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Securitized product that is backed by bank loans. The cash flows are divided, or tranched into different risk exposures. The sale of the loans allows the financial institution to reduce regulatory capital requirements.

Known as CDO’s, the pooling of bonds (CBO’s) or loans (CLO’s) that are transferred to a trust and the claims to these assets are subsequently sold to investors in different classes or tranches. Each tranche has different credit and investment characteristics.

Securitized product that is backed by low quality, or junk bonds. The cash flows are divided, or tranched into different risk exposures. CBOs are issued as investment grade bonds even though they are backed by junk bonds because the credit diversification within the structure increases the credit quality of the…

1) An interest rate collar or simply collar, is the purchase of a cap and the sale of a floor. A collar is constructed to reduce the cost of the cap. 2) The term collar can also be used to purchase a put and sell a call.

Also called an offsetting trade. A trade that closes an existing position by taking an offsetting position equal and opposite to that of the existing position.

Exchange affiliated organizations that handle the clearing, settling, matching of trades.

A combination involving a fixed-for-floating interest rate swap and a fixed-for-floating currency swap in which both floating rate sides are LIBOR based in the same currency. Allows for the creation of a fixed-for-fixed or floating-for-floating currency swap.

1) A transaction made for immediate settlement. 2) In futures trading, refers to contracts that do not provide for physical delivery of the underlying asset. Instead, contracts are settled in cash on a final settlement date using a mark-to-market procedure.

The payments made by one party to a contract to another party to the contract.

The series of cash flows associated with a debt instrument, swap, or other derivative instrument.

Multi- period cash settled options on interest-rates. The cap purchaser receives a cash payment whenever the reference rate exceeds the ceiling rate (also called the cap and sometimes called the contract rate) on a fixing date.

Also known as capital adequacy ratio (CAR) and risk based capital ratio. It is a measure, specifically a ratio, of a financial institution’s capital position. In general, it is the amount of capital held by the firm divided by the amount of assets adjusted for risk: