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What Is the Role of Variation Margin (VM) in Derivatives?

Variation margin (VM) is the additional funds is required to top off the balance in a margin account to the...

What Is the Most Common Type of Credit Derivative?

The most common type of credit derivative is the credit default swap (CDS). It is a financial instrument that allows...

What Is a Name?

The entity that is the underlying for a credit default swap (CDS) or a similar structure. The entity is the...

What Is The Difference Between a Currency Swap and an Interest Rate Swap?

A currency swap is similar, in concept, to an interest rate swap, but they differ quite remarkably in specific aspects....

How Do a Parisian Option and a Barrier Option Differ?

A Parisian option is a crossover between a barrier option and an Asian option. However, the payoff of a Parisian...

What Is the Difference Between Buying a Put and Selling Stock Short?

Buying a put option (i.e., a long put position) is mainly a bet that the underlying price is going to...

How Do Currency Options Work?

In simple terms, a currency option is the right to buy or sell an amount of a currency at a...

What Does a Low Gamma of an Option Indicate?

Gamma is the second derivative of the option’s price (premium) with respect to the underlying price/ rate. It is usually...

What Is the Difference Between a Digital Option and a Range Option?

A digital option (also a binary option) is an option which pays off a fixed amount of money if a...

What Is the Difference Between Par Swap Rate, Swap Rate, and Forward Swap Rate?

At inception, swaps are transacted at zero cost to both parties. A swap with a zero cost is called a...