Glossary – Finance

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There are 15 names in this directory beginning with the letter P.
Par Value
The principal amount of a bond.

Par Yield
The coupon on a bond that makes its price equal the principal.

Path-Dependent Option
An option whose payoff depends on the whole path followed by the underlying variable – not just its final value.

The cash realized by the holder of an option or other derivative at the end of its life.

PO (principal only)
A mortgage-backed security where the holder receives only principal cash flows on the underlying mortgage pool.

Portfolio Immunization
Making a portfolio relatively insensitive to interest rates.

Portfolio Insurance
Entering into trades to ensure that the value of a portfolio will not fall below a certain level.

Position Limit
The maximum position a trader (or group of traders acting together) is allowed to hold.

The par or face value of a debt instrument.

Program Trading
A procedure where trades are automatically generated by a computer and transmitted to the trading floor of an exchange.

Protective Put
A put option combined with a long position in the underlying asset.

The reversion of a bond’s price to its par value at maturity.

Put-Call Parity
The relationship between the price of a European call option and the price of a European put option when they have the same strike price and maturity date.

Puttable Bond
A bond where the holder has the right to sell it back to the issuer at certain predetermined times for a predetermined price.

Puttable Swap
A swap where one side has the right to terminate early.
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