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Glossary

C

Call Actions
taken to pay the principal amount prior to the stated maturity date, in accordance with the provisions for “call” stated in the proceedings and the securities. Another term for call provisions is redemption provisions.
Calendar rebalancing
Rebalancing a portfolio to target weights on a periodic basis; for example, monthly, quarterly, semiannually, or annually.
Calendar-and-percentage-of-portfolio rebalancing
Monitoring a portfolio at regular frequencies, such as quarterly. Rebalancing decisions are then made based upon percentage-of-portfolio principles.
Call
An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
Calmar ratio
The compound annualized rate of return over a specified time period divided by the absolute value of maximum drawdown over the same time period.
Cannibalization

Cannibalization occurs when an investment takes customers and sales away from another part of the company.
Cap
(1) A contract on an interest rate whereby at periodic payment dates, the writer of the cap pays the difference between the market interest rate and a specified cap rate if, and only if, this difference is positive. This is equivalent to a stream of call options on the interest rate. (2) A combination of interest rate call options designed to hedge a borrower against rate increases on a floating-rate loan.
Cap rate
With respect to options, the exercise interest rate for a cap.
Capital adequacy ratio
A measure of the adequacy of capital in relation to assets.
Capital allocation line 
A graph line that describes the combinations of expected return and standard deviation of return available to an investor from combining an optimal portfolio of risky assets with a risk-free asset.
Call date
The date at which some bonds are redeemable by the issuer prior to the maturity date. In the event of a refunded security, a prerefunded date will appear in place of any call date and will be indicated by an R = prerefunded; or an E = escrowed to maturity.
Call premium
The dollar amount paid to the investor by the issuer for exercising a call provision that is usually stated as a percent of the principal amount called.
Call price
The specified price at which a bond will be redeemed or called prior to maturity, typically either at a premium (above par value) or at par.
Call protection
Bonds that are not callable for a certain number of years before their call date.
Call risk
For a CMO, the risk that declining interest rates may accelerate mortgage loan prepayment speeds, causing an investor’s principal to be returned sooner than expected. As a consequence, investors may have to reinvest their principal at a lower rate of interest.
Callable bonds
Bonds that are redeemable by the issuer prior to the maturity date, at a specified price at or above par.
Cap
The maximum interest rate that can be paid on a floating-rate security.
Capital markets
Capital markets are the electronic and physical markets in which bonds and other financial instruments such as stocks and commodities are sold to investors. Institutions such as governments and corporations use the capital markets to raise money through public offerings of bonds and stocks or through private placements of securities to institutional investors such as pension funds and insurance companies.
Capped swap
A swap in which the floating payments have an upper limit.
Caps
A combination of interest rate call options designed to provide protection against interest rate increases.
Captive finance subsidiary
A wholly-owned subsidiary of a company that is established to provide financing of the sales of the parent company.
Carried interest
A private equity fund manager’s incentive fee; the share of the private equity fund’s profits that the fund manager is due once the fund has returned the outside investors' capital.
Carry
The cost of borrowing funds to finance an underwriting or trading position. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed. A negative carry is when the rate on the funds borrowed is greater than the rate on the securities that are being financed.
Carry market 
A situation where the forward price is such that the return on a cash-and-carry is the risk-free rate.
Carrying amount
The amount at which an asset or liability is valued according to accounting principles.
Cash
In accounting contexts, cash on hand (e.g., petty cash and cash not yet deposited to the bank) and demand deposits held in banks and similar accounts that can be used in payment of obligations.
Cash balance plan

A defined-benefit plan whose benefits are displayed in individual record-keeping accounts.
Cash basis
Accounting method in which the only relevant transactions for the financial statements are those that involve cash.
Cash conversion cycle
A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to days of inventory on hand + days of sales outstanding – number of days of payables. Synonyms: net operating cycle
Cash equivalents
Very liquid short-term investments, usually maturing in 90 days or less.
Cash flow additivity principle
The principle that dollar amounts indexed at the same point in time are additive.
Cash flow at risk
A variation of VAR that reflects the risk of a company’s cash flow instead of its market value.
Cash flow from operations
The net amount of cash provided from operating activities. Synonyms: cash flow from operating activities operating cash flow
Cash flow matching
An asset/liability management approach that provides the future funding of a liability stream from the coupon and matured principal payments of the portfolio. A type of dedication strategy.
Cash flow statement
A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of cash; consists of three parts: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Synonyms: statement of cash flows
Cash offering
A merger or acquisition that is to be paid for with cash; the cash for the merger might come from the acquiring company’s existing assets or from a debt issue.
Cash price
The price for immediate purchase of the underlying asset. Synonyms: spot price
Cash ratio
A liquidity ratio calculated as (cash + short-term marketable investments) divided by current liabilities; measures a company’s ability to meet its current obligations with just the cash and cash equivalents on hand.
Cash settlement
A procedure used in certain derivative transactions that specifies that the long and short parties engage in the equivalent cash value of a delivery transaction.
Cash-flow-statement-based accruals ratio
The difference between reported net income on an accrual basis and the cash flows from operating and investing activities compared to the average net operating assets over the period.
Cash-flow-statement-based aggregate accruals
The difference between reported net income on an accrual basis and the cash flows from operating and investing activities.
Catalyst
An event or piece of information that causes the marketplace to re-evaluate the prospects of a company.
Cause-and-effect relationship
A relationship in which the occurrence of one event brings about the occurrence of another event.
Cautious investors
Investors who are generally averse to potential losses.
CBRC
China Banking Regulatory Commission
CCI
Clearing Corporation of India
CCP
Central Counterparties
CDO
Collateralized Debt Obligation
CDS
Credit Default Swap
CEBS
Committee of European Banking Supervisors
CEIOPS
Committee of European Insurance and Occupational Pensions Supervisors
Certificate of ownership
Proof of ownership; a document issued to shareholders by a trustee of a unit investment trust.
Certificates of participation (COPs)
COPs are a structure where investors buy certificates that entitle them to receive a participation, or share, in the lease payments from a particular project The lease payments are passed through the lessor to the certificate holders with the tax advantages intact. The lessor typically assigns the lease and lease payments to a trustee, which then distributes the lease payments to the certificate holders.
CESR
Committee of European Securities Regulator
CFTC
US Commodity Futures Trading Commissions
Clean CMO
Also known as "sequential-pay CMO," the most basic type of CMO, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired, and so on.
Clean price
Price of a bond excluding accrued interest. Bond prices are usually quoted clean.
Cell-matching technique 
A portfolio construction technique used in indexing that divides the benchmark index into cells related to the risk factors affecting the index and samples from index securities belonging to those cells.
Central limit theorem
A result in statistics that states that the sample mean computed from large samples of size n from a population with finite variance will follow an approximate normal distribution with a mean equal to the population mean and a variance equal to the population variance divided by n.
Centralized risk management
When a company has a single risk management group that monitors and controls all of the risk-taking activities of the organization. Centralization permits economies of scale and allows a company to use some of its risks to offset other risks. See also enterprise risk management.
Chain rule of forecasting
A forecasting process in which the next period’s value as predicted by the forecasting equation is substituted into the right-hand side of the equation to give a predicted value two periods ahead.
Chain-linking
A process for combining periodic returns to produce an overall time-weighted rate of return.
Chart of accounts
A list of accounts used in an entity’s accounting system.
Cheapest to deliver
A bond in which the amount received for delivering the bond is largest compared with the amount paid in the market for the bond.
Cherry-picking
When a bankrupt company is allowed to enforce contracts that are favorable to it while walking away from contracts that are unfavorable to it.
Classified balance sheet
A balance sheet organized so as to group together the various assets and liabilities into subcategories (e.g., current and noncurrent).
Claw-back provision 
With respect to the compensation of private equity fund managers, a provision that specifies that money from the fund manager be returned to investors if, at the end of a fund’s life, investors have not received back their capital contributions and contractual share of profits.
Clean surplus accounting
Accounting that satisfies the condition that all changes in the book value of equity other than transactions with owners are reflected in income.
Clean surplus relation
The relationship between earnings, dividends, and book value in which ending book value is equal to the beginning book value plus earnings less dividends, apart from ownership transactions.
Clean-surplus accounting
The bottom-line income reflects all changes in shareholders’ equity arising from other than owner transactions. In the absence of owner transactions, the change in shareholders’ equity should equal net income. No adjustments, such as translation adjustments, bypass the income statement and go directly to shareholders equity.
Clearinghouse
An entity associated with a futures market that acts as middleman between the contracting parties and guarantees to each party the performance of the other.
Clean CMO
Also known as "sequential-pay CMO," the most basic type of CMO, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired, and so on.
Clean price
Price of a bond excluding accrued interest. Bond prices are usually quoted clean.

Closed-end mutual fund
A fund created with a fixed number of shares, which are traded as listed securities on a stock exchange.
Closing date
This is similar to a settlement date, but occurs for a new issuance of bonds. The closing may be as long as 30 days in case of a competitively sold issue.
Closing price
The closing price of a bond is the last trading price before the exchange or market in which it is traded closes for the day. Given the existence of after-hours trading, the opening price at the start of the next trading day may be different from the closing price of the day before.
Coincident indicators 
A set of economic variables whose values reach peaks and troughs at about the same time as the aggregate economy.
Cointegrated
Describes two time series that have a long-term financial or economic relationship such that they do not diverge from each other without bound in the long run.
Collar
An option strategy involving the purchase of a put and sale of a call in which the holder of an asset gains protection below a certain level, the exercise price of the put, and pays for it by giving up gains above a certain level, the exercise price of the call. Collars also can be used to provide protection against rising interest rates on a floating-rate loan by giving up gains from lower interest rates.
Collateral return
The component of the return on a commodity futures contract that comes from the assumption that the full value of the underlying futures contract is invested to earn the risk-free interest rate.
Collateralized debt obligation
A securitized pool of fixed-income assets.
Collateral
Securities or property pledged by a borrower to secure payment of a loan. If the borrower fails to repay the loan, the lender may take ownership of the collateral. Collateral for CMOs consists primarily of mortgage pass-through securities or mortgage loans, but may also encompass letters of credit, insurance policies, or other credit enhancements.
Collateralize
The process by which a borrower pledges securities or property or other types of financial assets in order to provide security or collateral toward repayment of a loan or debt.
Collateralized debt obligation (CDO)
A type of asset-backed security (ABS), CDOs are backed by fixed income assets such as bonds, receivables on loans—usually non-mortgage—or other debt that have different levels of risk. Shares of the pool are sold to investors, divided into the different risk classes or "tranches" enabling the isolation of credit risk to reduce the risk of loss due to default. Each tranche usually has different maturities and risks.
Collateralized mortgage obligation (CMO)
A multiclass bond backed by a pool of mortgage pass-through securities or mortgage loans. See REMIC.
Commercial mortgage-backed securities (CMBS
)  Commercial mortgage-backed securities (CMBS) have as underlying collateral loans on hotels, multifamily housing, retail properties, and office or industrial properties. Unlike residential mortgage loans, commercial loans tend to be “locked out” from prepayment for ten years and thus prepayment risk is reduced. However, default risk is greater on commercial loans.
Commercial paper
Short term, unsecured bond notes issued by a corporation or a bank to meet immediate short term needs for cash. Maturities typically range from 2 to 270 days. Commercial paper is usually issued by corporations with high credit ratings and sold at a discount from face value.
Commingled real estate funds
Professionally managed vehicles for substantial commingled (i.e., pooled) investment in real estate properties.
Commitment period 
The period of time over which committed funds are advanced to a private equity fund.
Committed lines of credit
A bank commitment to extend credit up to a prespecified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
Commission
The fee paid to a dealer when the dealer acts as agent in a transaction, as opposed to when the dealer acts as a principal in a transaction (see “net price”). Commissions differ in how they are calculated, such as a percentage of the value of a transaction or flat fee amount, and including whether the investor is using a bank, brokerage or online firm. Investors should be sure to ask and to understand what commission or other sales fees are charged by a broker or agent to make an investment transaction, including if such information is not provided in writing).
Common size statements
Financial statements in which all elements (accounts) are stated as a percentage of a key figure such as revenue for an income statement or total assets for a balance sheet.
Common-size analysis
The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.
Company fundamental factors
Factors related to the company’s internal performance, such as factors relating to earnings growth, earnings variability, earnings momentum, and financial leverage.
Company share-related factors
Valuation measures and other factors related to share price or the trading characteristics of the shares—such as earnings yield, dividend yield, and book-to-market value.
Comparable company
A company that has similar business risk, usually in the same industry and preferably with a single line of business.
Complement
In probability, with reference to an event S, the event that S does not occur; in economics, a good that is used in conjunction with another good.
Completed contract
A method of revenue recognition in which the company does not recognize any revenue until the contract is completed; used particularly in long-term construction contracts.
Component cost of capital
The rate of return required by suppliers of capital for an individual source of a company’s funding, such as debt or equity.
Compounding 
The process of accumulating interest on interest.
Comprehensive income
The change in equity of a business enterprise during a period from nonowner sources; includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income equals net income plus other comprehensive income.
Comprehensive income
All changes in equity other than contributions by, and distributions to, owners; income under clean surplus accounting.
Conditional expected value
The expected value of a stated event given that another event has occurred.
Conditional probability
The probability of an event given (conditioned on) another event.
Conditional variances
The variance of one variable given the outcome of another.
Common stock
A share representing participation in the ownership of an enterprise, generally with the right to participate in dividends and in most cases to vote on major matters affecting stockholder interests.
Companion tranche
A CMO tranche that absorbs a higher level of the impact of collateral prepayment variability in order to stabilize the principal payment schedule for a PAC or TAC tranche in the same offering.
Competitive underwriting or sale
A sale of municipal securities by an issuer in which underwriters or syndicates of underwriters submit sealed bids (or oral auction bids) to purchase the securities. The securities are won and purchased by the underwriter or syndicate of underwriters which submits the best bid according to guidelines in the notice of sale. This is contrasted with a negotiated underwriting.
Compound accreted value
The value of a zero-coupon bond at any given time, based on the principal, with interest compounded at a stated rate of return over time.
Compound interest
Interest that is calculated on the initial principal and previously paid interest.
Compounding
Compounding is the process by which investment interest earnings added to the investment principal form a larger base on which to accumulate additional earnings over time.
Concession
Fractional discount from the public offering of new securities at which the underwriter sells the bonds to dealers not in the syndicate.
Confidence interval
A range that has a given probability that it will contain the population parameter it is intended to estimate.
Confirming evidence trap
The bias that leads individuals to give greater weight to information that supports an existing or preferred point of view than to evidence that contradicts it.
Conglomerate merger
A merger involving companies that are in unrelated businesses.
Consistency
A desirable property of estimators; a consistent estimator is one for which the probability of estimates close to the value of the population parameter increases as sample size increases.
Consistent
With reference to estimators, describes an estimator for which the probability of estimates close to the value of the population parameter increases as sample size increases.
Consistent growth
A growth investment substyle that focuses on companies with consistent growth having a long history of unit-sales growth, superior profitability, and predictable earnings.
Consolidation
The combining of the results of operations of subsidiaries with the parent company to present financial statements as if they were a single economic unit. The asset, liabilities, revenues, and expenses of the subsidiaries are combined with those of the parent company, eliminating intercompany transactions.
Constant maturity swap
A swap in which the floating rate is the rate on a security known as a constant maturity treasury or CMT security. Synonyms: CMT swap
Constant maturity treasury
A hypothetical U.S. Treasury note with a constant maturity. A CMT exists for various years in the range of 2 to 10.
Constraints
(1) Restricting conditions. (2) Relating to an investment policy statement, limitations on the investor’s ability to take full or partial advantage of particular investments. Such constraints are either internal (such as a client’s specific liquidity needs, time horizon, and unique circumstances) or external (such as tax issues and legal and regulatory requirements).
Confirmation
A document used by securities dealers and banks to state in writing the terms and execution of a verbal arrangement to buy or sell a security.
Common Stock 
Type of security representative of ownership in a corporation. Holders of common stock, known as shareholders, exercise their ownership interests by electing the board of directors and voting on corporate policy.
Constitutional Documents
means the articles of association and memorandum of association of the Company and any other similar documents that dictate the rules and regulations for the constitution and management of the Company’s corporate affairs.
Contango
A situation in a futures market where the current futures price is greater than the current spot price for the underlying asset.
Contingent claims
Derivatives in which the payoffs occur if a specific event occurs; generally referred to as options.
Contingent immunization
A fixed-income strategy in which immunization serves as a fall-back strategy if the actively managed portfolio does not grow at a certain rate.
Continuing residual income
Residual income after the forecast horizon.
Continuous auction markets
Auction markets where orders can be executed at any time during the trading day.
Continuous random variable
A random variable for which the range of possible outcomes is the real line (all real numbers between -¥ and +¥) or some subset of the real line.
Continuous time
Time thought of as advancing in extremely small increments.
Continuously compounded return
The natural logarithm of 1 plus the holding period return; or equivalently, the natural logarithm of the ending price over the beginning price.
Contested Meeting
 A meeting of shareholders convened by parties other than the company leadership to simultaneously solicit votes.
Contested Proposal
A proposal submitted by a shareholder that takes a different position from that submitted by the company’s management. Brokers may not vote on behalf of clients (the shareholders) with uninstructed shares on any contested matters.
Contra account
An account that offsets another account.
Contrarian
A value investment substyle focusing on stocks that have been beset by problems.
Contribution margin
The amount available for fixed costs and profit after paying variable costs; revenue minus variable costs.
Control Number
Typically, a unique 12-digit identification number which is used to distinguish individual shareholders voting their proxies by phone.
Control premium
An increment or premium to value associated with a controlling ownership interest in a company.
Controlling interest
An investment where the investor exerts control over the investee, typically by having a greater than 50 percent ownership in the investee.
Convenience yield
The nonmonetary return offered by an asset when the asset is in short supply, often associated with assets with seasonal production processes.
Conventional cash flow
A conventional cash flow pattern is one with an initial outflow followed by a series of inflows.
Conversion factor
An adjustment used to facilitate delivery on bond futures contracts in which any of a number of bonds with different characteristics are eligible for delivery.
Convertible debt
Debt with the added feature that the bondholder has the option to exchange the debt for equity at prespecified terms.
Convexity
A measure of how interest rate sensitivity changes with a change in interest rates.
Convexity adjustment 
An estimate of the change in price that is not explained by duration.
Corporate Governance
The relationship between all stakeholders in a company, i.e., shareholders directors and management, as defined by a formal corporate charter, by-laws, or policy, intended to mitigate conflicts of interest. The system of principles, policies, procedures, and clearly defined responsibilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form.
Corporate raider
A person or organization seeking to profit by acquiring a company and reselling it, or seeking to profit from the takeover attempt itself (e.g., greenmail).
Corporate venturing 
Investments by companies in promising young companies in the same or a related industry.
Corporation
A legal entity with rights similar to those of a person. The chief officers, executives, or top managers act as agents for the firm and are legally entitled to authorize corporate activities and to enter into contracts on behalf of the business.
Correlation
A number between –1 and +1 that measures the co-movement (linear association) between two random variables.
Correlation analysis
The analysis of the strength of the linear relationship between two data series.
Cost averaging
The periodic investment of a fixed amount of money.
Cost leadership
The competitive strategy of being the lowest cost producer while offering products comparable to those of other firms so that products can be priced at or near the industry average.
Cost of capital
The rate of return that suppliers of capital require as compensation for their contribution of capital.
Cost of carry
The cost associated with holding some asset, including financing, storage, and insurance costs. Any yield received on the asset is treated as a negative carrying cost.
Cost of carry model
A model for pricing futures contracts in which the futures price is determined by adding the cost of carry to the spot price.
Cost of debt
The cost of debt financing to a company, such as when it issues a bond or takes out a bank loan.
Cost of goods sold
For a given period, equal to beginning inventory minus ending inventory plus the cost of goods acquired or produced during the period.
Cost of preferred stock
The cost to a company of issuing preferred stock; the dividend yield that a company must commit to pay preferred stockholders.
Cost recovery method
A method of revenue recognition in which the seller does not report any profit until the cash amounts paid by the buyer—including principal and interest on any financing from the seller—are greater than all the seller’s costs for the merchandise sold.
Cost structure
The mix of a company’s variable costs and fixed costs.
Country beta 
A measure of the sensitivity of a specified variable (e.g., yield) to a change in the comparable variable in another country.
Covariance
A measure of the comovement (linear association) between two random variables.
Covariance matrix
A matrix or square array whose entries are covariances; also known as a variance–covariance matrix.
Covariance stationary
Describes a time series when its expected value and variance are constant and finite in all periods and when its covariance with itself for a fixed number of periods in the past or future is constant and finite in all periods.
Coverage
Benchmark coverage is defined as the proportion of a portfolio’s market value that is contained in the benchmark.
Covered call
An option strategy involving the holding of an asset and sale of a call on the asset.
Covered interest arbitrage
A transaction executed in the foreign exchange market in which a currency is purchased (sold) and a forward contract is sold (purchased) to lock in the exchange rate for future delivery of the currency. This transaction should earn the risk-free rate of the investor’s home country.
Crack spread 
The difference between the price of crude oil futures and that of equivalent amounts of heating oil and gasoline.
Credit
With respect to double-entry accounting, a credit records increases in liability, owners’ equity, and revenue accounts or decreases in asset accounts; with respect to borrowing, the willingness and ability of the borrower to make promised payments on the borrowing.
Credit analysis
The evaluation of credit risk; the evaluation of the creditworthiness of a borrower or counterparty.
Credit default swap
A swap used to transfer credit risk to another party. A protection buyer pays the protection seller in return for the right to receive a payment from the seller in the event of a specified credit event.
Credit derivatives
A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.
Credit event 
An event affecting the credit risk of a security or counterparty.
Credit forwards
A type of credit derivative with payoffs based on bond values or credit spreads.
Credit protection seller 
With respect to a credit derivative, the party that accepts the credit risk of the underlying financial asset.
Credit risk
The risk of loss caused by a counterparty’s or debtor’s failure to make a promised payment.
Credit spread risk 
The risk that the spread between the rate for a risky bond and the rate for a default risk-free bond may vary after the purchase of the risky bond.
Credit swap
A type of swap transaction used as a credit derivative in which one party makes periodic payments to the other and receives the promise of a payoff if a third party defaults.
Credit VAR
A variation of VAR that reflects credit risk. Synonyms: Credit VAR Default VAR Credit at Risk
Credited rates
Rates of interest credited to a policyholder’s reserve account.
Credit-linked notes
Fixed-income securities in which the holder of the security has the right to withhold payment of the full amount due at maturity if a credit event occurs.
Creditworthiness
The perceived ability of the borrower to pay what is owed on the borrowing in a timely manner; it represents the ability of a company to withstand adverse impacts on its cash flows.
Cross hedging 
With respect to hedging bond investments using futures, hedging when the bond to be hedged is not identical to the bond underlying the futures contract. With respect to currency hedging, a hedging technique that uses two currencies other than the home currency.
Cross-default provision
A provision stipulating that if a borrower defaults on any outstanding credit obligations, the borrower is considered to be in default on all obligations.
Cross-product netting
Netting the market values of all contracts, not just derivatives, between parties.
Cross-sectional analysis
Analysis that involves comparisons across individuals in a group over a given time period or at a given point in time.
Cross-sectional data
Observations over individual units at a point in time, as opposed to time-series data.
Credit scoring model
A statistical model used to classify borrowers according to creditworthiness.
Credit spread forward 
A forward contract used to transfer credit risk to another party; a forward contract on a yield spread.
Credit spread option
An option on the yield spread on a bond.
Currency forward
A forward contract in which the underlying is a foreign currency.
Currency option
An option that allows the holder to buy (if a call) or sell (if a put) an underlying currency at a fixed exercise rate, expressed as an exchange rate.
Currency return
The percentage change in the spot exchange rate stated in terms of home currency per unit of foreign currency.
Currency risk
The risk associated with the uncertainty about the exchange rate at which proceeds in the foreign currency can be converted into the investor’s home currency.
Currency swap
A swap in which each party makes interest payments to the other in different currencies.
Currency-hedged instruments
Investment in nondomestic assets in which currency exposures are neutralized.
Current assets
Assets that are expected to be consumed or converted into cash in the near future, typically one year or less. Synonyms: liquid assets
Current cost
With reference to assets, the amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities, the undiscounted amount of cash or cash equivalents that would be required to settle the obligation today.
Current credit risk
The risk associated with the possibility that a payment currently due will not be made.
Current exchange rate
For accounting purposes, the spot exchange rate on the balance sheet date.
Current liabilities
Short-term obligations—such as accounts payable, wages payable, or accrued liabilities—that are expected to be settled in the near future, typically one year or less.
Current rate method
Approach to translating foreign currency financial statements for consolidation in which all assets and liabilities are translated at the current exchange rate. The current rate method is the prevalent method of translation.
Current ratio
A liquidity ratio calculated as current assets divided by current liabilities.
Current taxes payable
Tax expenses that have been recognized and recorded on a company’s income statement but which have not yet been paid.
Cushion spread 
The difference between the minimum acceptable return and the higher possible immunized rate.
Custom security-based benchmark

A custom benchmark created by weighting a manager’s research universe using the manager’s unique weighting approach.
Customer Name
Securities which are registered in the name of the customer and held directly with the issuing company. 
Convertible bond
A corporate bond that can be exchanged, at the option of the holder, for a specific number of shares of the company's stock. Because a convertible bond is a bond with a stock option built into it, it will usually offer a lower than prevailing rate of return.
Convexity
A measure of the change in a security’s duration with respect to changes in interest rates. The more convex a security is, the more its duration will change with interest rate changes.
Corporate bond
Bonds issued by corporations. Corporations use the funds they raise from selling bonds for a variety of purposes, from building facilities to purchasing equipment to expanding their business. Corporate bonds (also called corporates) are debt obligations, or IOUs, issued by private and public corporations. They are typically issued in multiples of $1,000 and/or $5,000.
Cost of Funds Index (COFI)
A bank index reflecting the weighted average interest rate paid by savings institutions on their sources of funds. There are national and regional COFI indexes.
Counterparty
One of two entities in a traditional interest rate swap. In the municipal market a counterparty and a party can be a state or local government, a broker-dealer or a corporation.
Coupon
A feature of a bond that denotes the amount of interest due and the date payment is to be made. Where the coupon is blank, it can indicate that the bond can be a “ zero-coupon,” a new issue, or that it is a variable-rate bond. In the case of registered coupons (see "Registered Bond"), the interest payment is mailed directly to the registered holder. Bearer coupons are presented to the issuer's designated paying agent or deposited in a commercial bank for collection. Coupons are generally payable semiannually.
Coupon payment
The actual dollar amount of interest paid to an investor. The amount is calculated by multiplying the interest of the bond by its face value.
Coupon rate
The interest rate on a bond, expressed as a percentage of the bond's face value. Typically, it is expressed on a semi-annual basis.
Covenant
The issuer’s pledge, in the financing documents, to do or to avoid from doing certain practices and actions.
Cover bid
The second-highest bidder in a competitive sale.
Covered bonds
Covered bonds, at their most basic, are debt securities backed by a guarantee from the issuing entity and secured by a dynamic pool of assets on that entity's balance sheet. The issuer is typically a regulated financial institution. Germany introduced covered bonds, known as Pfandbriefe, in 1770—the bonds have continued to be a widely used funding tool for mortgage loans and public works projects across Europe for over 200 years.
CP Index
Usually the Federal Reserve Commercial Paper Composite, calculated each day by the Federal Reserve Bank of New York by averaging the rate at which the five major commercial paper dealers offer "AA" industrial commercial paper for various maturities. Most CP-based floating-rate notes are reset according to the 30- and 90-day CP composites.
CPI-U
The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS). The CPI-U was selected by the Treasury because it is the best known and most widely accepted measure of inflation.
CPO
Commodity Pool Operator
CRA
Credit Rating Agencies
CRD
Capital Requirements Directive
Credit default swap (CDS)
A credit default swap is akin to an insurance policy in the event of certain credit events such as bankruptcy, failure to pay and restructuring of debt. The CDS contract protects the buyer against the loss of principal in an underlying asset if a credit event occurs. The buyer of protection pays a premium-a fixed periodic payment--usually on a quarterly basis, to the seller of protection until a credit event occurs or the contract matures, whichever is earlier.
Credit enhancement
The use of the credit of a stronger entity to strengthen the credit of a weaker entity in bond or note financing. This term is used in the context of bond insurance, bank facilities and government programs.
Credit rating agency
A company that analyzes the credit worthiness of a company or security, and indicates that credit quality by means of a grade, or credit rating.
Credit ratings
Designations used by ratings services to give relative indications of credit quality.
Credit risk
The risk for bond investors that the issuer will default on its obligation (default risk) or that the bond value will decline and/or that the bond price performance will compare unfavorably to other bonds against which the investment is compared due either to perceived increase in the risk that an issuer will default (credit spread risk) or that a company's credit rating will be lowered (downgrade risk).
Credit spread
A yield difference, typically in relation to a comparable U.S. Treasury security, that reflects the issuer’s credit quality. Credit spread also refers to the difference between the value of two securities with similar interest rates and maturities when one is sold at a higher price than the other is purchased.
CSRC
China Securities Regulatory Commission
Currency risk or exchange rate risk
Investors who invest in a government bond that is not in his/her home currency face currency or exchange rate risk since the value of his/her investment could go down as well as up depending on what happens to the currency exchange rate.
Current face
The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.
Current refunding
A financing structure under which the old bonds are called or mature within 90 days of the issuance of the new refunding bonds.
Current yield
The ratio of the interest rate payable on a bond to the actual market price of the bond, stated as a percentage. For example, a bond with a current market price of par ($1,000) that pays eighty dollars ($80) per year in interest would have a current yield of eight percent.
CUSIP
The Committee on Uniform Security Identification Procedures was established by the American Bankers Association to develop a uniform method of identifying securities. CUSIP numbers are unique nine-character alphanumeric identifiers assigned to each series of securities.
Cyclical businesses
Businesses with high sensitivity to business- or industry-cycle influences.
Cyclical stocks 
The shares of companies whose earnings have above-average sensitivity to the business cycle.
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