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R - When the fifth letter of a NASDAQ stock symbol is an
R, the represented stock has rights.
R squared - A measure of predictability; the correlation coefficient
squared.
Racketeer Influenced and Corrupt Organization Act - A U.S. federal law
used to discourage insider trading and securities fraud in the late
1980s.
Radar Alert - Referring to risk arbitrage, unusual buying activity of a
company’s stock that could be in indicator of a takeover attempt.
Raider - Referring to risk arbitrage, an investor who attempts to take
control of a firm by purchasing a controlling interest in the firm’s
stock and then replacing the management team; person or group conspiring
to take control of a firm without the consent of the firm’s current
management.
Rainbow Option - An option with a payoff based on the performance of two
or more instruments or indexes.
Rally - Situation when prices move upward; the opposite of a reaction.
RAM - Abbreviation for a reverse-annuity mortgage.
Random Variable - Function where a real number is given to every
possible outcome of a random experiment.
Random Walk - Opinion that daily stock price changes are random,
independent of each other, each having the same probability
distribution.
Randomized Strategy - Strategy where a random element is introduced in
order to reduce the information contained in each choice.
Range - The high and low prices during a defined period of time.
Range Accumulation Option or Warrant - A series of short term binary
options that pays off when the underlying price or rate falls within a
designated range. Payoff is the sum of all the binary options at
expiration.
Range Forward - Forward exchange rate contract that limits the upper and
lower costs of foreign exchange.
Range Warrant - A multitranche structure which distributes a fixed
return as long as the underlying falls within a designated range per
tranche.
Ranking - A credit quality ladder within a corporation's debt structure.
Ratchet Swap - Swap in which the fixed rate can be adjusted downward in
small increments every reset period if the floating rate drops by more
than an agreed amount.
Rate Anticipation Swaps - Swap, or exchange, of bonds for new bonds (in
order to achieve the desired portfolio duration) based on conjecture
about future interest rates.
Rate Differential Swap - An interest rate or other swap with one of the
payments denominated in a currency different than the currency that
denominates the notional principal amount.
Rate Fixing Date - Two business days before the first date the new rates
are effective in a swap.
Rate Lock - Agreement that guarantees a certain interest rate for a
specified period of time.
Rate Of Interest - The rate used to calculate interest.
Rate Of Return - The current value less the value when purchased divided
by the value when purchased.
Rate Of Return Ratios - Ratios that measure a company’s profitability in
relation to various measures.
Rate Risk - The possibility of losses experienced by a bank as a result
of a increased cost of funding fixed-rate assets caused by rising
interest rates.
Ratings - Evaluations of credit quality.
Ratio Spread - An option spread with a discrepancy in the number of
contracts purchased and the number of contracts sold.
Rational Expectations - The belief that market participants form
expectations that reflect all available information.
Raw Material Supply Agreement - A contract for the supply of raw
material.
Reaction - Situation where prices move downward; the opposite of a
rally.
Reading The Tape - Referring to general equities, following a stock’s
performance by watching the ticker tape for changes in its price.
Ready Market - A market with narrow spreads and nearly identical price
quotes from the market makers.
Real - Referring to general equities, natural.
Real Assets - Perceivable assets such as equipment and buildings, as
opposed to financial assets or obligations.
Real Capital - Assets that can be expressed in financial terms such as
securities.
Real Cash Flow - Cash flow expressed in real terms.
Real Economic Earnings (REE) - An assessment of the fundamental
underlying earnings of a corporation.
Real Estate Investment Trust - Abbreviated as REIT, an investment fund
that owns real estate, is often publicly held, and is similar to a
closed-end mutual fund.
Real Estate Mortgage Investment Conduit - Abbreviated at REMIC, a
financing entity that holds mortgages secured by real property and
issues pass-through certificates, bonds, or other forms of multiple
classes of ownership interests.
Real Exchange Rates - Exchange rates adjusted to include any inflation
differential.
Real Interest Rate - Interest rate not taking into account the effect of
expected inflation; an interest rate expresses in terms of real goods.
Real Option - An option on a physical asset, such as real property,
commodities, etc.
Real Time - As close to immediate as possible; real time quotes are the
most recent offers to sell or buy.
Real Time Gross Settlement (RTGS) - The funds settlement system used on
the FEDWIRE and planned for other modern fund transfer systems.
Real Yield Security (REALS) - A floating rate note with a coupon reset
quarterly to either the increase in the consumer price index plus a
predetermined real yield spread or, if the consumer price index should
be flat or decline, to the level of the real yield spread.
Realistic On Price - Referring to general equities, understanding that
the quantity of an order will affect the price.
Realized Compound Yield - Yield that assumes that coupon payments are
earning the going interest rate and are rolled over until the bond’s
maturation.
Realized Return - The actual earned return over a period of time.
Rebalancing - Reconstructing the proportions of assets in a portfolio in
order to bring it closer to the desired composition.
Rebate - Referring to general equities, agreement for the return of part
of the interest earned by the lender of stock to a short seller.
Rebate Strangle Option - A combination of a put and a call option, with
the strike price of each option serving as the knock-out trigger for
it’s counterpart. If one option reaches a trigger price, the other
option expires immediately and the strangle seller must refund the
entire strangle premium to the buyer.
Recapitalization Proposal - A plan for the restructuring of a company’s
debt and equity in an attempt to avoid takeover.
Receivable Pay-through Securities - Instruments which provide an
investor with an undivided interest in a pool of securitized
receivables.
Receivables Balance Fractions - Portion of monthly sales that are
uncollected (accounts receivable) at the end of a given month.
Receivables Turnover Ratio - A measure of the efficiency in which a
company is managing its accounts receivable; the total operating revenue
divided by the average receivable.
Receiver - An appointed person to oversee the repayment of debts by a
bankrupt company.
Receiver's Swaption - A swaption that gives the holder the right to
receive a fixed rate and pay a floating rate.
Reclamation - The right to demand the return of a security due to
irregularities in the delivery.
Recognized Investment Exchange - Any legal exchange in the United
Kingdom.
Reconstitution - A combination of stripped coupon and principal cash
flows to reassemble a traditional coupon security.
Record Date - The date on which an investor must own shares in order to
collect a dividend, rights, or other distribution.
Recourse - A type of loan in which the lender has a valid claim if the
collateral is not enough to repay the debt.
Recovery Forward Contract - A double-barrier option in which an end user
can sell a foreign currencyforward at a premium to the market rate if
the rate stays within a determined range throughout the life of the
contract. The dealer will rebate part of the contract's premium if the
lower barrier is breached.
Red Herring - A preliminary publication of a prospectus with information
that the SEC requires, not yet approved by the SEC.
Redeemable - Can be redeemed under the terms of the contract.
Redeemable Warrant - A warrant that may be redeemed for cash instead of
exercised.
Redemption - Often refers to convertible securities, the repayment of a
preferred stock issue, or debt security at or prior to maturity. In
reference to open-end mutual funds, the act of selling shares back to
the fund company for cash or securities.
Redemption Charge - Another term for a back-end load; a commission
charged by a mutual fund at the time of redemption, often expressed as a
percentage.
Redemption Cushion - Another term for a back-end load; a commission
charged by a mutual fund at the time of redemption, often expressed as a
percentage.
Reduced Cost Option - Any option with a reduced premium resulting from
the sale of another option, acceptance of a less favorable strike, or
introduction of a barrier provision.
Reference Index - An index used as a determinant of the value of a
financial instrument.
Reference Instrument - A highly-rated debt instrument or an equity index
priced to serve as the basis for a market or credit risk contingent
payment.
Reference Rate - An interest rate that is used as a benchmark, or
reference.
Refi Rate - The refinancing rate of a pool of mortgages.
Refundable - Can be refunded under the terms of the contract.
Refunded Bond - A bond that may have initially been issued as a general
obligation bond but is now secured by an escrow fund; a prerefunded
bond.
Refunding - The redeeming of a bond with the proceeds from the issuance
of lower cost debt obligations.
Regional Fund - A mutual fund that focuses its investment in a certain
geographical area overseas.
Regional Stock Exchanges - Referring to listed equity securities,
American securities exchanges that are located outside of New York city.
Registered Bond - A bond where the issuer keeps record of ownership and
payments.
Registered Investment Advisor - A company or person registered as a
professional financial advisor with the SEC.
Registered Investment Company - A company with the necessary
requirements as stated by the Securities and Exchange Commission to sell
mutual funds.
Registered Options Principal (ROP) - A brokerage firm employee
authorized by an exchange and the SEC to handle customer option
accounts.
Registered Representative - A person who solicits business for a
commission house or futures merchant and is registered with the
Commodity Futures Trading Commission; a stockbroker.
Registered Security - Referring to general equities, a security that
when purchased, the holder’s name is recorded in a registrar.
Registered Trader - An exchange member who frequently trades for his/her
own account.
Registrar - An institution that records the issue and ownership of
securities.
Registration - Referring to general equities, the process where
securities that will be sold to the public are reviewed by the SEC.
Registration Statement - A document filed with the SEC in order to
register securities for public offering.
Regression - A statistical approach to formulating predictions or
explanations by use of an equation; method for estimating the
relationship between variables.
Regression Analysis - An analytical approach used to make estimations in
regard to the relationship between two or more variables.
Regression Equation - An equation used to explain the relationship
between given variable(s) and an unknown variable.
Regression Toward The Mean - The inclination of latter observations of a
random variable to be progressively closer to its mean.
Regular Settlement - Referring to general equities, when a stock
contract is settled and delivered. US transactions are settled on the
fifth full day of business after the trade date.
Regular Way Settlement - Delivery of a purchased security is made
against payment in Fed funds on the day after the transaction.
Regulated Investment Company (RIC) - A company that meets Internal
Revenue Service requirements in order to receive income pass-through
provisions for fund management.
Regulation A - A regulation by the SEC that exempts small public
offerings from registration requirements and allows companies to sell
their own securities without the assistance of a broker.
Regulation D - Regulations involving the issuance and sale of
unregistered securities.
Regulation M - Federal Reserve rule that requires member banks to hold
reserves against Eurodollars lent by their foreign branches to domestic
companies and to hold reserves against their borrowings from those
foreign branches for a 28 day averaging period.
Regulation Q - Rule issued by the Federal Reserve that limits the rates
that banks can pay on savings and time deposits.
Regulation S - An exemption that allows firm’s to issue unregistered
securities, for foreign investors. Abuse of Regulation S has been common
in regard to penny stock fraud.
Regulatory Accounting Procedures - A required accounting method that
allows Savings and Loan Associations to annually elect to defer
gains/losses from the sale of assets by amortizing the gain/loss over
the average life of the asset that was sold.
Regulatory Arbitrage - A financial contract or a series of transactions
undertaken by a party to accomplish a financial objective which is
unavailable to them directly because of regulatory obstacles.
Regulatory Pricing Risk - The possibility of loss that exists when
regulators limit the premium rates that insurance companies can charge
insureds.
Regulatory Spread - The difference in return as a result of differences
in registration requirements and fees between U.S. notes and Eurobond
markets.
Regulatory Surplus - The surplus that is found using regulatory
accounting principles which can be different from a surplus found using
economic accounting principles.
Reinsurance - Insurance bought by a primary insurance underwriter to
reduce exposure to loss.
Reinvestment - The purchase of additional shares in a stock or mutual
fund rather than receiving distributions from dividends and capital
gains in cash.
Reinvestment Rate - Rate at which interest payments made on a debt
security can be reinvested.
Reinvestment Risk - The possibility for loss that exists due to the fact
that future proceeds will have to be reinvested at a lower interest rate
than the current interest rate.
Reinvoicing Center - Subsidiary of a multi-national corporation that
reduces transaction exposure by reinvoicing to affiliates in their local
currency once exports have been billed to the home country in that
country’s currency.
Relative Purchasing Power Parity - The belief that a country’s rate of
change in commodity prices in relation to that of another country
determines the exchange rate of currency between those two countries.
Relative Risk - Volatility of an asset's return measured against the
return of a benchmark.
Relative Strength - A comparison on a stock’s price movement over the
previous year and that of a market index; [the current stock price
divided by the price of one year before] divided by [the current market
index divided by the market index of one year before].
Relative Value - The value of one instrument as compared to that of
another.
Relative Yield Spread - Referring to bonds, the ratio of the yield
spread to the yield level.
Release - Referring to general equities, allowance by another party
involved in the trade to be free from obligation and to show the order
to another broker.
Relinking - When a party enters into an interest rate swap agreement to
offset exposure to a floating rate or reverse floating rate note making
an adverse move.
Remainderman - The beneficiary of the residual assets of a trust after
an event has occurred which will terminate the trust.
Remaining Maturity - The amount of time left before a bond matures.
Remaining Principal Balance - The amount of principal left to be paid
under a mortgage.
Remarketed Preferred Stock - Preferred stock with a dividend rate that
resets at the end of each dividend period.
Remarketed Reset Notes - Floating rate notes with an interest rate rest
to an adjusted rate, determined by what rate will cause the notes to
sell at par.
Rembrandt Market - A foreign market located in the Netherlands.
Réméré - A method of transferring collateral in a repurchase agreement
in which the borrower has an option to repurchase the collateral.
Remote Disbursement - The practice of writing a check drawn on a bank in
a remote location in an effort to increase disbursement float.
Renewal - Referring to general equities, renewing, or replacing an
expired day order with an identical on the next day.
Reoffering Yield - The yield to maturity at which the underwriter offers
to sell the bonds.
Reopen An Issue - Situation where the Treasury will sell more of an
existing issue instead of offering a new issue.
Reorganization - The plan for restructuring a company that is in
bankruptcy.
Replacement Cost - The cost to replace an asset
Replacement Cycle - How often an asset is replaced by an asset of equal
value.
Replacement Value - The cost if an asset were replaced today.
Replacement-Chain Problem - The thought that future replacement should
be taken into account when deciding between a number of projects.
Replicating Portfolio - A portfolio that is constructed in such a way as
to match a particular index.
Repo - Repurchase agreement; contract where a security is sold with the
agreement that the seller will repurchase it on a certain date at a
certain price.
Repo Rate - The financing rate for government securities sold against
repurchase agreements.
Report - Referring to general equities, a confirmation of the execution
of an order.
Reported Factor - A numeric expression of outstanding principal balance
divided by the original principal balance, for a given amortization
period.
Reporting Currency - The currency that a company prepares its financial
statements in.
Reporting Level - Level by which, when exceeded, futures and options
must be reported to the exchange.
Reproducible Assets - A tangible asset such as a building or equipment.
Repurchase Agreement - Also called a repo; contract where a security is
sold with the agreement that the seller will repurchase it on a certain
date at a certain price.
Repurchase Of Stock - The act of a company repurchasing, or buying back,
its own stock.
Required Reserves - Amounts of money that a bank is required to keep on
deposit at the Federal Reserve Bank in non-interest bearing accounts.
Required Return - The lowest expected return one requires before buying
an asset.
Required Yield - Referring to bonds, yield required to match available
expected returns for other instruments with comparable risk.
Research Portable - Referring to general equities, a system that
transmits research data via computer.
Reserve - A deposit of money held in order to meet unplanned needs; an
entry in accounting that reflects contingent liabilities.
Reserve Currency - Foreign currency held in case of a need for exchange
intervention or the settlement of claims between governments.
Reserve Ratio - A percentage of deposits that a bank is required to keep
on deposit at a Federal Reserve Bank.
Reset Date - The date a swap's periodic payment terms are established.
Reset Frequency - Frequency, or how often, the floating rate changes.
Reset Option - A call option whose strike price may be reset to a lower
strike or a put whose strike price may be reset to a higher strike at
some point during the life of the instrument if the option is out of the
money on the reset date.
Reset Swap - An interest rate swap agreement with the floating rate
payment based on the reference index rate at the end of the interest
period rather than the rate at the start of the period.
Residual Assets - Remaining assets after debtholder claims are
satisfied.
Residual Dividend Approach - Approach where a company pays dividends
only if there are no acceptable investment opportunities available for
the funds.
Residual Interest Bonds (RIBs) - Bonds that consist of municipal reverse
floaters and Select Auction Variable Rate Securities (SAVRs) that the
issuer pays a fixed rate on the whole issue in order to pay for the
floating rate on the SAVR and the residual on the bonds.
Residual Losses - Losses suffered by shareholders that are consequential
to poor management decisions.
Residual Method - Accounting method of allocating the expense of
acquiring another company among the assets of the acquired company.
Residual Risk - The component of an asset's risk that cannot be
explained market or industry risk.
Residual Unhedged Risk - Unmatched risk remaining after the
implementation of a hedging position.
Residual Value - The value of a leased property at the time of the lease
expiring.
Residuals - Remaining cash flow generated by pool collateral; a measure
of the impact of company-specific events.
Resistance Level - Referring to general equities, a price level that is
difficult for a security to rise above.
Resolution Trust Corporation (RTC) - An organization responsible for the
organization and recovery of the assets of failed thrift institutions.
Restricted - Referring to general equities, listed as a trader that may
not maintain positions or solicit business in a stock due to affiliate
ownership, etc.
Restricted Stock - Referring to general equities, stock that must be
traded in compliance with special regulations from the SEC; stock that
is restricted from trading in the secondary market.
Restrictive Covenants - Rules placing constraints on borrowers.
Restructuring - A change in the financial structure of a corporation
characterized by writedowns of assets and reduction in operations and
personnel.
Retail - Customers, both institutional and individual, as opposed to
brokers.
Retail Credit - Consumer credit; credit given to consumers for the
purchase of goods and services.
Retail Investors - Investors who are investing for their own account, as
opposed to for the account of a company.
Retail Price Index (RPI) - The principal price index used in the United
Kingdom as a basis for inflation- adjusted government bonds.
Retained Earnings - Earnings that are not paid out as dividends, but are
retained for reinvestment in company operations.
Retention Rate - The percentage of earnings that are retained, or held
by a company, not paid out as dividends.
Retire - To end a security, extinguish it, or pay off a debt: terminate.
Retracement - A price movement in the opposite direction of the previous
movement.
Retractable Note - A debt instrument callable by the issuer at selected
dates.
Retractable Swap - A swap that gives the fixed rate payer the right to
cancel the swap under certain conditions.
Return - The change in value of s security or portfolio over a given
period of time.
Return On Assets - Abbreviated as ROA, a measure of a company’s
profitability; net income for the past year divided by total average
assets.
Return On Equity - Abbreviated as ROE, a measure of a company’s
profitability, net income for the past year divided by common
stockholder equity (with adjustments for any stock splits), expressed as
a percentage.
Return On Investment - Abbreviated at ROI, book income as a ratio to net
book value, expressed as a percentage; the amount of income from an
investment.
Return On Net Capital Employed (RONCE) - Pre-tax profit divided by
capital committed to the specific operation.
Return on Sales - Net income divided by sales.
Return On Total Assets - Proportion of earnings available to common
stockholders to total assets.
Return-To-Maturity Expectations - An investor’s return realized by
rolling over short-term bonds to a given investment horizon (time
period) will be equal to holding a zero-coupon bond with a maturity that
matches the investment horizon.
Reuters - A London news and quotation service.
Revaluation - When a foreign exchange currency value increases because
it is pegged to gold or other currencies.
Revenue - Income of a firm before expenses or taxes.
Revenue Bond - A municipality bond issued to finance a project or
enterprise where the issuer promises to give the bondholders the
revenues from the operating projects.
Revenue Fund - An accounting of revenues from an enterprise that is
financed by a municipal revenue bond.
Reversal - A change in direction in the stock market.
Reverse Contingent Premium Option - Option that requires payment of a
premium only if the option is out-of-the-money at maturity.
Reverse Conversion - A technique used by an institution in order to
receive a better than money market return at a low risk. The institution
sells stock short, buys a call, and sells a put to attain a desired
return.
Reverse Dual Currency Bond - A bond which pays coupons in a foreign
currency(typically the currency of the issuer) and pays principal in the
base currency.
Reverse Equity Risk Reversal - A combination of a short out-of-the-money
put, a long out-of-the- money call, and a short futures or cash market
position where the value of the position increases as the underlying
decreases.
Reverse Floating Rate Note - A popular floating rate note structure in
which the rate paid increases as market floating rates decline.
Reverse Floating Rate Swap - A swap structure with a reverse floating
rate payment from one counterparty.
Reverse Interest Rate Collar - A collar that provides an interest cost
or yield that decreases as rates rise and increases as market rates fall
within a range.
Reverse Option Hedge - A position formed by holding more than one call
option for each unit of the underlying the investor is short. As the
market price moves away from the strike price of the options in either
direction, the position becomes more profitable.
Reverse Price Risk - The possibility of loss when a loan is sold at
rates prevailing at the time of mortgage application and then is set at
the close, and the rates have fallen by close.
Reverse Repo - A repurchase agreement from the customer’s perspective.
Reverse Stock Split - A decrease in the number of share where
shareholders maintain their amount of equity, for example, a 1 for 3
split.
Reverse Swap - A swap agreement in which counterparties reverse
positions of an existing swap. Used as an alternative to a cancellation
for tax and accounting purposes.
Reverse Zero Coupon Swap - Swap in which the interest rate and principal
payments are paid by the counterparty over time.
Reverse-Annuity Mortgage - Abbreviated as RAM, a mortgage where a bank
loan is made for an amount equal to a percentage of the value of a home,
then, payments are made to the homeowner as an annuity.
Reversible Swap - A swap device which allows one of the counterparties
to switch from paying a fixed rate to receiving a fixed rate.
Reversing Trade - Entering the opposite side of a currently held
position in order to close it out.
Reversion - Removal of assets from an overfunded defined benefit pension
plan by the plan sponsor.
Revolving Credit Agreement - The agreement of a bank to lend up to a
certain amount to a customer during a certain time period.
Revolving Line Of Credit - A line of credit at a bank where a customer
borrow and repay funds as needed.
Reward-To-Volatility Ratio - The proportion of excess return to
portfolio standard deviation.
Rich - Referring to general equities, a term describing a security with
a price that seems too high.
Riding The Yield Curve - The purchase of long-term bonds expecting
capital gains as yields fall and the bond maturity declines.
Right - A shareholder privilege that allows them to purchase shares of a
new issue of common stock before it is offered to the public
Right Here - A term referring to the fact that an inquiry is ready to be
executed and the price is in line.
Rights Offering - An offering of rights where a shareholder is allowed
to purchase additional company shares, often at a discount.
Rights-On - Term describing shares that trade with rights attached.
Ring - Area on the trading floor where traders execute orders; a pit.
Rising Star - An upgrade in a bond’s rating as a result of improvement
in the credit quality of the issuer.
Risk - Possibility or likeliness of loss, degree of uncertainty.
Risk Adjusted Return - A rate of return that shows how an asset
performed as compared to a benchmark, calculated by subtracting the rate
of return from the rate of return of an asset with similar risk.
Risk Adjusted Return On Capital (RAROC) - A technique for analyzing risk
of an instrument or set of instruments in which the rate of return must
increase as the rate of risk increases.
Risk Analysis Program (RAP) - A spreadsheet program used to measure the
market risk of a portfolio.
Risk Arbitrage - Capturing the spread, or difference, between the market
value of an announced takeover target and the price the acquiring firm
eventually pays.
Risk Assessment Matrix (Ram) - Classification of a level of risk within
distinct components of an operation.
Risk Averse - Term describing an investor that tends to select
investments that have lower risk when given the opportunity.
Risk Aversion Coefficient - The rate at which an investor is willing to
sacrifice expected return in order to decrease risk.
Risk Classes - Projects grouped together by their common amount of risk
Risk Controlled Arbitrage - A series of transaction utilizing mortgage
backed securities as assets.
Risk Equivalent Unit (REU) - Measurement of the volatility of an option
as compared to a move in the underlying and the position covered by the
option.
Risk Factors - Factors that affect returns.
Risk Indexes - Groupings of risk that are used to calculate fundamental
beta.
Risk Lover - An investor who enjoys investing in securities that have a
high level of risk.
Risk Management - The management of exposure to risk through careful
selection of investments.
Risk Measurement - Evaluation of risk management activities for the top
management of a corporate or fund management organization.
Risk Measurement Units (RMUs) - Currency-denominated Ratings assigned to
specific financial instruments.
Risk Neutral - An approach toward risk that leads an investor to be
unbiased between investments with the same expected value but different
risks.
Risk Pool - A collection of risks associated with a specific set of
conditional obligations in an insurance plan.
Risk Premium - Extra amount earned by holding risky assets rather than
low or no risk assets.
Risk Premium Approach - A method of allocating assets to determine the
valuation of asset classes using expected returns.
Risk Seeking - An approach toward risk that leads an investor to favor
an investment with the same expected value but an uncertain outcome to
an investment with a certain outcome.
Risk Transfer - The use of a security or contract to change the
arrangement of cash flows in a portfolio.
Risk-Adjusted Profitability - Determination of an expected value that is
equal to the actual risky expected value.
Risk-Adjusted Return - The return earned on an asset adjusted for the
amount of risk involved with that particular asset.
Risk-Controlled Arbitrage - Strategy in which a bank buys swaps the cash
flows of a mortgage and uses collars to reduce interest rate and
prepayment risk.
Risk-Free Asset - An asset that has no risk; an asset with a known
return.
Risk-Free Rate - Rate earned on an asset that has no risk.
Risk-Reward Ratio - Referring to general equities, measure of risk as
compared to possible reward or return.
Riskless Arbitrage - Purchasing and selling an asset at the same time in
order to yield a profit.
Riskless Asset - A risk-free asset; an asset whose future asset is
known.
Riskless Rate - Rate earned on an investment that is considered to be
without risk.
Riskless Rate Of Return - The rate of return earned from a riskless
asset.
Risky Asset - An asset that has a high level of risk; an asset with an
uncertain return.
ROA - Abbreviation for return on assets.
Rocket Scientist - Nickname for the creators and managers of risk
management products and services.
ROE - Abbreviation for return on equity.
ROI - Abbreviation for return on investment.
Roll Down - To close an option position and replace it with a new
position with a lower strike price.
Roll Order - Referring to listed equity securities, the replacement of a
position that is maturing with a position with a new maturity.
Roll Over - Reinvesting funds that have been received from a maturing
security: the transfer of funds from one financial instrument to
another.
Roll Up - To close an option position and replace it with a new position
with a higher strike price.
Roll-Down Call - A call option with a strike price moved to a lower
level if the underlying falls far enough to hit the trigger price. The
option then becomes a down-and-out call struck at the lower level with
an outstrike at an even lower level. If the underlying hits this trigger
price, the option expires worthless.
Roll-Over Risk - Exposure from mispricing of an option or futures
contract at the time an old position must be closed and a new position
opened.
Roll-Up Put - A put option with a strike price moved to a higher level
if the underlying rises enough to hit the trigger price. The option then
becomes an up-an-out put, struck at a higher price on the underlying. If
the underlying hits this trigger price prior to maturity, the put is
cancelled and expires worthless.
Rollercoaster Swap - A swap agreement with fluctuating swap payments in
order to oblige the financing requirements of a counterparty.
Rolling Hedge - Maintaining a continuous short-term options position by
closing contracts close to maturity and opening contracts with later
maturities.
Rolling Over - Substitution of an options position with a different
expiration date or strike price for a previously established position.
Rolling Spot Currency Contract - A currency contract with no carry cost
or benefit because it is adjusted daily to the swap rate.
Rollover Replication - Hedging of a long term option position with
shorter term option positions.
Rotation - Call auction method used on an option exchange by which all
of the option series in a particular underlying are opened.
Round Lot - An order of 100 shares of a stock; an order of shares of
stock in a multiple of 100.
Round-Trip Transactions Costs - Costs that are involved in completing a
transaction.
Round-Turn - The act of offsetting a position either by an opposite
transaction, by making delivery of the actual commodity, or by making
delivery of the financial instrument
Rule 13-D - An SEC rule stating that a form must be filed within ten
days of acquiring ownership of 5% or greater of any class of equity
securities in a publicly held company. The holder must file with the SEC
and the exchange that the stock is listed on.
Rule 14-D - Rule having to do with restrictions covering public tender
offers.
Rule 144 - A part of the Securities Act of 1933 that dictates terms and
conditions in regard to the trading of unregistered stocks.
Rule 144A - An SEC rule that allows institutional buyers to buy/sell
securities that are not listed.
Rule 415 - A rule that allows companies to file a registration for
securities that they are not issuing at the time, but intend to issue
when market conditions improve.
Rule of Seventy-two - Rule used to determine approximate amount of time
money invested at a certain rate will take to double. (Rate of return
multiplied by the number of years equals 72)
Run - A series of quotes for different maturities or securities.
Rung - A threshold in a ladder option.
Runoff - Trades that are executed on the NYSE before close, but are not
reported until later due to heavy trading. |
