Financial Math FM/Glossary

Notation and terminology
See here for notation and terminology used on the FM exam.

Glossary and index of terms
Accumulation function

Accumulation of discount

American option

Amortization

Annuity-due

Annuity-immediate

Arbitrage

Arithmetic increasing/decreasing payment annuity

Ask price

At-the-money

Bermudan option

Bid price

Bid-ask spread

Book value

Call option

Callable

Cash-flow matching

Collars (including zero-cost collars)

Compound interest

Convertible bond

Convertible m-thly

Convexity

Cost of carry

Coupon

Coupon rate

Covered call

Credit risk

Current value

Deferred swap

Derivative

Discount factor

Discount rate (rate of discount)

Diversifiable risk

Dividends

Dollar-weighted rate of return

Duration (Macaulay modified and effective)

Effective rate

Equation of value

European option

Expiration

Expiration date

Face value

Final payment

Force of interest

Forward contract

Forward rate

Fully leveraged purchase

Future value

Futures contract

Geometric increasing/decreasing payment annuity

Hedging

Immunization

Implied repo rate

In-the-money

Inflation and real rate of interest

Interest

Interest rate (rate of interest)

Interest rate swap

Lease rate

Level payment annuity

Long position

Maintenance margin

Mandatorily convertible bond

Margin

Margin call

Marking-to-market

Naked writing

Net profit/payoff

Nominal rate

Nondiversifiable risk

Notional Amount

Out-of-the-money

Outright purchase

Outstanding balance

Over-the-counter market

Par Value

Payable continuously

Payable m-thly

Paylater strategy

Perpetuity

Portfolio and investment year allocation methods

Prepaid forward contract

Prepaid swap

Present value/net present value

Price

Principal

Put option

Put-call parity

Redemption value

Redington immunization

Short position

Short selling

Simple commodity swap

Simple interest

Sinking fund

Spot price

Spot rate

Spreads

Stock index

Stock price

Straddles (including strangles written straddles and butterfly spreads)

Strike price/Exercise price

Swap

Swap spread

Swap term

Synthetic forwards

Term of annuity

Term of bond

Term of loan

Time-weighted rate of return

Underlying asset

Yield curve

Yield rate

Yield rate

balloon payment

bear

box

bull

drop payment

full immunization

future value

non-callable

present value

rate of return

ratio spreads

stock dividend