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,Options, Futures, and Other Derivatives Options, Futures, and Other Derivatives.pdf Options, Futures, and Other Derivatives.pdf
Financial Intermediary A bank or other financial institution that facilitates the flow of funds between
different entities in the economy.
Commodity Futures Trading Commission A body that regulates trading in futures contracts in the United States.
Callable Bond A bond containing provisions that allow the issuer to buy it back at a
predetermined price at certain times during its life.
Zero-Coupon Bond A bond that provides no coupons.
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.
Extendable Bond A bond whose life can be extended at the option of the holder.
Dividend A cash payment made to the owner of a stock.
Synthetic CDO A CDO created by selling credit default swaps.
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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.
Central Clearing Party A clearing house used for over-the-counter contracts.
Box Spread A combination of a bull spread created from calls and a bear spread created
from puts.
Interest Rate Collar A combination of an interest-rate cap and an interest rate floor.
Futures Contract A contract that obligates the holder to buy or sell an asset at a predetermined
delivery price during a specified future time period. The contract is settled daily.
Forward Contract A contract that obligates the holder to buy or sell an asset for a predetermined
delivery price at a predetermined future time.
Day Count A convention for quoting interest rates.
Convertible Bond A corporate bond that can be converted into a predetermined amount of the
company's equity at certain times during its life.
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FICO A credit score developed by Fair Isaac Corporation.
Eurocurrency A currency that is outside the formal control of the issuing country's monetary
authorities.
Package A derivative that is a portfolio of standard calls and puts, possibly combined with
a position in forward contracts and the asset itself.
Quanto A derivative where the payoff is defined by variables associated with one
currency but is paid in another currency.
Credit Derivative A derivative whose payoff depends on the creditworthiness of one or more
companies or countries.
Interest Rate Derivative A derivative whose payoffs are dependent on future interest rates.
Implied Distribution A distribution for a future asset price implied from option prices.
Bivariate Normal Distribution A distribution for two correlated variables, each of which is normal.
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