SHOP

A graphic portrayal of the relationship between the yields to maturity of instruments of a given class and the terms to maturity of those instruments. See also term structure of interest rates.

A foreign bond issued in the United States.

A graph that depicts the relationship between implied volatility and the strike prices of options with the same expiration dates. Implied volatility is on the Y-axis and the options’ strike price is on the X-axis and the resulting curve is in the shape of a smile.

A graph that depicts the relationship between implied volatility and the strike prices of options with the same expiration dates. Implied volatility is on the Y-axis and the options’ strike prices are on the X-axis and the resulting curve is skewed. Different markets exhibit curves of different shapes.

A curve depicting the relationship between implied volatility and time to expiration.

1) Refers to the price or yield of a security or market to rise or fall. Measured by the variance and standard deviation of the security. 2) Bond price volatility refers to the change in the bond price given a change in yields. See: Dollar value of a basis point.

Measures the change in the option’s premium for each 1% change in the underlying instrument’s volatility.

A tool for assessing market risk. VAR measures the expected maximum loss at a given confidence interval over the holding period.

Also called Treasuries, sometimes called Governments. Debt issues of the United States Treasury consist primarily of Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds).

Also called an ascending yield curve. The normal shape of the yield curve when short maturity instruments have lower yields than long maturity instruments.

Diversifiable risk or residual risk, which is specific to a security and can be removed through diversification. It is the variability of a security’s total returns, which is not related to the overall market variability.

Refers to the asset/instrument that the derivative contract derives its value from.