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Financial Markets Glossary

O - R




See overnight.


Obligation Assimilable du Trésor, French Treasury bond.

OBL: (Or Bobl)  Bundesobligation, a German government bond.
Obligation netting:

See netting.

Odd date:

See broken date.


If a market maker says “Off!”, he means “The price that I last quoted is no longer valid”.

Off-balance sheet

An instrument where the principal amount is either not transferred, or is transferred simultaneously in both directions.


(Or ask).  In general, the price at which the dealer quoting a price is prepared to sell or lend. The offer price of a foreign exchange quotation is the rate at which the dealer will sell the base currency and buy the variable currency.  The offer rate in a deposit quotation is the interest rate at which the dealer will lend the currency involved.  The offer rate in a repo is the interest rate at which the dealer will lend the collateral and borrow the cash.


A rate which is not the current market rate.

Off-side date:

The value date for the second leg of a repo.


Obligation Linéaire Obligatie, Belgian government bond.

On-side date:

The value date for the first leg of a repo.

Open interest:

The quantity of futures contracts (of a particular specification) which have not yet been closed out by reversing.  Either all long positions or all short positions are counted but not both.

Open outcry

Trading face-to-face on a physical exchange.

Open repo:

A repo with no fixed maturity.  The repo is generally rolled over each day at a new repo rate, although the rate could instead be re-fixed at longer intervals, such as monthly.  Same as day-to-day repo.

Operational risk:

The risk of losses due to failures in the bank’s operations generally.


An option is the right, without any obligation, to undertake a particular deal at predetermined rates.  See call, put.

Option forward:

See time option.


See over the counter.


A call (put) option is out-of-the-money if the underlying is currently less (more) valuable than the strike price.  (For a European option, typically considers the underlying’s current forward price rather than it’s current spot price).  See at-the-money, in-the-money.


A foreign exchange forward or short-date deal is an outright if it involves a single settlement of one currency against another, as opposed to an FX swap, which involves two settlements.

Over the counter:

(Or OTC).  An OTC transaction is one dealt privately between any two parties, with all details agreed between them, as opposed to one dealt on an exchange  -  for example a forward deal as opposed to a futures contract.


A position in which a dealer's liabilities (borrowings taken in) are of longer maturity than the assets (loans out).

Overlent: A position in which a dealer's assets (loans out) are of longer maturity than the liabilities (borrowings taken in).

(Or O/N or today/tomorrow).  A deal from today until the next working day ('tomorrow')

Overnight limit:

The maximum size of a position which a dealer is allowed to take overnight.

Own funds:

A bank’s available capital and reserves for the purposes of capital adequacy rules.


In foreign exchange, when the outright and spot exchange rates are equal, the forward swap is zero or par.

When the price of a security is equal to the face value, usually expressed as 100, it is said to be trading at par.

A par swap rate is the current market rate for a fixed interest rate swap against LIBOR.

Par yield curve:

A curve plotting maturity against yield for bonds priced at par.


The official rate of exchange for one currency in terms of another which a government is obliged to maintain by means of intervention.

Participation forward:

A product equivalent to a straightforward option plus a forward deal, but structured as a forward deal at an off-market rate plus the opportunity to benefit partially if the market rate improves.


A path-dependent option is one which depends on what happens to the underlying throughout the option's life (such as an American or barrier option) rather than only at expiry (a European option).


The person to whom something is payable (for example, a bill of exchange).

Payment versus payment:

See PvP.


Short for 'Pension Livrée'. Classic repo in the French domestic market.


See points.


The first stage of money laundering, in which the cash is placed in the financial system.  See layering, integration.

Plain vanilla:

See vanilla.


The last two decimal places in an exchange rate.  For example, when EUR/USD is 1.2510 / 1.2520, the points are 10 / 20.  See big figure.

Position risk:

Same as market risk, used particularly in capital adequacy calculations.

Positive yield curve

See normal yield curve.


See purchasing power parity.

Precious metals:

Gold, silver, palladium, platinum, and the other platinum group metals (rhodium, ruthenium, iridium and osmium).


The amount by which a currency is more expensive, in terms of another currency, for future delivery than for spot, is the forward premium (in general, a reflection of interest rate differentials between two currencies).  If an exchange rate is 'at a premium' (without specifying to which of the two currencies this refers), this generally means that the variable currency is at a premium.  See discount.

An option premium is the amount paid up-front by the purchaser of the option to the writer.

Present value:

The amount of money which needs to be invested now to achieve a given amount in the future when interest is added.  See time value of money, future value.

Prêt de titres:

Securities lending in France.

Price differential:

(As defined in the GMRA) the accrued interest on the cash lent in a repo.

Price factor:

See conversion factor.

Pricing rate:

(As defined in the GMRA) same as the repo rate.

Primary market:

The primary market for a security refers to its original issue.  See secondary market.

Probability density:

A description of how likely any one of a series of numbers is to occur.

Probability distribution:

The mathematical description of how probable it is that the value of something is less than or equal to a particular level.

Promissory note

A written promise to pay.

Prompt date:

The delivery date for a commodity futures contract or the date on which the buyer of the option will buy or sell the underlying commodity if a option is exercised.

Prompt month:

The front month  - i.e. the nearest expiring futures contract  - in commodities.

Public order member

A member of a futures exchange able to enter into transactions on behalf of customers.

Purchase price:

(As defined in the GMRA) in a classic repo, the cash originally lent (effectively the dirty price adjusted for haircut).  In a buy / sell-back, the original clean price transacted at the beginning.

Purchasing power parity

The idea that a currency’s exchange rate must move, in the long term, to adjust for inflation differentials against other countries.  See fundamental equilibrium exchange rate.


A put option is an option to sell the commodity or instrument underlying the option.  See call.


Payment versus payment, in which settlement of cash payments from one institution to another is made through a clearing mechanism which allows for the payments to be transferred finally only when any payments due in the opposite direction from the same institution are made simultaneously.  See DvP.

Quanto swap:

A swap where the payments on one or both legs are based on a measurement (such as the interest rate) in one currency but payable in another currency.

Quasi-coupon date:

The regular date on which a coupon payment would be scheduled if there were one.  Used for price / yield calculations for zero-coupon instruments.

Quoted currency:

See variable currency

Range forward:

A zero-cost collar where the customer is obliged to deal with the same bank at spot if neither limit of the collar is breached at expiry.

Real effective exchange rate:

An effective exchange rate adjusted for inflation differentials between countries.



The interest paid on cash collateral in a securities lending transaction.

Reciprocal rate:

An exchange rate quoted in such a way that the base currency and variable currency are reversed.


Checking the entries shown on an account statement (for example the bank’s nostro account statement) with the bank’s internal records (for example the accounting ledgers) to ensure that they correspond exactly.

Record date:

A coupon or other payment due on a security is paid by the issuer to whoever is registered on the record date as being the owner.  See ex-dividend, cum-dividend.


A security is said to be redeemed when the principal is repaid by the issuer.


Registered security

A security where ownership for the purpose of paying coupons and principal is determined by whoever is recorded centrally as the owner.  There might or might not also be a physical piece of paper evidencing ownership.  See bearer security.

Reinvestment rate: The rate at which interest paid during the life of an investment is reinvested to earn interest-on-interest, which in practice will generally not be the same as the original yield quoted on the investment.
Replacement risk:

The risk of losing an unrealised profit because the counterparty defaults.


(Or RP).  Usually refers in particular to classic repo.  Also used as a term to include classic repos, buy/sell-backs (and sometimes also securities lending).

Repurchase agreement:

See repo.

Repurchase price:

(As defined in the GMRA) in a classic repo, the current value of the cash loan  -  that is, the original cash loan plus accrued interest on it so far, at any time during the transaction.  See sell back price.

Reputational risk:

The risk of damage to a bank’s reputation.


An official one-off increase in the value of a currency in terms of other currencies.  See devaluation.


See reverse repo.

Reverse repo:

(Or reverse).  The opposite of a repo.

Reverse to maturity:

A reverse repo with the same maturity date as the security used for collateral.

Rho (r):

The change in an option's value relative to a change in interest rates.

Risk asset ratio:

The ratio of a bank’s own funds to its risk-weighted assets.

Risk reversal:

Purchase (or sale) of a call option (generally at a higher strike), combined with the sale (or purchase) of a put option (generally at a lower strike).


A variance / covariance model for VaR, made available by JP Morgan.

Risk-weighted assets:

The money which a bank has put at risk for the purposes of capital adequacy rules.


See tom/next.  Also refers to renewal of a loan.


See Repo.


Real time gross settlement system, in which each payment instruction is effected immediately in full, as it is received, provided that the payer has enough funds.

Running yield: Same as current yield.


Markets International Ltd
Aylworth, Naunton
Cheltenham GL54 3AH

e-mail: ask@markets-international.com

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