Definition of Flat trades

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.

Basket trades

Related: Program trades.

Flat benefit formula

Method used to determine a participant's benefits in a defined benefit plan by
multiplying months of service by a flat monthly benefit.

Flat price risk

Taking a position either long or short that does not involve spreading.

Flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.

Flat price (also clean price)

The quoted newspaper price of a bond that does not include accrued interest.
The price paid by purchaser is the full price.

Inflation

The rate at which the general level of prices for goods and services is rising.

Inflation risk

Also called purchasing-power risk, the risk that changes in the real return the investor will
realize after adjusting for inflation will be negative.

Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.

Inflation-escalator clause

A clause in a contract providing for increases or decreases in inflation based on
fluctuations in the cost of living, production costs, and so forth.

Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade

inflation

Rate at which prices as a whole are increasing.

Cost-Push Inflation

Inflation whose initial cause is cost increases rather than excess demand. See also demand-pull inflation.

Deflation

A sustained decrease in the price level. The opposite of an inflation.

Deflator

A price index used to deflate a nominal value to a real value by dividing the nominal value by the price deflator.

Demand-Pull Inflation

Inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.

Disinflation

A reduction in the rate of inflation.

GDP Deflator

Price index used to deflate nominal GDP to real GDP by dividing nominal GDP by the GDP deflator.

Hyperinflation

Extremely high inflation.

Inflation

A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level.

Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.

Stagflation

Simultaneous existence of high inflation and high unemployment, or simultaneous existence of rising inflation and r sing unemployment.

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