Glossary – Finance

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There are 24 names in this directory beginning with the letter C.
Calendar Spread
A position that is created by taking a long position in a call option that matures at one time and a short position in a similar call option that matures at a different time (A calendar spread can also be created using put options).

A method for implying volatility parameters from the prices of actively traded options.

Call Option
An option to buy an asset at a certain price by a certain date.

Call Settlement
A procedure for settling a futures contract in cash rather than by delivering the underlying asset.

Call-or-Nothing Put Option
An option that provides a fixed predetermined payoff if the final asset price is below the strike price and zero otherwise.

Callable Bond
A bond containing provisions that allow the issuer to buy it back at a predetermined price at certain times during its life.

Capital Asset Pricing Model
A model relating the expected return on an asset to its beta.

One component of an interest rate cap.

Cash Flow Mapping
A procedure for representing an instrument as a portfolio of zero-coupon bonds for the purpose of calculating value at risk.

Cash-or-Nothing Call Option
An option that provides a fixed predetermined payoff if the final asset price is above the strike price and zero otherwise.

A firm that guarantees the performance of the parties in an exchange-traded derivatives transaction. (Also referred to as a clearing corporation).

Commodity Swap
A swap where cash flows depend on the price of a commodity.

Compound Option
An option on an option.

Constant Maturity Treasury Swap
A swap where the yield on a Treasury bond is exchanged for either a fixed rate or a floating rate on each payment date.

Continuous Compounding
A way of quoting interest rates. It is the limit as the assumed compounding interval is made smaller and smaller.

Convertible Bond
A corporate bond that can be converted into a predetermined amount of the company’s equity at certain times during its life.

A measure of the curvature in the relationship between bond prices and bond yields.

Interest payment made on a bond.

Covered Call
A short position in a call option on an asset combined with a long position in the asset.

Credit Default Swap
An instrument that gives the holder the right to sell a bond for its face value in the event of a default by the issuer.

Credit Rating
A measure of the creditworthiness of a bond issue.

Credit Transition Matrix
A table showing the probability that a company will move from one credit rating to another during a certain period of time.

Credit Value At Risk
The credit loss that will not be exceeded at some specified confidence level.

Currency Swap
A swap where interest and principal in one currency are exchanged for interest and principal in another currency.
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