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Equity Swap
An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. The two cash flows are usually referred to as "legs" of the swap; one of these "legs" is usually pegged to a floating rate such as LIBOR. This leg is also commonly referred to as the "floating leg". The other leg of the swap is based on the performance of either a share of stock or a stock market index. This leg is commonly referred to as the "equity leg". Most equity swaps involve a floating leg vs. an equity leg, although some exist with two equity legs. An equity swap involves a notional principal, a specified duration and predetermined payment intervals. Equity swaps are typically traded by delta one trading desks. Applications Typically equity swaps are entered into in order to avoid transaction costs (including Tax), to avoid locally based dividend taxes, limitations on leverage (notably the US mar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Swap (finance)
In finance, a swap is an agreement between two counterparty, counterparties to trade, exchange financial instruments, cashflows, or payments for a certain time. The instruments can be almost anything but most swaps involve cash based on a notional principal amount.Financial Industry Business Ontology Version 2 , Annex D: Derivatives, EDM Council, Inc., Object Management Group, Inc., 2019 The general swap can also be seen as a series of forward contracts through which two parties exchange financial instruments, resulting in a common series of exchange dates and two streams of instruments, the ''legs'' of the swap. The legs can be almost anything but usually one leg involves cash flows based on a notional principal amount that both parties agree to. This principal usu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
LIBOR
The London Inter-Bank Offered Rate (Libor ) was an interest rate average calculated from estimates submitted by the leading Bank, banks in London. Each bank estimated what it would be charged were it to borrow from other banks. It was the primary benchmark, along with the Euribor, for short-term interest rates around the world. Libor was phased out at the end of 2021, with market participants encouraged to transition to risk-free interest rates such as SOFR and SARON. LIBOR was discontinued in the summer of 2023. The last rates were published on 30 June 2023 before 12:00 pm UK time. The 1 month, 3 month, 6 month, and 12 month Secured Overnight Financing Rate (SOFR) is its replacement. In July 2023, the International Organization of Securities Commissions (IOSCO) said four unnamed United States dollar, dollar-denominated alternatives to LIBOR, known as "credit-sensitive rates", had "varying degrees of vulnerability" that might appear during times of market stress. Libor rates w ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stock
Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all Seniority (financial), senior claims such as secured and unsecured debt), or Voting interest, voting power, often dividing these up in proportion to the number of like shares each stockholder owns. Not all stock is necessarily equal, as certain classes of stock may be issued, for example, without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of Shareholder, shareholders. Stock can be bought and sold over-the-counter (finance), privately or on ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stock Market Index
In finance, a stock index, or stock market index, is an Index (economics), index that measures the performance of a stock market, or of a subset of a stock market. It helps investors compare current stock price levels with past prices to calculate market performance. Two of the primary criteria of an index are that it is ''investable'' and ''transparent'': The methods of its construction are specified. Investors may be able to invest in a stock market index by buying an index fund, which is structured as either a mutual fund or an exchange-traded fund, and "track" an index. The difference between an index fund's performance and the index, if any, is called ''tracking error''. Types of indices by coverage Stock market indices may be classified and segmented by the set of underlying stocks included in the index, sometimes referred to as the "coverage". The underlying stocks are typically grouped together based on their underlying economics or underlying investor demand that the ... [...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 pri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Hedge (finance)
A hedge is an investment Position (finance), position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance policy, insurance, forward contracts, swap (finance), swaps, option (finance), options, gambles, many types of Over-the-counter (finance), over-the-counter and Derivative (finance), derivative products, and futures contracts. Public futures markets were established in the 19th century to allow transparent, standardized, and efficient hedging of agricultural commodity prices; they have since expanded to include futures contracts for hedging the values of Energy derivative, energy, precious metals, foreign currency, and interest rate fluctuations. Etymology Hedging is the practice of taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Basis Point
A basis point (often abbreviated as bp, often pronounced as "bip" or "beep") is one hundredth of 1 percentage point. Changes of interest rates are often stated in basis points. For example, if an existing interest rate of 10 percent is increased by 1 basis point, the new interest rate would be 10.01 percent. The related term '' permyriad'' means one part per ten thousand. Definition :1 basis point (bp) = 0.01%, 10−4, , or 0.0001. :10 bp = 0.1%, 10−3, , or 0.001. :100 bp = 1%, 10−2, , or 0.01. Basis points are used as a convenient unit of measurement in contexts where percentage differences of less than 1% are discussed. The most common example is interest rates, where differences in interest rates of less than 1% per year are usually meaningful to talk about. For example, a difference of 0.10 percentage points is equivalent to a change of 10 basis points (e.g., a 4.67% rate increases by 10 basis points to 4.77%). In other words, an increase of 100 basis points means a ri ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
FTSE 100 Index
The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the "Footsie" , is the United Kingdom's best-known stock market index of the 100 most highly capitalised blue chips listed on the London Stock Exchange. History The index started on 3 January 1984, having been constructed by the London Stock Exchange to better reflect activity on the market. The index would replace the Financial Times' own FT 30 after its public unveiling on 14 February. As late as 10 February, the Stock Exchange referred to the index as 'SE 100', cutting out the Financial Times who had not contributed to its construction. Recognition was ultimately given to the fact that having the FT involved in the official launch possessed value. The new index allowed the Stock Exchange's own London Traded Options Market (LTOM) to launch an options contract derived from the FTSE's real-time data in May 1984, while competitors LIFFE were quick to coinci ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Collateral Contract
A collateral contract is usually a single term contract, made in consideration of the party for whose benefit the contract operates agreeing to enter into the principal or main contract, which sets out additional terms relating to the same subject matter as the main contract. For example, a collateral contract is formed when one party pays the other party a certain sum for entry into another contract. A collateral contract may be between one of the parties and a third party. It can also be epitomized as follows: a collateral contract is one that induces a person to enter into a separate "primary" contract. For example, if X agrees to buy goods from Y that will, accordingly, be manufactured by Z, and does so on the strength of Z's assurance as to the high quality of the goods, X and Z may be held to have made a collateral contract consisting of Z's promise of quality given in consideration of X's promise to enter into the main contract with Y. Elements of a valid collateral cont ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Derivatives (finance)
The derivative of a function is the rate of change of the function's output relative to its input value. Derivative may also refer to: In mathematics and economics * Brzozowski derivative in the theory of formal languages *Covariant derivative, a way of specifying a derivative along tangent vectors of a manifold with a connection. * Exterior derivative, an extension of the concept of the differential of a function to differential forms of higher degree. *Formal derivative, an operation on elements of a polynomial ring which mimics the form of the derivative from calculus * Fréchet derivative, a derivative defined on normed spaces. * Gateaux derivative, a generalization of the concept of directional derivative in differential calculus. * Lie derivative, the change of a tensor field (including scalar functions, vector fields and one-forms), along the flow defined by another vector field. * Radon–Nikodym derivative in measure theory * Derivative (set theory), a concept app ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
