normally to the first three digits of an exchange rate

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

BOLLINGER BANDS A technical study used by chartists; Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move

BOND Bonds are debt instruments issued by a government or municipality for a period of more than one year. An investor is lending money when buying bonds. The seller of the bond agrees to repay the principal amount of the loan at a specified time plus interest

BOND RATING A rating based on the possibility of default by a bond issuer. The ratings range from AAA to D

BREAK EVEN POINTThe price of a financial instrument where total revenue received equals total costs (TR=TC)

BREAK OUTA technical term used by chartists to denote a break of a support, a resistance level, or any technical formation

BROKER An agent who executes orders to buy and sell currencies and related instruments either for a commission or a spread

BROKERAGE The commission charged by a broker

BUBA (BUNDESBANK) Bundesbank, the Central Bank of Germany

BULL MARKETA spread designed to exploit rising exchange rates by purchasing a put option with a lower strike price and selling one with a higher strike price

BULL (CALL) SPREAD The measure of an asset's risk in relation to the market. A security with a beta of 1.5, will move about 1.5 times the market return

BULLION A term for gold bars

BUTTERFLY SPREADSPREAD An option strategy combining a bull and bear spread. It uses three strike prices. The lower two strike prices are used in the bull spread and the higher strike price from the bear spread. Both puts and calls can be used

BUYER/TAKERSPREAD The purchaser of a currency pair or an option

BUYING RATE Rate at which the dealer is willing to buy the currency; or bid price

BUYING THE SPREAD In an option, buy the nearby contract and simultaneously sell the deferred contract; also referred to as a bull spread

CABLE A term used in the foreign exchange market for the USD/GBP rate

CALENDAR SPREAD An option position comprised of purchase and sale of two option contracts of the same type and at the same strike price but with different expiration dates

CALL OPTION An option that gives the holder the right, but not the obligation, to buy the underlying instrument at a specified price during a fixed period

CANCEL To void a working order in the market

CAPITALMoney invested in a company

CAPM Capital Asset Pricing Model; An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities

CAPITAL GAIN When securities are sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost

CAPITAL MARKETS A general term encompassing all markets for financial instruments with more than one year to maturity

CAR A term used to describe the amount of an underlying commodity; one commodity contract

CASH COW A company that generates a steady and significant amount of free cash flow

CASH DELIVERY Same day settlement

CASH FLOW Measure of the actual cash generated by a business rather than the accounting profit

CASH MARKETS Also called spot markets; these are markets that involve the immediate delivery of an instrument

CASH SETTLEMENTS A method of settling certain futures or option contracts whereby the seller pays the buyer the cash value of the commodity traded

BEAR MARKET A substantial drop in prices over a prolonged period of time

CBOE Chicago Board Options Exchange

CBOT Chicago Board of Trade

CEILING The highest price such as an interest rate or other numerical factor allowable in a financial transaction

CENTRAL BANK A bank which is responsible for controlling a country's monetary policy

CERTIFICATE OF DEPOSIT 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

CHAPTER 7 PROCEEDINGS Provisions of the Bankruptcy Reform Act under which the debtor's assets are liquidated by a court because reorganization would fail to establish a profitable business

CHAPTER 11 PROCEEDINGS Provisions of the Bankruptcy Reform Act under which the debtor is reorganized by a court because the estimated value of the reorganization exceeds the expected proceeds from its liquidation

CHARTIST An individual who studies graphs of historic data to find trends and predict support and resistance levels as well as other continuation and reversal patterns

CLASS Options of the same type with the same underlying security

CLEARING The procedure were a clearing house or principle becomes the buyer and/or the seller, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract

CLEARING HOUSE An adjunct to a futures exchange through which transactions executed on its floor are settled by a process of matching trades

CLOSED POSITION A transaction which leaves the trade with a zero net exposure to the market with respect to a particular currency

CME Chicago Mercantile Exchange

CME Chicago Mercantile Exchange

COMEX Commodity Exchange of New York

CME Chicago Mercantile Exchange

COMMISSIONThe fee that a broker may charge clients for dealing on their behalf

COMMODITY A commodity is food, metal, or another fixed physical substance that investors buy or sell, usually through futures contracts

CONDOR An option strategy consisting of both puts and calls at different strike prices to capitalize on a narrow range of volatility

CONFIRMATION Monthly measure of prices of a specified set of consumer goods and services, providing a measure of inflation. Rising CPI is normally associated with expectation of higher short term interest rates and may therefore be supportive for a currency in the short term.

CONTRACT EXPIRY DATE The last trading date of a futures or options contract

CORPORATE FINANCE The processes by which companies raise capital to fund growth, acquisitions etc; the division of an investment bank which advises on acquisitions, mergers, bid defenses, restructures and disposals

COVER Any transaction taken to limit exposure

COVERED CALL Having a long position in a currency or an asset combined with a short call option position on the same underlying currency or asset

COST OF LIVING INDEX An index that measures inflation such as CPI

COUNTER PARTY The party that takes the other side of an exchange transaction

COUNTER VALUE If a currency is traded against the dollar, the counter value would be the dollar value of the transaction

CREDIT RISK The risk of loss due to a counterparty defaulting or a debtor not repaying, or more generally the risk of loss due to some "credit event"

CROSS DEAL A foreign exchange deal involving two currencies that neither of which is the US Dollar or the base currency

CROSS RATES Rates between two currencies that neither of which is the US Dollar or the base currency

CURRENCY SWAP An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency

CURRENT ACCOUNT The net balance of a country's balance of payments (BOP) and contains the import and export items of goods and services as well as transfer payments and net investment income

DAY ORDER An order that is automatically canceled if not executed during the day

DAY TRADER A trader who takes positions that are closed during the same trading day

DEAL DATE The date that the transaction took place

DEAL TICKET The primary method of recording the basic information of a transaction

DEALER An individual or firm acting as a principal in the purchase or sale of currencies or securities. Dealers trade for their own account and risk

DECLARATION DATE The latest day or time by which the buyer of an option must indicate to the seller his intention to execute the option

DEFAULT Failure to make timely payment of interest or principal on a debt security

EMPLOYMENT RATE The percentage of the labor force that is employed

DEFICIT EA shortfall that is usually referenced to the balance of trade

DEFLATOR A price index measuring changes in prices of all new, domestically produced, final goods and services in an economy

DELIVERY DATE The date when the exchange of the currencies is made on a currency contract, or the value date. Could also refer to the exchange of commodity on a commodities contract

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 futures contract may be delivered in fulfillment of the contract

DELIVERY The settlement of a futures contract by receipt or tender of a financial instrument, currency or commodity

DELTA Delta measures the sensitivity of the value of a option to changes in the price of its underlying instrument

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

DEPO Deposit

EXERCISE PRICEThe price at which an options holder can buy or sell the underlying instrument

DEPRECIATION A fall in the value of a currency due to market forces

DEREGULATION The reduction of government's role in controlling markets, which lead to a free and presumably a more efficient marketplace

DERIVATIVES A broad term relating to instruments such as futures or options. The value of a derivative instrument moves in relation to the underlying

DEVATLUATION Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement from the government

DIAGONAL 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 bull character

DIRECT QUOTE For foreign exchange, the number of US dollars needed to buy one unit of a foreign currency

DIRTY FLOAT A system of floating exchange rates in which a government may intervene to change the direction of the value of the country's currency

DISCLOSURE The release of all information pertaining to the company's business activity, regardless of how that information may influence investors

DISCOUNT A term used for instruments where the forward rate is lower than the spot rate or where an option is trading for less than its intrinsic value

DISCOUNT RATE The rate at which a central bank is prepared to discount certain bills for financial institutions as a means of easing their liquidity

DISCRETIONARY ACCOUNT Accounts over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control

DISINFLATION A decrease in the rate of inflation

DISINVESTMENT A reduction in capital investment of a company and its decision not to replace depleted capital goods

DISPOSABLE INCOME Earnings after tax

DIVERGENCE When two or more averages or indexes fail to show confirming trends

DIVIDEND A portion of a company's profit paid to common and preferred shareholders

DIVIDEND RATE The fixed or floating rate paid on preferred stock based on par value

DOMESTIC MARKET A nation's internal market representing the mechanisms for issuing and trading securities of entities domiciled within that nation

DOMESTIC MARKET A nation's internal market representing the mechanisms for issuing and trading securities of entities domiciled within that nation

DOUBLE BOTTOM A term used in technical analysis to refer to the drop of a stock's price, a rebound, and then a drop back to the same level as the original drop

DOUBLE TOP A term used in technical analysis to refer to the rise of a stock's price, a drop, and then a rise back to the same level as the original rise

DOWNGRADE A negative change in ratings for a stock, or other rated security

DUE DILIGENCE Background check and research conducted by the company to assess validity of a prospective client and that client's customers

DURABLE GOODS ORDERS A measure of new orders placed with domestic manufacturers for immediate and future delivery. A major indicator of the health of the manufacturing sector in an economy

EBIT Earnings before Interest and Taxes

EBITD Earnings before Interest, Taxes and Depreciation

EBITDA Earnings before Interest, Taxes, Depreciation and Amortization

ECB Earnings Per Share; A company's profit divided by its number of outstanding shares

EPS A day when the banks in a currency's principal financial center are open for business

EASING A modest decline in interest rates or prices

ECONOMIC INDICATOR A statistic released by a government body that indicates current economic trends such growth rate, retail sales, employment, etc…

EMPLOYMENT RATE The percentage of the labor force that is employed

EQUILIBRIUM EXCHANGE Exchange rate at which demand for a currency is equal to the supply of the currency in the economy

EQUITY The residual dollar value of a trading account, assuming its liquidation is at the current market price

EUROCURRENCY Currency deposited by companies and federal governments in banks outside their own country, usually currency of a non-European country deposited in Europe

EURODOLLARS Deposits denominated in United States Dollar at banks outside the United States

EUROPEAN OPTION An option that can be exercised only on its expiration date rather than before that date

EUROPEAN UNION The group of countries formally known as the European Community

EXCHANGE CONTROLA system of controlling inflows and outflows of foreign exchange

EXCHANGE RATE The price of one country's currency expressed in another country's currency

EXECUTION The process of completing an order to buy or sell an instrument

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 PRICE The price at which an options holder can buy or sell the underlying instrument

EXERCISE VALUE The profit amount between the strike price and the underlying investment when the option is exercised

EXOTIC A less broadly traded currency or option

EXPIRATION DATE The last date after which the option can no longer be exercised

EXPIRATION DATE The last date after which the option can no longer be exercised

EXPIRATION MONTH The month in which an option expires

EXPIRY DATE The last date on which an option can be bought or sold

EXPOSURE The condition of being subjected to a source of risk

FAIR MARKET PRICE Amount at which an asset would change hands between two parties, were both have knowledge of the relevant facts

FAST MARKET A financial market that has a combination of high volatility and heavy trading

FED FUND RATE The interest rate at which banks lend to each other overnight. This is a closely watched short term interest rate that the Fed controls through open market operations

FED The United States Federal Reserve. The 7-member Board of Governors that oversees Federal Reserve Banks, establishes monetary policy, and monitors the economic health of the country

FEDERAL OPEN MARKET COMMITTEE A 12-member committee which sets credit and interest rate policies for the Federal Reserve System. This committee consists of 7 members of the Board of Governors, and 5 of the 12 Federal Reserve Bank Presidents. This group, headed by the Chairman of the Federal Reserve Board, sets interest rates either directly (by changing the discount rate) or through the use of open market operations (by buying and selling government securities which affects the federal funds rate)

FEDERAL RESERVE BOARD The 7-member Board of Governors that oversees Federal Reserve Banks. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms. Also called the Fed

FEDERAL RESERVE SYSTEM The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board

FIDUCIARY One who must act for the benefit of another party

FILL The price at which an order is executed

FILL OR KILL A exchange traded order that is canceled unless executed within a designated time period

FINANCE COMPANY A company whose business and primary function is to make loans to individuals, while not receiving deposits like a bank

FINANCIAL INSTITUTION An enterprise such as a bank whose primary business and function is to collect money from the public and invest it in financial assets

FINANCIAL FUTURE A futures contract based on a financial instrument

FINANCIAL MARKET An organized institutional structure for creating and exchanging financial assets

FISCAL POLICY Government spending and taxing for the specific purpose of stabilizing the economy

FIXED EXCHANGE RATE Official rate set by monetary authorities. Often the fixed exchange rate permits fluctuation within a band

FIXING A method for determining fixed rates. Such a process occurs either once or twice daily at defined times. 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. A form of managed float

FLOATING EXCHANGE RATE An exchange rate where the value is determined by market forces

FLOATING PROFIT/LOSS The profit/loss that may only be realized if the open contracts are liquidated (settled)

FLOOR An exchanges trading area. May also be used as the lower limit of an option or an interest rate

FOMC See Federal Open Market Committee

FOREIGN EXCHANGE The purchase or sale of a currency against another

FOREX An over-the-counter market where buyers and sellers conduct foreign exchange transactions

FORCED LIQUIDATION The premature closing out of a contract when an investor is unable to meet a margin call

FORWARD CONTRACT A cash market transaction between a bank and a customer in which the seller agrees to deliver a specific cash commodity to the buyer at some point in the future. Unlike futures contracts, forward contracts are privately negotiated and are not standardized

FORWARD DEAL A deal with a value date greater than spot

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 FRA - A forward contract that specifies an interest rate to be paid on an obligation beginning on some future date

FORWARD RATE Forward rates are quoted in terms of forward points or pips, which represents the difference between the forward and spot rates. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction

FREE RESERVES Total reserves held by a bank less the reserves required by the authority

FRONT OFFICE The activities carried out by the dealer

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, interest rates, etc…

FUTURES CONTRACT A standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date

FX An over-the-counter market where buyers and sellers conduct foreign exchange transactions

G7The 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

GAMMAA measurement of how fast delta changes, given a unit change in the underlying price of the instrument

GAPA significant price movement of a currency, security or commodity between two trading sessions

GLOBALIZATIONA Tendency toward a worldwide investment environment and the integration of national capital markets

GLOBEXA 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

GOLD BULLIONA Investment-grade gold which may be smelted into gold coins or bars

GOLD STANDARDA monetary system that backs its currency with a reserve of gold, and allows currency holders to convert their currency into gold. The U.S. went off the gold standard in 1971

GOOD UNTIL CANCELED(GTC) An instruction to a broker that the order must remain valid until cancelled by the client

GROSSBefore deduction of tax

GROSS DOMESTIC PRODUCTGDP is the broadest measure of aggregate economic activity available. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports

GDP DEFLATORA ratio that is used to account for the effect of inflation on the GDP figure

GTCSee Good until Canceled

GTF(GTF) An instruction to a broker that the order must remain valid until closing of trading day on Friday

HARD CURRENCYA freely convertible currency that is not expected to depreciate in value in the foreseeable future

HEAD AND SHOULDERS A technical analysis term referring to a chart formation in which a price exhibits three successive rallies, the second one being the highest. The name derives from the fact that on a chart the first and third rallies look like shoulders and the second looks like a head. Bearish indicator

HEDGEAn investment made in order to reduce the risk of adverse price movements in a currency or security, by taking an offsetting position in the same or a related instrument

HEDGE FUNDA fund that may employ a variety of techniques to enhance returns

HIBORHong Kong Inter-bank Offered Rate

HISTORICAL VOLATILITYThe historical rate at which the price of an underlying currency or security moves up and down

HOLDERBuyer

HORIZONTAL SPREADThe simultaneous purchase and sale of two options that differ only in their expiration dates

HOUSING STARTSA measure of the number of residential units on which construction is begun each month

HYPERINFLATIONVery high and self sustaining inflation levels

KEYNESIAN ECONOMICSAn economic theory of British economist, John Maynard Keynes that active government intervention is necessary to ensure economic growth and stability

KIWI Slang for the New Zealand dollar

KNOCK INWhere a barrier option becomes active as the underlying spot price hits the barrier level

KNOCK OUTWhere a barrier option ceases to exist as the underlying spot price hits the barrier level

WORKING DAYA day when the banks in a currency's principal financial center are open for business

LAGGING INDICATORS Economic indicators that follow rather than precede the country's overall pace of economic activity

LAISSE-FAIRE Doctrine that a government should not interfere with business and economic affair

LAST TRADING DAY The day on which trading ceases for an expiring contract

LBO A transaction used to take a public corporation private that is financed through debt such as bank loans and bonds

LEAD MANAGER The commercial or investment bank with the primary responsibility for organizing syndicated bank credit or bond issue. The lead manager recruits underwriting banks, negotiates terms of the issue with the issuer, and assesses market conditions

LEADING INDICATORS An economic indicator that changes before the economy has changed. Examples of leading indicators include production workweek, building permits, unemployment insurance claims, money supply, inventory changes, and stock prices

LEVERAGE The degree to which an investor or business is utilizing borrowed money

LIBID The London Interbank Bid Rate; the rate charged by one bank to another for deposits

LIBOR The London Interbank Offered Rate, the rate charged by one bank to another for lending money

LIFFE London International Financial Futures Exchange

LIMIT DOWN The maximum price decline permitted in 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 permitted in one trading session

LIMIT The amount that one bank is prepared to trade with another; or the amount that a dealer is permitted to trade in a given currency

LINES An banking arrangement to lend an investor any amount up to the full amount of the line

LIQUIDATION Any transaction that closes out a previously established position

LIQUIDITY The ability of an asset to be quickly converted into cash; or a market with a large number of buyers and sellers

LOMBARD RATE One of the key commercial interest rates in Europe; an interest rate for a loan against the security of pledged paper

LONG The state of actually owning a currency, security, or commodity

LONG HEDGE The purchase of futures contracts for price protection purposes as a defensive position against an increase in cash prices

M0 Cash in circulation; only used by the UK

M1 Cash in circulation plus demand deposits at commercial banks

M2 Includes demand deposits, time deposits and money market mutual funds, excluding large CDs

M3 M2 plus large time deposits, repos of maturity greater than one day and institutional money market accounts

M4 M2 plus negotiable CDs

MACROECONOMICS Analysis of a country's economy as a whole

MAINTENANCE MARGIN The minimum margin which an investor must keep on deposit in a margin account at all times for of each open contract

MARGIN CALL Difference between the buying and selling rates; or the initial deposit made brokerage firm upon establishing an account

MARGIN The risk that a customer goes bankrupt after entering into a forward contract

MARKED-TO-MARKETAn arrangement whereby the profits or losses on a futures contract are settled each day

MARK UPThe difference between the lowest current offered price and the higher price that a dealer charges to a customer

MARKET AMOUNTThe conventional amount dealt between banks

MARKET IF TOUCHED (MIT)An exchange order that automatically becomes a market order if the specified price is reached

MARKET ON CLOSE (MOC)TAn exchange order that is filled as close as possible to the close

MARKET MAKERA brokerage company or a bank that maintains a firm bid and ask price and is ready, willing, and able to buy or sell at publicly quoted prices

MARKET ORDERAn order to buy or sell a financial instrument immediately at the best possible price

MATIFMarche a Terme International de France

MATURITY DATEThe last trading day of a futures contract

MEDIUM TERM NOTEA corporate debt instrument that has maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years

MICRO ECONOMICS The study of the behavior of small economic units such as individual consumers or households

MIDDLE OFFICEThe group of employees responsible for calculating profits and losses and for managing risks

MID-PRICE The average of both buying and selling prices

MINEExpression used to indicate that the willingness to buy at the rate offered by the counter party

MINIMUM PRICE FLUCTUATION The smallest increment of market price movement possible

MINIMUM RESERVE Reserves required to be deposited at central banks by commercial banks and other financial institutions

MIO Traders' reference for a Million

MM Money Markets

MODERN PORTFOLIO THEORYThe conventional amount dealt between banks

MODERN PORTFOLIO THEORY Principals underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification

MOMENTUM INDICATORS The conventional amount dealt between banks

MONEY MARKET Market for short-term debt securities with maturity of one year or less and often 30 days or less

MONEY SUPPLY The total supply of money in circulation in a given country's economy at a given time

MOVING AVERAGE Moving averages are used on charts to that show whether an instrument's price is trending up or down. It is a technical analysis term meaning the average price of an instrument over a specified time period, used in order to spot pricing trends by flattening out large fluctuations

MUTUAL FUND An open-ended fund operated by an investment company that raises money from shareholders and invests in a group of assets in accordance with a stated set of objectives

NASD National Association of Securities Dealers; Nonprofit organization formed under the joint sponsorship of the investment bankers' conference and the SEC to provide regulation on the OTC market

NET ASSET VALUE The value of a fund's investments

NET POSITION The difference between total open long and open short positions in a given instrument held by an individual

NET PRESENT VALUE The present value of the expected future cash flows minus the cost

NEUTRAL Describing an opinion that is neither bearish not bullish

NEW YORK MERCANTILE EXCHANGE NYMEX; The world's largest physical commodity futures exchange

NEW YORK STOCK EXCHANGE NEW YORK STOCK EXCHANGE

NOSTRO ACCOUNT A foreign currency current account maintained with another bank that is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident

NOT HELD ORDER A futures order, usually a Market order, in which the customer gives the floor broker total discretion to transact on a best-efforts basis

NOTE A short-term debt security usually with a maturity of five years or less

OECD An international organization helping governments tackle the economic, social and governance challenges of a global economy

OFFER The price at which a seller is willing to sell

OFFERED MARKET Temporary situation where offers exceed bids

OFFERING MEMORANDUM A document that outlines the terms of securities to be offered in a private placement

OFFSET The closing-out or liquidation of a position

OFF-SHORE The operations of a financial institution that although physically located in a country, has little connection with that country's financial systems

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 MARKET COMMITTEE Same as Federal Open Market Committee

OPEN MARKET OPERATIONS Central Bank operations in the markets to influence exchange and interest rates

OPEN POSITION A position that is not yet closed

OPTION CLASS Options of the same type as said to be of the same class

OPTION SERIES The right, but not the obligation, to buy (call) or sell (put) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time

OPTION The net of the total commitments in a given currencys

OTC Over-the-Counter; A security which is not traded on an exchange

OUT-OF THE MONEY A call option whose strike price is higher than the market price of the underlying, or a put option whose strike price is lower than the market price of the underlying

OVER BOUGHT Technically too high in price, and hence a technical correction is expected

OVERNIGHT LIMIT Net long or short position in one or more currencies that a dealer can carry over into the next dealing day

OVERNIGHTA deal from today until the next business day

OVER THE COUNTER See OTC

OVER SOLD Technically too low in price, and hence a technical correction to the upside is expected

PAID-IN CAPITAL Represents the excess of funds received for stock of a corporation in excess of its book value

PAR Equal to the nominal or face value of a security; A bond selling at par is worth an amount equivalent to its original issue value or its value upon redemption at maturity

PARITY Equality; the value of one currency in terms of another

PAYMENT DATE The date on which a dividend or bond interest payment is scheduled to be delivered

PAYROLL EMPLOYMENT Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government

P/E Price Earnings Ratio; shows the multiple of earnings at which a stock sells and determined by dividing current stock price by current earnings per share

PENSION FUND A fund set up to pay the pension benefits of workers after retirement

PETRODOLLARS Foreign exchange reserves of oil producing nations arising from oil sales

PHYSICAL COMMODITY A commodity is food, metal, or another fixed physical substance that investors buy or sell

PIP The smallest price unit in a currency (0.0001 of a unit)

PLAZA ACCORD The 1985 Plaza Hotel agreement by the G5 to lower the dollar

POINT Minimum fluctuation or smallest increment of price movement; One percent on an interest rate

PORTFOLIO A collection of investments, real and/or financial

POSITION The net of the total commitments in a given currencys

POWER OF ATTORNEY A written authorization allowing a person to perform certain acts on behalf of another, such as moving of assets between accounts or trading for a person's benefit

PREFERRED SHARES Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders

PRESENT VALUE The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future

PRICE GAP TGaps occur when opening price movements create a blank spot on the chart. This occurs when the high of the day is below the low of the previous day or when the low of the day is above the high of the previous day

PRIMARY DEALER Usually refers to the select list of securities firms that are authorized to deal in new issues of government bonds

PRODUCER PRICE INDEX PPI; An inflationary indicator published by the U.S. Bureau of Labor Statistics to evaluate wholesale price levels in the economy

PROGRAM TRADING Trades based on signals from computer programs, usually entered directly from the trader's computer and executed automatically

PREMIUM The amount by which a forward rate exceeds a spot rate; the margin paid above the normal price level

PRICE EARNINGS RATIOSee P/E above

PROFIT TAKING The The action taken by investors to sell when prices are rising or to purchase when prices are declining in order to secure gains

PUT OPTION Gives the right but not the obligation to sell currencies or instruments at the option exercise price within a predetermined time period

QUANTITATIVE RESEARCH Use of advanced econometric and mathematical valuation models to identify the firms with the best possible prospective

QUOTE The price quoted for information purposes but not to deal

QUOTA The amount of sales needed to reach a company's sales goal; an amount set by the government to limit imports or exports

RALLY A substantial rise in the market price following a decline

RANGE The high and low transaction prices of a currency, security or commodity during a given period

SDR Special Drawing Right; an artificial currency unit based upon several national currencies. SDR serves as the official monetary unit of the IMF, and acts as a supplemental reserve for national banking systems

RATE The price of one currency in terms of another

RATING An evaluation of credit quality of a company's debt issue by a rating agency. Investors and analysts use ratings to assess the riskness of an investment

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 TA reversal of the prevailing trend in price movement. The term is most often used to describe a decline after a period of rising prices

REAL Inflation adjusted model of Gross Domestic Product

REAL GDP An investor who has sold a currency or an instrument without having covered it

REAL TIME REAL TIME

RECESSION A period of general economic decline; specifically a decline in GDP for two or more consecutive quarters

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

REPO A contract in which the seller of fixed income securities such as Treasury Bills agrees to buy them back at a specified time and price

REPO RATE See Repo

RESERVES TFunds set aside for emergencies or other future needs; Official reserves are to ensure that a government can meet near term obligations

RESERVE REQUIREMENT The ratio of reserves to deposits, expressed as a fraction, prescribed by national banking authorities

RESISTANCE POINT 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 movement

RETAIL PRICE INDEX RPI; an inflationary indicator that measures the change in the cost of a fixed basket of retail goods

RETAIL SALES A monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes; often a measure of consumer confidence

RETURN ON EQUITY Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity

RETURN ON INVESTMENT A figure of merit used to help make capital investment decisions. ROI is calculated by considering the annual benefit divided by the investment amount

REUTER DEALING A system for screen based trading between banks in operation since the early 1980s

REVERSAL Change in the general trend of the market

REVALUATION A change, usually an increase, in a country's fixed exchange rate as a result of official action

RISK MANAGEMENT The process of analyzing exposure to risk and determining how to best handle such exposure

RISK REVERSAL A combination of purchasing put options with the sale of call options. The put limits downside, while the call limits the upside

ROLLOVER A completed transaction involving both a purchase and a subsequent sale, or a sale followed by a liquidating purchase

ROUND TURN

RUNNING A POSITION Keeping open positions in the hope of a speculative gain

SAME DAY TRANSACTION A transaction that matures on the day the transaction takes place

SCALPING A strategy of buying at the bid and selling at the offer as soon as possible

SDR Special Drawing Right; an artificial currency unit based upon several national currencies. SDR serves as the official monetary unit of the IMF, and acts as a supplemental reserve for national banking systems

SECONDARY MARKET The market in which securities are traded after they are initially offered in the primary market

SELLING RATE Rate that a bank is willing to sell foreign currency

SERIES All options of the same class which share a common strike price and expiration date

SETTLEMENT DATE The date by which an executed transaction must be settled; in currencies it is 2 days while stocks is 3 days

SETTLEMENT PRICE The official closing price for a future set by the clearing house at the end of each trading day

SHARES Certificates or book entries representing ownership in a corporation or similar entity

SHORT POSITION An investor who has sold a currency or an instrument without having covered it

SHORT COVERING Buying to unwind a short position

SHORT-TERM INTEREST RATESNormally the 90 day rate

SLIPPAGE The difference between estimated transactions costs and actual transactions costs. The difference usually represents revisions to price difference or spread and commission costs

SOFFEX Swiss Options and Financial Futures Exchange, a fully automated and integrated trading and clearing system

SPOT Refers to a transaction for immediate delivery; spot currency transactions have a value date of 2 business days

SPOT NEXT The overnight swap from the spot date to the next business day

SPOT MONTH The contract month closest to delivery

SPOT PRICE The price that a 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 The difference between the bid and ask price of a currency; the difference between the price of two related futures contracts

SQUARE The buy and sell positions are in balance; no open positions

SQUAWK BOX A speaker connected to a phone often used in broker trading desks

SQUEEZE A term referring to certain normal amounts and maturities for dealing

STANDARD Government obligations with maturities more than one year but less than ten years

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

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 British pound, otherwise known as Cable

STOP LOSS ORDER A market order to buy or sell a certain quantity of a certain currency or security if a specified price (the stop price) is touched

STERLING British pound, otherwise known as Cable

STRADDLEThe simultaneous purchase/sale of both call and put options for the same currency, exercise/strike price and expiry date

STAGFLATION Recession or low growth in conjunction with high inflation rates

STRAPA combination of two calls and one put

SUPPORT LEVELS When an exchange rate depreciates or appreciates to a level where technical analysis techniques suggest that the currency will rebound or not go below

SWAP PRICE A price as a differential between two dates of the swap

SWAP An exchange of streams of payments over time according to specified terms

SWAPTION An option to enter into a swap contract

SWIFT Society for World-wide Interbank Telecommunications is a Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions

SWISSY Market slang for Swiss Franc

SYNTHETICS The artificial creation of an asset using combinations of other assets; In options, a long call option and a short put option amounts to a synthetic long, or a long put option and a short call option amounts to a synthetic short

T-BILL Treasury Bill; Short-term obligations of a Government issued for periods of one year or less

TECHNICAL ANALYSIS The study of price action in markets through the use of charts and quantitative techniques to attempt to forecast price trends

TECHNICAL CORRECTION An adjustment to the price of an instrument that is based on technical factors rather than market sentiment

TENDER The process of inviting parties to submit a formal offer for the supply or purchase of goods and services, followed by evaluation of offers and selecting a successful bidder

TENOR A Maturity of an option or a loan

THEORETICAL VALUE Mathematically determined value of a derivative instrument as dictated by a pricing model such as the Black-Scholes model

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 due to lack of liquidity of the instrument

TICKET The primary method of recording the basic information of a transaction

TIME VALUE The portion of the option premium that is attributable to the amount of time remaining until the expiration of the option contract. Time value is whatever value the option has in addition to its intrinsic value. The longer the time remaining until expiration, the higher the time value

TOP DOWN APPROACH A method of security selection that starts with asset allocation and works systematically through sector and industry allocation to individual security selection

TOMORROW NEXT Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa

TRADE An oral or electronic transaction involving one party buying or selling a currency, security, or derivative from another party

TRADE BALANCE The sum of the money gained by a given economy by selling exports, minus the cost of buying imports; part of the balance of payments

TRADE DATE The date on which a trade occurs

TRADE DEFICIT/SURPLUS The difference between the value of imports and exports

TRADE ABLE AMOUNT The smallest transaction size acceptable

TRADE TICKET The primary method of recording the basic information of a transaction

TRANSACTION DATE The date on which a trade occurs

TRANSACTION An executed order to buy or sell an instrument; could be an entry or a liquidation trade

TREASURER The corporate officer responsible for designing and implementing a firm's financing and investing activities

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

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 Outstanding stock that has been sold and subsequently repurchased by the issuing firm. Treasury stock does not carry voting rights or an ability to collect dividends, and is not used in earnings per share calculations

TURNOVER The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded

TWO-WAY QUOTATION When a dealer quotes both buying and selling rates for foreign exchange transactions

UNCOVERED A position not covered by an offsetting position

UNCOVERED CALL A short call option position in which the writer does not own the underlying product represented by the option contracts

UNDER-VALUATION An exchange rate is normally considered to be undervalued when it is below its purchasing power parity

UNDER WRITER A firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors

UNDER WRITING A Acting as the underwriter in the issue of new securities for a firm

UNEMPLOYMENT RATE The percentage of the people classified as unemployed as compared to the total labor force

UNILATERAL TRANSFERS Items in the current account of the balance of payments of a country that correspond to gifts from foreigners or pension payments to foreign residents who once worked in the particular country

UP TICK A transaction executed at a price greater than the previous transaction

VALUATION Determination of the value of a company's stock based on earnings and the market value of assets

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 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

VALUE SPOT Spot normally settles after two working days

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

VARIATION MARGIN Profits or losses on open positions in futures and options contracts which are paid or collected daily

VEGA Expresses the price change of an option for a one per cent change in the implied volatility

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

VOLATILITY A measure of the fluctuations in the underlying instrument over a given time period. It is expressed as a percentage and computed as the annualized standard deviation of percentage change in daily price. High values usually mean high risk

VOLATILITY RISK Profits or The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset

WALL STREET Generic term for the securities industry firms that buy, sell, and underwrite securities

WARRANT A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market price. Warrants are traded as securities whose price reflects the value of the underlying stock

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

WORKING CAPITAL The difference between current assets and current liabilities

WORKING DAY A day when the banks in a currency's principal financial center are open for business

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

YARD Slang for milliard, one thousand million

YEAR TO DATE YTD; The period beginning at the start of the calendar year up to the current date

YIELD CURVE A graph that shows changes in yield on instruments depending on time to maturity. 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

ZERO COUPON BOND Business to Business; A strategy of dealing directly with businesses, rather than consumers

ZERO INVESTMENT PORTFOLIO A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy