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Zero Coupon Swap
In finance, a zero coupon swap (ZCS) is an interest rate derivative (IRD). In particular it is a linear IRD, that in its specification is very similar to the much more widely traded interest rate swap (IRS). General description A zero coupon swap (ZCS)Pricing and Trading Interest Rate Derivatives: A Practical Guide to Swaps J H M Darbyshire, 2017, is a derivative contract made between two parties with terms defining two 'legs' upon which each party either makes or receives payments. One leg is the traditional fixed leg, whose cashflows are determined at the outset, usually defined by an agreed fixed rate of interest. A second leg is the traditional floating leg, whose payments at the outset are forecast but subject to change and dependent upon future publication of the interest rate inde ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Interest Rate Derivative
In finance, an interest rate derivative (IRD) is a derivative whose payments are determined through calculation techniques where the underlying benchmark product is an interest rate, or set of different interest rates. There are a multitude of different interest rate indices that can be used in this definition. IRDs are popular with all financial market participants given the need for almost any area of finance to either hedge or speculate on the movement of interest rates. Modeling of interest rate derivatives is usually done on a time-dependent multi-dimensional Lattice ("tree") or using specialized simulation models. Both are calibrated to the underlying risk drivers, usually domestic or foreign short rates and foreign exchange market rates, and incorporate delivery- and day count conventions. The Heath–Jarrow–Morton framework is often used instead of short rates. Types The most basic subclassification of interest rate derivatives (IRDs) is to define linear and no ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bootstrapping (finance)
In finance, bootstrapping is a method for constructing a ( zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g. bonds and swaps. A ''bootstrapped curve'', correspondingly, is one where the prices of the instruments used as an ''input'' to the curve, will be an exact ''output'', when these same instruments are valued using this curve. Here, the term structure of spot returns is recovered from the bond yields by solving for them recursively, by forward substitution: this iterative process is called the ''bootstrap method''. The usefulness of bootstrapping is that using only a few carefully selected zero-coupon products, it becomes possible to derive par swap rates (forward and spot) for ''all'' maturities given the solved curve. Methodology As stated above, the selection of the input securities is important, given that there is a general lack of data points in a yield curve (there are only a fixed number of products in the market). More ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
FTSE MTIRS Index
The FTSE MTIRS Indices are designed to accurately move in direct correlation to OTC Interest Rate Swaps market with a total of 45 indices covering the USD curve from 2 years to 30 years including spreads and butterflies. FTSE MTIRS Indices account for changes to both fixed and floating rates and are rebalanced daily. The value of the FTSE MTIRS Indices change as the NPV changes and is mathematically rebalanced daily to ensure that the indices represent periods out of spot and remains at constant maturity. Composite market maker prices are used to calculate the FTSE MTIRS Index series and are used for rebalancing, supplying perfect correlation to OTC Interest Rate Swaps and effectively tracks fixed for floating Interest rates enabling the tracking of OTC Interest rate Swap exposure. Structure *To buy the MTIRS index mirrors—receive fixed and pay floating. *To sell the MTIRS index mirrors—pay fixed and receive floating. *MTIRS index positions are worth: the nominal amount ti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Notional Amount
The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change and is thus referred to as ''notional.'' Explanation Contrast a bond with an interest rate swap: * In a bond, the buyer pays the principal amount at issue (start), then receives coupons (computed off this principal) over the life of the bond, then receives the principal back at maturity (end). * In a swap, no principal changes hands at inception (start) or expiry (end), and in the meantime, interest payments are computed based on a notional amount, which acts ''as if'' it were the principal amount of a bond, hence the term ''notional principal amount'', abbreviated to ''notional''. In simple terms, the notional principal amount is essentially how much of an asset or bonds a person owns. For example, if a premium bond were bought for £1, then the notional princi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Derivative (finance)
In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be used for a number of purposes, including insuring against price movements ( hedging), increasing exposure to price movements for speculation, or getting access to otherwise hard-to-trade assets or markets. Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default swaps. Most derivatives are traded over-the-counter (off-exchange) or on an exchange such as the Chicago Mercantile Exchange, while most insurance contracts have developed into a separate industry. In the United States, after the financial crisis of 2007–2009, there has been increased pressure to move derivatives to trade on exchanges. Derivatives are one of the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Over-the-counter (finance)
Over-the-counter (OTC) or off-exchange trading or pink sheet trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges. A stock exchange has the benefit of facilitating liquidity, providing transparency, and maintaining the current market price. In an OTC trade, the price is not necessarily publicly disclosed. OTC trading, as well as exchange trading, occurs with commodities, financial instruments (including stocks), and derivatives of such products. Products traded traditional stock exchanges, and other regulated bourse platforms, must be well standardized. This means that exchanged deliverables match a narrow range of quantity, quality, and identity which is defined by the exchange and identical to all transactions of that product. This is necessary for there to be transparency in stock exchange-based equities trading. The OTC market does not have this limitation. Parties m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bank For International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through its meetings, programmes and through the Basel Process – hosting international groups pursuing global financial stability and facilitating their interaction. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City. History The BIS was established in 1930 by an intergovernmental agreement between Germany, Belgium, France, the United Kingdom, Italy, Japan, the United States, and Switzerland. It opened its doors in Basel, Switzerland, on 17 May 1930. The BIS was originally intended to facilitate reparations imposed on Germany by the Treaty of Versailles after World War I, and to act as the tru ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
FAS 133
Launched prior to the millennium, (and subsequently amended) FAS 133 ''Accounting for Derivative Instruments and Hedging Activities'' provided an "integrated accounting framework for derivative instruments and hedging activities." FAS 133 Overview Statements of Financial Accounting Standards No. 133, ''Accounting for Derivative Instruments and Hedging Activities'', commonly known as FAS 133, is an accounting standard issued in June 1998 by the Financial Accounting Standards Board (FASB) that requires companies to measure all assets and liabilities on their balance sheet at “fair value”. This standard was created in response to significant hedging losses involving derivatives years ago and the attempt to control and manage corporate hedging as risk management not earnings management. All derivatives within the scope of FAS133 must be recorded at fair value as an asset or liability. Hedge accounting may be applied if there is hedge documentation and gains and losses in the v ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
International Financial Reporting Standards
International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's financial performance and position so that company financial statements are understandable and comparable across international boundaries. They are particularly relevant for companies with shares or securities listed on a public stock exchange. IFRS have replaced many different national accounting standards around the world but have not replaced the separate accounting standards in the United States where U.S. GAAP is applied. History The International Accounting Standards Committee (IASC) was established in June 1973 by accountancy bodies representing ten countries. It devised and published International Accounting Standards (IAS), interpretations and a conceptual framework. These were looked to by many national accounting standard-s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Instruments: Recognition And Measurement
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in financial systems at various scopes, thus the field can be roughly divided into personal, corporate, and public finance. In a financial system, assets are bought, sold, or traded as financial instruments, such as currencies, loans, bonds, shares, stocks, options, futures, etc. Assets can also be banked, invested, and insured to maximize value and minimize loss. In practice, risks are always present in any financial action and entities. A broad range of subfields within finance exist due to its wide scope. Asset, money, risk and investment management aim to maximize value and minimize volatility. Financial analysis is viability, stability, and profitability asse ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Best Fit
Curve fitting is the process of constructing a curve, or mathematical function, that has the best fit to a series of data points, possibly subject to constraints. Curve fitting can involve either interpolation, where an exact fit to the data is required, or smoothing, in which a "smooth" function is constructed that approximately fits the data. A related topic is regression analysis, which focuses more on questions of statistical inference such as how much uncertainty is present in a curve that is fit to data observed with random errors. Fitted curves can be used as an aid for data visualization, to infer values of a function where no data are available, and to summarize the relationships among two or more variables. Extrapolation refers to the use of a fitted curve beyond the range of the observed data, and is subject to a degree of uncertainty since it may reflect the method used to construct the curve as much as it reflects the observed data. For linear-algebraic analysis o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
KPMG
KPMG International Limited (or simply KPMG) is a multinational professional services network, and one of the Big Four accounting organizations. Headquartered in Amstelveen, Netherlands, although incorporated in London, England, KPMG is a network of firms in 145 countries, with over 265,000 employees and has three lines of services: financial audit, tax, and advisory. Its tax and advisory services are further divided into various service groups. Over the past decade various parts of the firm's global network of affiliates have been involved in regulatory actions as well as lawsuits. The name "KPMG" stands for "Klynveld Peat Marwick Goerdeler". The initialism was chosen when KMG (Klynveld Main Goerdeler) merged with Peat Marwick in 1987. History Early years and mergers In 1818, John Moxham opened a company in Bristol. James Grace and James Grace Jr. bought John Moxham & Co. and renamed it James Grace & Son in 1857. In 1861, Henry Grace joined James Jr. and t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
