Category: R

When a variable rate of interest is exchanged for a fixed rate of interest to accommodate flexibility between two terms experiencing different financial needs. Refer to variable principal swap.

A swap exchanging realized and implied volatility for a market reference. This is common for equith and foreign exchange markets. Refer to variable swap.

When bankruptcy is files this occurs. The company is analyzed by trustee to liquidate assets and pay off claims. This is done before a court decides what to do with the company.

The ratio between the net income and average total assets measured during an identified period of time.

The relative change in the cost of an option making it a risk free rate holding all other variables constant. Refer to delta, gamma, theta, greeks, and vega.

The concept that the level of risk can be reduced by combining uncorrelated risks. AKA pooling.

Gaining capital by purchasing and holding longterm bonds in the event of declining yields. AKA riding the curve.

Restructuring a company to create more equity and reduce debt. The company may be solvent or filing for bankruptcy. Or reorganizing the voting abilities of stock. AKA deleveraging. Refer to dual class

When an asset is repurchased by a lender the borrower must pay this interest rate. It is usually lower than before since it is secured by collateral.

The total, unadjusted return generated for shareholders by a firm during an identified period of time. Refer to risk adjusted return on capital.

When a holding is at its highest price and a firm will benefit from selling it.

The higher payments made to a firm that invests in high risk ventures with the possibility of default. AKA risk margin. Refer to premium.

A risk reducing strategy that involves closing out nearby or next nearby derivative contracts and then repurchasing to push out the maturity date. AKA stack and roll. Refer to strip hedge.

When insured parties group together to protect one another. New members are sought to prevent loss. AKA recriprocal insurance exchange.

The chance that an asset will be reinvested at a less than favorable rate. This can cause great loss. AKA refinancing risk or reinvestment risk. Refer to negative gap, positive gap, ratesensitive

A formula used to determine profit made by an investment or to compare several investments to determine which ones generate the most capital.

Giving existing shareholders an opportunity to purchase new stock at current prices with the remaining available stock being sold in the open market at the future rate. AKA privileged subscription issue and

The process of estimating the impact of financial and operating risks on a firm using formulas, statistics, and actuarial techniques. Refer to risk identification and risk management.

When a repurchase agreement, revolving credit facility, evergreen deposit, commercial paper, account payable, or not is renewed or reissued as it comes due providing continued funding for the debtor.