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Financial Markets Glossary

S - Z




See spot/next.


See spot-a-week.


See synthetic agreement for forward exchange.


See special drawing right.

Secondary market:

The market for buying and selling a security after it has been issued.  See primary market.



Securities lending:

(Or stock lending).  When a specific security is lent against some form of collateral.


A financial asset sold initially for cash by a borrowing organisation (the 'issuer').  The security is often negotiable and usually has a maturity date when it is redeemed.

Same as collateral.

Sell / buy-back:

Simultaneous spot sale and forward purchase of a security, with the forward price calculated to achieve an effect equivalent to a classic repo.

Sell back differential

(As defined in the GMRA) the accrued interest on the cash loan at any time during a buy / sell-back (equivalent to price differential in a classic repo).

Sell back price:

(As defined in the GMRA)   Calculated for the original repurchase date in a buy / sell-back, the clean forward price.  Calculated for any other date, the all-in price for close-out.  See repurchase price.

Serial months

Additional futures delivery months added to the regular cycle, so that the three nearest possible months are always available.

Settlement risk:

The risk that a bank will fail to receive cash or securities from a counterparty on settlement date after it has already paid cash or delivered securities to that counterparty.


A short position is a surplus of sales over purchases of a given currency or asset, or a situation which naturally gives rise to an organisation benefitting from a weakening of that currency or asset.  To a money market dealer however, a short position is a surplus of money lent out over borrowings taken in (which gives rise to a benefit if that interest rate falls).   See long.

Short date:

A deal for value on a date other than spot but less than one month after spot.


Securities Industry and Financial Markets Association, the US domestic professional body for the securities and repo markets. Successor to TBMA and SIA.  See ICMA

Simple interest:

When interest on an investment is paid all at maturity or not reinvested to earn interest-on-interest, the interest is said to be simple.  See compound interest.

Simple yield to maturity:

Bond coupon plus principal gain / loss amortised over the time to maturity, as a proportion of the clean price per 100.  Does not take time value of money into account.  See yield to maturity, current yield.

Special collateral:

A repo dealt for special collateral can only be secured by one particular security;  the buyer enters into the transaction precisely because he needs that specific security rather than any other.  If a security 'goes special', it means that there is particular demand to borrow it, so that it commands a lower repo rate than usual.  See general collateral.

Special drawing right: (Or SDR).  The artificial basket currency of the IMF
Specific collateral:

Similar to special collateral.  A buyer may insist on a security rather than general collateral, because he needs that particular one.

Specific risk:

In measuring position risk for capital adequacy purposes, the risk arising from the issuer of a particular security held by the bank. See general risk.


A deal undertaken because the dealer expects prices to move in his favour, as opposed to hedging or arbitrage.


A deal to be settled on the customary value date for that particular market.  In the foreign exchange market, this is for value in two working days' time.

In some futures such as gold, ‘spot’ means the nearest expiring futures contract.

A spot curve is a yield curve using zero-coupon yields.


(Or S/N).  A transaction from spot until the next working day.


(Or S/W).  A transaction from spot to a week later.


The difference between the bid and offer prices in a quotation.

Also a strategy involving the purchase of an instrument and the simultaneous sale of a similar related instrument, such as the purchase of a call option at one strike and the sale of a call option at a different strike.

Also the difference between the prices or rates of two different but associated things, such as the difference between the price of oil and the price of coal, or the yield on a bond and an IRS rate.


Spécialiste en Pension sur Valeurs du Trésor (French primary dealers in repo).


A position in which sales exactly match purchases, or in which assets exactly match liabilities.  See long, short.


See standard settlement instructions.

Standard deviation (s):

A measure of how much the values of something fluctuate around its mean value.  Defined as the square root of the variance.

Standard settlement instructions:

Instructions for settlement with a particular counterparty which are always followed for a particular kind of deal and, once in place, are therefore not repeated at the time of each transaction.

STIR futures

Short-term interest rate futures contract.

Stock lending:

See securities lending.


A price or rate which, if touched in the market, will trigger the closing of a position in order to avoid any further loss. See take profit.


See straight-through processing.

Straddle: A position combining the purchase of both a call and a put at the same strike for the same date.  See strangle.
Straight-through processing:

Computer transmission of the details of a trade, without manual intervention, from their original input by the trader to all other relevant areas  -  position keeping, risk control, accounts, settlement, reconciliation.


A position combining the purchase of both a call and a put at different strikes for the same date.  See straddle.


The 'street' is a nickname for the market.  The street convention for quoting the price or yield for a particular instrument is the generally accepted market convention.


(Or exercise price).  The strike price or strike rate of an option is the price or rate at which the holder can insist on the underlying transaction being fulfilled.


A strip of futures is a series of short-term futures contracts with consecutive delivery dates, which together create the effect of a longer-term instrument (for example four consecutive 3-month futures contracts as a hedge against a one-year swap).  A strip of FRAs is similar.

To strip a bond is to separate its principal amount and its coupons and trade each individual cashflow as a separate instrument.  In this situation, ‘STRIP’ is an acronym for ‘separately traded and registered interest and principal’.


A repo dealt for general collateral may allow the seller to substitute one security for another as collateral during the term of the repo.


A foreign exchange swap is the purchase of one currency against another for delivery on one date, with a simultaneous sale to reverse the transaction on another value date.

See also interest rate swap, currency swap.


An option on an interest rate swap or currency swap.


Society for Worldwide Interbank Financial Telecommunications.


A switch occurs when a deal is transacted through a broker but, on hearing the name of the counterparty, a dealer is unable to honour the transaction because he has no credit line available for that counterparty.  The broker can then arrange for a third party bank which has credit lines available for both parties to stand between them, as principal counterparty to each.


A package of transactions which is economically equivalent to a different transaction (for example the purchase of a call option and simultaneous sale of a put option at the same strike is a synthetic forward purchase).

Synthetic agreement for forward exchange:

(Or SAFE).  A generic term for ERAs and FXAs.

Synthetic repo: A series of transactions which is economically equivalent to a repo (for example a bond sale in the cash market, purchase of a bond call option and sale of a bond put option at the same strike, all undertaken simultaneously).
System repo:

When the US Federal Reserve ('Fed') does a repo with the market on its own account, in order to adjust the supply of cash in the market, or to signal a change in interest rate policy.  See Fed repo, customer repo.

System risk:

The risk of losses due to failures in the bank’s computer systems.

Systemic risk:

The risk of failure in the entire payment clearing system or banking system of which the bank is a part.


See tom/next.


A weight measurement for gold (1.2 troy ounces = 37.3 grammes), used in Hong Kong.


The exposure to interest rates over a forward-forward period arising from a mismatched position (such as a two-month borrowing against a three-month loan).

A forward foreign exchange dealer's exposure to spot movements.

The extreme left- and right-hand ends of a probability distribution.


Uncollateralised securities lending in the domestic Japanese market.


A price or rate which, if touched in the market, will trigger the closing of a position in order to ensure that an existing profit is captured.  See stop-loss.

Tau (t):

Same as vega.

Technical analysis:

(Or charting).  An approach to forecasting which considers only past price movements.  See fundamental analysis .

Ted spread:

The simultaneous purchase / sale of a Eurodollar futures contract and the sale / purchase of a US Treasury bill futures contract.  See spread.


The tenor of an instrument is the length of time from issue to maturity.


The time between the beginning and end of a deal or investment.

Term repo:

A repo dealt for a specific length of time, as opposed to an open repo.

Theta (Q):

The change in an option's value relative to a change in the time left to expiry.

Thin market:

A market in which there is little trading volume.

Third-party repo:

Same as triparty repo.


The minimum change allowed in a futures price.

Tick value:

The value of a one tick price change on one futures contract.

Time deposit:

A non-negotiable deposit for a specific term.  Same as fixed deposit.

Time option:

(Or option forward).  A forward currency deal in which the value date is set to be within a period rather than on a particular day.  The customer sets the exact date two working days before settlement.

Time value of money:

The concept that a future cashflow can be valued as the amount of money which it is necessary to invest now in order to achieve that cashflow in the future.  See present value, future value.

Today/tomorrow: See overnight.

A weight measurement for gold (.375 troy ounces = 11.66 grammes), used in India and the Arabian Gulf.


(Or T/N or rollover).  A transaction from the next working day ('tomorrow') until the day after ('next' day  -  i.e. spot in the foreign exchange market.)

Trading book:

For the purposes of capital adequacy, that part of a bank's business which broadly involves its trading department.

Transaction exposure:

The risk to currency movements arising from a definite, or closely forecast, transaction.

(As defined in the GMRA) the difference between the current value of the cash loan (including accrued interest) plus margin, and the current market value of the securities (including accrued coupon) for any particular transaction.

Translation exposure:

(Or balance sheet exposure).  The risk to currency movements arising from an asset or liability on the balance sheet which is denominated in a foreign currency.

Treasury bill:

A short-term security issued by a government, generally with a zero coupon.

Treasury bond:

A US government bond of over 10 years' original maturity.  See Treasury note.

Treasury note:

A US government bond of up to 10 years' original maturity.  See Treasury bond.

Triparty agent:

The third-party custodian in a triparty repo.

Triparty repo:

Repo in which the collateral is delivered to and held by a third party custodian on behalf of the buyer, against cash settled through the same third party via DVP.

Troy ounce:

Standard unit of weight in precious metals, equal to 31.10348 grammes.

True yield:

The yield which is equivalent to the quoted discount rate (for a US or UK treasury bill for example).

Trust-me repo:

Same as hold-in-custody repo.


Same as collar.


A two-way price includes both bid and offer sides of the price.

Unallocated account:

Ownership of a certain weight of gold, without his holding being associated with any specific physical gold bars.  The holder is an unsecured creditor of the bank where the account is held.  See allocated account.

Under reference:

If a market-maker or his broker says that a price he has quoted is “under reference”, he means that the price must be re-confirmed before a counterparty can deal on it.


The underlying of a futures or option contract is the commodity or financial instrument on which the contract depends.  Thus the underlying for a bond option is the bond;  the underlying for a short-term interest rate futures contract is typically a three-month deposit.

US-style repo:

Same as classic repo.

Value at risk:

(Or VaR).  The maximum potential loss which an organisation might suffer on its positions over a given time period, estimated within a given confidence level.

Value basis

The theoretical futures price, less the actual futures price.

Value date:

(Or settlement date or maturity date)  The date on which a deal is to be consummated.  In some bond markets, the value date for coupon accruals can sometimes differ from the settlement date.


A vanilla transaction is a straightforward one

VaR: See value-at-risk.
Variable currency:

(Or counter currency).  Exchange rates are quoted in terms of the number of units of one currency (the variable or counter currency) which corresponds to one unit of the other currency (the base currency).

Variance (s2): The square of the standard deviation of a series of numbers.  A measure of how much the values of something fluctuate around its mean value.  Defined as the average of (value - mean)2.  See standard deviation.

Variance / covariance:

A method of calculating VaR which applies assumed variances and covariances to a probability distribution which is generally taken as normal.  See historic VaR, Monte Carlo simulation.

Variation margin:

See margin


(Or epsilon (e), eta (h), kappa (k) or lambda (l) or tau (t)). The change in an option's value relative to a change in the underlying's volatility.


The standard deviation of the continuously compounded return on the underlying.  Volatility is generally annualised.  See historic volatility, implied volatility.

Also the price sensitivity of a bond as measured by modified duration.


A vostro account at a bank is another bank's currency account held there.  See nostro.

Warrant: An option, generally referring to a call option  -  often a call option on a security where the warrant is purchased as part of an investment in another or the same security.

Same as 'seller' of an option.


One American billion  - i.e. 1,000,000,000.


The interest rate which can be earned on an investment, currently quoted by the market or implied by the current market price for the investment  -  as opposed to the coupon paid by an issuer on a security, which is based on the coupon rate and the face value. 

For a bond, often understood to mean the yield to maturity unless otherwise specified.

Yield curve:

A graph showing the current yield (or interest rate) for each maturity.

Yield to equivalent life:

The same as yield to maturity for a bond with partial redemptions.

Yield to maturity:

(Or YTM).  The internal rate of return of a bond  -  the yield necessary to discount all the bond's cashflows to an NPV equal to its current price.  See simple yield to maturity, current yield.


“I sell the base currency”.  For example, if someone who has asked for and received a price says “5 yours!”, he means “I sell 5 million units of the base currency”.  See mine.


See yield to maturity.

Zero-cost collar:

A collar where the premiums paid and received are equal, giving a net zero cost.


A zero-coupon security is one that does not pay a coupon.  Its price is correspondingly less to compensate for this. 

A zero-coupon yield is the yield which a zero-coupon investment for that term would have if it were consistent with the par yield curve.





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