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Measures the price/yield sensitivity of a security versus the market as a whole. A beta of 1 means the security has the same degree of price sensitivity or price risk as the general market. A beta < 1 means the security is less sensitive and a beta > 1 means…

Arises from using an incorrect or inappropriate benchmark to compare and assess portfolio returns and management.

A standard that works as a reference point for performance measurement. A benchmark is usually an index comprised of securities from various asset classes such as stocks, bonds etc. The Benchmark selected has characteristics similar to that of the investment strategy for which the benchmark is applied.

An option which can be exercised only on certain discreet dates after the premium is paid and up to expiration.

Securities which are physically held by investors. To receive interest payments, the holder actually clips the coupon and sends it to the obligor.

A swap in which both counter-parties pay a floating rate of interest but these are tied to different reference rates. Also called floating-for-floating interest rate swaps.

1) The degree to which the difference between two prices fluctuates. 2) The residual risk that remains after a hedge has been placed.

An interest rate equal to one one-hundredth of 1 percentage point, that is, 0.01 percent. The term “basis points” is often abbreviated in the text as “bps.”

1) Generally refers to the differences in two prices. 2) Also can refer to the day count convention uses in fixed income securities. For example, in the United States, money market instruments pay interest on an actual over 360 days basis or day count convention. The basis is 360 days.…

A type of exotic option that provides a payoff if the value of the underlying reaches (or does not reach) a predetermined price or “barrier level”. Barrier options are called “knock in” if the right to exercise the option is met, or “knock out” if the right is not met.…

A bond portfolio structuring technique where investments are made primarily in securities with only short term and long-term maturities. Such a strategy helps in achieving a targeted average maturity or duration and the price volatility of an intermediate bond. This strategy allows one portion of the portfolio to take advantage…

The Federal Reserve requires banks to put “in reserve” a certain portion of their deposits.