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20 Cards in this Set
- Front
- Back
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Derivative securities market
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The markets in which derivative securities trade.
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Spot contract
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An agreement to transact involving the immediate exchange of assets and funds.
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Forward contract
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An agreement to transact involving the future exchange of a set amount of assets at a set price.
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Futures contract
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An agreement to transact involving the future exchange of a set amount of assets for a price that is settled daily.
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Marked to market
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Describes the prices on outstanding futures contracts that are adjusted each day to reflect current futures market conditions.
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Long position
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A purchase of a futures contract (this term is also used for an investor who owns an asset and will profit from an increase in price)
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Short position
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A sale of a futures contract (this term is also used for an investor who sells any asset short)
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Initial margin
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A deposit required on futures trades to ensure that the terms of any futures contract will be met.
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Option
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A contract that gives the holder the right, but not the obligation, to buy or sell the underlying asset at a specified price within a specified period of time.
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Call option
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An option that gives the right but not the obligation to buy a security at a specified price within a specified period of time.
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Put option
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An option that gives the right but not the obligation to sell a security at a specified price within a specified period of time.
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American option
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An option that can be exercised at any time before and on the expiration date.
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European option
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An option that can be exercised only on the expiration date.
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Bermudan option
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An option that can be exercised on certain dates up to and including the expiration date.
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Asian option
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An option that utilizes the average price of the underlying over a period of time as the point of comparison for the exercise price. This is utilized to prevent manipulation of the underlying’s price at expiration.
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Straddle
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An option strategy whereby identical (expiration and strike price) puts and calls are either purchased or written at the same time.
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Swap
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An agreement between two parties to exchange assets or a series of cash flows for a specific period of time at a specified interval.
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Cap
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A call option on interest rates, often with multiple exercise dates.
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Floor
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A put option on interest rates, often with multiple exercise dates.
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Collar
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A position taken simultaneously in a cap and a floor.
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