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.
Under ZCIS, both streams of income are paid in a lump sum when the swap reaches maturity and the inflation rate is known, instead of exchanging periodic payments.
As inflation rises, the buyer of inflation receives more from the seller of inflation than he paid.
Conversely, if inflation falls, the buyer of inflation receives from the seller of inflation less than what he paid.
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.
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.
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.
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.
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.
Esoteric debt refers to debts or other financial instruments that have a complex structure that is correctly understood by only a few people with specialized knowledge.
A hedged tender is a way to counteract the risk that the offering company will refuse some or all of the investor’s shares presented as part of the tender offer.
The Hollywood Stock Exchange (HSX) is an entertainment “stock market” where people can buy and sell virtual shares of celebrities and movies for a currency called the Hollywood Dollar®.
Letter of guarantee - an agreement issued by a bank on behalf of a customer who has entered into an agreement for the purchase of goods from a supplier.
External arbitrage is a type of arbitrage involving multinational US banks to take advantage of interest rate differentials between the US and other countries.