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Forward Rate Agreement
In finance, a forward rate agreement (FRA) is an interest rate derivative (IRD). In particular it is a linear IRD with strong associations with interest rate swaps (IRSs). General description A forward rate agreement's (FRA's) effective description is a cash for difference derivative contract, between two parties, benchmarked against an interest rate index. That index is commonly an interbank offered rate (-IBOR) of specific tenor in different currencies, for example LIBOR in USD, GBP, EURIBOR in EUR or STIBOR in SEK. An FRA between two counterparties requires a fixed rate, notional amount, chosen interest rate index tenor and date to be completely specified.Pricing and Trading Interest Rate Derivatives: A Practical Guide to Swaps J H M Darbyshire, 2017, Extended descriptio ...
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Finance
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 profitabil ... [...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] |
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] |
Bid–ask Spread
The bid–ask spread (also bid–offer or bid/ask and buy/sell in the case of a market maker) is the difference between the prices quoted (either by a single market maker or in a limit order book) for an immediate sale ( ask) and an immediate purchase ( bid) for stocks, futures contracts, options, or currency pairs in some auction scenario. The size of the bid–ask spread in a security is one measure of the liquidity of the market and of the size of the transaction cost. If the spread is 0 then it is a frictionless asset. Liquidity The trader initiating the transaction is said to demand liquidity, and the other party (counterparty) to the transaction supplies liquidity. Liquidity demanders place market orders and liquidity suppliers place limit orders. For a round trip (a purchase and sale together) the liquidity demander pays the spread and the liquidity supplier earns the spread. All limit orders outstanding at a given time (i.e. limit orders that have not been executed) are t ... [...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] |
Forward Rate
The forward rate is the future yield on a bond. It is calculated using the yield curve. For example, the yield on a three-month Treasury bill six months from now is a ''forward rate''.. Forward rate calculation To extract the forward rate, we need the zero-coupon yield curve. We are trying to find the future interest rate r_ for time period (t_1, t_2), t_1 and t_2 expressed in years, given the rate r_1 for time period (0, t_1) and rate r_2 for time period (0, t_2). To do this, we use the property that the proceeds from investing at rate r_1 for time period (0, t_1) and then reinvesting those proceeds at rate r_ for time period (t_1, t_2) is equal to the proceeds from investing at rate r_2 for time period (0, t_2). r_ depends on the rate calculation mode (simple, yearly compounded or continuously compounded), which yields three different results. Mathematically it reads as follows: Simple rate : (1+r_1t_1)(1+ r_(t_2-t_1)) = 1+r_2t_2 Solving for r_ yields: Thus r_ = \ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Forward-forward Agreement
In business and contract law, a forward-forward agreement (FFA) is a form of forward rate agreement in which party ''A'' agrees to lend party ''B'' the ''m1'' amount of money, at future time ''t1''. In return, ''B'' will pay to ''A'' a larger monetary amount ''m2'' at time ''t2 > t1''. The name "forward-forward agreement" derives from the fact that both issuing and repayment of the loan take place in the future. A regular forward rate agreement lends the money at once. A quoted forward rate is associated with every forward-forward agreement. This can be thought of as the interest rate earned by party ''A'' for lending the money to ''B''. See also *Futures contract *Forward contract In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on at the time of conclusion of the contract, making it a type of derivat ... * Arbitrage References {{reflist Business term ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
List Of Finance Topics
The following outline is provided as an overview of and topical guide to finance: Finance – addresses the ways in which individuals and organizations raise and allocate monetary resources over time, taking into account the risks entailed in their projects. Overview The term finance may incorporate any of the following: * The study of money and other assets * The management and control of those assets * Profiling and managing project risks Fundamental financial concepts * Finance ** Arbitrage ** Capital (economics) ** Capital asset pricing model ** Cash flow ** Cash flow matching ** Debt *** Default *** Consumer debt *** Debt consolidation *** Debt settlement *** Credit counseling *** Bankruptcy *** Debt diet *** Debt-snowball method *** Debt of developing countries **Asset types *** Real Estate *** Securities *** Commodities *** Futures *** Cash ** Discounted cash flow ** Financial capital *** Funding ** Entrepreneur *** Entrepreneurship ** Fixed incom ... [...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 * Formal derivative, an operation on elements of a polynomial ring which mimics the form of the derivative from calculus * Radon–Nikodym derivative in measure theory * Derivative (set theory), a concept applicable to normal functions * Derivative (graph theory), an alternative term for a line graph deva * Derivative (finance), a contract whose value is derived from that of other quantities * Derivative suit or derivative action, a type of lawsuit filed by shareholders of a corporation In science and engineering * Derivative (chemistry), a type of compound which is a product of the process of derivatization * Derivative (linguistics), the process of forming a new word on the basis of an existing word, e.g. happiness and unhappy from happy *Aeroderivative gas tu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
