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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] |
Notional
::''See Notional amount or Notional profit for economic terms '' Notional (born February 1, 2004, in California) is a retired American Thoroughbred racehorse. He was sired by In Excess and out of the mare Truly Blessed. His damsire, French Deputy, is a son of the 1997/98 Leading sire in North America, Deputy Minister. Notional was trained by Doug O'Neill for owner J. Paul Reddam, who also have three-year-olds Great Hunter and Liquidity in their stable. Racing at age two, Notional's best showing in a stakes race was a third in the 2006 Hollywood Prevue Stakes. In his three-year-old debut, Notional won January's Grade II San Rafael Stakes at Santa Anita Park in Arcadia, California, by four lengths under jockey Corey Nakatani. Sent to the Fair Grounds Race Course in New Orleans, Louisiana, in February, Notional scored a 2 length win in the Risen Star Stakes under jockey Robby Albarado in a race where favorite Circular Quay was seriously impeded as a result of a race acciden ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bond (finance)
In finance, a bond is a type of Security (finance), security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the Maturity (finance), maturity date and interest (called the coupon (bond), coupon) over a specified amount of time.) The timing and the amount of cash flow provided varies, depending on the economic value that is emphasized upon, thus giving rise to different types of bonds. The interest is usually payable at fixed intervals: semiannual, annual, and less often at other periods. Thus, a bond is a form of loan or IOU. Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, to finance current expenditure. Bonds and Share capital, stocks are both Security (finance), securities, but the major difference between the two is that (capital) stockholders h ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Interest Rate Swap
In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations with forward rate agreements (FRAs), and with zero coupon swaps (ZCSs). In its December 2014 statistics release, the Bank for International Settlements reported that interest rate swaps were the largest component of the global OTC derivative market, representing 60%, with the notional amount outstanding in OTC interest rate swaps of $381 trillion, and the gross market value of $14 trillion. Interest rate swaps can be traded as an index through the FTSE MTIRS Index. Interest rate swaps General description An interest rate swap's (IRS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against an interest rate index. The most common IRS ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Principal Amount
Debt is an obligation that requires one party, the debtor, to pay money borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. In financial accounting, debt is a type of financial transaction, as distinct from equity. The term can also be used metaphorically to cover moral obligations and other interactions not based on a monetary value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a "debt of gratitude" to the second person. Etymology The English term "debt" was first used in the late 13th century and comes by way of Old French from the Latin verb ''debere'', "to owe; to have from someone else." The related term "debtor" ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Total Return Swap
In finance, a total return swap (TRS), total rate of return swap (TRORS), or cash-settled equity swap is a financial contract that transfers both the credit risk and market risk of an underlying asset. Contract definition A swap agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains. In total return swaps, the underlying asset, referred to as the reference asset, is usually an equity index, loans, or bonds. This is owned by the party receiving the set rate payment. Total return swaps allow the party receiving the total return to gain exposure and benefit from a reference asset without actually having to own it. These swaps are popular with hedge funds because they get the benefit of a large exposure with a minimal cash outlay. In a total return swap, an investment bank could buy assets for a hed ... [...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] |
Leverage (finance)
In finance, leverage, also known as gearing, is any technique involving borrowing funds to buy an investment. Financial leverage is named after a lever in physics, which amplifies a small input force into a greater output force. Financial leverage uses borrowed money to augment the available capital, thus increasing the funds available for (perhaps risky) investment. If successful this may generate large amounts of profit. However, if unsuccessful, there is a risk of not being able to pay back the borrowed money. Normally, a lender will set a limit on how much risk it is prepared to take, and will set a limit on how much leverage it will permit. It would often require the acquired asset to be provided as collateral security for the loan. Leverage can arise in a number of situations. Securities like options and futures are effectively leveraged bets between parties where the principal is implicitly borrowed and lent at interest rates of very short treasury bills.Mock, E. J., R. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Delta (finance)
In mathematical finance, the Greeks are the quantities (known in calculus as partial derivatives; first-order or higher) representing the sensitivity of the price of a derivative instrument such as an option to changes in one or more underlying parameters on which the value of an instrument or portfolio of financial instruments is dependent. The name is used because the most common of these sensitivities are denoted by Greek letters (as are some other finance measures). Collectively these have also been called the risk sensitivities, risk measures or hedge parameters. Use of the Greeks The Greeks are vital tools in risk management. Each Greek measures the sensitivity of the value of a portfolio to a small change in a given underlying parameter, so that component risks may be treated in isolation, and the portfolio rebalanced accordingly to achieve a desired exposure; see for example delta hedging. The Greeks in the Black–Scholes model (a relatively simple idealised model o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Exchange-traded Fund
An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. Many ETFs provide some level of diversification compared to owning an individual stock. An ETF divides ownership of itself into shares that are held by shareholders. Depending on the country, the legal structure of an ETF can be a corporation, trust, open-end management investment company, or unit investment trust. Shareholders indirectly own the assets of the fund and are entitled to a share of the profits, such as interest or dividends, and would be entitled to any residual value if the fund undergoes liquidation. They also receive annual reports. An ETF generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occur. The larges ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inverse Exchange-traded Fund
An inverse exchange-traded fund is an exchange-traded fund (ETF), traded on a public stock market, which is designed to perform as the ''inverse'' of whatever index or benchmark it is designed to track. These funds work by using short selling, trading derivatives such as futures contracts, and other leveraged investment techniques. By providing over short investing horizons and excluding the impact of fees and other costs, performance opposite to their benchmark, inverse ETFs give a result similar to short selling the stocks in the index. An inverse S&P 500 ETF, for example, seeks a daily percentage movement opposite that of the S&P. If the S&P 500 rises by 1%, the inverse ETF is designed to fall by 1%; and if the S&P falls by 1%, the inverse ETF should rise by 1%. Because their value rises in a declining market environment, they are popular investments in bear markets. Short sales have the potential to expose an investor to unlimited losses, whether or not the sale involves a ... [...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] |
Interest Rates
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized. The interest rate has been characterized as "an index of the preference . . . for a dollar of present ncomeover a dollar of future income". The borrower wants, or needs, to have money sooner, and is willing to pay a fee—the interest rate—for that privilege. Influencing factors Interest rates vary according to: * the government's directives to the central bank to accomplish the government's goals * the currency of the principal sum lent or borrowed * the term to mat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
