American Style Option
An American style option can be exercised at any time prior to expiry.
Appreciation
An asset, for example a currency, is said to appreciate if it rises in price.
Arbitrage
The purchase or sale of an instrument and the simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
Ask (Offer)
Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask prices are shown on the right side of a quote, e.g. EUR/USD 1.1745/50 denotes that one EUR can be bought for 1.1750 USD.
Asset Allocation
An investment practice that divides capital among different types of asset classes in order to achieve a return that is proportionate to the investor’s risk appetite and diversification requirements.
Aussie / AUD
Financial slang / symbol for the Australian Dollar (AUD).
Balance of Payments
In a simplistic sense, the Balance of Payments is the net difference between money transactions coming into the country and that leaving it over a set period. Persistent net transactions in could be supportive for that country’s currency, while persistent outflows are generally negative the currency.
Barrier/Option Barrier
A type of option which has a specified level which must not be broken in order for the option to be paid. This can lead the option writer to defend the price level so the option barrier is not broken.
Base Currency
The currency in which the operating results of the bank or institution are reported.
Basel III
The latest of the three Basel accords which regulate the global banking system, with particular focus of the base capital requirements banks have to hold.
Basket
A group of currencies (as opposed to one single currency) normally used to measure the exchange rate of another currency. See “Dollar Index,” for an example of a basket.
Basis Point
1 basis point is equivalent to 0.01% and is used to describe interest rate changes. For example, if the ECB increased interest rates to 1.50% from 1.25%, this would be an increase of 25 basis points.
Bearish
The term ‘bearish’ when applied to markets or economic data, implies a negative belief or sentiment. A data point missing market expectations may be considered ‘bearish’. A market ‘bear’ believes things are set to get worse and may sell his market. Bearish is a synonym for Bullish.
Bear Market
The generally accepted definition of a bear market is one that has fallen by 20% or more from the recent high.
Beneficiary
In deliverable Foreign Exchange, a beneficiary is simply the (future) recipient of any transactional proceeds. A beneficiary can be an individual or a business entity.
Bid
The opposite of the Ask. It is the market price for traders to sell currencies. The Bid Price is shown on the left side of a quote, e.g. EUR/USD 1.1745 / 50 denotes that one EUR can be sold for 1.1745 USD.
Bid-Offer Spread
The difference, in smallest units of price (or pips for FX markets) between a market’s best bid and best offer. If you are an ‘at market’ buyer, you buy at the offer price. As a ‘at market’ seller, you sell at the bid price.
Bid to Cover Ratio
A measure of demand for government debt that has been auctioned.
BIS
The Bank for International Settlements. The role of the body is to serve central banks in their pursuit of monetary and financial stability and foster international cooperation, acting as a bank for Central Banks globally.
BOC, The
The Bank of Canada. This is the Canadian central bank.
BOE, The
The Bank of England. This is the central bank of the UK, which sets its interest rates, manages other monetary policy and issues bank notes. Most Global central banks are based on the BOE model.
BOJ, The
The Bank of Japan. This is central bank of Japan.
Bullish
The term ‘bullish’ when applied to markets or economic data, implies a positive belief or sentiment. A data point beating market expectations may be considered ‘bullish’. A market ‘bull’ believes things are rosy and may buy his market. Bullish is a synonym for Bearish.
Bull Market
The generally accepted definition of a bull market is one that has risen by 20% or more from the recent low.
Business Confidence
This is a survey of the current business conditions in a country, usually carried out by asking business managers what they think about the prospects for the company and country. Increases in Business Confidence readings show more optimism relative to the previous reading, while decreases indicate the reverse.
BRICS
An acronym that refers to the countries of Brazil, Russia, India, China and South Africa which are considered to be at a similar stage of newly advanced economic development.
BRL
The symbol for the Brazilian Real.
Broker
An agent who executes orders to buy and sell currencies and related instruments earning commission or the bid-offer spread in the process. 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.
Buba
Nickname of the German Bundesbank, the German central bank.
Bund
The benchmark German 10-year government bond. The term usually refers to the futures contract based on the underlying 10-year government bond.
Cable
The nickname given for the GBP/USD cross rate. The FX pair got the name from the early telecommunication cable that was laid across the Atlantic between the UK and the US, in order to relay stock and FX prices to financial exchanges.
CAC/CAC40
The primary French stock exchange.
Call
A term related specifically to options, wherein Call refers to the right but not the obligation to buy an underlying asset.
Cash Market
Market place where financial instruments are traded and delivered for immediately delivery. Also called Spot market.
CBOT
The Chicago Board of Trade is the world’s oldest futures and options exchange which later merged with the CME and now acts as a market maker.
Central Bank
The generic name given to a country’s primary monetary authority. For example, the Bank of England.
Clearer
Market term for a large bank or financial institution that clears trades. The term originates from those banks that clear cheques.
CME
The Chicago Mercantile Exchange, one of the largest futures and options exchanges in the world.
Commodity
Physical substances such as Gold and Oil, traded in spot or derivative markets.
Commodity Currencies / Dollars
These are currencies whose economies are heavily tied into the fortunes of commodity prices. Canada, for example, is a significant exporter of oil (along with other commodities). As an example, the Canadian Dollar (CAD) tends to rally if WTI Crude rises. Another example: a rise in Gold is usually good news for the Australian Dollar (AUD), as Australia is the 3rd largest Gold exporter in the world.
Confederation of British Industry (CBI)
An influential lobbying organisation for UK business on national and international issues.
Consumer Confidence
Consumer confidence data are derived by conducting a survey of a country’s consumers, in particular reference to their saving and spending plans. This reading is used to assess the potential short-term performance of an economy.
Consumer Price Index (CPI) & Core CPI
A consumer price index measures the change of a general basket of goods consumed by a typical consumer. The reading is taken at consistent intervals to help assess the current level of inflation experienced by the economy’s typical consumer. Core CPI measures the same index but with food and energy taken out. The latter are more volatile, potentially creating a distorted view of inflation of the economy at the time of the reading.
Contagion
When a negative shock to a financial sector/system is transmitted to other healthier more sustainable sectors in an economy or country.
Continuing Claims
This US-centric data point counts the people who are already currently receiving benefits due to being unemployed.
Corporate
A national or multinational corporation. Large corporations use the FX markets to hedge themselves against currency risk. For example, a company may have high revenues in USD’s but high costs in EUR’s.
Coupon
The interest rate payable to the holder of a bond by the issuer.
Crawling Peg
A type of currency peg which is adjusted periodically.
Cross Rate
An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies referenced to a third, usually the US Dollar.
Currency Risk
The possibility that currency depreciation will negatively affect the value of assets currently held, especially those denominated in a foreign currency.
Custodial Buyers
A Global Custodian processes cross-border securities trades, keeps financial assets safe and services the associated portfolios.
DAX
The primary German stock index.
Deflation
Deflation means a period of time where the money in circulation in an economy falls. Price deflation is when the costs of products and services in an economy fall from the perspective of the consumer.
Depreciation
An asset, for example a currency is said to depreciate when it falls in price.
Derivative
A financial product whose value is derived from an underlying asset, for example Futures or Options.
DKK
Symbol for the Danish Krona.
Dollar Index
This is a basket of currencies that are used to measure the overall performance of the US Dollar. The main components are:
- EUR (57.6%)
- JPY (13.6%)
- GBP (11.9%)
- CAD (9.1%)
- SEK (4.2%)
- CHF (3.6%)
Double-No-Touch (DNT)
A type of option which pre-defines a range for a specified time. For example, the owner of a 1.3000-1.3500 DNT would be paid if prices do not trade outside this range until expiry.
Dove/Dovish
Dovish refers to an economic outlook which generally supports lower interest rates. Doves take the position that lower interest rates are preferable with specific regard to inflation.
Dow Jones Industrial Average
A US stock index which includes the 30 largest blue-chip companies.
Downtick
A decrease in price(s).
EUREX
A major global derivatives exchange.
Euribor
The interest rate for inter-bank lending in EUR between the primary banks in the Eurozone.
Euro (EUR)
The European single currency.
European Central Bank (ECB)
The central bank created to manage monetary policy for the Eurozone. It represents the EU member countries.
Eurogroup
The term for the meetings held by the group of finance ministers that represent the EU member countries.
European Financial Stability Fund (EFSF)
The temporary instrument was set up and funded by the European Union member countries to provide financial assistance to member countries that required it. It was replaced by the permanent European Stability Mechanism in June 2013.
European Stability Mechanism (ESM)
European Union agency that provides financial assistance, in the form of loans, to Eurozone countries or as new capital to banks in difficulty. It is a permanent agency, based in Luxembourg, and has replaced the temporary European Financial Stability Facility (EFSF).
European Style Option
A European option can only be exercised on the expiry date.
European Union (EU)
The economic association of over a dozen European countries which seek to create a unified, barrier-free market for products, services and labour movement throughout the continent, as well as a common currency with a unified authority over that currency.
EUROSTOXX 50
A stock index containing the fifty largest European companies by weighted market capitalisation.
Eurozone
The group of countries that use the EUR.
Exotic Currency
A less broadly traded currency.
Expiry Date
The last day on which the holder of an option can exercise his right to buy or sell the underlying security.
Fade/Fading
A trading method whereby a trader places a trade after an initial spike in prices, usually after a data release, attempting to profit from the retracement of the initial move.
Fast Money
A market term for short term traders/scalpers who only hold a position for a very short period of time.
Federal Deposit Insurance Corporation (FDIC)
An organisation that preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and by limiting the effect on the financial system when a bank fails.
Federal Reserve (FED)
The US Federal Reserve is the US central banking system, which is responsible for monetary policy, maximising long-term employment and setting long-term interest rates. Twelve regional Federal Reserve Banks contribute to the decision making of the Fed.
FED’s Beige Book
Each Federal Reserve Bank gathers information of the general condition of the US economy. The Beige Book summarises these findings by district and sector.
Fibonacci Retracements
A form of technical analysis which uses the Fibonacci sequence as a basis for calculating support/resistance levels.
Fiscal Policy
Government budgetary policy, especially within taxation and borrowing.
Flat/Square
Where a client has not traded in that currency or where an earlier deal is reversed, thereby creating a neutral (flat) position.
Float
A currency can have its price fully determined by market forces, known as ‘free-floating’ or its price can be controlled by a government/central bank, known as a ‘managed float’.
FOMC (Federal Open Market Committee)
The Federal Open Market Committee is the branch of the Federal Reserve that is responsible for monetary policy. The Committee is composed of board of Governors, comprised of seven members and five Reserve Bank presidents.
Forward
A forward contract is the obligation to buy or sell and asset at a specified price and date. Forwards are typically used to hedge future FX exposure. As an example, if a corporate entity knows it will receive a set amount of Euros in 30 days’ time, it may enter into a forward agreement that will lock in a price now rather than risk the future payment to be worth less due to adverse currency movements. Forwards are often used when markets are volatile, or when a significant event (such as an election) is due to occur between now and the payment date. Of course, markets can move against the purchaser of a forward, who will still be obliged to fulfil his obligation to the contract.
FTSE/FTSE 100
The primary UK stock exchange.
Fundamental Analysis
Fundamental analysis focuses on key underlying economic and political factors to determine the direction of an instrument’s value.
G7
A group comprised of Canada, France, Germany, Italy, Japan, UK, and USA whose leaders meet since 1986 one or more times every year to coordinate economic and monetary policies.
G20
A group comprised of the finance ministers and central bank governors of systemically important industrialised and developing economies to discuss key issues in the global economy.
GDP (Gross Domestic Product)
The Gross Domestic Product is the monetary value of all the finished goods and services produced within a county’s borders, usually over a 1 year period. The metric is also used on a quarterly basis.
Gilt
Market term for government bonds issued by the UK government.
GNP (Gross National Product)
The Gross National Product is a broad measure of a country’s economic activity, usually over a 1 year period.
Government Bond
A debt instrument issued by a government, through the Treasury or Debt Management Office, for a period of time with the purpose of raising capital by borrowing. a bond is a promise to repay the principal along with interest (coupons) on a specified date.
Greenback
The nickname given to the US Dollar, mainly because 1-dollar bills were printed in green on the back!
Haircut
In lending the haircut refers to the difference between the value of a loan and the value of the collateral used to secure it.
Handle
A market term for the larger denominations when quoting a financial instruments price. For example, if EUR/USD moves in price from 1.4498 to 1.4502, it has traded with a ‘1.44 handle’ then a ‘1.45 handle’.
Hard Currency
A currency that investors have confidence in.
Hawk/Hawkish
Hawkish refers to an economic outlook which generally supports higher interest rates. Hawks take the position that higher interest rates are preferable with specific regard to inflation.
Hedge Fund
A specific type of investment vehicle that explicitly pursues absolute returns on underlying investments through various trading strategies.
Hedging
The act of protecting against adverse movements in markets in which one has an economic interest. See “Forward” or “Option” for examples of hedging.
Home Price Index
A house price index measures the changes in the value of single-family home across a region or nation. A rise usually adds equity to existing homeowners and contribute to an economy’s feel-good factor.
Housing Starts
Housing Starts data show the amount of new, privately owned housing units that have started construction over the reference period. A rise in starts often indicates a long-term confidence in the economy’s housing markets.
IBAN (International Bank Account Number)
If you have a bank account, you have an IBAN number. It is an internationally agreed standard for designating your bank account on the Global level. The IBAN number consists of 34 alphanumeric characters that designate who your bank is, in what country, with what sort code and bank account number. You will need your IBAN number when receiving money from overseas. For more, see “Virtual IBAN”.
IFO (Information and Forschung)
An important German economic research institute and think tank which produces economic indicators of the German economy.
Illiquid Market
A market or currency pair which has a low volume of buy/sell orders and prices can therefore move a disproportionally large amount.
Import / Export Price Index
These two indices measure the prices of imports and exports in an economy. To create the import index, the cost of the goods produced outside, but consumed inside an economy are compiled. For exports, the cost of good produced inside, but consumed outside an economy are used.
Inflation
Inflation means a period of time where the money in circulation in an economy rises. Price inflation is when the costs of products and services in an economy rise from the perspective of the consumer.
Initial Claims
This US-centric data point measures the amount of individuals registering for benefits immediately following redundancy or loss of job, in the most recent period.
Initial Public Offering (IPO)
The first sale of stock by a formerly private company. Following which they become publicly listed on a stock exchange.
INR
The symbol for the Indian Rupee.
Institute of International Finance (IIF)
The global association of financial institutions. It supports the financial industry in managing risks, developing best practices & standards; and in advocating regulatory, financial, and economic policies.
Interbank Market
The market in which banks/financial institutions trade with each other. The term refers to short-term money or foreign exchange markets that are only accessible to banks or financial institutions.
Interest Rate / Interest Rate Differential
An interest rate is simply a proportion of a body of money (loan or savings) that is charged or received as interest to the borrower, expressed as a percentage. An Interest Rate Differential is the difference in interest rates between two assets, economies, or similar. Interest differentials are key determinants to currency cross-rates.
International Monetary Fund (IMF)
An organization of 187 countries, working to foster global monetary co-operation, secure financial stability, promote high employment and sustainable economic growth. Has moved increasingly towards providing monetary/fiscal policy advice and loans to countries undergoing crisis.
Intervention
A policy tool in which a national central bank takes an active participatory role in influencing the country’s currency exchange rate.
ISM (Institute for Supply Management)
An American organisation comprised of supply management professionals mainly from the manufacturing sector which produces several American economic indicators.
JGB
Japanese government bonds.
Kampo
The investment arm of the Japanese postal savings organisation which focuses on overseas investments and is active in the forex markets.
Kiwi (NZD)
The New Zealand Dollar.
LIBOR
Short for the London Inter-Bank Offered Rate. This rate is fixed daily by the British Bankers’ Association and is the interest rate for inter-bank lending.
LIFFE (London International Financial Futures Exchange)
An association composed of the three largest future exchanges in the UK.
Limit Order
A limit order is a standing order left with your broker or in the market to transact a certain buying or selling demand at a certain price. If the market trades through the limit order then the order will trigger, ‘filling’ the order at that price.
Long
A trader who is long a market, effectively owns a part of that market, and expects the market to go up. If the market is higher than his entry price (the price at which he is ‘long’) then his trade will show a profit, and vice versa.
Loonie
Financial slang for the Canadian Dollar (CAD). The Canadian 1-dollar coin is called the loonie, as the coin bears an image of the common loon, an indigenous bird to Canada.
LSE
The London Stock Exchange.
Manufacturing PMI
The PMI is an indicator of the economic health of a country’s manufacturing sector. Typically, this is a component index measuring new orders, inventories, production, supplier deliveries and the cost of employment.
Margin
The required initial deposit of collateral to enter into a position or foreign exchange trade. This is held as a deposit on any running contract.
Margin Call
A demand for additional funds to cover positions.
Market Marker
A firm that stands ready to buy and sell a particular asset class on a regular and continuous basis at a publicly quoted price in order to enhance liquidity, used particularly in stocks of companies.
Market Order
An order for immediate execution at the best available price.
Maturity
Associated with fixed income markets, referring to the date at which principal or redemption payments have to be repaid to the counterparty.
Models / Algos
Automated trading systems which use quantitative algorithms to buy/sell. Generally used by top end Hedge funds or large institutions.
Monetary Policy
The actions of a central bank, currency board or other regulatory committee that determines the size and rate of growth of the money supply, which in turn affects interest rates.
Money Supply
The total amount of money in circulation in a country. There are 5 levels of Money Supply:
- M0 and M1, the narrowest definitions of money supply, include coins, notes and other easily convertible cash equivalents.
- M2 includes the above plus short term deposits in banks and 24-hour money market funds
- M3 includes the above plus longer-term deposits and 24hr+ money market funds
- M4 includes pretty much everything!
Month End Rebalance
Fixings related to the adjustments that international portfolio managers need to make to their currency hedges based upon the performance other asset classes they hold positions in. These portfolio managers usually reweigh their portfolios at the end of each month if moves were larger than anticipated.
Moving Average (MA)
A basic form of technical analysis which displays the average price of a security for a set period of time.
MPC (Monetary Policy Committee)
The 9-member committee from the Bank of England sets UK monetary policy. It holds regular meetings at which the UK interest rate is reviewed, with minutes of the meeting released to explain the views of the committee.
NASDAQ
An American stock index which traditionally lists technology companies.
Net Proceeds
The amount a beneficiary will receive net of all fees, commissions and costs incurred in a transaction.
Nikkei 225
The primary Japanese index.
NOK
Symbol for the Norwegian Krone.
Non-Farm Payroll (NFP)
This data point is the most significant and market-moving economic data point on the monthly calendar. This reading is usually given on the first Friday of every month and reflects the total number of paid workers in the system, excluding government jobs, private household jobs, farm employees and jobs in non-profit organisations.
NYSE
The New York Stock Exchange.
Option
This is another hedging tool, given the option taker a right – but not an obligation – to transact in a market at a certain price. This right usually costs a premium (similar to a one-off insurance premium) which will rise or fall in price depending on the value of the right. As an example, a business might buy a long-term option which allows it to buy 100,000 Euro at 1.15 at some point in the future. If the Euro then rose in value to 1.30, then this right is more valuable than it was when it was bought. The new value of the option would offset the – in this case detrimental – rise in the value by the same amount, effectively hedging the transaction. An option to buy is called a ‘Call,’ an option to sell is called a ‘Put’.
Parity
When a currency pair trades at 1.0000 or in other words when two currencies are worth the same.
Peg
An exchange rate for a currency where the government has decided to link the value to another currency or to some valuable commodity like gold.
People’s Bank of China (PBOC)
The Chinese central bank.
Pip(s)
The smallest price movement in an exchange rate. For example, in GBPEUR, the difference between 1.1732 and 1.1733 is one pip.
Profit Taking
The unwinding of a position to realise profits.
Put
A term related specifically to options, wherein Put refers to the right but not the obligation to sell an underlying asset.
OPEC
OPEC stands for the Organisation of the Petroleum Exporting Countries – an intergovernmental organisation of oil exporting nations, founded in 1960. OPEC accounts for 43% of Global Oil output and the vast majority of proven reserves. It is operated in the same manner as a cartel and is often called as such.
Open Order
Buy or sell order that does not expire until cancelled.
Operation Twist
A method of lowering interest rates originally used by the US Federal Reserve in the 1960’s. In practise the Fed sells short term duration securities and buys long term maturities in order to lower the interest rate on the 10-year note in particular which is the benchmark for other rates such as mortgages.
Quantitative Easing (QE)
A method of stimulating the economy by a central bank, whereby it buys assets, typically government bonds, to inject extra liquidity into the economy.
Range
The difference between the highest and lowest price of a traded asset class recorded during a specified period.
Rating Agency
Independent agencies such as Moody’s, Standard & Poor’s and Fitch which assess the credit quality and likelihood of default of an issuer of debt and produce a rating to reflect this.
RBA
The Reserve Bank of Australia, the Australian central bank.
Real Money
A market term for institutional investors, typically large asset managers such as pension funds or money market funds.
Recession
A general slowdown in economic activity over a sustained period of time. Technically defined as two consecutive quarters of falling GDP.
Remittance
A sum of money sent in payment or gift by a person or entity.
Remitter
A person or entity who sends a payment.
REPO
Shorthand for ‘Repurchase Operation’ which is a contract in which a seller of securities agrees to buy them back at a specified time.
Reserve Currency
A currency held by a central bank on a permanent basis as a store of international liquidity; these are normally the USD, EUR and GBP.
Resistance
Resistance is a term used in technical analysis to describe a price level where selling momentum for the asset exceeds the buying momentum, forming a ceiling that blocks price movements in the upward direction.
Retail Sales
Retail Sales is a measure of the sales of retail goods over a period of time. Usually, samples are taken to then derive a nationwide picture. Retail sales are an indicator of the willingness of the consumer to buy goods.
RUB
Symbol for the Russian Rouble.
S&P 500
A leading American stock index which lists the top 500 companies from the NYSE and NASDAQ.
Safe Haven
A safe haven, as the phrase implies, is a place to escape from adverse conditions. In financial markets, safe havens are seen as instruments that tend to retain their value when market conditions are volatile. Traditionally, these include Gold, the Japanese Yen and Bond instruments like US Treasuries. After the Global trend of Quantitative Easing changed the financial rulebook, the perceptions of the concept of safe havens is changing.
Scalping/Scalper
A trading style of holding a position for very short period of time, usually measured in seconds, and exiting after a small change in profitable price direction.
SEK
Symbol for the Swedish Krona.
Semi-Official Name
Large institutional investors which sometimes invest in forex markets at the behest of a government.
Short
A trader who is short a market, has effectively sold a market and must buy it back in future. He expects the market to fall, at which point buying back what he sold earlier would cost less. If the market is lower than his entry price (the price at which he is ‘short’) then his trade will show a profit, and vice versa.
Short Covering/Short Squeeze
The purchase of an instrument to close out a short position. To close a position, an investor purchases the same number of assets that were sold short.
SNB
The Swiss National Bank, the Swiss central bank.
Sovereign Rating
A measure of a country’s creditworthiness with particular focus on the ratings given by the big three rating’s agencies, Standard & Poor’s, Moody’s and Fitch.
Sovereign Wealth Fund
A fund created by a country which has large foreign exchange reserves in order to manage those reserves. Typically, the source of this wealth is from commodities such as Crude Oil. For example, the China Investment Corporation, or Norges in Norway.
Spot
The current market price of a security that is traded for immediate delivery.
Spread
The difference between the bid and ask price of a currency.
Stagflation
Stagflation is a combination of slowing or negative growth (usually due to unemployment) and inflation. This effectively means that prices will rise despite wages falling and higher unemployment.
STIRS
Short-Term Interest Rate futures which are based on the various inter-bank lending rates such as Euribor.
Stop Order
An order to buy or to sell a currency when the currency’s price reaches or passes a specified level.
Stop Loss Order
A standing order in a market to protect an investor or trader from excess losses. For instance, if a trader is long a market, he might place a stop 5% below his entry price, meaning his usual worst case scenario for the trade would be to lose 5% on his trade. A Stop Loss can be left in the market or with a broker and will be working at all times, which is especially important for 24 hour markets like FX and futures.
Straddle
Options strategy that allows the holder to profit based on how much the price of the underlying security moves, regardless of the direction of price movement.
Strike Price
In options trading this is the fixed price at which the holder of the option is entitled to buy or sell.
Support
The opposite of resistance. A term used in technical analysis to describe a price level where buying momentum for the asset exceeds the selling momentum, forming a floor that blocks future price movements in the downward direction.
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. Swapping is similar to borrowing one currency and lending another for the same period.
Strike Price
In options trading this is the fixed price at which the holder of the option is entitled to buy or sell.
Swissy (CHF)
The Swiss Franc.
Systematically Important Financial Institution (SIFI)
A financial institution whose failure may pose systemic risks to the world economy.
T-Bill
Shorter term government debt issued at a discount from par value instead of having a coupon.
Tightening
When a central bank raises interest rates or otherwise conducts monetary policy in an attempt to reduce demand and curb inflation.
Toshin
Japanese investment funds which focus on investing in non-domestic assets and are active in the Forex markets.
TSLF (Term Securities Lending Facility)
A 28-day lending facility managed by the Federal Reserve to enhance liquidity and foster proper functioning of the financial markets. In practice, larger financial institutions can receive state guaranteed Treasury collateral from offered collateral such as credit card debt.
TARP (Troubled Asset Relief Program)
A programme started in October 2008 whereby the US Treasury bought illiquid assets from banks and other financial institutions, thus allowing them to stabilise their balance sheets.
TALF (Term Asset-Backed Securities Loan Facility)
A programme created by the US Fed to spur consumer credit lending. The program was announced on November 25th 2008, and under the TALF the Fed lent over USD 1tn.
Technical Analysis
A method of evaluating securities by analysing statistics generated by historical market activity. Charts and other tools are used to identify patterns that can suggest future activity.
Trade Date
The date on which a trade has been carried out in the market.
Trading Pit/Floor
The area of an exchange where trade is conducted in the old open outcry manner as opposed to electronically.
Troika
An investigative body created and comprised of officials from the EU, ECB & IMF which periodically evaluate Euro-zone countries involved in bailouts.
TRY
The symbol for the Turkish Lira.
Unconvertible Currency
A currency that cannot be exchanged for another because of foreign exchange regulations.
Unemployment Rate
The percentage of unemployed people who would otherwise be part of the active workforce of a country.
Uptick
Opposite of down-tick, an increase in prices.
USD
Symbol for the United States Dollar.
Value Date
The date at which a trade matures or settles. Monies should have been sent, received and matched to the transaction by this date.
Vanilla
Typically used to describe the simplest type of option. Opposite of exotic.
Virtual IBAN
Like an IBAN, but one that exists exclusively online. The Virtual IBAN acts as a currency wallet that can make and receive payments in various currencies.
Volatility
A measure of the amount by which an asset price is expected to fluctuate over a given period. Can also be implied from futures pricing, which is referred to as implied volatility.
Volatility Index (VIX)
An index measuring the implied volatility in the S&P 500 index, it is viewed as a leading forecasting tool for market behaviour.
Whipsaw
Market term for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Whisper Number
Analysts’ predictions for earnings or economic indicators, which often become known to the public despite not being formally released.
WTI Crude Inventories (EIA Crude Oil Stocks)
This weekly stockpiles report is a weekly measure of the change in the number of barrels of crude oil and derivatives. For crude oil, this reading can cause significant volatility in the markets, causing investors and traders to (re)assess the current demand and supply picture.
Yard
A common term for billion, which denotes one thousand million.
Yield
This is the income return such as interest or dividends that are received from holding a certain asset. Yield is usually described in percentage points over the current face value of the instrument.
Yield Curve
A graph plotting the interest rate of a given security (most commonly government debt) for a range of different maturities.
Yuan, The (CNY)
The Chinese Yuan.
ZEW (Centre for European Economic Research)
An important economic research institute and think tank which produces economic indicators particularly on the German economy but also for other European nations.
