Forward and currency swap

Generally, we have the intuition that forward has worse rate then swap. FX Forwards A forward is a contract that locks in the price at which a counterparty can buy or sell a currency on a future date. The exchange rate is typically today’s rate, adjusted for the interest rate differential in the two currencies. If the interest rate in the local currency is higher than that of the USD (or whatever the reference currency is), the FX forward will include a devaluation expectation. A forward can be used to hedge the foreign exchange exposure of a loan or an … Continue reading Forward and currency swap

What is the difference between a collateralized debt obligation (CDO) and an asset backed security (ABS)?

An asset-backed security (ABS) is a security created by pooling non-mortgage assets that is then resold to investors. A collateralized debt obligation (CDO) is a complex type of ABS that can be based on non-mortgage assets, mortgage assets or both together. The ABS evolved from mortgage-based securities (MBS], which are created from pools of mortgage assets, typically first mortgages on homes. Rather than mortgages, ABSs are backed by credit card receivables, home equity loans, student loans, auto loans and other non-mortgage financial vehicles. A CDO is an ABS issued by a special purpose vehicle (SPV), which is a business entity … Continue reading What is the difference between a collateralized debt obligation (CDO) and an asset backed security (ABS)?

Mirror trading

Introduction The mirror trading method allows traders in financial markets to select a trading strategy and to automatically “mirror” the trades executed by the selected strategies in the trader’s brokerage account.[1] Traders can select strategies that match their personal trading preferences, such as risk tolerance and past profits. Once a strategy has been selected, all the signals sent by the strategy will be automatically applied to the client’s brokerage account. No intervention is required by the client as all the account activity is controlled by the platform. Clients may trade one or more strategies concurrently. This enables the trader to diversify … Continue reading Mirror trading

130-30 Strategy

What is the ‘130-30 Strategy’ The 130-30 strategy is a strategy that uses financial leverage by shorting poor performing stocks and purchasing shares that are expected to have high returns. A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and then using the funds to take a long position in the stocks the investor feels will outperform the market. Often, investors will mimic an index such as the S&P 500 when choosing stocks for this strategy. BREAKING DOWN ‘130-30 Strategy’ To engage in a 130-30 strategy, an investment manager could rank the stocks used in the … Continue reading 130-30 Strategy

Personal Choice Retirement Account

With a Schwab Personal Choice Retirement Account® (PCRA), you can invest in a retirement plan with the freedom of a brokerage account. What is it? A Schwab PCRA is a self-directed brokerage account (SDBA) that resides within your employer-sponsored retirement plan. In addition to the choices typically offered by retirement plans, PCRA lets you invest in a much wider range of investments. How it works: Your retirement plan provider must offer PCRA as part of your retirement plan in order for you to open an account. Your employer will determine if your retirement plan’s investment selection for PCRA includes only … Continue reading Personal Choice Retirement Account

Volcker Rule

The Volcker Rule refers to § 619[1] (12 U.S.C. § 1851) of the Dodd–Frank Wall Street Reform and Consumer Protection Act, originally proposed by American economist and former United StatesFederal Reserve Chairman Paul Volcker to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers.[2] Volcker argued that such speculative activity played a key role in the financial crisis of 2007–2010. The rule is often referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank’s own accounts, although a number of exceptions to this ban … Continue reading Volcker Rule

Line Of Credit and Letter Of Credit

What is a ‘Line Of Credit – LOC’ A line of credit, abbreviated as LOC, is an arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain. The borrower can access funds from the line of credit at any time, as long as he does not exceed the maximum amount set in the agreement and as long as he meets any other requirements set by the financial institution, such as making timely minimum payments. BREAKING DOWN ‘Line Of Credit – LOC’ The main … Continue reading Line Of Credit and Letter Of Credit