Forex Terms Flashcards
barrier option
A type of option whose payoff depends on whether or not the underlying asset has reached or exceeded a predetermined price. A barrier option can be a knock-out, meaning it can expire worthless if the underlying exceeds a certain price, limiting profits for the holder but limiting losses for the writer. It can also be knock-in, meaning it has no value until the underlying reaches a certain price.
BBA
British Banker’s Association
bear
Someone who things that a particular asset or market will decrease in price
BID
A buy order placed at or below the market; Price a dealer/trader is prepared to pay
Bid/Offer Spread
The difference between the bid price and the offer (sale) price
Bio
Billion
BIS
Bank of International Settlements. An international organization which fosters monetary and financial cooperation and serves as a bank for central banks. Often as agent in the forex market
bnp
BNP Paribas
Bobl
Medium-term debt Instrument issued by Germany (4.5 to 5.5 years)
BOC
Bank of Canada
Boe, BOE
Bank of England. The UK analogue to the US Federal Reserve.
BOJ
Bank of Japan. The Japanese analogue to the US Federal Reserve.
bounce
Upward price movement after a decline
Bps, pips
Basis POints
btmu
Bank of Tokyo Mitsubishi UFJ
BTPs
Italian government bonds
buba
Bundesbank - German Federal Reserve Bank
bucket
Refers to the grouped timing of particular cash flow or derivative or price at a particular time, e.g. July Bucket
bull
Someone who thinks that a particular asset or market will increase in proce
Bund’s
Long-term debt instrument issued by Germany (8.5 to 10.5 years). German 10-year government bonds. The Bobl is the 5 year and Schatz the 2-year
Butterflies (butterfly spread)
The butterfly strategy is a known strategy used in forex, which can be implemented while using both call or put options. Trading strategy where a trader is buying at price A and C whilst selling an appropriately weighted amount at price B where price B is between price A and C (or selling at A-C and buying at B)
Cable, cbl
GBP/USD. GPB/USD Exchange rate; also refers to GBP generally.
CAC
The french stock index, the CAC 40
cad
Canadian Dollar
Call option, call
The right (but not the obligation) to buy an underlying asset from the counterparty at a fixed price
Candle.Candlestick
Tools for charting movement in FX. For instance, you can have bullish and bearish candlesticks
carry
Returns realized from an asset minus the cost of the holding asset
chf, francs, swiss, swissies, sfr
Swiss franc
Commercial Paper, cp
An unsecured, short-term money market security sold by banks and other corporations to raise funds.
Condor
A four-part option strategy using calls and puts
copper
Futures contracts which settle on IMM dates ten years from the date quoted
Corporates
The finance and treasury departments of large multinational corporations that typically contract with big wirehouse providers like UBS in FX. They must hedge their currency exposures to try and offset currency risk.
cosmo
cosmorex, swiss broker
Cost of carry
The cost of carrying or holding a position less any income received on the asset would be used interchangeably with carry where carry is negative.
Counterparty
The other party to trade or contract
cp
commercial paper
Cross surrency swap
An interest rate swap where the payment legs are made in two different currencies
cs
Credit Suisse
Currency Swap
A present exchange of one currency for equal value in a different currency; see also FOREX
Curve: Flatten, steepen, invent
The graph showing future price projected at present time. These are typically built by each trader using a variety of sources of information to asset them in pricing their trades.
Slopes up less steeply, slopes up more steeply, slopes down
Custody Bank / Custodian
A bank which holds securities in custody for other financial institutions. For instance, Bank of New York Mellon and State Street.
DAX
German stock index
Deferred Swap
Agreement to enter into a swap at some time in the future (also a forward swap)
Delta
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the “hedge ration”
Depo
Deposit. Deposit rate offered on particular currency
dkk
Danish Krone
Dove
Proponent of lower rates
Dovish
A statement related to monetary policy which implies looser policy (lower rates)