MARKET: Fixed Income
The principal amount at which the issuer of a debt security contracts to redeem/ repay that security at maturity. It is also referred to as the bond’s face (nominal) value. A price of 100%.
Par Bond
MARKET: Fixed Income
A bond that is selling/trading at par. A bond would generally trade at par if the market yield-to-maturity is equal to the fixed coupon rate on the bond.
Par Value
MARKET: Fixed Income
The stated nominal value or face value of a fixed income security. From this comes the expressions at par (at the par value), above par (trading at a premium) and under par (trading at a discount).
Perfect Competition
MARKET: Economics
A market structure in which the following five criteria are met:
- All firms sell an identical product.
- All firms are price takers.
- All firms have a relatively small market share.
- Buyers know the nature of the product being sold and the prices charged by each firm.
- The industry is characterised by freedom of entry and exit.
Perpetuity
MARKET: TVM
Annuities in which the periodic payments begin on a fixed date and continue indefinitely. It is also referred to as a perpetual annuity.
Phillips Curve
MARKET: Economics
Inflation and unemployment have a stable and inverse relationship. According to the Phillips curve, the lower an economy's rate of unemployment, the more rapidly wages paid to labour increase.
Plain Vanilla Swap
MARKET: Derivatives
The most straight-forward type of interest rate swap. A plain vanilla swap is an interest rate swap where one leg (side) of the contract has a fixed rate of interest and the second leg (side) of the swap is referenced against a money market index, such as LIBOR or JIBAR. The notional principal amount of the swap also remains constant throughout the life of the contract.
Point
MARKET: FX
One unit in the last decimal place of a foreign exchange transaction quotation. Example, if USD/ZAR is quoted as 10.1250, the ‘50’ of the quote represents 50 ZAR points. One point in foreign exchange usually represents 100 in the quoted (terms) currency against 1 million of the base (commodity) currency. In USD/ZAR, the USD is the base currency, while ZAR represents the quoted currency. $1 million x 0.0001 is equal to R100.
Political Risk
MARKET: Risk Management
The potential impact on capital flows to the country as a direct result of deliberate policy actions of the government. It can range from decisions such as a devaluation of the domestic currency through changes in tax laws or regulations on the repatriation of profits (exchange control) to the expropriation or nationalisation of foreign assets. Political risk is also referred to as country risk or sovereign risk. Sovereign risk, however, would also refer to the possibility of default by a country on its debt obligations.
Ponzi Scheme
MARKET: General
This scheme uses funds from new investors to pay high returns to existing investors. Such funds are destined to collapse as soon as new investment tails off or a significant number of investors simultaneously wish to withdraw their funds.
Position Risk
MARKET: Risk Management
The risk of loss as a result of movements in financial prices/rates/values on a position (long or short) taken by a trader or other market participant.
Potential Exposure
MARKET: Risk Management
An assessment of the possible future positive/negative value in all of the contracts/transactions outstanding with an individual counterparty who may choose not (or may be unable) to honour their obligations.
Premium
MARKET: Options
The cost associated with a financial option contract, referring to the combination of intrinsic value and time value.
Premium Bond
MARKET: Fixed Income
A bond that sells above par/face value. A bond would generally trade above par if the market yield-to-maturity is below the coupon on the bond.
Premium Currency
MARKET: FX
When a currency is trading at a premium and is referred to as a premium currency, it implies that its cost against another currency is higher in the forward date than it is at spot. If the premium currency is the based (commodity) currency in the exchange rate quotation, it means that its interest rate is lower than that of the counter (terms, quoted) currency.
Present Value
MARKET: TVM
The present value of a known future cash flow is the amount of money that will be exchanged in the future, discounted to represent a value in today’s terms (or account for the time value of money). In a positive interest rate environment, a given amount of money would always be more valuable sooner rather than later since this enables the recipient to take advantage of investment opportunities (and earn interest). Because of this, the present value of a known future cash flow is normally smaller (lower) than the given future value.
Present Value Benefit (PVB)
The present value benefit of a deal. This is like EVA, but ignores the cost of capital. EVA is a better measure to use than PVB.
Price Elasticity of a Bond
MARKET: Fixed Income
The ratio of a small percentage change in the price of a bond to a small percentage change in the bond’s yield-to-maturity.
Price Maker
MARKET: General
A person or a firm which undertakes to quote a buy (bid) and sell (offer) price in a financial instrument, commodity, asset on transaction. The price maker is usually rewarded by earning the bid-offer spread.
Price Taker
MARKET: General
A client or customer who requests (asks for) a price/rate/value from the market maker. The price taker would usually pay the bid-offer spread or pay more to buy (buy at the offer) that receives (sell at the bid) when selling.
Primary Market
MARKET: Debt Markets
The market where new issues of short-, medium- or long-term money market paper, securities/ shares or bonds are launched, i.e. issued for the first time and the issuer receives the proceeds of the issue.
Prime Rate
MARKET: General
Benchmark rate at which banks lend funds to the general public. Represents the interest rate (base rate – depended on credit quality) at which the general public can arrange financing for motor vehicles, mortgages and overdrafts.
Private Placement
MARKET: Debt Markets
A direct private offering of securities/instruments/shares to a selected number of institutional and/or private investors. It is the opposite of a public offering, where the securities are presented or made available to the general public. Investors in privately placed securities generally include insurance companies, pension funds, mezzanine funds, equity funds and unit trusts.
Private Sector Credit Extension (PSCE)
MARKET:Economics
PCSE is credit provided to the public sector. It includes loans, leases and credit cards.
Promissory Notes (PN)
MARKET: Money Markets
Money MarketsA negotiable interest rate instrument that contains a promise to pay a certain amount of money to a named person, to that person’s order, or to the bearer on a pre-specified date in the future.
PPI
Producer Price Index
Public (Government) Debt
MARKET: Economics
Also known as public debt or national debt. Money (or credit) owed by any level of government; either central government, federal government, municipalities or local government agencies. As the government represents the people of the country, government debt can be seen as an indirect debt of the taxpayers. Government debt can also be categorised as internal debt, owed to lenders within the country (as it is denominated in the domestic currency), and external debt, owed to foreign lenders (if government borrowed in a foreign currency). Governments usually borrow by issuing interest rate securities such as government bonds and bills.
Public Sector Borrowing Requirement (PSBR)
MARKET: Economics
The PSBR is the consolidated cash-borrowing requirement of general government and non-financial public enterprises.
Purchasing Managers Index (PMI)
MARKET: Economics
An indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.
Purchasing Power Parity Theory (PPP)
MARKET: FX
The Purchase Power Parity Theory (PPP) suggests that over the long term, exchange rates between two currencies will adjust to reflect the relative inflation rates of those two currencies.
Purchasing Price Index
MARKET: Economics
A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPI’s measure price change from the perspective of the seller.
Put-Call Parity
MARKET: Options
In financial mathematics, put-call parity defines a distinct relationship between the price (premium) of a call option and that of a put option, where both options have the same strike price and term-to-expiry. To derive the put-call parity relationship, the assumption is made that neither option is exercised before the given expiration day. This, of course, only applies to European-style options.
Put Option
MARKET: Options
A financial contract that gives the owner (buyer) the right, but not the obligation, to sell a specified amount of the underlying financial instrument (asset) at a pre-determined price (strike/exercise) on. Or before a given maturity (expiry) date.
Put Spread
MARKET: Options
The bear put spread is an option trading strategy with limited profit and limited loss that can be used when the trader is moderately bearish on the underlying security. It is constructed by buying high strike put options and selling the same number of lower strike put options on the same underlying security and the same expiration month. The trader will profit from this strategy if the price of the underlying falls to at least below the strike of the higher strike option. The profit is limited to the difference between the two strike prices.
PVBP
MARKET: General
Price Value of a Basis Point
