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Definition of Index arbitrage
An investment/trading strategy that exploits divergences between actual and theoretical
The simultaneous buying and selling of a security at two different prices in two different markets,
The purchase of securities on one market for immediate resale on
Transactions designed to make a sure profit from inconsistent prices.
Yield curve option-pricing models.
An alternative model to the capital asset pricing model developed by
People who search for and exploit arbitrage opportunities.
Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
Designing a portfolio so that its performance will match the performance of some bond index.
Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
The CPI, as it is called, measures the prices of consumer goods and services and is a
An index calculated by tracking the cost of a typical bundle of consumer goods and services over time. It is commonly used to measure inflation.
A portfolio manager invests dollars in an instrument denominated in a foreign
Taking advantage of divergences in exchange rates in different money markets by
The European, Australian, and Far East stock index, computed by Morgan Stanley.
Also called indexing plus, an indexing strategy whose objective is to exceed or replicate
A series of numbers measuring percentage changes over time from a base period. The index number for the base period is by convention set equal to 100.
An index is a statistical measure of a market based on the performance of a sample of securities in that market. For example, the S&P/TSX Composite index reflects the performance of the most actively traded stocks on The Toronto Stock Exchange.
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
Investment fund designed to match the returns on a stockmarket index.
Mutual funds that aim to track the performance of a specific stock or bond index. This process is also referred to as indexing and passive management.
A model of stock returns using a market index such as the S&P 500 to represent common or
A call or put option based on a stock market index.
Index Portfolio Rebalancing Service (IPRS)
index Portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually.
A stock index option issued by either a corporate or sovereign entity as part of a security
The adjustment of benefits to compensate for the effects of inflation.
Bond whose payments are linked to an index, e.g. the consumer price index.
A passive instrument strategy consisting of the construction of a portfolio of stocks designed to
An index that uses the capital asset pricing model to determine whether a money manager
Measure of the investment performance of the overall market.
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Optimization approach to indexing
An approach to indexing which seeks to Optimize some objective, such
present value index
see profitability index
A measure of the price level calculated by comparing the cost of a bundle of goods and services in a given year with its cost in a base year. See also index.
The present value of the future cash flows divided by the initial investment. Also called
See cash value added.
A method for determining the profitability of an investment. It is
Ratio of net present value to initial investment.
profitability index (Pl)
a ratio that compares the present value of net cash flows to the present value of the net investment
Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.
Speculation on perceived mispriced securities, usually in connection with merger and
Risk controlled arbitrage
A self-funding, self-hedged series of transactions that generally utilize mortgage
Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
The simultaneous purchase and sale of the same asset to yield a profit.
Single index model
A model of stock returns that decomposes influences on returns into a systematic factor,
Related: market model
Standard & Poor’s Composite Index
index of the investment performance of a portfolio of 500 large stocks. Also called the
Stock index option
An option in which the underlying is a common stock index.
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Stratified sampling approach to indexing
An approach in which the index is divided into cells, each
Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell
For a stock index option, the index value at which the buyer of the option can buy or sell the
Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize
A measure of the excess return per unit of risk, where excess return is defined as the
Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit.
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