An international organisation that oversees the global financial system by following the macro-economic policies of its member countries, in particular those with an impact on exchange rates and the BoP.
IMM
MARKET: Derivatives
The International Money Market (IMM) was set up by the Chicago Mercantile Exchange (CME) in 1972 and formally introduced the trading of financial futures. Currency futures were the first contracts to trade on the IMM.
Implied Volatility
MARKET: Options
A forward-looking assessment of the volatility (variability) in the price of the asset, exchange rate, commodity price etc.
Imports
MARKET: Economics
Any good or commodity brought into one country from another country in a legitimate fashion, typically for use in trade. Imported goods or services are provided to domestic consumers by foreign producers.
Indenture
MARKET: Fixed Income
A contract between an issuer of bonds and the bondholder (investor) stating the time period before repayment of capital, the amount of interest paid and when it is paid, if the bond is convertible (and if so, at what price or what ratio), if the bond is callable and the amount of money that is to be repaid in such a case. The indenture contains all the specific details of the security.
Index-Amortising Swaps
MARKET: Derivatives
An interest rate swap in which the notional principal amount for the purposes of calculating cash flows decreases over the life of the swap contract in a pre-specified manner. Also known as simply amortising swaps.
Index Future
MARKET: Derivatives
A financial instrument that provides the buyer (holder) with a standardised basket of shares on a pre-specified future delivery date (usually March, June, September or December). Share index futures are cash-settled, with the payment representing the difference between the contract price and the actual market price of the underlying index. Index futures are available on a number of well-known indices, such as the FTSE 100, the S&P 500, the Nikkei and the FTSE JSE ALSI index.
Indication price (level)
Purely an indication of the current market price. Can not normally be traded on
Inflation
MARKET: Economics
The continuous change in the price of goods and services in an economy.
Inflation Targeting
MARKET: Economics
Inflation targeting is a monetary policy framework intended to achieve price stability over a specified period. The reserve bank and government agree on a target range to be achieved over this specified period.
Initial Margin
MARKET: Futures
The minimum amount that a futures exchange requires a buyer or seller of a futures contract to deposit when trading in futures contracts. As long as the position is open, this represents the minimum amount (balance) that must be maintained in the margin account. Market participants usually earn interest on the balance in their margin accounts.
Interbank Deposits
MARKET: Money Markets
The deposits made between banking institutions in the domestic money markets.
Interbank Market
MARKET: Money Markets
The part of the money market in which banks lend to each other, by means of buying and selling assets and liabilities, such as BAs, Commercial Paper and Certificates of Deposit (NCDs), usually with maturities of less than one year.
Interest
MARKET: General
Money (compensation) paid for the use of funds for specified periods.
Interest Rate
MARKET: General
The amount charged (paid) for a loan (deposit), usually expressed as a percentage (%) per annum (p.a.) of the sum borrowed (invested).
Interest Rate Future
MARKET: Derivatives
Short-term interest rate futures are standardised exchange-traded contracts the underlying of which is a market interest rate for a specified time period. The contracts usually have fixed expiry (maturity) dates of March, June, September and December and are listed with fixed contract sizes, minimum rate movements and tick values (value of one basis point move in underlying interest rate).
Interest Rate Option
MARKET: Derivatives
Also referred to as an Interest Rate Guarantee (IRG). An interest rate option gives the buyer the right, but not the obligation, to receive (put – floor) or pay (call – cap) a specified interest rate on a notional principal amount over a specified period of time. If the market interest rate (as pre-specified intervals) is higher (cap) or lower (floor) than the cap or floor (contract) rate, the buyer of the cap/floor will receive a settlement amount from the seller as compensation. No compensation is payable by the buyer if the market interest rate is below (cap) or above (floor) the contact rate.
(Covered) Interest Rate Parity Theory
MARKET: FX
The covered interest parity theory states that the interest differential between two currencies should be equal to the percentage difference between the forward exchange rate and the spot exchange rate.
Interest Rate Risk
MARKET: Risk Management
Due to the inverse relationship between the price and the yield of a interest rate security, a capital loss will be realised if this security is sold when interest rates have increased. This risk of loss is generally referred to as market or interest rate risk.
Interest Rate Swap (IRS)
MARKET: Derivatives
A contract which involves the exchange of cash flows based on different interest rate indices denominated in the same currency on a pre-specified notional principal amount with a pre-determined schedule of payment dates and calculations. In a generic interest rate swap, one counterparty will receive (pay) fixed flows in exchange for making (receiving) floating interest rate payments.
Internal Rate of Return (IRR)
MARKET: TVM
A capital budgeting method used by firms to decide whether they should make long-term investments. The IRR is the rate which can be earned on the invested capital, i.e. the yield on the investment. A project is a good investment proposition if its IRR is greater than the rate of interest that could be earned by alternative investments (investing in other projects, buying bonds, even putting the money in a bank account). Mathematically, the IRR is defined as any discount rate that results in a net present value of zero given a series of expected cash flows. In general, if the IRR is greater than the project's cost of capital, or hurdle rate, the project will add value to the company. The IRR of a bond is equal to its yield to maturity (YTM).
International Securities and Derivatives Association (ISDA)
ISDA’s among the world’s largest global financial trade associations as measured by number of member firms.
In-the-Money
MARKET: Options
In-the-money options have positive monetary value (intrinsic value) as well as time value. A call option is in-the-money when the strike price is below the current market price. A put option is in-the-money when the strike price is above the current trading (market) price.
Intrinsic Value
MARKET: Options
The economic value of a financial option contract. It represents the value that an option holder can realise if the option is exercised at that point in time. An option’s intrinsic value cannot be less than zero.
Investment Grade
MARKET: Debt Markets
For fixed income securities, or other interest-bearing instruments, an investment grade rating represents a bond with a rating of BBB or higher.
ISDA
The International Swaps and Derivatives Association (ISDA) is a trade organization of participants in the market for OTC derivatives. Has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions
ISO Currency Code
Internationally standardised three-letter abbreviation for a country’s currency
ISDA
International Petroleum Exchange
