The Futures Bond Basis, Second Edition

GLOSSARY

Accrued interest The proportion of interest or coupon earned on an investment from the previous coupon payment date until the value date.

Accumulated value The same as Future value.

ACT/360 A day/year count convention taking the number of calendar days in a period and a ‘year’ of 360 days.

ACT/365 A day/year convention taking the number of calendar days in a period and a ‘year’ of 365 days. Under the ISDA definitions used for interest rate swap documentation, ACT/365 means the same as ACT/ACT.

ACT/ACT A day/year count convention taking the number of calendar days in a period and a year equal to the number of days in the current coupon period, multiplied by the coupon frequency. For an interest rate swap, that part of the interest period falling in a leap year is divided by 366 and the remainder is divided by 365.

Add-on factor Simplified estimate of the potential future increase in the replacement cost, or market value, of a derivative transaction.

All-in price See Dirty price.

Amortising An amortising principal is one which decreases during the life of a deal, or is repaid in stages during a loan. Amortising an amount over a period of time also means accruing for it pro rata over the period. See Bullet.

Annuity An investment providing a series of (generally equal) future cash flows.

Appreciation An increase in the market value of a currency in terms of other currencies.

Arbitrage The process of buying securities in one country, currency or market, and selling identical ...