Glossary of Terms


See Asset-Backed Security.


Instrument where tranches are created from the tranches of ABSs.

Accrual Swap

An interest rate swap where interest on one side accrues only when a certain condition is met.

Accrued Interest

The interest earned on a bond since the last coupon payment date.

Adaptive Mesh Model

A model developed by Figlewski and Gao that grafts a high-resolution tree on to a low-resolution tree so that there is more detailed modeling of the asset price in critical regions.

Agency Costs

Costs arising from a situation where the agent (e.g., manager) is not motivated to act in the best interests of the principal (e.g., shareholder).

American Option

An option that can be exercised ...

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