SHOP

A yield that is expressed on an annualized basis regardless of the number of payments per year.

Any form of debt in which the principal balance is repaid gradually over the term of the loan.

A loan repayment schedule, which describes the payment process by which the principal on a loan will be amortized. Such schedules usually also depict the interest payments and the total payments (principal and interest combined).

An option that allows the buyer of the option the right to exercise the option at any time during the life of the option.

The unsystematic or non-market risk in a portfolio. Alpha is the risk specific to an asset and can be eliminated in a diversified portfolio of assets.

Also called effective annual percentage cost (the latter term is often applied to component costs individually). An important measure of the total cost of a financing that expresses the cost on an annual percentage basis. This measure is very useful for comparing alternative financing opportunities.

Bonds issued by an entity of the U.S. government, such as Ginnie Mae, or by a Government Sponsored Enterprise (GSE), such as Fannie Mae, Freddie Mac, Federal Home Loan Bank System and Sallie Mae.

The management of a portfolio based on the judgment of the portfolio manager. Active management seeks to outperform an index or a benchmark. It involves active trading to take advantage of opportunities based on relative valuations across securities within the investment universe.

Any swap in which the notional principal increases over the tenor of the swap. Thus, interest exchanges are made on a progressively larger notional principal.

Also known as discount basis. A yield measure used to express the yield on certain non-coupon bearing securities, such as T-bills, that always sell at a discount from face value.

The ability of one country to produce more of a given good with its endowed resources. In the context of swaps, the ability of one party to borrow at a lower rate of interest in a given currency than another party.