foreign exchange rate risk
71Power reverse dual currency note — A dual currency note (DC) pays coupons in the investors domestic currency with the notional in the issuers’ domestic currency. A reverse dual currency note (RDC) is the reverse. A power reverse dual currency note (PRDN) or power reverse dual… …
72Repricing Opportunity — The change in interest rate of an interest sensitive asset or liability. Banks earn income from interest, so their income fluctuates with changes in interest rates. A bank can minimize its interest rate risk and maximize its net interest income… …
73Currency Certificate — A note that grants the holder the right to convert a specific amount of one currency to another at a given exchange rate until it expires. A currency certificate is a bearer certificate in that there is no registered owner. Currency certificates… …
74Triangular arbitrage — (sometimes called triangle arbitrage) refers to taking advantage of a state of imbalance between three foreign exchange markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the… …
75Reserve Currency — A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate. A large percentage of commodities, such as gold and oil, are… …
76Quantity-Adjusting Option - Quanto Option — A cash settled, cross currency derivative in which the underlying asset is denominated in a currency other than the currency in which the option is settled. Quantos are settled at a fixed rate of exchange, providing investors with shelter from… …
77Reinvoicing Center — A subsidiary or department of a multinational corporation where all intrafirm transactions are centralized and foreign currency related receivables and liabilities are netted. The means of hedging the entire multinational firm s foreign currency… …
78Nostro Account — A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions. The term is derived from the Latin word for… …
79Front Fee — The option premium paid by an investor upon the initial purchase of a compound option. A compound option is one where the underlying asset is also an option (i.e. an option on an option). The front fee gives the investor the right but not the… …
80Quanto — A quanto is a type of derivative in which the underlying is denominated in one currency,but the instrument itself is settled in another currency at some fixed rate. Such products are attractive for speculators and investors who wish to have… …
