Saturday, December 6, 2008
== S of Forex Dictionary ==
Same day transaction
A transaction that matures on the day the transaction takes place.
Sandwich spread
Same as a butterfly spread.
Savings ratio
The percentage of disposable income that is saved or used for debt repayment.
Scalping
A strategy of buying at the bid and selling at the offer as soon as possible.
SDR
Special Drawing Right. A standard basket of five major currencies in fixed amounts as defined by the IMF.
Seasonally Adjusted
A method of dealing with statistics to adjust for regular annual fluctuations in figures normally caused by non economic factors, e.g. school leavers' impact on unemployment, or rise in food prices in winter. The months data is divided by the percentage of the average monthly figure. As a simple arithmetic adjustment it does not deal with exceptional seasonal factors such as extreme winters.
Selling rate
Rate at which a bank is willing to sell foreign currency.
Seller/grantor
Also known as the option writer.
Serial expiration
Options on the same underlying futures being contract which expire in more than one month.
Series
All options of the same class which share a common strike price and expiration date.
Settlement date
The date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.
Settlement price
The official closing price for a future set by the clearing house at the end of each trading day.
Settlement Risk
Risk associated with the non settlement of the transaction by the counter party.
Short / Short Position
A shortage of assets in a particular currency. See short sale.
Short Contracts
Contracts with up to six months to delivery.
Short Covering
Buying to unwind a shortage of a particular currency or asset.
Short forward date / rate
The term short forward refers to periods up to two months, although it is more commonly used with respect to maturities of less than one month.
Short sale
The sale of a currency futures not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
Short straddle
A compound option that consists of a short call and a short put on the same currency, at the same strike price, and with the same expiration dates. The maximum profit consists of the combined premium of the two individual options. The loss occurs when the level of the premium is overpassed by the currency swing, and the loss is unlimited.
Short strangle
A compound option that consists of a short call and a short put on the same currency, with the same expiration dates, but with different strike prices. The maximum profit consists of the combined premium of the two individual options. The loss is unlimited.
Short term interest rates
Normally the 90 day rate.
Shorts
see Short forward date / rate.
SIBOR
Singapore Inter-bank Offered Rate.
Sidelined
A major currency that is lightly traded due to major market interest being in another currency pair.
SIMEX
Singapore International Monetary Exchange.
SITC
Standard International Trade Classification. A system for reporting trade statistics in a common manner.
SOFFEX Swiss Options and Financial Futures Exchange, a fully automated and integrated trading and clearing system.
Soft Market
More potential sellers than buyers, which creates an environment where rapid price falls are likely.
Sovereign immunity
Legal doctrine which means that the state cannot be sued or have its assets seized.
Sovereign risk
(1) Risk of default on a sovereign loan; (2) Risk of appropriation of assets held in a foreign country.
Split Date
See broken date.
Spot
(1) The most common foreign exchange transaction (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spot next
The overnight swap from the spot date to the next business day.
Spot month
The contract month closest to delivery
Spot price / rate
The price at which the currency is currently trading in the spot market.
Spot week
A standard period of one week swap measured from the current value date of the currency spot rate.
Spread
(l) The difference between the bid and ask price of a currency. (2) The difference between the price of two related futures contracts. (3) For options, transactions involving two or more option series on the same underlying currency.
Square
Purchase and sales are in balance and thus the dealer has no open position.
Squawk Box
A speaker connected to a phone often used in broker trading desks.
Squeeze
Action by a central bank to reduce supply in order to increase the price of money.
Stable market
An active market which can absorb large sale or purchases of currency without major moves.
Standard
A term referring to certain normal amounts and maturities for dealing.
Standard and Poors
A US firm engaged in assessing the financial health of borrowers. The firm also has generated certain stock indices i.e. S&P 500.
Stand by Credit
An arrangement with the IMF for draw downs on a "need " basis. The term is sometimes more generally used.
Sterilization
Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
Sterling Index
A index based on the movement of sterling against the major currency.
Sterling
British pound, otherwise known as cable.
STIBOR
Stockholm Inter-bank Offered Rate.
Stocky
Market slang for Swedish Krona.
Stop loss order
Order given to ensure that , should a currency weaken by a certain percentage, a short position will be covered even though this involves taking a loss. Realize profit orders are less common.
Stop out Price
US term for the lowest accepted price for Treasury Bills at auction.
Straddle
The simultaneous purchase/sale of both call and put options for the same share, exercise/strike price and expiry date.
Stagflation
Recession or low growth in conjunction with high inflation rates.
Straight
A bond with unquestioned right to repayment of principal and interest at the specified dates with no additional further rights or bonuses.
Straight date
See fixed dates.
Strap
Also called exercise price. The price at which an options holder can buy or sell the underlying instrument.
Strip
A combination of two puts and one call.
Structural Unemployment
Unemployment levels inherent in an economic structure.
Supply side economics
The concept is that tax cuts will boost investment leading to an increase in the supply of goods in the economy. To be compared with demand led Keynesian economics.
Support levels
When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.
Swap as a percentage
Swaps expressed as an annualized percentage.
Swap margin
See forward margin.
Swap price
A price as a differential between two dates of the swap Swap rate See forward margin.
Swap
The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
Swaption
An option to enter into a swap contract.
SWIFT
Society for World-wide Interbank Telecommunications. A Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions.
Swissy
Market slang for Swiss Franc.
Switch
See Deposit Swap.
Synthetics
Options or futures that create a position that able to be achieved directly but is generated by a combination of options and futures in the relevant market. In foreign exchange a SAFE combines two forward contracts into a single transaction where settlement only involves the difference in values.
A transaction that matures on the day the transaction takes place.
Sandwich spread
Same as a butterfly spread.
Savings ratio
The percentage of disposable income that is saved or used for debt repayment.
Scalping
A strategy of buying at the bid and selling at the offer as soon as possible.
SDR
Special Drawing Right. A standard basket of five major currencies in fixed amounts as defined by the IMF.
Seasonally Adjusted
A method of dealing with statistics to adjust for regular annual fluctuations in figures normally caused by non economic factors, e.g. school leavers' impact on unemployment, or rise in food prices in winter. The months data is divided by the percentage of the average monthly figure. As a simple arithmetic adjustment it does not deal with exceptional seasonal factors such as extreme winters.
Selling rate
Rate at which a bank is willing to sell foreign currency.
Seller/grantor
Also known as the option writer.
Serial expiration
Options on the same underlying futures being contract which expire in more than one month.
Series
All options of the same class which share a common strike price and expiration date.
Settlement date
The date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.
Settlement price
The official closing price for a future set by the clearing house at the end of each trading day.
Settlement Risk
Risk associated with the non settlement of the transaction by the counter party.
Short / Short Position
A shortage of assets in a particular currency. See short sale.
Short Contracts
Contracts with up to six months to delivery.
Short Covering
Buying to unwind a shortage of a particular currency or asset.
Short forward date / rate
The term short forward refers to periods up to two months, although it is more commonly used with respect to maturities of less than one month.
Short sale
The sale of a currency futures not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
Short straddle
A compound option that consists of a short call and a short put on the same currency, at the same strike price, and with the same expiration dates. The maximum profit consists of the combined premium of the two individual options. The loss occurs when the level of the premium is overpassed by the currency swing, and the loss is unlimited.
Short strangle
A compound option that consists of a short call and a short put on the same currency, with the same expiration dates, but with different strike prices. The maximum profit consists of the combined premium of the two individual options. The loss is unlimited.
Short term interest rates
Normally the 90 day rate.
Shorts
see Short forward date / rate.
SIBOR
Singapore Inter-bank Offered Rate.
Sidelined
A major currency that is lightly traded due to major market interest being in another currency pair.
SIMEX
Singapore International Monetary Exchange.
SITC
Standard International Trade Classification. A system for reporting trade statistics in a common manner.
SOFFEX Swiss Options and Financial Futures Exchange, a fully automated and integrated trading and clearing system.
Soft Market
More potential sellers than buyers, which creates an environment where rapid price falls are likely.
Sovereign immunity
Legal doctrine which means that the state cannot be sued or have its assets seized.
Sovereign risk
(1) Risk of default on a sovereign loan; (2) Risk of appropriation of assets held in a foreign country.
Split Date
See broken date.
Spot
(1) The most common foreign exchange transaction (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spot next
The overnight swap from the spot date to the next business day.
Spot month
The contract month closest to delivery
Spot price / rate
The price at which the currency is currently trading in the spot market.
Spot week
A standard period of one week swap measured from the current value date of the currency spot rate.
Spread
(l) The difference between the bid and ask price of a currency. (2) The difference between the price of two related futures contracts. (3) For options, transactions involving two or more option series on the same underlying currency.
Square
Purchase and sales are in balance and thus the dealer has no open position.
Squawk Box
A speaker connected to a phone often used in broker trading desks.
Squeeze
Action by a central bank to reduce supply in order to increase the price of money.
Stable market
An active market which can absorb large sale or purchases of currency without major moves.
Standard
A term referring to certain normal amounts and maturities for dealing.
Standard and Poors
A US firm engaged in assessing the financial health of borrowers. The firm also has generated certain stock indices i.e. S&P 500.
Stand by Credit
An arrangement with the IMF for draw downs on a "need " basis. The term is sometimes more generally used.
Sterilization
Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
Sterling Index
A index based on the movement of sterling against the major currency.
Sterling
British pound, otherwise known as cable.
STIBOR
Stockholm Inter-bank Offered Rate.
Stocky
Market slang for Swedish Krona.
Stop loss order
Order given to ensure that , should a currency weaken by a certain percentage, a short position will be covered even though this involves taking a loss. Realize profit orders are less common.
Stop out Price
US term for the lowest accepted price for Treasury Bills at auction.
Straddle
The simultaneous purchase/sale of both call and put options for the same share, exercise/strike price and expiry date.
Stagflation
Recession or low growth in conjunction with high inflation rates.
Straight
A bond with unquestioned right to repayment of principal and interest at the specified dates with no additional further rights or bonuses.
Straight date
See fixed dates.
Strap
Also called exercise price. The price at which an options holder can buy or sell the underlying instrument.
Strip
A combination of two puts and one call.
Structural Unemployment
Unemployment levels inherent in an economic structure.
Supply side economics
The concept is that tax cuts will boost investment leading to an increase in the supply of goods in the economy. To be compared with demand led Keynesian economics.
Support levels
When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.
Swap as a percentage
Swaps expressed as an annualized percentage.
Swap margin
See forward margin.
Swap price
A price as a differential between two dates of the swap Swap rate See forward margin.
Swap
The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
Swaption
An option to enter into a swap contract.
SWIFT
Society for World-wide Interbank Telecommunications. A Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions.
Swissy
Market slang for Swiss Franc.
Switch
See Deposit Swap.
Synthetics
Options or futures that create a position that able to be achieved directly but is generated by a combination of options and futures in the relevant market. In foreign exchange a SAFE combines two forward contracts into a single transaction where settlement only involves the difference in values.
Thursday, December 4, 2008
== T of Forex Dictionary ==
T-Bill
see Treasury Bill.
Tagesgeld
German term for money lent until the following day and automatically repaid on the day. Taegliches geld automatically rolls over.
Talking up
Statements made normally by the central bank or government minister designed to bolster market sentiment with respect to the currency.
Tail
(1) In US Treasury cash auctions, refers to the differences between the average " issue price" and the "stop out price". (2) In the repo market, a dealer establishes a tail when it deliberately makes the reverse repo for longer than the repo in the hope that the interest rates will fall, lowering the cost of the remaining part of the reverse repo.
Tan Book
An economic report prepared by the Federal Reserve for FOMC meetings.
Tap
UK term for a supply of Government stock available for sale through the Government broker at a stated price.
Tau
Expresses the price change of a option for a percentage change in the implied volatility.
Technical Analysis
Is concerned with past price and volume trends- often with the help of chart analysis- in a market, in order to be able to make forecasts about future price developments of the commodity being traded.
Technical Correction
An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Temporal Accounting
Method of determining accounting exposure which translates all balance sheet items at the current rate of exchange, not the one at the time the cost was incurred.
Tender
(1) a formal offer to supply or purchase goods or services. (2) In the UK the term for the weekly Treasury Bill issue.
Tenor
Maturity or number of days to maturity normally on bills of exchange.
Terme
French for period.
Terme sec
French for outright in forward foreign exchange transaction.
Termingeld
German term for money market operations of over one month.
Theory of elasticities
A model of exchange rate determination stating that the exchange rate is simply the price of foreign exchange that maintains the BOP in equilibrium. The degree to which the exchange rate responds to a change in the trade balance depends entirely on the elasticity of demand to a change in price.
Terms of Trade
The ratio between export and import price indices.
Theta
A measure of the sensitivity of the price of an option to a change in its time to expiry.
Thin market
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
Threshold of divergence
A safety feature for the EMS that creates an emergency exit for currencies that become the singular focus of various adverse forces. The threshold of divergence indicates when the specific country with the pressured currency should take additional steps other than simple central bank intervention in the foreign exchange markets.
Thursday/Friday Dollars
A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
TIBOR
Tokyo Inter-bank Offered Rate.
Tick
A minimum change in price, up or down.
Ticket
See Deal Slip.
Tier One
A measure of a banks financial strength used by the BIS being the shareholders' equity available to cover actual or potential irredeemable and non-cumulative preference shares. It excludes hybrid forms of capital such as fixed term stock, goodwill, and revaluation reserves. BIS has a minimum requirement of 4% on risk weighted assets.
Tight Money
A condition where there is a shortage of credit as a result of monetary policy restricting the supply of credit normally through raising interest rates.
TIFFE
Tokio International Financial Futures Exchange.
Time decay
The decline in the time value of an option as the expiry approaches.
Time deposit
Interest bearing deposits at a savings institution that has a specific maturity.
Time value
That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.
Today/Tomorrow
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Tombstone
Colloquial term for announcement in a publication that a loan or bond has been arranged.
Tomorrow next (Tom next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
Trade date
The date on which a trade occurs.
Trade deficit/Surplus
The difference between the value of imports and exports. Often only reported in visible trade terms.
Trade weighted
Exchange rate The changes in the exchange rate against a trade weighted basket including the currencies of the county's principal trading partners.
Traded options
Transferable options with the right to buy and sell a standardized amount of a currency at a fixed price within a specified period.
Tradeable amount
Smallest transaction size acceptable.
Trade Ticket
See deal ticket.
Transaction date
The date on which a trade occurs.
Tranche
A portion. Specifically used for borrowings from the IMF.
Transaction
The buying or selling of securities resulting from the execution of an order.
Transaction exposure
Potential profit and loss generated by current foreign exchange transactions.
Translation exposure
The risk of change of the consolidated corporate earnings as a result of past volatility in the base currency.
Translation loss / profit
The calculation of loss or profit resulting from the valuation of foreign assets and liabilities for balance sheet purposes, when consolidating into the base currency.
Treasury bills
Short-term obligations of a Government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date. In the UK they are normally for 91 days, and are offered at weekly tenders. In the US they are auctioned.
Treasury bonds
Government obligations with maturities of ten years or more.
Treasury notes
Government obligations with maturities more than one year but less than ten years.
Treasury stock
Previously issued stock that has been repurchased by, or donated to, or otherwise are acquired by the issuing firm. Treasury stocks pay no dividends and have no voting privileges.
Treaty of Rome
Founding treaty of the EU, most recently modified by the Maastricht Treaty. Troc, troquer French FX term for swap.
Turnover
The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.
Two Tier market
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa. Two- Way quotation When a dealer quotes both buying and selling rates for foreign exchange transactions.
see Treasury Bill.
Tagesgeld
German term for money lent until the following day and automatically repaid on the day. Taegliches geld automatically rolls over.
Talking up
Statements made normally by the central bank or government minister designed to bolster market sentiment with respect to the currency.
Tail
(1) In US Treasury cash auctions, refers to the differences between the average " issue price" and the "stop out price". (2) In the repo market, a dealer establishes a tail when it deliberately makes the reverse repo for longer than the repo in the hope that the interest rates will fall, lowering the cost of the remaining part of the reverse repo.
Tan Book
An economic report prepared by the Federal Reserve for FOMC meetings.
Tap
UK term for a supply of Government stock available for sale through the Government broker at a stated price.
Tau
Expresses the price change of a option for a percentage change in the implied volatility.
Technical Analysis
Is concerned with past price and volume trends- often with the help of chart analysis- in a market, in order to be able to make forecasts about future price developments of the commodity being traded.
Technical Correction
An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Temporal Accounting
Method of determining accounting exposure which translates all balance sheet items at the current rate of exchange, not the one at the time the cost was incurred.
Tender
(1) a formal offer to supply or purchase goods or services. (2) In the UK the term for the weekly Treasury Bill issue.
Tenor
Maturity or number of days to maturity normally on bills of exchange.
Terme
French for period.
Terme sec
French for outright in forward foreign exchange transaction.
Termingeld
German term for money market operations of over one month.
Theory of elasticities
A model of exchange rate determination stating that the exchange rate is simply the price of foreign exchange that maintains the BOP in equilibrium. The degree to which the exchange rate responds to a change in the trade balance depends entirely on the elasticity of demand to a change in price.
Terms of Trade
The ratio between export and import price indices.
Theta
A measure of the sensitivity of the price of an option to a change in its time to expiry.
Thin market
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
Threshold of divergence
A safety feature for the EMS that creates an emergency exit for currencies that become the singular focus of various adverse forces. The threshold of divergence indicates when the specific country with the pressured currency should take additional steps other than simple central bank intervention in the foreign exchange markets.
Thursday/Friday Dollars
A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
TIBOR
Tokyo Inter-bank Offered Rate.
Tick
A minimum change in price, up or down.
Ticket
See Deal Slip.
Tier One
A measure of a banks financial strength used by the BIS being the shareholders' equity available to cover actual or potential irredeemable and non-cumulative preference shares. It excludes hybrid forms of capital such as fixed term stock, goodwill, and revaluation reserves. BIS has a minimum requirement of 4% on risk weighted assets.
Tight Money
A condition where there is a shortage of credit as a result of monetary policy restricting the supply of credit normally through raising interest rates.
TIFFE
Tokio International Financial Futures Exchange.
Time decay
The decline in the time value of an option as the expiry approaches.
Time deposit
Interest bearing deposits at a savings institution that has a specific maturity.
Time value
That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.
Today/Tomorrow
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Tombstone
Colloquial term for announcement in a publication that a loan or bond has been arranged.
Tomorrow next (Tom next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
Trade date
The date on which a trade occurs.
Trade deficit/Surplus
The difference between the value of imports and exports. Often only reported in visible trade terms.
Trade weighted
Exchange rate The changes in the exchange rate against a trade weighted basket including the currencies of the county's principal trading partners.
Traded options
Transferable options with the right to buy and sell a standardized amount of a currency at a fixed price within a specified period.
Tradeable amount
Smallest transaction size acceptable.
Trade Ticket
See deal ticket.
Transaction date
The date on which a trade occurs.
Tranche
A portion. Specifically used for borrowings from the IMF.
Transaction
The buying or selling of securities resulting from the execution of an order.
Transaction exposure
Potential profit and loss generated by current foreign exchange transactions.
Translation exposure
The risk of change of the consolidated corporate earnings as a result of past volatility in the base currency.
Translation loss / profit
The calculation of loss or profit resulting from the valuation of foreign assets and liabilities for balance sheet purposes, when consolidating into the base currency.
Treasury bills
Short-term obligations of a Government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date. In the UK they are normally for 91 days, and are offered at weekly tenders. In the US they are auctioned.
Treasury bonds
Government obligations with maturities of ten years or more.
Treasury notes
Government obligations with maturities more than one year but less than ten years.
Treasury stock
Previously issued stock that has been repurchased by, or donated to, or otherwise are acquired by the issuing firm. Treasury stocks pay no dividends and have no voting privileges.
Treaty of Rome
Founding treaty of the EU, most recently modified by the Maastricht Treaty. Troc, troquer French FX term for swap.
Turnover
The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.
Two Tier market
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa. Two- Way quotation When a dealer quotes both buying and selling rates for foreign exchange transactions.
== U of Forex Dictionary ==
Ultimo
Continental term for month or year end.
Uncovered
Another term for an open position.
Under reference (Order)
Before finalizing a transaction all the details should be submitted for approval to the order giver, who has the right to turn down the proposal.
Under-valuation
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
Undo
A colloquial term for reversing a transaction. e.g. a spot sale by means of a forward purchase or if done in error a spot purchase.
Uniform Price Auction
See Dutch Auction.
Unit of Account
A device designed to provide a consistent value with varying currencies. e.g. Euro and SDR.
Unload
Term for sale of assets or unwinding positions either to limit loss or to undermine other market participants positions.
Unmatched Book
If the average maturity of a banks liabilities is less than that of its assets, it said to be running an unmatched book.
Unwind
Selling of assets and or instruments to square a position.
Up tick
A transaction executed at a price greater than the previous transaction.
US Dollar index
Currency index of the United States dollar relative to a basket of foreign currencies. It is a weighted geometric mean of the dollar's value compared to the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD), Swedish Krona (SEK) and Swiss Franc (CHF).US Quote Exchange rate quotation on a reciprocal basis. See domestic quote.
Continental term for month or year end.
Uncovered
Another term for an open position.
Under reference (Order)
Before finalizing a transaction all the details should be submitted for approval to the order giver, who has the right to turn down the proposal.
Under-valuation
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
Undo
A colloquial term for reversing a transaction. e.g. a spot sale by means of a forward purchase or if done in error a spot purchase.
Uniform Price Auction
See Dutch Auction.
Unit of Account
A device designed to provide a consistent value with varying currencies. e.g. Euro and SDR.
Unload
Term for sale of assets or unwinding positions either to limit loss or to undermine other market participants positions.
Unmatched Book
If the average maturity of a banks liabilities is less than that of its assets, it said to be running an unmatched book.
Unwind
Selling of assets and or instruments to square a position.
Up tick
A transaction executed at a price greater than the previous transaction.
US Dollar index
Currency index of the United States dollar relative to a basket of foreign currencies. It is a weighted geometric mean of the dollar's value compared to the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD), Swedish Krona (SEK) and Swiss Franc (CHF).US Quote Exchange rate quotation on a reciprocal basis. See domestic quote.
== V of Forex Dictionary ==
Valeur Compensee
Payments are said to be " valeur compensee" when payment by one party in one centre and settlement by the other party in another centre takes place on the same day.
Value at risk
The expected loss from an adverse market movement, with a specified probability over a particular period of time.
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. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month If the one month date falls on a non-banking day in one of the centers then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not effect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also referred to as maturity date.
Value Spot
Normally settlement for two working days from today. See value date.
Value Today
Transaction executed for same day settlement; sometimes also referred to as "cash transaction".
Vanilla
A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. Compare with exotic options which have additional terms.
Variation margin
Profits or losses on open positions in futures and options contracts which are paid or collected daily.
Vega
Expresses the price change of an option for a one per cent change in the implied volatility.
Velocity of Money
The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period.
Vertical bear call spread
A compound option strategy of buying two options with a common expiration date; one option is a short call with a lower strike price and the other is a long call with a higher strike price. The seller's maximum profit is limited to the premium paid for the two options. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss consists of the dollar difference between the two strike prices, minus the total premium received.
Vertical bear put spread
A compound option strategy of buying two options with a common expiration date; one option is a long put with a higher strike price and the other is a short put with a lower strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the difference between the higher strike price and the total premium. The maximum loss is limited to the premium paid for the two options.
Vertical bear spread
An option combination whose theoretical value will decline to a predetermined maximum profit if the price of the underlying currency declines and whose maximum loss is also predetermined.
Vertical bull call spread
A compound option strategy of buying two options with a common expiration date; one option is a long call with a lower strike price and the other is a short call with a higher strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss is limited to the premium paid for the two options.
Vertical bull put spread
A compound option strategy of buying two options with a common expiration date; one option is a long put with a lower strike price and the other is a short put with a higher strike price. The buyer's maximum profit consists of the net premium paid for the two options (one paid, the other received). The break-even point is calculated as the difference between the higher strike price and the total premium received. The maximum loss is limited to the dollar difference between the two strike prices, minus the total premium received.
Vertical bull spread
An option combination whose theoretical value will rise to a predetermined maximum profit if the price of underlying currency rises, and whose maximum loss is also predetermined. Vertical spread A compound option that consists of two similar options (i.e., calls or puts), one being bought and the other sold, on the same currency and with the same expiration date, but with different strike prices.
VDU
Video display unit, sometimes a computer terminal or vendor screen.
VIBOR
Vienna Inter-bank Offered Rate.
Visible Trade
Trade in merchandise goods as compared with capital flows and invisible trade.
Volatility
A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes. (historic). Can be implied from futures pricing, implied volatility.
Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
Payments are said to be " valeur compensee" when payment by one party in one centre and settlement by the other party in another centre takes place on the same day.
Value at risk
The expected loss from an adverse market movement, with a specified probability over a particular period of time.
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. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month If the one month date falls on a non-banking day in one of the centers then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not effect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also referred to as maturity date.
Value Spot
Normally settlement for two working days from today. See value date.
Value Today
Transaction executed for same day settlement; sometimes also referred to as "cash transaction".
Vanilla
A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. Compare with exotic options which have additional terms.
Variation margin
Profits or losses on open positions in futures and options contracts which are paid or collected daily.
Vega
Expresses the price change of an option for a one per cent change in the implied volatility.
Velocity of Money
The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period.
Vertical bear call spread
A compound option strategy of buying two options with a common expiration date; one option is a short call with a lower strike price and the other is a long call with a higher strike price. The seller's maximum profit is limited to the premium paid for the two options. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss consists of the dollar difference between the two strike prices, minus the total premium received.
Vertical bear put spread
A compound option strategy of buying two options with a common expiration date; one option is a long put with a higher strike price and the other is a short put with a lower strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the difference between the higher strike price and the total premium. The maximum loss is limited to the premium paid for the two options.
Vertical bear spread
An option combination whose theoretical value will decline to a predetermined maximum profit if the price of the underlying currency declines and whose maximum loss is also predetermined.
Vertical bull call spread
A compound option strategy of buying two options with a common expiration date; one option is a long call with a lower strike price and the other is a short call with a higher strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss is limited to the premium paid for the two options.
Vertical bull put spread
A compound option strategy of buying two options with a common expiration date; one option is a long put with a lower strike price and the other is a short put with a higher strike price. The buyer's maximum profit consists of the net premium paid for the two options (one paid, the other received). The break-even point is calculated as the difference between the higher strike price and the total premium received. The maximum loss is limited to the dollar difference between the two strike prices, minus the total premium received.
Vertical bull spread
An option combination whose theoretical value will rise to a predetermined maximum profit if the price of underlying currency rises, and whose maximum loss is also predetermined. Vertical spread A compound option that consists of two similar options (i.e., calls or puts), one being bought and the other sold, on the same currency and with the same expiration date, but with different strike prices.
VDU
Video display unit, sometimes a computer terminal or vendor screen.
VIBOR
Vienna Inter-bank Offered Rate.
Visible Trade
Trade in merchandise goods as compared with capital flows and invisible trade.
Volatility
A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes. (historic). Can be implied from futures pricing, implied volatility.
Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
== W of Forex Dictionary ==
Wage drift
The difference between the basic wage and actual earnings including overtime and bonuses.
Wash trade
A matched deal which produces neither a gain nor a loss.
Whipsaw
Term for where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.
Wholesale Money
Money borrowed in large amounts from banks and institutions rather than from small investors.
Wholesale Price Index
It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.
Window-dressing
Where financial institutions or companies raise funds for specific reporting dates such as year ends to give the appearance of high liquidity.
Working balance
Discretionary element in the monetary reserves of a central bank.
Working day
A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centers in the case of a cross are open).
World Bank
A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.
Writer
The seller of a call or put option in connection with an opening position who receives a premium and who is required to perform if it is exercised.
The difference between the basic wage and actual earnings including overtime and bonuses.
Wash trade
A matched deal which produces neither a gain nor a loss.
Whipsaw
Term for where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.
Wholesale Money
Money borrowed in large amounts from banks and institutions rather than from small investors.
Wholesale Price Index
It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.
Window-dressing
Where financial institutions or companies raise funds for specific reporting dates such as year ends to give the appearance of high liquidity.
Working balance
Discretionary element in the monetary reserves of a central bank.
Working day
A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centers in the case of a cross are open).
World Bank
A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.
Writer
The seller of a call or put option in connection with an opening position who receives a premium and who is required to perform if it is exercised.
== Y of Forex Dictionary ==
Yard
Slang for billion, one thousand million.
Yield Curve
The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities.
Slang for billion, one thousand million.
Yield Curve
The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities.
== Z of Forex Dictionary ==
Z Certificate
Certificate issued by the Bank of England to "discount houses" in lieu of stock certificates to facilitate their dealing in the short dated gilt edge securities.
Zero coupon bond
A bond that pays no interest. The bond is initially offered at a discount to its redemption value.
Certificate issued by the Bank of England to "discount houses" in lieu of stock certificates to facilitate their dealing in the short dated gilt edge securities.
Zero coupon bond
A bond that pays no interest. The bond is initially offered at a discount to its redemption value.
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