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CREDIT RISK & EQUITY DERIVATIVES

Glossary

assets: Financial assets (e.g. shares, bonds) are claims on another person or corporation. These assets will usually be fairly standardised and governed by the property or securities laws of the appropriate country.
CBOT: Chicago Board of Trade
CFTC: Commodities Futures Trading Commission (US)
clearing house: An organisation associated with a futures/options exchange that guarantees the performance of both parties to the contract, collects margin and maintains records of the parties to the transactions
CME: Chicago Mercantile Exchange
contracts: A contract is an agreement between two parties. These contracts will rarely be standardised.
convertible bond: A bond which the holder can convert into a specified number of shares
covered warrants: Covered warrants are OTC options that are issued, usually, by investment banks in the public market. They may be linked to a wide range of assets (e.g. stock, stock index, commodity, currency). The term "covered" is now really a historical anachronism: it refers to the early issue of these types of warrants, where the issuer would claim to hold a position in an underlying asset to ensure performance of the warrant (hence performance was covered). It meant little then, and nothing now.
HKFE: Hong Kong Futures Exchange
LIFFE: London International Financial Futures Exchange
marked to market: The process in a futures market in which the daily price changes are paid by the parties incurring losses to the parties making profits
OSE: Osaka Securities Exchange
otc options: Over-the-counter options, a generic term to include many different instruments: covered warrants, new products, structured finance packages
SWF: Swiss franc
warrant: A long-term option issued by a company, usually to buy its stock

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