Investments M3

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• Sinking fund Issuer sets aside a certain payment to cover par value payment over the life of the bond. Could be operated by repurchases of fractions of outstanding bonds in open market or to a special call price associated with the sinking fund provision.
• Call provision Allows issuer to repurchase the bond, fully or partial, at a specified call price before maturity date
• Put provision bondholder has the right to sell the bond back to the issuer at par value on designated dates
• Dividend restriction Covenants limit dividend firms may pay.
• Currency swap Agree to exchange currency payments, e.g. dollar to pound, on several future dates
• Realized compound return compound return when future coupons may be reinvested to other interest rates than the yield to maturity
• Stock index future substitute for holdings in underlying stocks, synthetic stock positions
• Risk-weighted capital used to link the minimum amount of capital that banks must have, with the risk profile of the bank's lending activities (and other assets)
• Expected shortfall The expected loss on a security conditional on returns being in the left tail
• Operational risk risk of loss due to inadequate or failed internal processes, people and systems or from external events
• Credit risk The risk that counterparties may be unable to fulfill contractual obligations
• Market risk The risk of losses due to movements in the level or volatility of market prices
• Liquidity risk risk refer to ability to meet short term payments
• Contango F0 > E(PT) seller has premium
• Covered call selling a call and buying a stock, protect against downfall
• Asian option payoff depend on average price on underlying asset on a time period
• Hedge ratio number of stocks required to hedge against price risk of holding one option

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