A swaption is an option on a swap. There are two types of swaption: 1. A payer’s swaption: if you buy this option, it gives you the right (but not obligation) to enter into a forward starting swap where you pay fixed interest. 2. A receiver’s swaption: if you buy this option, it gives you […]

Swap is a term that describes a bilateral transaction where two institutions exchange cash flows based on separate indices. A swap has a start date, a maturity date, and a principal amount on which the cash flow payments are calculated. The simplest example is an interest rate swap. There is no principal exchange, only interest […]

This is the traditional two-day settlement period where transactions are agreed upon today, but the delivery and payment take place in two days.

A special purpose vehicle is a company that is usually set up in a tax and business-friendly environment, for example, Delaware, Jersey, or the Netherlands Antilles.

When a particular bond is in demand in the repo market, the repo rate can fall much lower than market interest rates. That bond is then referred to as unique collateral (see repurchase agreement).

This refers to a situation where you sell a financial asset that you do not own. You hope to benefit from any fall in the price of that asset.

This is a measure of risk and returns often used in fund management.

Settlement risk refers to the risk or probability that one party will not uphold their contractual obligation in a transaction or deal.

This is the area of a financial institution responsible for originating confirmations, verifying trades, and arranging payments. It is outside and independent of the treasury.

The segregation of duties is the assignment of various steps in a process to different people.