A basket option is a kind of fancy financial thing called an over-the-counter complex option. When you buy one of these options, it lets you make money based on how the price of a group of things changes compared to a set price. This group of things the price is based on is called a…
A basket credit swap is a special type of deal between two groups of people. It’s a bit like insurance. One group agrees to make regular payments to the other group. In return, the other group promises to pay money if certain bad things happen to companies or countries the first group has lent money…
A basket aggregate is a special kind of insurance policy. It puts a total limit on how much money the insurance company will pay out for different types of losses and risks. Multiple lines of coverage See, a normal insurance policy usually just covers one specific thing. Like maybe it only covers damage from fires….
Basis trading is a way to make money by buying and selling things. A basis trade uses two different things that are related to each other. One thing is bought with cash. The other thing is a futures contract. Cash Instrument The thing bought with cash is called the “cash instrument”. A cash instrument can…
A basis swap is a special type of interest rate swap. In an interest rate swap, two parties agree to exchange interest rate payments. Usually one party pays a fixed interest rate and the other party pays a floating rate that can change over time. In a basis swap, both parties pay floating interest rates…
Basis risk is a type of risk in finance. It can happen when you use one thing to protect yourself against losing money on something else, but the two things don’t match up perfectly. What causes basis risk Trying to reduce other risks Many times, basis risk happens because people are trying to get rid…
Basis price is the price used to figure out if you made or lost money on an investment. It is calculated by taking the price you paid for the investment and subtracting the price you sold it for. You also have to add in any fees or commissions you paid. An example of basis price…
Barrier options are a type of option. Options are contracts that give you the right to buy or sell something at a set price by a certain date. Barrier options are a special kind of option where that right to buy or sell only starts or stops if the price of the thing you’re trading…
A “banque d’affaire” is what they call a merchant bank over in France. These special banks put their own money into helping companies do big business deals. They also sell and trade company stocks and bonds. Merchant banks are pretty different from the regular banks most folks use. Your usual bank takes deposits, makes loans,…
Banking book accounting is a special way that banks keep track of their money and assets. It’s different from the normal accounting that most businesses use. Banks use banking book accounting for certain things they own, like the loans they give out and some kinds of investments. Accrual Accounting In banking book accounting, banks use…
