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Term Definition: # | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

"Blind broker" A mechanism for interdealer transactions that maintains the anonymity of both parties to the trade. The broker serves as the agent to the principals' transactions.
Back Term referring to the amount that the spot price exceeds the forward price.
Back Office The departments and processes related to the settlement of financial transactions.
Back to Back (1) Transaction where all the obligations and liabilities in one transaction are mirrored in a second transaction. (2) Transaction where a loan is made in one currency in one country against a loan in another country in another currency.
 
Backwardation Term referring to the amount that the spot price exceeds the forward price.
Bad days Refers to days delayed in the receipt of redemption proceeds because the maturity date falls on a weekend or a holiday.
Balance The amount held in a customer’s account calculated for closed transactions (currently opened positions are not included). If there are no open positions, the balance and equity will be equal. 
Balance of Payments AA systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either (i) balance of payments on "current account"; or (ii) the current account plus certain long-term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and/or decline in currency values. 
Balance of Trade The value of exports less imports. Invisibles are normally excluded, and is otherwise referred to as merchantile or physical trade. Figures can be quoted on FoB/ FaS, customs cleared, or Fob export, FoB export.
Band The range in which a currency is permitted to move. A system used in the ERM.
Bank line Line of credit granted by a bank to a customer, also known as a “line.” 
Bank notes Banknotes are paper issued by the central or issuing bank and are legal tender, but are not usually considered to be part of the FX market. However banknotes can be converted, in some counties, into FX. Bank notes are normally priced at a premium to the current spot rate for a currency.
Bank Rate The rate at which a central bank is prepared to lend money to its domestic banking system. 
Banking day see trading day and value date
Baron Adesi and Whaley An option model for valuing American options, an extention of Black Scholes.
Barrier Option A family of path dependent options whose pay-off pattern and survival to the expiration date depend not only on the final price of the underlying currency but also on whether or not the underlying currency breaks a predetermined price levelat any time during the life of the option. See Down and Out call/put, Down and in call/put, Up and out call/put, Up and in call/put.
Base currency The first currency in a currency pair. A currency against which the exchange rate is applied. Usually it stands first in the codes of currency rates. It shows how much the base currency is worth against the second one. For instance, if the USD/CHF rate equals 1.6215, then one USD is worth 1.6215 CHF.
Base Rate A term used in the UK for the rate used by banks to calculate the interest rate to borrowers. Top quality borrowers will pay a small amount over base.
Basis The difference between the cash price and futures price.
Basis The difference between the cash price and futures price. 
Basis convergence The process whereby the basis tends towards zero as the contract expiry approaches.
Basis point One per cent of one per cent.
Basis point One percent of one percent.
Basis price The price expressed in terns of yield maturity or annual rate of return.
Basis trading Taking opposite positions in the cash and futures market with the intention of profiting from favourable movements in the basis.
Basis trading Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis. 
Basket A group of currencies normally used to manage the exchange rate of a currency. Some times referred to as a unit of account.
Basket AA group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account. 
BBA British Banking Association
Bear Someone who believes that the prices/market will decline. 
Bear An investor who believes that prices are going to fall.
Bear call spread A spread designed to exploit falling exchange rates by purchasing a call option with a high exercise price and selling one with a low exercise price.
Bear Market A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market).
Bear market A prolonged period of generally falling prices
Bear put spread A spread designed to exploit falling exchange rates by purchasing a put option with a high exercise price and selling one with a low exercise price.
Bear Squeeze Any official action in the market or through regulations which makes it costly or difficult for bears to stay short of a suspect currency.
Bearer Refers to instruments in which ownership can transfer by mere physical delivery, requires no registration as does not have the name of the holder on its face. Certain stamp duty advantages arise from this type of instrument.
Benchmark A bond, frequently the most recent, sizeable issue, whose terms set a standard for the market. The benchmark bond usually has the greatest liquidity and the highest turnover, and is the most frequently quoted. In certain markets (e.g., Japan), there is a seasoning period during which the bond is not the benchmark. The term is similarly used in the commodities field particularly oil.
Best of two Option Gives the option holder a payoff based on the independent performance of two different instruments.
Best Order Firm order with no rate limit stipulated.
Beta A measure of relative volatility of the price of the instrument to the overall performance of the market
Bid The price at which a buyer has offered to purchase the currency or instrument.
Bid Price Bid is the market buying price, the price at which Delta Stock or the market is prepared to buy a specified currency in a foreign exchange contract or cross currency contract. At this price, the trader can sell foreign exchange. It is shown in the left side of the quotation, for example 1.4527- 1.4532
Big Figure Refers normally to the first three digits of an exchange rate that dealers treat as understood in quoting. For example a quote of "30/40" on dollar mark could indicates a price of 1.5530/40BIS Bank of International Settlement.
Big Figure Quote A currency rate without the last two digits. Examples USD/JPY rate of 122.05/122.10, the big figure is 122. EUR/USD rate of 0.9325/0.9330, the big figure is 0.93.
Bilateral Clearing A system used where foreign currency is limited. Payments are usually routed through the central banks, and sometimes require that the trade balance is equalled every year.
Binary Options A binary "call" (or "step up") is like a standard European call option except that the pay off at expiry is fixed at one unit of the counter currency, if the call expires in the money.
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. It is widely used in the currency markets
Book In a professional trading environment, a "book" is the summary of a trader’s or desk’s total positions.
Book The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.
Book entry form The issuer records bond ownership without use of bond certificates. This is usually a computerised system.
Booked The recording of a transaction outside the country where the transaction is itself negotiated.
Boris Slang for Russian trading
Box Option Options are purchased the gains/losses on which offset positions in the underlying currency.
Box Spread A combination of a horizontal, or calendar, call spread and a horizontal put spread. Both spreads have the same expiration dates on their long and short positions. A bear call spread with a bull put spread is a credit box. A bull call spread with a bear put spread is a debit box.
Bps Basis points
Brady Plan A plan conceived by Nicholas Brady US Treasury Secretary to reschedule and restructure third world debt.
Break A sudden or rapid fall in instrument pricing.
Break even point The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss or gain. In the case of a call option, the breakeven point is the exercise price plus the premium.
Break out In the options market, undoing a conversion or a reversal to restore the option buyer's original position.
Bretton Woods The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Bretton Woods Accord of 1944 AnAn agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and set the price of gold at 35 USD per ounce. The agreement lasted until 1971. 
Broad Money A broad definition of money supply including long term deposits and corporate lending.
Broken dates or period Deals that are undertaken for value dates that are not standard periods eg. 1 month. The standard periods are 1 week, 2 weeks, 1,2,3,6, and 12 months. Terms also used are odd dates, or cock dates, broken period or broken period.
Broker AnAn agent who handles investors' orders to buy and sell currency. For this service, a commission is charged which, depending on the broker and the amount of the transaction, may or may not be negotiated.
Broker An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.
Brokerage Commission charged by a broker.
Broker-dealer See Dealer.
BUBA Bundesbank, the reserve bank of Germany.
Bull Someone who believes that the prices/market will rise. 
Bull An investor who believes that prices are going to rise.
Bull (call or put) spread An option position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An option with a lower strike price is bought and one with a higher strike price is sold.
Bull Market AA market characterized by rising prices. 
Bull market A prolonged period of generally rising prices.
Bulldogs Sterling bonds issued in the UK by foreign institutions.
Bullet maturity A bond whose principal is paid only on the final maturity date.
Bullion A term for gold bars, not coin.
Bundesbank Central Bank of Germany.
Business Day Any day on which commercial banks are open for business in the principal financial centers of the countries where currencies are traded.
Butterfly spread (1) A futures butterfly spread is a spread trade in which multiple futures months are traded simultaneously at a differential. The trade basically consists of two futures spread transactions with either three or four different futures months at one differential. (2) An options butterfly spread is a combination of a bear and bull spread trade in which multiple options months and strike prices are traded simultaneously at a differential. The trade basically consists of two options spread transactions with either three or four different options months and strikes at one differential.
Buy- Back valuation The valuation of a forward exchange transaction by applying the current exchange rate that would apply to the remaining period of the transaction.
Buy in Market activity by an option writer when the writer holds insufficient assets to meet delivery upon expiration.
Buy-back see repurchase agreements
Buyer/taker The purchaser of an option, whether a call or put option. The buyer may also be referred to as the option holder. Option buyers receive the right, but not the obligation, to enter a futures/securities market position.
Buying Rate Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called the bid rate. 
Buying Rate Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Buying the spread To buy the nearby contract and simultaneously sell the deferred contract. Also referred to as a bull spread.

Term Definition: # | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

 

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