Combining non related securites to ensure more profit. Refer to diversification, diversifiable risk, nondiversifiable risk, and portfolio theory.

How a portfolio is managed. Risk and returns are measured to create diversification strategies.

When the price of cash is greater than the price of the futures. Refer to basis risk and negative basis.

When option purchases expose an investment to a larger price market. Refer to gamma and negative gamma.

When an asset has higher gains than losses. An example of these are long options and bonds. Refer to negative convexity, nonlinear instrument, and positive gamma.

The maximum amount payable to the insured by the insurer. AKA aggregate limit and exhaustion point.

When short term interest rates are lower than long term rates. This indicates normal market yield. AKA upward sloping yield curve. Refer to kinked and negative yield curve.

A shareholders right at first choice on buying stocks. Any left are available to the market at large. AKA antidilution provision and subscription priviledge. Refer to rights issue.

The derivative that protects crops against precipitation. Refer to temperature derivative.

An insured with less risk of loss and claims than the normal applicant. Insurers find these risks to increase their underwriting income and lower settlements.

Funding arranged before loss is incured. It is less expensive than post loss financing because the capital is there when its needed. Refer loss financing.

When a company quickly buys a block of stock offering a premium to shareholder. Refer to dawn raid or saturday night special.

The amount an insurer needs to cover its expenses and generate profit. Fair premium is determined using premium loading and pure premium.

A percent of new issue held by the manager to offer to the institutions investors.

An option that allows investors to redeem their bonds if a trigger event occurs. The sudden redemption reduces cash value and makes the stock less attractive to the buyer.

The speed a mortgage can be paid ahead of schedule.

The way banks calculate the speed a mortgage will be repaid. A common way is the constant repayment rate model.

A new bond floated to pay an existing bond issue. This occurs at the first call date. Proceeds are invested in low risk securites until the original bond is redeemable. This is

When a bond price is close to its call redemption price.

Stock that has a first claim on assets. If distress should occur these stockholders get first dibs.