FinanceAdvisor

Weather derivatives are financial instruments that can be used by organisations or individuals as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions. continued…

A warrant is a security that entitles the holder to buy or sell a certain additional quantity of an underlying security. This transaction takes place over an agreed-upon price, exercised within a period of time and at the holder’s discretion. The right to buy the underlying security is referred to as a call warrant; continued…

Volatility arbitrage, a.k.a. Vol Arb, is a trading strategy in which delta-neutral long or short option positions are entered into and maintained, often until the option’s expiration. The strategy is driven by differences between the option’s implied volatility, and a forecast of the underlier’s future realized volatility. continued…

A variance swap is a financial derivative whose payoff is the product of the time to expiry, in years, multiplied by the difference of the annualised realised volatility squared (that is, the annualised realised variance), \sigma_{realised}^{2}, of returns on the underlying price over that period and a fixed quantity, \sigma_{strike}^{2}, sometimes known as the variance strike. continued…

In finance, the underlying of a derivative is an asset, basket of assets or index, such that the cash flows of the derivative depend on its value. There must be an independent way to observe this value to avoid conflicts of interest. continued…

The turbo warrant is a stock option with two new features. It has a “low vega”, the option price is much less affected by the “implied volatility” of the stock market. The strike price of the option is also a “barrier”, if the stock hits that price the option expires worthless. continued…

Triple witching hour is the final hour of the stock market trading session on the third Friday of every March, June, September, and December. Those days are the expiry of three kinds of derivatives, continued…

A swaption is a financial instrument granting the owner an option to enter an interest rate swap. A swap is a contract in which the parties will exchange the cash flows associated with the items they are swapping. continued…

Total return swap, or total rate of return swap, or TRORS, a contract in which one party receives interest payments on a reference asset plus any capital gains and losses over the payment period, while the other receives a specified fixed or floating cash flow unrelated to the credit worthiness of the reference asset, especially where the payments are based on the same notional amount. continued…

In finance, a swap is a derivative, where two counterparties exchange one stream of cash flows against another stream. These streams are called the legs of the swap. The cash flows are calculated over a notional principal amount. continued…