Glossary – Finance

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There are 18 names in this directory beginning with the letter D.
Day Count
A convention for quoting interest rates.

Day Trade
A trade that is entered into and closed out on the same day.

Deferred Payment Option
An option where the price paid is deferred until the end of the option’s life.

Deffered Swap
An agreement to enter into a swap at some time in the future.

Delta Hedging
A hedging scheme that is designed to make the price of a portfolio of derivatives insensitive to small changes in the price of the underlying asset.

Delta-Neutral Portfolio
A portfolio with a delta of zero so that there is no sensitivity to small changes in the price of the underlying asset.

Diagonal Spread
A position in two calls where both the strike prices and times to maturity are different (A diagonal spread can also be created with put options).

Differential Swap
A swap where a floating rate in one currency is exchanged for a floating rate in another currency and both rates are applied to the same principal.

Discount Bond
See zero-coupon bond.

Discount Instrument
An instrument, such as a Treasury bill, that provides no coupons.

Discount Rate
The annualized dollar return on a Treasury bill or similar instrument expressed as a percentage of the final face value.

Dividend Yield
The dividend as a percentage of the stock price.

Down-and-In Option
An option that comes into existence when the price of the underlying asset declines to a prespecified level.

Downgrade Trigger
A clause in a contract that states that the contract will be terminated with a cash settlement if the credit rating of one side falls below a certain level.

Drift Rate
The average increase per unit of time in a stochastic variable.

A measure of the average life of a bond. It is also an approximation to the ratio of the proportional change in the bond price to the absolute change in its yield.

Duration Matching
A procedure for matching the durations of assets and liabilities in a financial institution.

Dynamic Hedging
A procedure for hedging an option position by periodically changing the position held in the underlying assets. The objective is usually to maintain a delta-neutral position.
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