Targeted Accrual Redemption Note (TARN)

• 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.

• 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.

• 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.

• An inflationary swap is a transaction in which one party transfers inflation risk to the counterparty in exchange for a fixed payment.

• The International Swaps and Derivatives Association is a professional association that has been working since 1985 to promote and improve the trading of swaps and derivatives.

• A Credit Default Swap (LCDS) allows one counterparty to exchange the credit risk on a benchmark loan for another in exchange for premium payments.

• A direct forward or foreign exchange forward is a foreign exchange contract that fixes the exchange rate and delivery date after the spot value date.

• Interest on the overnight swap rate is accrued and paid on the reset dates, with the fixed portion included in the cost of the swap for each party.

• Qualitative Spread Differential (QSD) is the difference between the market interest rates achieved by the two parties entering into an interest rate swap.

• A quanto swap is a derivatives transaction in which two parties exchange interest rates in different currencies.

• Swap rate refers to the fixed rate that a party to a swap contract asks for in exchange for a commitment to pay a short-term rate, such as the labor or federal fund rate.

• A variance swap is a derivative contract in which two parties exchange payments based on changes in the price or volatility of the underlying asset.

• A warrant premium is the additional value of a warrant in excess of the established minimum, which can be valued as the difference between its exercise price and the market price of the underlying asset.

• A weather derivative is a financial instrument used by companies or individuals to hedge their exposure to weather-related losses.

• A Zero Risk Base Swap (ZEBRA) is an interest rate swap entered into between a municipality and a financial intermediary.

• An inflationary zero-coupon swap (ZCIS) is a type of inflationary derivative in which an income stream linked to inflation is exchanged for an income stream with a fixed interest rate.

• A zero coupon swap involves paying a fixed portion of the swap in one lump sum when the contract reaches maturity.

• An American option is a type of option contract that allows holders to exercise their rights at any time up to and including the expiration date.

• A Convertible Asset Substitution Option Transaction, or ASCOT, is a way of separating the fixed income and equity components from a convertible bond.

A cession is a transfer of rights or property from one person to another.#

• In the money (ATM) are calls and puts where the exercise price is equal to or very close to the current market price of the underlying security.

• The Bank Note Swap Rate (BBSW) is a short-term interest rate used as a benchmark for valuing Australian dollar derivatives and securities, primarily floating rate bonds.

• Barrier options are a type of exotic option in which the payoff depends on whether the option reaches or exceeds a predetermined barrier price.

• Bear call spreads are formed by buying two call options, one long and one short, with different strike prices but the same expiration date.