The automated system for deposits and withdrawals of securities from the Depository Trust Company (DTC). |||This electronic method of clearing options speeds up the receipt of stock and cash, and thus accelerates the settlement process for investors.
One of the four types of compound options, this is a call option on an underlying put option. If the option owner exercises the call option, he or she receives a put option, which is an option that gives the owner the right but not the obligation to sell a specific asset at a set price within a defined time period. The value of a call on a put changes in inverse proportion to the stock price, i.e. it decreases as the stock price increases, and increases as the stock price decreases. Also known as a split-fee option. A call on a put will have therefore two strike prices and two expiration dates, one for the call option and the other for the underlying put option. As well, there are two option premiums involved; the initial premium is paid upfront for the call option; the additional premium is only paid if the call option is exercised and the option owner receives the put option. The premium in this case would generally be higher than if the option owner had only purchased the underlying put option to begin with. For example, consider a U.S. company that is bidding on a contract for a European project; if the company's bid is successful, it would receive say 10 million euros upon project completion in one year's time. The company is concerned about the exchange risk posed to it by the weaker euro if it wins the project. Buying a put option on 10 million euros expiring in one year would involve significant expense for a risk that is as yet uncertain (since the company is not sure that it would be awarded the bid). Therefore, one hedging strategy the company could use would be to buy, for example, a two-month call on a one-year put on the euro (contract amount of 10 million euros). The premium in this case would be significantly lower than it would be if it had instead purchased the one-year put option on the 10 million euros outright. On the two-month expiry date of the call option, the company has two alternatives to consider. If it has won the project contract or is in a winning position, and still desires to hedge its currency risk, it can exercise the call option and obtain the put option on 10 million euros. Note that the put option will now have ten months (i.e. 12 - 2 months) left to expiry. On the other hand, if the company does not win the contract, or no longer wishes to hedge currency risk, it can let the call option expire unexercised and walk away.
A financial designation, obtained through the Global Association of Risk Professionals (GARP) by achieving a passing score on the Financial Risk Manager (FRM) examination, having an active membership in GARP and by having two years of experience in financial risk management.The FRM program and exam, follows the major strategic disciplines of risk management: market risk, credit risk, operational risk and investment management. Recognized in over 90 countries across the globe, the FRM designation, is designed to measure a financial risk manager's ability to manage risk in a global environment. The FRM exam is challenging, having a pass rate of only 44.35% in 2007.
A trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival. The seller remains responsible for the goods until they are delivered. |||Contracts involving international transportation often contain abbreviated trade terms that describe matters. It includes details like the time and place of delivery, payment when the risk of loss shifts from the seller to the buyer, and who pays the costs of freight and insurance. The most commonly known trade terms are Incoterms. They are published by the International Chamber of Commerce (ICC). Incoterms are often identical in form to domestic terms (such as the American Uniform Commercial Code), but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms. It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term.
An indicator of the expected monthly change in house prices in the UK, published by the Royal Institution of Chartered Surveyors (RICS). The RICS house price balance is based on opinions about housing price trends of a sample size of surveyors based in the UK, covered by the RICS monthly Housing Market Survey. The house price balance figure is calculated as the proportion of surveyors reporting a rise in housing prices minus the proportion reporting a fall in prices. A positive net balance implies that more surveyors are seeing housing price increases than decreases, which would imply a robust housing market. A negative net balance implies that more surveyors are witnessing housing price decreases than increases, implying a fragile housing market. |||Consider the following example to calculate the house price balance figure. Assume that in a survey of 300 surveyors, 150 reported that prices went up, 50 reported no change and 100 reported that prices went down. Proportionally therefore, 50% reported higher prices and 33% reported lower prices, for a net house price balance of +17.
An exchange-traded fund (ETF) that is constructed by using various derivatives for the purpose of profiting from a decline in the value of an underlying benchmark. Investing in these ETFs is similar to holding various short positions, or using a combination of advanced investment strategies to profit from falling prices. Also known as a "Short ETF," or "Bear ETF". Watch: Understanding ETF One advantage is that these ETFs do not require the investor to hold a margin account as would be the case for investors looking to enter into short positions. There are several inverse ETFs that can be used to profit from declines in broad market indexes, such as the Russell 2000 or the Nasdaq 100. In addition, it is possible to buy inverse ETFs that focus on a specific sector, such as financials, energy or consumer staples. Most investors look to purchase inverse ETFs so that they can hedge their portfolios against falling prices.
An options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. Sometimes referred to as an interdelivery, intramarket, time or horizontal spread. An example of a calendar spread would be going long on a crude oil futures contract with delivery next month and going short on a crude oil futures contract whose delivery is in six months.
A slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors' financial health. Short-term focus by the media on a financial topic can create excitement that does little to help investors make smart, long-term financial decisions, and in many cases clouds investors' decision-making ability. Expanded media coverage, specifically the advent of 24-hour cable news networks and the internet and the tools it has provided the financial industry, has led to a large increase in financial porn. Examples of financial porn include constant advertisements of easy-to-use trading-strategy products that purport to turn minimal investments into small fortunes, media coverage of the latest and greatest sector trends and magazines with front pages that claim to have the next 10-must-own mutual funds of next year. Many of these products and ideas expose investors to great risks posed by both the movement of the market and the risk of fraud. The term was first coined by Emmy-winning Jane Bryant Quinn who is an American personal-finance writer.
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