MARKET: Debt Markets
Also known as par value or nominal value. It represents the value of a debt (interest rate) instrument that will be paid to the investor/holder on the maturity date. Face value is also the value on which the coupon/interest is calculated.
Fair Value
MARKET: General
Also called fair price,. A concept used in finance and economics, defined as a rational and unbiased estimate of the potential market price of goods, services, products or assets.
Fallen Angel
MARKET: Fixed Income
A bond that once carried an investment grade but has since been reduced (downgraded) to junk bond (speculative grade) status.
FED
Federal Reserve of America
Financial Account
MARKET: Economics
A statement of all financial transactions between a country and the rest of the world, including portfolio and fixed investment flows and movements in foreign exchange reserves.
Financial Future
MARKET: Derivatives
This is a generic term that covers any futures contract where the underlying asset/instrument is not a physical commodity. For example an interest rate, stock index or bond futures contract.
Financial Intelligence Control Act, SA (FICA)
To establish and maintain an effective policy and compliance framework and operational capacity to oversee compliance and to provide high quality, timeous financial intelligence for use in the fight against crime, money laundering and terror financing in order for South Africa to protect the integrity and stability of its financial system, develop economically and be a responsible global citizen.
Financial Services Board (FSB)
MARKET: General
An independent body established by statute that regulates all financial services companies, except for banks. Examples are short-term and long-term insurers, intermediaries, retirement funds, unit trusts and management companies.
Financial Stability Board
MARKET: General
The Financial Stability Board is an international body, which consists of representatives of financial authorities, institutions and central banks. It proposes regulatory, supervisory and other policies in the interest of ongoing financial stability.
Financial Services Board (FSB)
Financial regulator in South Africa.
Firm quote (price)
MARKET: General
A price which can be traded on, i.e. either buy or sell
Fiscal Policy
MARKET: Economics
The level of public expenditure and the means by which that expenditure is funded through taxes or borrowing.
Fiscal Year
MARKET: Economics
The 12-month period on which government budgets are based, starting on the 1st of April and ending on the 31st of March of the subsequent calendar year.
Fixed Exchange Rate
MARKET: FX
A currency whose rate of exchange is pre-determined at some fixed level against another currency that does not fluctuate with changes in supply and demand for that currency.
Fixed-for-Fixed
MARKET: Derivatives
Interest rate swaps in which both counterparties pay a fixed rate of interest to one another. This is a situation most common in currency swaps.
Fixed-for-Floating
MARKET: Derivatives
Interest rate swaps in which a fixed rate payment stream is exchanged for a payment stream referenced to a floating rate index, for example JIBAR or LIBOR.
Fixed Income Securities
MARKET: Fixed Income
Financial instruments or securities that pay interest/coupon at maturity or at regular intervals (usually semi-annually or annually) based on an interest rate (coupon) that does not change over the life of the instrument.
Fixed Interest Rate
MARKET: Derivatives
The fixed leg or side of an interest rate or currency swap.
Flight-to-quality
Action of investors moving their capital away from riskier investments to the safest possible investment vehicles. Usually caused by uncertainty in the financial markets
Fixed Rate Payer
MARKET: Derivatives
The swap counterparty that undertakes to pay the fixed interest rate in a swap transaction.
Floating Exchange Rate
MARKET: FX
The rate of exchange of a currency that is determined primarily by market forces, i.e. supply and demand.
Floating Interest Rate
MARKET: Derivatives
Floating (changeable) rate of interest (leg/side) on an interest rate or currency swap, e.g. 6-m LIBOR or 3-m JIBAR. A floating rate loan will imply that the interest is charged/calculated at regular intervals, based on a short-term interest rate index.
Floating Rate Note (FRN)
MARKET: Debt Markets
A note (debt instrument) with a variable interest rate. The adjustments (resets) to the interest rate are usually made every six months and are linked to a certain money-market index, such as LIBOR/JIBAR. Also known as a floater.
Floating Rate Payer
MARKET: Derivatives
The swap counterparty that undertakes to pay the floating rate (in return for a fixed rate) in a swap transaction.
Floor
MARKET: Options
A financial contract that gives the owner/buyer the right, but not the obligation, to receive compensation if the market interest rate is below pre-set interest rate (strike price) over a specified period of time.
FOMC (Federal Open Market Committee)
MARKET: General
The body that sets the interest rate and credit policies of the Federal Reserve System.
Foreign Bond
MARKET: Fixed Income
A fixed income security (bond) issued by a non-domestic borrower in a domestic capital market. For example, BMW issues a bond, denominated in US dollars and places the bond in the US bond market.
Foreign Direct Investment (FDI)
MARKET: Economics
FDI represents direct investments in productive assets by a company incorporated in a foreign country, as opposed to investments in shares of local companies by foreign entities. This is an important feature of an increasingly globalised economic system
Foreign Exchange Intervention
MARKET: FX
An international financial transaction in which a central bank buys or sells its domestic currency to influence foreign exchange rates against its domestic currency.
Foreign Exchange Market
MARKET: FX
The market in which transactions are concluded in foreign currency and where the exchange rate level of a country’s exchange rate is determined.
Foreign Exchange Transaction
MARKET: FX
The sale or purchase of one currency against another currency, either for value spot (T +2) or forward settlement.
Foreign Reserves
MARKET: Economics
The total amount of foreign currency and gold holdings (reserves) held by the central bank of that country.
Forward Exchange Contract (FEC)
MARKET: FX
An over-the-counter financial contract to either buy or sell one currency against another at some point in the future, the details of which were settled privately between the two counterparties. The period of the transaction, the exchange rate and the currency amounts are agreed on the transaction date.
Forward Exchange Rate
MARKET: FX
An exchange rate that is agreed on today in a forward foreign exchange transaction, that represents the rate at which one currency will be delivered against another currency at an agreed date in the future.
Forward Foreign Exchange
MARKET: FX
All foreign exchange transactions, where settlement takes place other than two business days from the transaction date (T + 2), usually for periods ranging from one month to twelve months. The forward exchange rate as well as the delivery date of the contract is fixed at the time of dealing.
Forward Interest Rate
MARKET: Derivatives
An interest rate that will apply to a loan or deposit beginning on a future date and maturing on a second future date, e.g. starting in six months and maturing six months thereafter. This forward interest rate will be referred to as a 6x12 interest rate.
Forward Rate Agreement
MARKET: Derivatives
A cash settled contract on short-term interest rates for a pre-specified period on a pre-specified interest rate index with a forward start date. A 6x9 FRA on ZAR JIBAR is a contract between two parties obliging one to pay the other the difference between the FRA rate (contract rate) and the actual JIBAR rate observed for that period. The comparison between the FRA rate and the actual JIBAR rate in this case will be derived at the T6m date and paid at the start of the forward three-month period in the contract.
Forward-Start Swap
MARKET: Derivatives
Interest rate contracts in which the start (effective) date is a specified date in the future, although the transaction is entered into on the spot date. An example of a forward-start swap is a 2x7 year swap. This contract is entered into on the spot date, but the effective date of the swap is at T2yr.
Forward Value Date
MARKET: General
A value (settlement) date which is further into the future than the spot settlement date.
FSA
MARKET: Regulation
The Financial Services Authority is an independent non-governmental and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its board is appointed by the Treasury. When acting as the competent authority for listing of shares on a stock exchange, it is referred to as the UK Listing Authority (UKLA), and maintains the Official list.
The Financial Services Agency is a Japanese government organisation responsible for overseeing banking, securities and exchange, and insurance to ensure the stability of the financial system of Japan. The agency reports to the Minister of Financial Services
Fungibility
MARKET: General
The property of interchangeability. Banknotes are considered to be fungible in that people are prepared to change one note for another without prejudicing their wealth. Futures contracts have the same characteristic, i.e. they are identical and interchangeable with another if they have the same specifications. This means that a Jun’10 All-Share index futures contract is fungible with another Jun’10 All-Share index futures contract.
Futures Contracts
MARKET: Derivatives
An exchange-traded (contract) obligation to buy or sell a financial instrument (physical settlement) or to make a payment (cash settlement) on one of the contract’s fixed delivery dates (usually March, June, September and December), the details of which are transparent publicly on the trading floor (or via a trading system). All contract specifications are standardised and the settlement/delivery takes place through the exchange’s clearing house.
Futures Market
MARKET: Derivatives
An exchange-traded market in which the trading of all types of futures contracts (equity, equity index, currency, commodity and interest rates) takes place.
Future Value
MARKET: TVM
The value of a cash flow(s) based on a specific present value, a specified interest rate and time period, at the end of that time period. Future values are usually higher than present values.
FX Swap
MARKET: FX
An over-the-counter short-term interest rate derivative contract. It usually consists of a spot foreign exchange transaction entered into at exactly the same time and for the same quantity as a forward foreign exchange transaction. It can be defined as a foreign exchange transaction that involves the exchange and re-exchange of two currencies for two different value dates, usually spot and forward dates. An FX swap can also be transacted to involve an exchange of two currencies for one forward date and a re-exchange of the same two currencies for a forward date later than the first forward date. An example of a forward-forward swap would be to transact a 3m against 6m FX swap.
