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Inflation |
An economic condition whereby prices for consumer goods
rise, eroding purchasing power. |
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Initial Margin Requirement or Opening Margin Requirement |
The minimum margin required to establish a new open
position. The required initial deposit of collateral to
enter into a position as a guarantee on future performance |
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Interest Arbitrage |
Switching into another currency by buying spot and selling
forward, and investing proceeds in order to obtain a
higher interest yield. Interest arbitrage can be inward,
i.e. from foreign currency into the local one, or outward,
i.e. from the local currency to the foreign one.
Sometimes, better results can be obtained by not selling
the forward interest amount. In that case, some treat it
as no longer being a complete arbitrage, as if the
exchange rate moved against the arbitrager, the profit on
the transaction may create a loss. |
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Interbank Rates |
The Foreign Exchange rates at which large international
banks quote other large international banks. |
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Interest parity |
One currency is in interest parity with another when the
difference in the interest rates is equalized by the
forward exchange margins. For instance, if the operative
interest rate in Japan is 3% and in the UK is 6%, a
forward premium of 3% for the Japanese yen against the
pound would bring about interest parity. |
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Interest rate Swaps |
An agreement to swap interest rate exposures from floating
to fixed or vice versa. There is no swap of the principal.
The interest cash flows whether it is payments or receipts
that are exchanged. |
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Internationalization |
Referring to a currency that is widely used to denominate
trade and credit transactions by non-residents of the
country of issue. The US dollar and Swiss franc are
examples. |
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Intervention |
Action by a central bank to affect the value of its
currency by entering the market. Concerted intervention
refers to action by a number of central banks to control
exchange rates. |
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ICCH: |
International Commodities Clearing House Limited, a
clearing house based in London operating world wide for
many futures markets. |
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IMF: |
International Monetary Fund, established in 1946 to
provide international liquidity on a short and medium term
and encourage liberalisation of exchange rates. The IMF
supports countries with balance of payments problems with
the provision of loans. |
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IMM: |
International Monetary Market part of the Chicago
Mercantile Exchange that lists a number of currency and
financial futures |
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Implied volatility: |
A measurement of the market's expected price range of the
underlying currency futures based on the traded option
premiums. |
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Implied volatility skews: |
The implied volatility varies for different strikes of an
option. |
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Implied Rates: |
The interest rate determined by calculating the difference
between spot and forward rates. |
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In-the-money: |
A call option is in-the-money if the price of the
underlying instrument is higher than the exercise/strike
price. A put option is in-the-money if the price of the
underlying instrument is below the exercise/strike price.
See Out-of-the-money. |
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Inconvertible currency: |
Currency which cannot be exchanged for other currencies,
either because this is forbidden by the foreign exchange
regulations. |
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Index linking: |
The process of linking wages, social benefits payments,
prices, interest rates or loan values to an economic
index, usually of prices, A bond whose coupon payments are
subject to some defined index such as the consumer price
index. |
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Indicative quote: |
A market-maker's price which is not firm |
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Indirect quote: |
See reciprocal currency. |
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Industrial Production Index: |
A coincident indicator measuring physical output of
manufacturing, mining and utilities. |
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Inflation: |
Continued rise in the general price level in conjunction
with a related drop in purchasing power. Sometimes
referred to as an excessive movement in such price levels. |
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Info Quote: |
Rate given for information purposes only. |
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Initial margin: |
The margin is a returnable deposit required to be lodged
by buyers and sellers with the clearing house to secure a
new futures or options position. |
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Inscribed form: |
See Book entry. |
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Instruction: |
The specification of the banks at which funds shall be
paid upon settlement. |
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Inter-bank rates: |
The bid and offer rates at which international banks place
deposits with each other. The basis of the interbank
market. |
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Inter-dealer broker: |
A specialist broker who acts as an intermediary between
market-makers who wish to buy or sell securities to
improve their book positions, without revealing their
identities to other market-makers. |
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Interest Arbitrage: |
Switching into another currency by buying spot and selling
forward, and investing proceeds in order to obtain a
higher interest yield. Interest arbitrage can be inward,
i.e. from foreign currency into the local one or outward,
i.e. from the local currency |
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Interest parity: |
One currency is in interest parity with another when the
difference in the interest rates is equalized by the
forward exchange margins. For instance, if the operative
interest rate in Japan is 3% and in the UK 6%, a forward
premium of 3% for the Japanese |
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Interest rate Options: |
An agreement permitting a party to obtain a particular
interest rate, issued both OTC and by exchanges. |
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Interest rate Cap: |
An agreement that provides the buyer of a cap with a
maximum interest rate for future borrowing requirements. |
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Interest rate Collar: |
A combination of a cap and a floor to provide maximum and
minimum interest rates for borrowing or lending. |
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Interest rate Floor: |
An agreement which provides the buyer of the floor with a
minimum interest rate for future lending requirements. |
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Interest rate Swaps: |
An agreement to swap interest rate exposures from floating
to fixed or vice versa. There is no swap of the principal.
It is the interest cashflows be they payments or receipts
that are exchanged. |
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International Settlement: |
Usually involves clearer like CEDEL or Euroclear and
usually assumes no holidays, local or general. |
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Internationalisation: |
Referring to a currency that is widely used to denominate
trade and credit transactions by non residents of the
country of issue. US dollar and Swiss Franc are examples. |
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Intervention: |
Action by a central bank to effect the value of its
currency by entering the market. Concerted intervention
refers to action by a number of central banks to control
exchange rates. |
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In the money: |
A call option is in the money when the strike price is
less than the current price of the underlying instrument.
A put is when the strike price is greater. |
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Intra Day limit: |
Limit set by bank management on the size of each dealer's
Intra Day Position. |
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Intra day position: |
Open positions run by a dealer within the day. Usually
squared by the close. |
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Intrinsic value: |
The amount by which an option is in-the-money. The
intrinsic value is the difference between the
exercise/strike price and the price of the underlying
security. |
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Inverted Market: |
Where near months are trading at premiums to longer dates. |
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Invisible Balance: |
Comprises transportation services, income and expenditure
on travel services, insurances, licences, earnings and
interest income from international capital movements. |
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IOM: |
Index and Options Market part of the Chicago Mercantile
Exchange |
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ISIN code: |
The International Securities Identification Number. The
structure of the ISIN code is two-digit alpha country code
(ISO 3166) or XS for securities numbered by CEDEL or
Euroclear; nine-digit Alpha-numeric code based on the
national securities code or the c |
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Islamic Banking: |
Banking operations carried on in line with Islamic
principles which prohibit usury. Interest is therefore
often replaced by involvement in the venture by
temporarily owning the out put from the business and on
selling it at a predetermined profit. Referre |
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Islamic Development Bank (IDB): |
Established in 1976 to assist in financing development in
countries with a substantial Islamic population. |
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ISMA: |
International Security Market Association ( formerly
AIBD). |
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ISMA Yield: |
A method of calculation recommended by ISMA. Yield is
compounded annually regardless of coupon frequency. |
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Investment Currency: |
An exchange control system under which currency needed for
foreign investment must be acquired through the investment
currency market. Such systems are liable to create wide
disparities between this and the actual market rate. |
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Issue Date: |
Date issuer receives payment for new issue. |
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Invisibles: |
A term for exports and imports of services as distinct
from merchandise (visibles). |
