1. An arrangement by which an organization accepts a customer’s financial assets and holds them on behalf of the customer at his or her discretion.
2. A statement summarizing the record of transactions in the form of credits, debits, accruals and adjustments that have occurred and have an affect on an asset, equity, liability or past, present or future revenue.
3. A relaying of happenings from one party to another.
Strenghtening of a currency as a result of higher market demand or a action of the oficial authorities.
Price channel where the arbitrage between cash and futures markets are not available.
Type of investor, which is tryeing to earn money from price diferences in the market, by simultaneous opposite contracts and making a non-risk profit. Arbitrageur for an example, is seeking price diferences between shares offered on one market, buys undervalued shares and sells the undervalued shares on other market, by this he makes a non-risk profit.
The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.
1. Sale Price. Offer by an investor, trader or dealer for the sale of a financial instrument. The offer contains both the price and quantity of the instrument.
2. The price at which market maker is willing to sell a financial instrument. Market makers shows and Buy price or the price at which it is willing to buy.
Basis Point – BPS
Unit of measurement equal to 1 / 100 or 1 percent, which is used to measure the change in the price of a financial instrument. Base points are typically used in calculating the return on fixed income instruments, interest rates and indices.
1. An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
2. The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.
3. A licensed real estate professional who typically represents the seller of a property. A broker’s duties may include: determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.
Investor who believes that the market, certain financial instruments or sector will rise.
financial market of a certain group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used in respect to the stock market, but really can be applied to anything that is traded, such as bonds, currencies, commodities, etc. Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue. Of course, no bull market can last forever, and sooner or later a bear market (in which prices fall) will come. It’s tough if not impossible to predict consistently when the trends in the market will change. Part of the difficulty is that psychological effects and speculation can sometimes play a large (if not dominant) role in the markets. The extreme on the high end is a stock-market bubble, and on the low end a crash.
The entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities – from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort
Another name for a technical analyst. This is a person who uses charts to identify patterns that can suggest future activity
Movement without clear direction.
To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.
A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security. Most major, full-service brokerages derive most of their profits from charging commissions on client transactions. Commissions vary widely from brokerage to brokerage
1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity exchange
1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend.
2. The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade
The possibility of a loss occurring due to the failure to meet contractual debt obligations
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.
The net balance of international payments of a country – export, import, support and unilateral transfers. Excludes capital flows.
stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day.
Opening and closing of positions within one trading session.
Data on which a deal is concluded.
A ticket that records all the terms, conditions and basic information of a trade agreement. A deal ticket is created after the transaction of shares, futures contracts or other derivatives. Also referred to as a “trading ticket”.
1. An individual or firm willing to buy or sell securities for their own account.
2. One who purchases goods or services for resale to consumers.
A situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports, or losses exceed profits.
An economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. The GDP deflator shows how much a change in the base year’s GDP relies upon changes in the price level. Also known as the “GDP implicit price deflator”.
Act by which the underlying commodity, security, cash or other financial instrument in a contract is delivered and received by the owner of the contract.
1. The final date by which the underlying commodity for a futures contract must be delivered in order for the terms of the contract to be fulfilled.
2. The maturity date of a currency forward contract.
1. Date of delivery. The last date to which the underlying commodity or other instrument by one futures contract, to be delivered to the owner of the contract, according to specific contract terms.
2. Date of maturity of forward exchange contract.
The risk that occurs as a result of conducting transactions between different time zones. More specifically, this refers to how the receiving party may not necessarily know whether the other party fulfilled its obligations until the next trading day.
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the “hedge ratio”.
Cash transaction by a person or institution to another.
Decline in the value of a currency against other currencies.
In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.
Intentional decreasing of the currency of a country against other currencies. In a system of fixed exchange rates, only a government decision (central bank) may change the official exchange rate fluctuations.
A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other words, it involves quoting in fixed units of foreign currency against variable amounts of the domestic currency.
The condition of the price of a bond that is lower than par. The discount equals the difference between the price paid for a security and the security’s par value.
Fed fund rate
The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
Federal Reserve system
The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States
Fill or Kill
An order to fill a transaction immediately and completely or not at all.
A theory describing the long-run relationship between inflation and interest rates.
Flag (Flat Square)
1. A price that is neither rising nor declining.
2. In forex, the condition of being neither long nor short in a particular currency. Also referred to as ‘being square’.
3. A bond that is trading without accrued interest.
A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst’s outlook or any other type of news release
A monetary system in which a country’s government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The gold standard was mainly used from 1875 to 1914 and also during the interwar years
A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market
Head and shoulders
A technical analysis term used to describe a chart formation in which a stock’s price:
1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract
Hit the bid
A buzzword used to describe an event where a broker agrees to sell at a bid price quoted by another broker. The broker is ultimately agreeing to sell a given stock at the highest price that another broker is willing to buy at.
In forex trading, a currency quote that is provided by a market maker to a trading party but that is not firm. In other words, when a market maker provides an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price to a trader up to the maximum quantity specified in the quote
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling
The percentage of the purchase price of securities (that can be purchased on margin) that the investor must pay for with his or her own cash or marginable securities. Also called the “initital margin requirement”.
A theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates
Interest rate swaps
An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap
A futures and options exchange in London, England that was modeled after the Chicago Board of Trade and the Chicago Mercantile Exchange. Similar to its American counterparts, this exchange used to deal with futures, options and commodities contracts. However, in 2002, LIFFE was acquired by Euronext as part of its strategy to increase its presence as a derivatives market. LIFFE has been renamed Euronext.liffe.
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled
An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads, and low volatility
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders.
2. Any transaction that offsets or closes out a long or short position
1.The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity.
2. The ability to convert an asset to cash quickly. Also known as “marketability”
The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%
1.Borrowed money that is used to purchase securities. This practice is referred to as “buying on margin”.
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product’s (or service’s) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.
A broker’s demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is sometimes called a “fed call” or “maintenance call”.
Mark to market
1.The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.
A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.
An order to buy or sell a stock immediately at the best available current price. A market order is sometimes referred to as an “unrestricted order”.
The day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away. Also referred to as “systematic risk”.
1. The length of time until the principal amount of a bond must be repaid.
2. The end of the life of a security.
The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank’s reserves. This measure of the money supply typically only includes the most liquid currencies. Also known as the “money base”.
The securities market dealing in short-term debt and monetary instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.
A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses wishing to make large value purchases of real estate without paying the entire value of the purchase up front. Mortgages are also known as liens against property, or claims on property.
An indicator frequently used in technical analysis showing the average value of a security’s price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance
New York Stock Exchange
A corporation, operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members’ seats on the Exchange, judging whether a potential applicant is qualified to be a specialist
1. To liquidate a futures position by entering an equivalent, but opposite, transaction which eliminates the delivery obligation.
2. To reduce an investor’s net position in an investment to zero, so that no further gains or losses will be experienced from that position
Located or based outside of one’s national boundaries
An order stipulating that if one part of the order is executed, then the other part is automatically canceled.
1. An unexecuted order that is still valid.
2. The start of trading on a securities exchange
An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed
A financial derivative which represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (excercise date).
The instruction, by a customer to a brokerage, for the purchase or sale of a security with specific conditions
Out of the money
1. For a call, when an option’s strike price is higher than the market price of the underlying asset.
2. For a put, when the strike price is below the market price of the underlying asset.
1. A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.
2. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree – usually on high volume – that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback.
1. A condition in which the price of an underlying asset has fallen sharply, and to a level below which its true value resides. This condition is usually a result of market overreaction or panic selling.
2. A situation in technical analysis where the price of an asset has fallen to such a degree – usually on high volume – that an oscillator has reached a lower bound. This is generally interpreted as a sign that the price of the asset is becoming undervalued and may represent a buying opportunity for investors.
1. A method of stabilizing a country’s currency by fixing its exchange rate to that of another country.
2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.
The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point – for most pairs this is the equivalent of 1/100th of one percent, or one basis point.
The financial risk that a country”s government will suddenly change its policies. Also known as “geopolitical risk
1.The total cost of an option.
2. The difference between the higher price paid for a fixed-income security and the security’s face amount at issue.
3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement’s coverage be required.
1. The payment of a debt obligation prior to its due date.
2. The excess payment over a scheduled debt repayment amount
1. The last price at which a security or commodity traded, meaning the most recent price on which a buyer and seller agreed and at which some amount of the asset was transacted.
2. The bid or ask quotes are the most current prices and quantities at which the shares can be bought or sold. The bid quote shows the price and quantity at which a current buyer is willing to purchase the shares, while the ask shows what a current participant is willing to sell the shares for. This is also known as an asset’s “quoted price”.
A period of sustained increases in the prices of stocks, bonds or indexes. This type of price movement can happen during either a bull or a bear market, when it is known as either a bull market rally or a bear market rally, respectively. However, a rally will generally follow a period of flat or declining prices.
Sharp price movement of an financial instrument
A stock’s low price and high price for a particular trading period, such as the close of a day’s trading, the opening of a day’s trading, a day, a month, or a year
The typical downward movement in the price of a security after the price had previously risen
Reaching a key level and then repulse away.
Repurchase Agreement (Repo)
A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement
Zone, that had proved back in time, like a hard to break.
A calculated adjustment to a country’s official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government (i.e. central bank) can alter the official value of the currency. Contrast to “devaluation”.
Market currency rates from a specific point in time that are used as a base value by currency traders to assess whether a profit or a loss has been realized for the day. In most cases, the revaluation rate is the closing rate for the previous trading day.
1.An individual or entity that exchanges any type of good or service in return for payment.
2. In the option market, the seller is the investor who collects a premium from the buyer in return for taking on the risk associated with holding a short position in an option. The seller of an option is also known as a “writer”.
1.The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller.
2. The payment date of benefits from a life insurance policy
The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. This type of risk can lead to principal risk
Short (Short sale)
A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal amount of shares at some point in the future. The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up. The profit that the investor receives is equal to the value of the sold borrowed shares less the cost of repurchasing the borrowed shares.
A market that has more potential sellers than buyers. A soft market can describe an entire industry, such as the retail market, or a specific asset, such as lumber. This is often referred to as a buyer’s market, as the purchasers hold much of the power in negotiations
The current price at which a particular commodity can be bought or sold at a specified time and place
1.The difference between the bid and the ask price of a security or asset.
2. An options position established by purchasing one option and selling another option of the same class but of a different series.
An intercom speaker often used on brokers’ trading desks in investment banks and stock brokerages. A squawk box allows a firm’s analysts and traders to communicate with the firm’s brokers.
1.In financial terms, a period of time when borrowing is difficult.
2. In general business terms, times when increasing costs cannot be passed onto consumers. The decrease in profits is said to be caused by a “squeeze” on profit margins
A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.
Stop loss order
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position. Also known as a “stop order” or “stop-market order”.
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity
A decrease in the market price of an asset or entire market after extensive price increases. A technical correction occurs even when there is no evidence that the increasing price trend should cease. It is often caused when investors temporarily slow down their purchases of securities, which commonly leads to a pullback toward a short-term support level
A measure of the rate of decline in the value of an option due to the passage of time. Theta can also be referred to as the time decay on the value of an option. If everything is held constant, then the option will lose value as time moves closer to the maturity of the option. Theta is part of the group of measures known as the “Greeks” (other measures include delta, gamma and vega) which are used in options pricing
A market with a low number of buyers and sellers. Since few transactions take place in a thin market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also typically result in a larger spread between the two quotes. Also known as a “narrow market
The minimum upward or downward movement in the price of a security
A computerized device that relays financial information to investors around the world, including the stock symbol, the latest price and the volume on securities as they are traded.
Something whose price is below its perceived value. opposite of overvalued.
Solid clear appreciation.
A transaction occurring at a price above the previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. This term is commonly used in reference to stocks, but it can also be extended to commodities and other securities
A future date used in determining the value of a product that fluctuates in price. Typically, you will see the use of value dates in determining the payment of products and accounts where there is a possibility for discrepancies due to differences in the timing of valuation. Such products include forward currency contracts, option contracts, and the interest payable or receivable on personal accounts. Also referred to as “valuta”.
A spot trade set to be settled after two days. This is the standard timeframe for spot trade settlement, and is designated as T+2. Spot trades can be settled overnight, called value tomorrow (T+1), and can also be settled for cash today (T+0)
A variable margin payment that is made by clearing members to their respective clearing houses based upon adverse price movements of the futures contracts that these members hold
1.A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
2. A variable in option-pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option’s expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used
The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction
The account a correspondent bank, usually U.S. or UK, holds on behalf of a foreign bank. Also known as a loro account
A condition where a security’s price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origins of term is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name