European Central Bank
Economic Value Added (EVA)
This is the PV of all value (margin and fees less costs) generated from the deal over its life. It takes into account all funding and hedging costs, the expected loss due to credit risk and the cost of capital that will be incurred.
Effective Exchange Rate Index
MARKET: FX
An index that reflects the value of a currency against a basket of representative foreign currencies.
Effective Duration
MARKET: Fixed Income
The duration for a bond with an embedded option (callable or puttable bond) when the value (market price) is calculated to include the expected change in value caused by the option when interest rates change. It measuresthe sensitivity of a bond's price to interest rate changes, and illustrates that the embedded option will also affect the price of the bond.
Effective Rate
MARKET: General
The actual return, expressed as a percentage, including reinvestment income, earned on an investment, assuming that the compounding of interest takes place more than once per year.
Effective Tax Rate
MARKET: General
This rate represents the actual tax liability expressed as a percentage of a pre-tax income base rather than as a percentage of taxable income.
Elasticity
MARKET: Economics
A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.
Emerging Markets
MARKET: General
Emerging markets are countries that are in the process restructuring their economies along market-oriented lines and offer a wealth of opportunities in trade, foreign direct investment and technology transfers. According to the World Bank, the five biggest emerging markets are China, India, Indonesia, Brazil and Russia. Other countries that are also considered as emerging markets include Mexico, Argentina, South Africa, Poland, Turkey, and South Korea.
Eonia
MARKET: Debt Markets
Eonia (Euro OverNight Index Average) is an effective overnight rate calculated as a weighted average of all overnight unsecured lending transactions in the interbank market.
Equilibriium
MARKET: Economics
The state in which market supply and demand balance each other and as a result, prices become stable. Generally, when there is too much supply for goods or services, the price goes down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium.
Equity Option
MARKET: Options
A contract that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a specified number of shares at a pre-specified price (strike price) on or before a specified date in the future.
Equity Swap
MARKET: Derivatives
A swap where a set of future cash flows are exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate, such as LIBOR/JIBAR. The other will be based on the performance of a share or stock market index. E.g. in a general equity swap, one party swaps R5,000,000 at JIBAR + 0.03% against R5,000,000 JSE All Share equivalent for 6 months. On the maturity date of the swap, that party (the floating rate payer/equity receiver) would owe to the other the JIBAR-based floating amount and would receive (or pay) the JSE All Share positive (or negative) performance.
Euribor
MARKET: Debt Markets
Euribor (Euro Interbank Offered Rate) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale (or interbank) money market.
Euro
MARKET: FX
The euro (EUR) is the official currency of 16 out of 27 member states of the European Union (EU). The states, known collectively as the Eurozone, are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
Eurobond
MARKET: Fixed Income
A bond issued in a currency other than the lender’s domestic currency. For example, a eurodollar bond that is denominated in U.S. dollars and issued in Japan by an Australian company. A Eurobond is normally a bearer bond, payable to the bearer.
Euroclear
MARKET: General
One of two principal clearing houses for securities traded in the Euromarket. Euroclear is market-owned and governed, and has previously acquired London Crest, Necigef Netherlands, Sicovam Paris and CIK Brussels.
Eurocurrency
MARKET: FX
Transactions in a particular currency, not governed by the domestic banking regulations of that currency, or of the center in which the transaction is booked. A dollar deposit placed with a London bank is a typical eurocurrency (eurodollar) transaction.
Eurodollars
MARKET: General
US dollars that are deposited in foreign banks outside of the United States or in foreign branches of US banks.
Euroland
MARKET: General
The geographical area that uses the euro.
European-style Option
MARKET: Options
A financial option that can be exercised only on the expiration date of the option.
European Union (EU)
The EU is a union of twenty-seven independent states based on the European Communities and founded to enhance political, economic and social co-operation.
Eurozone
MARKET: General
The collective group of countries which use the euro as their official currency.
Exchange Control (EXCON)
MARKET: FX
Exchange control or “EXCON” are rules implemented and aimed at regulating the flow of currency out of South Africa, or restrict the amount of foreign assets held by South African companies and individual investors.
Exchange Rate
MARKET: FX
The price of one currency in terms of another.
Exchange Rate Regime
MARKET: FX
The way a country manages its currency with respect to foreign currencies in the foreign exchange market. The basic types of regimes are a floating exchange rate, where the market (supply and demand) dictates the movements of the exchange rate; a managed float, where the central bank (monetary authority) keeps the rate from deviating far from a target band or value; and a pegged exchange rate, which ties the domestic currency to another currency.
Exchange Risk
MARKET: Risk Management
If an investor buys a financial asset denominated in a foreign currency, the investor’s return is exposed to fluctuations in the exchange rate between the investor’s domestic currency and the foreign currency in which the financial asset is denominated.
Exchange-traded
MARKET: General
Recognized Derivatives Exchange, example SAFEX
Exchange-traded Contracts
MARKET: Derivatives
Financial instruments (usually futures and options) listed on exchanges such as the Chicago Board of Trade (CBOT) or SAFEX.
Exchange-traded Funds (ETFs)
MARKET: Equity Markets
Exchange-traded funds (or ETFs) are open-ended collective investment schemes (unit trusts), traded as shares on most global stock exchanges. Typically, ETFs try to replicate a stock market index such as the S&P 500 JSE All Share Index, a market sector such as energy or technology, or a commodity such as gold or petroleum.
Excise Duties
MARKET: Economics
Taxes imposed on the manufacture or sale of certain specified domestic or imported goods. Excise duties are usually charged on products such as alcoholic beverages, petroleum and tobacco products.
‘Excon’ Exchange Control
Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased. Allows allow countries a greater degree of economic stability by limiting the amount of exchange rate volatility due to currency inflows/outflows.
Ex-coupon Date
MARKET: Fixed Income
Usually a certain number of days before the next coupon payment date on a fixed income security. Starting with the ex-coupon date, a fixed-income security trades without the coupon, which means that the next coupon payment will be made to the holder of the bond as recorded on the ex-coupon date, not to the holder on the actual coupon payment date.
Exercise
MARKET: Options
The exercise of an option means to put into effect, or take up the right to buy (call) or sell (put).
Exercise Price
MARKET: Options
Also known as the strike price. It represents the price at which the option holder can buy (call) or sell (put) the underlying financial asset, currency, or commodity.
Exotic Derivatives
MARKET: Derivatives
Any derivative contract that is not a plain vanilla contract. Examples include barrier options, average rate and average strike options, chooser options, Constant Maturity Swaps etc.
Expiry Date
MARKET: Options
The last day on which an American-style option may/can be exercised, or the day on which an European-style option can/may be exercised. After the expiry date, an option is considered worthless if it was not exercised.
Export
MARKET: General
The process of selling goods and services to another country (countries) or markets as opposed to selling in the domestic market.
Extendible Swap
MARKET: Derivatives
An interest rate swap that gives the buyer the right, but not the obligation, to extend the maturity of the original swap on a pre-specified number of dates or a specific date in the future.
