MARKET: Debt Markets, Fixed Income, Bonds
ACT/360: The most common day count convention used by most currencies including the US dollar and euro for apportioning interest. Each month is treated normally, i.e. using the actual number of days in the relevant period and the year is assumed to have 360 days. No adjustment is made to the denominator in leap years, i.e. it remains 360.
ACT/365: A day count convention in which each month is treated normally, i.e. actual number of days in the month, and the year has the normal number of days (365). No adjustment is made to the denominator in leap years, i.e. it remains 365. ZAR and GBP are two of the currencies that employ this convention.
ACT/ACT: This day count convention treats each month normally, i.e. the actual number of days in each month, and the year has the usual number of days. In this convention, adjustment to the denominator is made for leap years.
30/360: Each month is treated as having 30 days. The year is considered to have 360 days.
DAX
MARKET: General
The DAX (Deutscher Aktien IndeX, formerly Deutscher Aktien-Index (German stock index)) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system. According to Deutsche Boerse, the operator of Xetra, DAX measures the performance of the 30 largest German companies in terms of order book volume and market capitalization.
Day Count
MARKET: General
In finance, a method used to calculate the fraction of a year between two dates. It is used in the calculation of accrued interest and in many other formulae in financial mathematics.
Debenture
MARKET: Debt Markets
A type of debt instrument that is not secured by a physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond to secure capital.
Debt Securities
MARKET: Debt Markets
IOUs created through loan-type transactions and securities that allow the issuer to raise funds: Commercial Paper (CP), Negotiable Certificates of Deposit (Bank NCDs), Bank Bills, Notes and Bonds (Fixed Income Securities), and/or variations of the above.
Default
MARKET: General
Default implies the actual non-payment of interest or loan obligations by an issuer of debt securities or the borrower of funds.
Default Risk
MARKET: Risk Management
The likelihood that an issuer/borrower will actually fail to make timely payments of principal and interest. It is a form of credit risk in which the reduction in the capacity to pay is so severe that a scheduled payment is delayed or missed altogether.
Deficit
MARKET: Economics
A situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports, or losses exceed profits. A deficit is the opposite of a surplus. If a country imports more than it exports, it is said to have a trade deficit.
Deflation
MARKET: Economics
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.
Deleveraging
MARKET: Fixed Income
Deleveraging represents the actual decision to reduce the level of debt previously used to enhance (increase) the potential return on an investment.
Delivery Date
MARKET: Derivatives
The final maturity date of a financial or commodity futures contract.
Delivery Risk
MARKET: FX
Also referred to as Herstatt or settlement risk. It represents the risk that a counterparty will be unable or unwilling to deliver a currency in terms of a foreign exchange transaction.
Delivery Versus Payment (DVP)
Also referred to as Herstatt or settlement risk. It represents the risk that a counterparty will be unable or unwilling to deliver a currency in terms of a foreign exchange transaction.
Delta
MARKET: Options
The sensitivity of an option premium to changes in the price of the underlying, also known as the hedge ratio.
Delta Hedging
MARKET: Options
The process of setting or keeping the delta of a portfolio of financial instruments zero, or as close to zero as possible — where delta is the sensitivity of the value of a derivative to changes in the price of its underlying instrument.
Deposit Market
MARKET: Money Markets
The section of the debt markets, normally short term (money markets) where money (funds) is deposited by one party with another for a specified period of time at an agreed rate of interest.
Depreciation
MARKET: FX
This represents the reduction in the value of fixed assets as a result of wear and tear or redundancy. Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over several years.
Derivative Instrument
MARKET: Derivatives
A financial contract whose value is dependant on or derived from the value of some underlying asset or group of assets. The main classes of derivative instruments are: forwards, futures, options and swaps. There are derivative contracts on currencies, commodities, equities, equity indices, interest rates and combinations of these. Derivatives can be exchange-traded or over the counter.
Devaluation
MARKET: FX
A reduction in the value of a currency with respect to other currencies. In contrast, (currency) depreciation is most often used for the unofficial decrease in the exchange rate in a floating exchange rate system. Depreciation and devaluation are sometimes used interchangeably, but they always refer to values in terms of other currencies.
Development Finance Institutions (DFIs)
MARKET: General
State agencies that aim to meet the funding needs of riskier but socially and economically desirable projects that are beyond the credit acceptance levels of commercial banks.
Direct Placement
MARKET: Bond and Equity Markets
Selling a new issue, not by offering it for sale to the general public, but by placing it with one or several selected institutional investors. Also referred to as a private placement.
Direct Quotation
MARKET: FX
An exchange rate in which the value of a unit of foreign exchange currency is quoted in units of domestic currency, e.g. in England the number of USD for GBP1. In the foreign exchange markets, any currency value quoted against one US dollar is considered to be a direct quotation.
Dirty Price
MARKET: Fixed Income
Clean price of the bond plus accrued interest, if any, on an interest-bearing security. Also known as the total price, all-in or settlement price.
Discount
MARKET: FX
The margin by which the forward exchange rate (base currency wise) is less expensive than the spot rate.
Discounting
MARKET: TVM
In finance and economics, discounting is the process of finding the present value of an amount of cash at some future date (future value), assuming a given interest rate.
Discount Bond
MARKET: Fixed Income
A bond selling or issued below par. A bond would generally trade below par if the market yield-to-maturity is above the coupon rate of the bond.
Discount Currency
MARKET: FX
In a foreign exchange swap, a discount currency is the currency with the lower interest rate. If the base currency for the swap is the discount currency, it means that the party borrowing the discount currency will receive more of the quoted (terms) currency than it originally lent in exchange for the discount currency at the end of the transaction.
Discount Factor
MARKET: TVM
The discount factor is the number by which a known future cash flow must be multiplied in order to obtain the current present value of the cash flow.
Discount Rate
MARKET: TVM
The rate which is used to calculate the present value of a future cash flow or the market rate quoted on a Treasury Bill or other straight discount security.
Discount Securities
MARKET: Debt Markets
Money or capital market instruments that are issued at a discount to their face value and redeemed at maturity for full face value.
Discrete Compounding
MARKET: TVM
Discrete or periodic compounding refers to the calculation of a future value assuming that interest compounds (is earned) on an annual, semi-annual, quarterly, monthly or daily basis over the relevant time period.
Discrete Discounting
MARKET: TVM
Discrete or periodic discounting refers to the calculation of a present value assuming that interest compounds (is earned) on an annual, semi-annual, quarterly, monthly or daily basis over the relevant time period.
Disinflation
MARKET: Economics
A slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation.
Disposable Income
MARKET: General
Disposable income represents the total income by households less all taxes and employee contributions.
Dollarisation
MARKET: FX
A reference to the adoption of the US dollar by a country as its official medium of exchange. The decision by a government to do so, is usually as a result of the failure of the national currency system, followed by the need for a stabilising influence on its domestic economy. Another reason could be because of the existence of strong trading and/or political ties with the United States.
Domestic Market
MARKET: Debt Markets
The part (section) of the debt markets in which local (domestic) institutions or participants enter into financial transactions (borrowings/investments) denominated in the domestic (home) currency.
Done
Market term used to indicate that a transaction has been successfully completed
Double
MARKET: General
Both a buy (bid) and sell (ask) price (rate) is quoted by a market maker.
Dow
Dow Jones Industrial Average is one of several stock market indices in the US. The average is computed from the stock prices of 30 of the largest and most widely held public companies in the US and is generally seen as a major influence on the movements of other major stock market indices
DOW JONES INDUSTRIAL AVERAGE
MARKET: General
The Dow Jones Industrial Average (DJI, also called the DJIA, Dow 30, or informally the Dow Jones or the Dow) is one of several stock market indices, created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. The average is computed from the stock prices of 30 of the largest and most widely held public companies in the United States. The "industrial" portion of the name is largely historical. Many of the 30 components have little or nothing to do with traditional heavy industry.
The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. Not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate the value of the index. Since the divisor is currently less than one, the value of the index is higher than the sum of the component prices.
Duration (Macaulay)
MARKET: Fixed Income
A measure of the weighted average life of the interest payments and the return of the principal on the maturity date of a fixed-income security. It is used primarily as a measure of the sensitivity of the market price of a bond to interest rate (yield) movements, and is approximately equal to the percentage change in price for a given change in yield.
