Finance Derivatives Glossary

Accreting	An ______ principal is one which increases during the life of the deal
Accreting swap	Swap whose notional amount increases during the life of the swap (opposite of amortising swap)
Accrued interest	The proportion of interest or coupon earned on a bond from the previous coupon payment date until the value date
Accumulated value	The same as future value
act/360	A day/year count convention taking the number of calendar days in a period and a "year" of 360 days
act/365	A day/year convention taking the number of calendar days in a period and a "year" of 365 days.
act/act	A day/year count convention taking the number of calendar days in a period and a "year" equal to the number of days in the current coupon period multiplied by the coupon frequency.
Agency securities	In the United States, securities issued by government-sponsored entities, such as the Government National Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC)
American	An _______ option is one which may be exercised at any time during its life
Amortising	This principal is one which decreases during the life of a deal, or is repaid in stages during a loan
Annuity	An investment providing a series of (generally equal) future cash flows
Appreciation	An increase in the market value of a currency in terms of other currencies
Arbitrage	The process of buying securities in one country, currency or market, and selling identical securities in another to take advantage of price differences.
Arbitrageur	Someone who undertakes arbitrage trading
Arch	(autoregressive conditional heteroscedasticity) A discrete-time model for a random variable. It assumes that variance is stochastic and is a function of the variance of previous time steps and the level of the underlying
Ask	The two-way price at which a market maker will buy and sell stock
Asset	Probable future economic benefit obtained or controlled as a result of past events or transactions. Generally classified as either current or long-term
Asset & Liability Management (ALM)	The practice of matching the term structure and cash flows of an organisation's asset and liability portfolios to maximise returns and minimise risk.