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Market participant that uses the market makers price.

The rate of return earned on an investment when all of the cash flows received over a given time period are reinvested. The rate takes into account earning interest on interest. May also be referred to as the compounded rate.

A measure of price sensitivity for fixed income securities having embedded options, such as callable bonds and mortgage backed securities. Changes in cash flow due to changes in interest rates are taken into account such that the effective duration estimates the change in the price of the security for a…

A measure developed by Frederick Macaulay that allows for accurate measurement of a debt instrument’s price sensitivity to yield changes. Duration is the instrument’s weighted average time to maturity.

A dual currency note (DC) pays coupons in the investors’ domestic currency with the notional in the issuers’ domestic currency.

The dollar value change that would result from a 1 basis point change in an instrument’s yield. In order to make the definition usable, the DVBP must be stated per some amount of face value.

The product of the modified duration and the market value of the bond. Dollar duration expresses the price volatility of an asset or portfolio of assets in absolute dollar amounts as opposed to modified duration which shows the price volatility in terms of percentage changes in price.

Risk on an individual security that can be eliminated by owning that security in a well-diversified portfolio of assets. Also known as non-systematic risk, specific risk.

1) The rate that banks can borrow money from the Federal Reserve. 2) The rate used to discount future cash flows to determine the current value of the instrument. 3) The rate used in certain money market instruments e.g. U.S. Treasury Bills, when there is no coupon. The interest is…

The act of taking a future cash flow(s) and present valuing them to determine the current market value.

When the price of a security is below par (100.00), the bond is said to be trading at a discount and when it is trading above par it is trading at a premium.

See binary option.