Home Categories Trading Strategies An asset swap is used to convert cash flow characteristics in order to hedge risks from one financial instrument with undesirable cash flow characteristics to another with favorable cash flow characteristics. A holding bag is a slang term for an investor who holds on to a badly performing investment, hoping it will bounce back when there is a chance it won’t. A balanced investment strategy is a strategy that seeks a balance between capital preservation and capital growth. The condition of covered parity of interest rates suggests that the relationship between interest rates and the spot and forward values of the currencies of the two countries are in balance. Equity derivatives are financial instruments whose value is determined by the change in the price of the underlying asset, if that asset is a stock or stock index. An equity swap is similar to an interest rate swap, but instead of one side being “fixed”, it is based on the performance of a stock index. Financial engineering is the use of mathematical methods to solve financial problems. The forward price is the price at which the seller delivers the underlying asset, derivative or currency to the buyer of a forward contract on a predetermined date. GCF transactions are secured repurchase agreements in which the assets used as collateral are not specified until the end of the day. Grid trading involves placing buy and sell orders at regular intervals around a set price.