Covered interest rate parity (CIRP) is an important concept in international finance that states that the forward exchange rate between two currencies equals the spot exchange rate adjusted for the interest rate differential between the two countries. In other words, CIRP ensures that there is no arbitrage opportunity between the two currencies. The covered interest … Read more
. Hedge: What It Is and What It Does in Investing How do you make money from hedging in forex? Hedging in forex is a risk management strategy used to protect against losses in the event of unforeseen circumstances such as currency fluctuations or political instability. By hedging, traders can minimize their exposure to the … Read more
A constant maturity swap (CMS) is a swap agreement in which the floating leg of the swap is reset periodically to a predetermined schedule of dates, while the fixed leg remains constant. The most common CMS products are based on LIBOR, but CMS products can also be based on other floating rate benchmarks, such as … Read more
A forward swap definition is a tradeable contract between two parties that agree to swap a series of cash flows at specified dates in the future. The cash flows are typically based on an underlying asset, such as a currency, interest rate, or commodity price. What is a swap in trading? A swap is a … Read more
A riskless principal transaction is a trade where the broker-dealer is acting as a riskless counterparty to the trade. This means that the broker-dealer is taking on the risk of the trade on behalf of their client. The client does not have to post any margin or collateral with the broker-dealer, and the broker-dealer does … Read more
The forward price definition is the theoretical price of a security at some point in the future. The future price is based on underlying factors such as the security’s current price, interest rates, and market conditions. What is the formula for forward price? Forward prices are determined by a forward contract, which is an agreement … Read more
An equity derivative is a financial derivative whose value is based on one or more underlying equity securities. Common types of equity derivatives include stock options, stock futures, and equity swaps. Equity derivatives can be used for a variety of purposes, including hedging, speculation, and arbitrage. For example, a stock option allows the holder to … Read more
A swap rate is the rate at which two currencies are exchanged. The swap rate is used to calculate the interest rate differential between two currencies. The swap rate is also known as the cross-currency rate or cross-rate. What are swaps with example? A swap is an agreement between two parties to exchange certain financial … Read more
Bottom fishing is a strategy employed by investors in an effort to purchase assets at a price that has bottomed out, or reached a low point, in the market. The hope is that the asset will then rebound in price as the market corrects itself. This strategy can be employed with stocks, bonds, commodities, or … Read more
iTraxx Definition is a financing tool that allows investors to hedge their portfolios against credit risk. It is a credit default swap (CDS) index that tracks the performance of a basket of underlying credit instruments. The iTraxx Definition is used by investors to manage their credit risk exposure and to make informed investment decisions. What … Read more
