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Definition of CBOE
Chicago Board Options Exchange. A securities exchange created in the early 1970s for the public
The option of terminating an investment earlier than originally planned.
An option that may be exercised at any time up to and including the expiration date.
The second-largest stock exchange in the United States. It trades
An option contract that can be exercised at any time between the date of purchase and
Yield curve option-pricing models.
option based on the average price of the asset during the life of the option.
Gives the lessee the option to purchase the asset at a price below fair market
contracts with trigger points that, when crossed, automatically generate buying or selling of
Packages that involve the exchange of more than two currencies against a base currency at
A nickname for the New York Stock exchange. Also known as The exchange. More than 2,000
General term for a document demanding payment.
An option pricing model in which the underlying asset can take on only two
A model for pricing call options based on arbitrage arguments that uses
The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
To exercise a call option.
An option contract that gives its holder the right (but not the obligation) to purchase a specified
Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving
Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary
Commodities Exchange Center (CEC)
The location of five New York futures exchanges: Commodity
option on an option.
Conditional sales contracts
Similar to equipment trust certificates except that the lender is either the
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
An option to buy or sell a foreign currency.
Refers to establishing and liquidating the same position or positions within one day's trading.
Over-the-counter options, such as those offered by government and mortgage-backed
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
The options available to the seller of an interest rate futures contract, including the quality
Non-interest-bearing money market instruments that are issued at a discount and
A sinking fund provision that may allow repurchase of twice the required number of bonds
Barrier option that comes into existence if asset price hits a barrier.
Barrier option that expires if asset price hits a barrier.
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
An option that is part of the structure of a bond that provides either the bondholder or
securities that give the holder the right to buy or sell a specified number of shares of stock, at
option that may be exercised only at the expiration date. Related: american option.
An option contract that can only be exercised on the expiration date.
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
A nickname for the New York stock exchange. Also known as the Big Board. More than
Governmental restrictions on the purchase of foreign currencies by domestic citizens or
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Exchange of stock
Acquisition of another company by purchase of its stock in exchange for cash or shares.
An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
The price of one country's currency expressed in another country's currency.
Exchange Rate Mechanism (ERM)
The methodology by which members of the EMS maintain their
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
Security that grants the security holder the right to exchange the security for the
Instruments exempt from the registration requirements of the securities Act of 1933 or the
Exercising the option
The act buying or selling the underlying asset via the option contract.
Federal agency securities
securities issued by corporations and agencies created by the U.S. government,
A country's decision to tie the value of its currency to another country's currency, gold
Floating exchange rate
A country's decision to allow its currency value to freely change. The currency is not
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
Currency from another country.
Foreign exchange controls
Various forms of controls imposed by a government on the purchase/sale of
Foreign exchange dealer
A firm or individual that buys foreign exchange from one party and then sells it to
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency
Forward exchange rate
exchange rate fixed today for exchanging currency at some future date.
Free on board
Implies that distributive services like transport and handling performed on goods up to the
An option on a futures contract. Related: options on physicals.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
Gold exchange standard
A system of fixing exchange rates adopted in the Bretton Woods agreement. It
Negotiable U.S. Treasury securities.
option that allows the underwriter for a new issue to buy and resell additional shares.
Historical exchange rate
An accounting term that refers to the exchange rate in effect when an asset or
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
A call or put option based on a stock market index.
Initial public offering (IPO)
A company's first sale of stock to the public. securities offered in an IPO are
trading by officers, directors, major stockholders, or others who hold private inside
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Last trading day
The final day under an exchange's rules during which trading may take place in a particular
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill
London International Financial Futures Exchange (LIFFE)
A London exchange where Eurodollar futures
An option that allows the buyer to choose as the option strike price any price of the
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.
London International Financial Futures Exchange (LIFFE)
London exchange where Eurodollar futures as well as futures-style options are traded.
Manufactured housing securities (MHSs)
Loans on manufactured homes - that is, factory-built or
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock
securities backed by a pool of mortgage loans.
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
New York Stock Exchange (NYSE)
Also known as the Big Board or The Exhange. More than 2,00 common
Nexus (of contracts)
A set or collection of something.
Nominal exchange rate
The actual foreign exchange quotation in contrast to the real exchange rate that has
contracts which have been bought or sold without the transaction having been completed by
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a
The percentage increase in an option's value given a 1% change in the value of the
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or
The option price.
Also called the option premium, the price paid by the buyer of the options contract for the right
Also called the option writer , the party who grants a right to trade a security at a given price in
Option-adjusted spread (OAS)
1) The spread over an issuer's spot rate curve, developed as a measure of
A contract that, in exchange for the option price, gives the option buyer the right, but not
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
Options on physicals
Interest rate options written on fixed-income securities, as opposed to those written on
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