Accrual Swap Definition

[Accrual Swap Definition]

Just like in other swap deals, one party pays the floating rate while the other party pays a fixed rate, with payments being made on the accrual swap only on fulfillment of the set conditions for the trade.

[Zero Coupon Swap Definition]

The zero coupon swap has several variations. Some are structured in such a way that the fixed lump sum is paid at the commencement of the contract, while others may be structured so that there is an option to convert the lump sum payment on the fixed arm into instalmental payments over the life of the contract. The objectives of the parties in the swap deal determine how the deal is structured.

[Zero Basis Risk Swap - ZEBRA Definition]

Municipal governments tend to use ZEBRA swaps because they make the cost of borrowing more predictable and therefore less risky.

[Xetra Definition]

The Xetra commenced full electronic trading operations in 1997 and as an electronic trading system, is now being used in many countries in Asia and Europe.

[Witching Hour Definition]

Also called triple witching, this is the last hour of trading before contracts on stock options, stock index futures and index options expire. There is usually increased volume of trade as investors try to unwind positions before the expiry catches up with them.

[Winnipeg Commodities Exchange - WCE Definition]

The WCE does not buy or sell securities or assets, but only serves as a standardized exchange with rules that guide transactions between buyers and sellers. It transited to a full electronic trading platform in 2004.

[West Texas Intermediate - WTI Definition]

WTI is also known as Texas light sweet crude oil.

[Wild Card Play Definition]

What the wild card play does is to allow the seller of an option the opportunity to deliver the option for a given amount of time after the exchange is closed for trading, but still using the last price that the option traded at. This means that even when there is a price change between closing and actual delivery, the seller can still deliver at the closing price.

[Wild Card Option Definition]

This option is used by traders who are short on a Treasury note future to deliver the asset after the price of settlement has been known, to permit them to make more informed decisions so as to maximize profit on the sale of the option.This is an option which confers on a selling party of a Treasuries futures option, the right to give a notice at 8pm Chicago time, of an intent to delay the delivery of the Treasury option until after the exchange on which that future was trading has closed for the day, by which time the settlement price has been fixed.

[Wide Basis Definition]

The wide basis occurs when traders expect a rapid shift in the fundamentals of the asset being traded between the present time and when the futures contract is to be settled. Usually as the time of expiry of the futures contract approaches, the differential in both prices narrows.

[Weighted Average Rating Factor - WARF Definition]

WARFs are usually used to calculate credit ratings on collateralized debt obligations (CDO) instruments, and are used to assess the chance of default on the underlying debt that the CDO instruments are based on, and so give a clue as to the investment-worthiness of the portfolio being measured.

[Weather Future Definition]

The weather future is mostly used by energy companies as a way of hedging against business losses that may occur due to weather changes or fluctuations. For instance, if an expected winter month where an energy company will ordinarily sell large amounts of heating oil turns out not to be as cold as predicted, sales of heating oil will drop and the energy company will lose revenue. Use of a weather future prevents such losses.

[Weak Hands Definition]

Weak hands are seen in situations where the options buyers do not have enough financial resources to redeem the payments that are due for commodities or assets that they are supposed to take delivery of on trade maturity, or do not have money to pay for storage and transportation of the asset.

[Wasting Asset Definition]

Wasting assets are commonly used to describe machinery and cars owned by a company, because these items tend to lose value over time. However, they can also be used to describe options since this is an investment vehicle where trade contracts have time limits.

[Warrant Premium Definition]

Several factors affect the premium on a warrant. A warrant premium decreases when the asset is highly volatile, has low volatility or if the warrant price increases.

[Warrant Coverage Definition]

A warrant coverage is an agreement between the shareholders of a company and the company's management to issue a part of the shareholders' ownership in the form of warrants.

[Warehouse Receipt Definition]

A warehouse receipt is also called a vault receipt.

[Volume Of Trade Definition]

The volume of trade is an indication of what the market's liquidity is like, with higher volumes indicative of greater liquidity. There are also time periods and days of the week when higher and lower liquidity is experienced.

[Volatility Swap Definition]

This trading option is mostly used by traders who favor the bulls, and are seeking additional levels of premium income. This is because premiums are received on the put trade and paid on the call trade, but the net is a positive, credited to the trader's account.

[Visible Supply Definition]

The visible supply is a measure of whether the price of the commodity will rise, fall or stay static. An increase in visible supply means that it is likely that prices will fall, while an decrease in visible supply means that prices are likely to rise as a result of the created scarcity.

[Vault Receipt Definition]

The vault receipt is what shows who the owner of the spot metal is prior to settlement of an options trade which requires physical delivery of the precious metal from oner (seller) to buyer.

[Variation Margin Definition]

This payment is made on a daily basis in order to reduce the risk exposure brought on by carrying risky positions.

[Variance Swap Definition]

The variance swap has two legs: a variable portion which is based on the variance of the closing prices of the asset and a fixed portion which is the strike price set at the inception of the swap trade. The payout to the counterparty to the swap deal is the differential between the two legs.

[Variable Price Limit Definition]

The variable price limit is usually set by the commodity exchanges on a daily basis and setting such variable limits allows the affected commodities to trade outside their normal daily ranges.

[Unparted Bullion Definition]

Unparted bullion obviously has a lower value than parted bullion. The exact value of unparted bullion will depend on the metals used in mixing, the degree of mix and the proportion of the constituent metals in the unparted mixture.