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Financial Glossary

CABLE

A term used in the foreign exchange market for the USD/GBP rate

CALENDAR SPREAD

An option position comprised of purchase and sale of two option contracts of the same type and at the same strike price but with different expiration dates

CALL OPTION

An option that gives the holder the right, but not the obligation, to buy the underlying instrument at a specified price during a fixed period

CANCEL

To void a working order in the market

CAPITAL

Money invested in a company

CAPM

Capital Asset Pricing Model; An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities

CAPITAL GAIN

When securities are sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost

CAPITAL MARKETS

A general term encompassing all markets for financial instruments with more than one year to maturity

CAR

A term used to describe the amount of an underlying commodity; one commodity contract

CASH COW

A company that generates a steady and significant amount of free cash flow

CASH DELIVERY

Same day settlement

CASH FLOW

Measure of the actual cash generated by a business rather than the accounting profit

CASH MARKETS

Also called spot markets; these are markets that involve the immediate delivery of an instrument

CASH SETTLEMENT

A method of settling certain futures or option contracts whereby the seller pays the buyer the cash value of the commodity traded

CBOE

Chicago Board Options Exchange

CBOT

Chicago Board of Trade

CEILING)

The highest price such as an interest rate or other numerical factor allowable in a financial transaction

CERTIFICATE OF DEPOSIT

A negotiable certificate in bearer form issued by a commercial bank as evidence of a deposit with that bank which states the maturity value, maturity rate and interest rate payable

CHAPTER 7 PROCEEDINGS

Provisions of the Bankruptcy Reform Act under which the debtor's assets are liquidated by a court because reorganization would fail to establish a profitable business

CHAPTER 11 PROCEEDINGS

Provisions of the Bankruptcy Reform Act under which the debtor is reorganized by a court because the estimated value of the reorganization exceeds the expected proceeds from its liquidation

CHARTIST

An individual who studies graphs of historic data to find trends and predict support and resistance levels as well as other continuation and reversal patterns

CLASS

Options of the same type with the same underlying security

CLEARING

The procedure were a clearing house or principle becomes the buyer and/or the seller, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract

CLEARING HOUSE

An adjunct to a futures exchange through which transactions executed on its floor are settled by a process of matching trades

CLOSED POSITION

A transaction which leaves the trade with a zero net exposure to the market with respect to a particular currency

CME

Chicago Mercantile Exchange

COMEX

Commodity Exchange of New York

COMMISSION

The fee that a broker may charge clients for dealing on their behalf

COMMODITY

A commodity is food, metal, or another fixed physical substance that investors buy or sell, usually through futures contracts

CONDOR

An option strategy consisting of both puts and calls at different strike prices to capitalize on a narrow range of volatility

CONFIRMATION

The process immediately following a transaction whereby the traders confirm the details of the trade

CONSUMER PRICE INDEX

Monthly measure of prices of a specified set of consumer goods and services, providing a measure of inflation. Rising CPI is normally associated with expectation of higher short term interest rates and may therefore be supportive for a currency in the short term.

CONTRACT EXPIRY DATE

The last trading date of a futures or options contract

CONTRACT

An agreement to buy or sell a specified amount of a particular currency on OTC, future or option basis for a specified month in the future

CORPORATE FINANCE

The processes by which companies raise capital to fund growth, acquisitions etc; the division of an investment bank which advises on acquisitions, mergers, bid defenses, restructures and disposals

COVER

Any transaction taken to limit exposure

COVERED CALL

Having a long position in a currency or an asset combined with a short call option position on the same underlying currency or asset

COST OF LIVING INDEX

An index that measures inflation such as CPI

COUNTER PARTY

The party that takes the other side of an exchange transaction

COUNTER VALUE

If a currency is traded against the dollar, the counter value would be the dollar value of the transaction

CREDIT RISK

The risk of loss due to a counterparty defaulting or a debtor not repaying, or more generally the risk of loss due to some "credit event"

CROSS DEAL

A foreign exchange deal involving two currencies that neither of which is the US Dollar or the base currency

CROSS RATES

Rates between two currencies that neither of which is the US Dollar or the base currency

CURRENCY SWAP

An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency

CURRENT ACCOUNT

The net balance of a country's balance of payments (BOP) and contains the import and export items of goods and services as well as transfer payments and net investment income

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