30/360 Also 360/360 or 30(E)/360. A day/year count convention
assuming 30 days in each calendar month and a ‘year’ of 360 days;
adjusted in America for certain periods ending on 31st-day of the
month (and then sometimes known as 30(A)/360).
AAA The highest credit rating for a company or asset – the risk of
default is negligible.
Accrued interest Interest due on a bond or other fixed income
security that must be paid by the buyer of a security to its seller.
Usual compensation: coupon rate of interest times elapsed days from
prior interest payment date (i.e. coupon date) up to but not including
settlement date.
Actual settlement date Date the transaction effectively settles in
the clearing house (exchange of securities eventually against cash).
Add-on In capital adequacy calculations, the extra capital required
to allow for the possibility of a deal moving into profit before a mark-
to-market calculation is next made.
Affirmation Affirmation refers to the counterparty’s agreement
with the terms of the trade as communicated.
Agent One who executes orders for or otherwise acts on behalf of
another (the principal) and is subject to its control and authority. The
agent takes no financial risk and may receive a fee or commission.
Agent bank A commercial bank that provides services as per their
Allocation (give up) The process of moving the trade from the
executing broker to the clearing broker in exchange-traded
Amortization Accounting procedure that gradually reduces the
cost value of a limited life asset or intangible asset through periodic
charges to income. The purpose of amortization is to reflect the resale
or redemption value. Amortization also refers to the reduction of
debt by regular payments of interest and principal to pay off a loan by
Annuity For the recipient, an arrangement whereby the individual
receives a pre-specified payment annually for a pre-specified number
of years.
Ask price Price at which a market-maker will sell stock. Also
known as the offer price.
Assets Everything of value that is owned or is due: fixed assets
(cash, buildings and machinery) and intangible assets (patents and
Assignment The process by which the holder of a short option
position is matched against a holder of a similar long option position
who has exercised his right.
Authentication agent A bank putting a signature on each physical
bond to certify its genuineness prior to the distribution of the
definitive bonds on the market.
Bank of England The UK’s central bank which undertakes policy
decided by the Treasury and determines interest rates.
Bankers’ acceptance Short-term negotiable discount note,
drawn on and accepted by banks which are obliged to pay the face
value amount at maturity.
Bargain Another word for a transaction or deal. It does not imply
that a particularly favourable price was obtained.
Base currency Currency chosen for reporting purposes.
Basis (gross) The difference between the relevant cash instrument
price and the futures price. Often used in the context of hedging the
cash instrument.
Basis (value or net) The difference between the gross basis and
the carry.
Basis point (BP) A change in the interest rate of one hundredth of
one per cent (0.01%). One basis point is written as 0.01 when 1.0
represents 1%.
Clearing, Settlement and Custody194

Get Clearing, Settlement and Custody now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.