Objectives

1) The outcomes expected of a particular strategy or course of action within a given time frame. 2)  Investment objectives refer to the investor’s goals expressed in terms of risk and return profiles, acceptable asset classes, and acceptable trading strategies and are included in the policy investment statement.

Off market

Whenever a swap or other instrument must be priced with a coupon or floating rate that deviates from currently prevailing market conditions.

Off-balance sheet

A position with potential financial consequence that does not appear on either the asset side or the liabilities side of a balance sheet. The advent of recent accounting changes such as FAS 133 and IAS 39 require these instruments to be accounted/recognized on the balance sheet. However, the term OBS still tends to be used in the marketplace.

Off-the-run

Those U.S. Treasury securities that are not the most recent issues for their respective maturities.

On-the-runs

Those U.S. Treasury securities that are the most recent issues for their respective maturities.

Option Adjusted Spread (OAS)

The spread over the spot or forward Treasury/swap curve that equates to the current market price.  Calculated summing the present values of future cash flows by using some constant spread over the Treasury/swap spot or forward curve and takes into account any potential exercise of embedded options.

Option Contract

A contract giving the owner the right, but not the obligation to purchase or sell the underlying asset.  A call option gives the owner the right to buy the underlying asset at the strike price and a put option gives the owner the right to sell the underlying asset at the strike price.  Option contracts have set maturities, e.g., 30 days

Option premium

The name given to the price paid for an option or an option-like feature.  The premium is determined by two types of value called intrinsic value and time value.

Out-of-the-money

In the case of a call option, the price of the underlying asset is below the strike price of the option.  In the case of a put option, the price of the underlying asset is above the strike price of the option.

Over-the-counter

Known more commonly by the acronym OTC.  A dealer market in which transactions take place via telephone, telex, and other electronic forms of communication as opposed to trading on the floor of an exchange.  Such markets allow for great flexibility in product design.

Overnight repo

A repurchase agreement that matures in one business day.