Glossary

Derivatives terms with short definitions, each paired with its Japanese equivalent.

A

Abandonment権利放棄: Abandonment is when the buyer of an option does not exercise the right even when the last day of the exercise period arrives.
Adapted process適合過程: An adapted process is a stochastic process whose value at each time is determined by the information known up to that time. It expresses that future values cannot be used in advance, and it is the condition required of the integrand of an Ito integral.
Add-onアドオン: An add-on is the per-asset-class amount that SA-CCR uses as the basis of the potential future exposure amount. It is built for each trade from the effective notional multiplied by a supervisory factor, and aggregated by hedging set and asset class.
Adjoint algorithmic differentiation随伴自動微分: Adjoint algorithmic differentiation is a method that applies the reverse (adjoint) mode of automatic differentiation to a whole computer program, obtaining the sensitivities of one output to many inputs together at a cost of a few times the original computation. It has been used for Monte Carlo Greeks and for the sensitivities of CVA.
Affine modelアフィン・モデル: An affine model is a class of interest rate models in which the short rate and the yield of a zero-coupon bond (the zero-coupon rate) can be written as affine functions of a few factors, that is, a constant plus a linear expression. As an example with the short rate r as the only factor, in the Hull-White model the zero-coupon bond price can be written as A·exp(B·r).
Affirmationアファメーション: Affirmation is the step in which the parties to a trade check the trade details sent by a broker, a dealer, or a trading venue and accept them. Acceptance starts the next steps, such as booking the trade and confirming it.
Allocation割当: Allocation is the splitting, after execution, of an order that was executed in bulk for several accounts into trades for each account.
ALMALM: ALM (asset and liability management) is the practice in which a financial institution looks at its assets and liabilities, such as deposits, loans and securities, as a whole and manages the risks arising from interest rate moves and other factors in a comprehensive way.
American optionアメリカン・オプション: An American option is an option that the buyer can exercise at any time from the start of trading to the last trading day.
Amortizing swap償却型スワップ: An amortizing swap is an interest rate swap whose notional amount decreases over the life of the trade according to a schedule set in advance. It is used to fix the interest on a loan that is repaid in installments, with the notional amount matched to the loan balance.
Anti-money laundering and countering the financing of terrorismマネー・ローンダリング及びテロ資金供与対策: Anti-money laundering and countering the financing of terrorism (AML/CFT) refers to the measures that financial institutions and others take to prevent the transfer of funds obtained through crime and the financing of terrorism, such as verifying clients, keeping transaction records, and reporting suspicious transactions. In Japan, the Act on Prevention of Transfer of Criminal Proceeds sets out the basic measures.
Anti-social forces反社会的勢力: Anti-social forces are groups or individuals that pursue economic gain through violence, intimidation, or fraud. Financial institutions keep out of any relationship with them, including transactions, through steps such as screening before trading.
Arbitrage裁定取引: Arbitrage is selling the more expensive and buying the cheaper of two instruments with the same character, and earning the price difference.
Arm's length principle独立企業間原則: The arm's length principle is the approach of setting taxable income by comparing the price of a transaction between companies in the same group with the price that independent companies would have set in the same circumstances.
Asian optionアジアン・オプション: An Asian option is an option whose payoff is determined not by the price of the underlying asset at expiry but by the average of the prices observed on dates set during the period.
At the moneyアット・ザ・マネー: At the money (ATM) is the state in which, when the buyer of an option exercises, there is no difference from exercising (the difference between the price of the underlying asset and the strike price). For both calls and puts, the strike price equals the price of the underlying asset.
Attachment point and detachment pointアタッチメント・ポイントとデタッチメント・ポイント: The attachment point is the level of portfolio losses at which a tranche starts to take losses. The detachment point is the level at which, once losses reach it, the tranche has lost its entire notional.
Australian Prudential Regulation Authority (APRA)オーストラリア健全性規制庁（APRA）: The Australian Prudential Regulation Authority (APRA) is the Australian prudential regulator. It sets prudential standards under legislation including the Banking Act, and in particular sets, in CPS 226, the margin requirements for non-centrally cleared OTC derivatives.
Australian Securities and Investments Commission (ASIC)オーストラリア証券投資委員会（ASIC）: The Australian Securities and Investments Commission (ASIC) is an Australian financial regulator. For OTC derivatives, it makes and enforces the derivative transaction rules that set reporting and central clearing obligations.
Autocallableオートコール: An autocallable is a feature of structured notes and similar products under which the product is redeemed automatically before maturity if the price of the underlying asset is at or above a set level on a predetermined observation date. On redemption, the investor receives the principal and a predefined coupon.
Automatic differentiation自動微分: Automatic differentiation is a method that treats a computation written as a program as a composition of elementary operations and applies the chain rule step by step to obtain the derivatives of the outputs with respect to the inputs. Unlike approximation by differences, it obtains the derivatives to machine precision (whether the computation itself matches the true sensitivity is a separate matter).

B

BA-CVABA-CVA: BA-CVA (the basic approach for CVA risk) is the method in the CVA risk capital charge that calculates capital with a prescribed formula from the exposure at default and effective maturity used in the counterparty credit risk calculation and from a risk weight set by the counterparty's sector and credit quality. It can be used without an accounting CVA calculation, and it does not need the approval of the Commissioner of the Financial Services Agency.
Bachelier modelバシュリエ・モデル: The Bachelier model is a model that prices options by assuming that the value of the underlying itself, such as a forward rate, follows a normal distribution. Because the underlying can take values at or below zero, it is used to value interest rate options when rates are negative.
Back officeバック・オフィス: The back office is the part of a financial institution that records the trades entered into by the front office, confirms their terms with the counterparty, and settles them by delivering cash or securities.
Back-to-back tradeバック・トゥ・バック取引: A back-to-back trade is a trade entered into with another party, in the opposite direction, to offset the risk of an existing trade. Within a group, the entity that traded with a client enters into an opposite trade on the same terms with another entity in the group, and moves the market-risk portion (the variability of payments and receipts) to that entity.
Backtestingバックテスト: Backtesting checks the accuracy of a VaR model by comparing each day's VaR with the actual daily profit or loss and counting the days on which the loss exceeded VaR (exceptions).
Backwardationバックワーデーション: Backwardation is the shape in which futures prices for the same commodity are lower for more distant (deferred) contract months.
Bank for International Settlements国際決済銀行: The Bank for International Settlements is an organization whose members are central banks, established in 1930 and headquartered in Basel, Switzerland. It provides a forum for cooperation among central banks.
Bank of Englandイングランド銀行: The Bank of England is the central bank of the United Kingdom, responsible for the conduct of monetary policy and the stability of the financial system. It includes the Prudential Regulation Authority as one of its parts.
Bank of Japan日本銀行: The Bank of Japan is a juridical person established under the Bank of Japan Act. As Japan's central bank, it issues banknotes, carries out currency and monetary control, and works to ensure smooth settlement of funds among financial institutions.
Barrier optionバリア・オプション: A barrier option is an option whose right disappears (knock-out) or comes into existence (knock-in) depending on whether the price of the underlying asset touches a set level (the barrier) before expiry.
Base correlationベース相関: Base correlation is the Gaussian copula correlation, fitted to the market price of a tranche, that is applied to the equity tranche from zero loss up to the tranche's upper end. One value is found for each upper end, working upward from the bottom.
Base metal非鉄金属: Base metals are, in commodity trading, copper, aluminum, nickel, zinc, tin and lead, which are treated separately from precious metals. They are used as industrial raw materials.
Basel Committee on Banking Supervisionバーゼル銀行監督委員会: The Basel Committee on Banking Supervision (BCBS) is the committee that develops the international standards for bank regulation (the Basel Framework), such as capital ratios and liquidity ratios. The standards it agrees are minimum standards, and each country or region may adopt stricter rules.
Basel IIIバーゼル III: Basel III is the reform of bank regulation that the Basel Committee on Banking Supervision (BCBS) carried out after the financial crisis. It includes strengthening the quality and quantity of capital and introducing the leverage ratio and liquidity regulations. In December 2017, the revision of risk measurement methods was finalized, which is called the Basel III finalization.
Basis riskベーシスリスク: Basis risk is the risk that the item being hedged and the commodity or index used as the hedge move differently, leaving part of the gains and losses uncancelled.
Basis spreadベーシス・スプレッド: A basis spread is the margin added to one of the two floating rates in a basis swap, which exchanges floating rates that differ in reference rate or tenor, so that the two sides balance. It serves as a gauge of the gap between two rates of different nature, such as the overnight rate and TIBOR.
Basis swapベーシス・スワップ: A basis swap is an interest rate swap in which two parties, on the same notional amount, exchange interest at two floating rates that differ in reference rate or tenor. In Japanese yen, examples include exchanging compounded TONA for TIBOR and exchanging TIBOR of different tenors, such as 3-month and 6-month.
Basket optionバスケット・オプション: A basket option is an option whose payoff is set by the difference between the basket value, the sum of the prices of several underlying assets at agreed weights, and the strike price.
Benchmark administratorベンチマーク管理者: A benchmark administrator, under the EU Benchmarks Regulation, is a person that has control over the provision of a benchmark. Provision means administering the arrangements for determining the benchmark, collecting and processing input data, and determining the benchmark by a formula or an assessment.
Benchmark rate指標金利: A benchmark rate is an interest rate that an administrator calculates by a set method and publishes, so that loans, derivatives and other transactions can refer to it when setting interest or payment amounts.
Bermudan optionバミューダン・オプション: A Bermudan option is an option that the buyer can exercise on several dates fixed in advance. Its exercise dates sit between those of a European option and an American option.
Best execution最良執行: Best execution is the duty of financial instruments business operators and similar firms to set a policy and method for executing client orders on the best terms, and to execute orders in line with that policy. In Japan it is set out in the Financial Instruments and Exchange Act.
Bid-ask spreadビッド・アスク・スプレッド: The bid-ask spread is the difference between the ask (the sell quote) and the bid (the buy quote). It bears directly on the trading costs that investors pay, and it is a source of revenue for a market maker.
Binomial model二項モデル: The binomial model is a method of pricing options that assumes the underlying price moves in only two ways, up or down, at each fixed time step.
Black modelブラック・モデル: The Black model is a model that prices options on a futures price or a forward rate by assuming that the rate of change of the futures price or forward rate follows a normal distribution. It is used to price caps, floors, swaptions, and JGB futures options and to quote their volatilities.
Black-Scholes modelブラック・ショールズ・モデル: The Black-Scholes model is a valuation model that uses a formula to give the theoretical price of a European option, under assumptions such as the underlying price following geometric Brownian motion and constant volatility and interest rates. Fischer Black and Myron Scholes presented it in a paper in 1973.
Booking entityブッキング法人: A booking entity is the legal entity in a financial group with several legal entities whose books carry a trade. It can be the same entity as the sales entity that deals with the client, or a different one.
Bootstrappingブートストラップ: Bootstrapping is a method of deriving discount factors or spot rates one maturity at a time, starting with the shortest, from market rates such as interest rate swap fixed rates. Each value found for one maturity is used in the calculation for the next.
Break-even point損益分岐点: The break-even point is the price of the underlying at which the profit or loss at expiry of an option or similar contract is zero. For a call option (call) it is the strike price plus the premium, and for a put option (put) it is the strike price minus the premium.
Breakeven inflation rateブレーク・イーブン・インフレ率: The breakeven inflation rate (BEI) is the yield on a fixed-rate government bond (the nominal rate) minus the yield on an inflation-linked bond of the same maturity (the real rate). If inflation equals the BEI, investing in either bond gives the same return.
British Bankers' Association英国銀行協会: The British Bankers' Association (BBA) is a trade association of banks in the UK that defined and administered LIBOR until February 2014.
Brokerブローカー: A broker is a firm that does not become the counterparty itself, but passes customers' orders on to an exchange or arranges OTC trades between the parties.
Brownian motionブラウン運動: Brownian motion is a stochastic process that moves continuously over time, whose increments over non-overlapping periods are independent and normally distributed with mean 0 and variance equal to the length of the period. It is obtained as the limit of a random walk with ever shorter intervals and smaller steps, and is used to model the movement of prices such as stock prices.
Business day convention営業日の調整: A business day convention is the rule that decides which business day, before or after, a scheduled date such as an interest payment date moves to when it falls on a holiday.
Butterfly spreadバタフライ・スプレッド: A butterfly spread is a type of option spread that combines options at a middle strike price with options at the strike prices above and below it. In the long form, profit is largest when the price of the underlying asset at expiry is near the middle, and both profit and loss are capped.

C

Calibrationキャリブレーション: Calibration is the procedure of choosing a model's parameters so that the prices the model produces match prices observed in the market. A model calibrated to the market prices of actively traded instruments is used to value instruments with no market price.
Call money marketコール市場: The call money market is a market in which financial institutions such as banks and securities companies lend and borrow funds for short periods to adjust their day-to-day surpluses and shortfalls of funds.
Call optionコール・オプション: A call option (call) is an option that gives its holder the right to buy the underlying asset at a price fixed in advance (the strike price). The buyer of a call makes a profit if the price of the underlying asset at expiry is above the sum of the strike price and the premium.
Callable bondコーラブル債: A callable bond is a bond whose issuer holds the right (a call) to redeem it before maturity on dates and at a price set in advance. In return for selling this right to the issuer, the investor receives a higher coupon rate than on an otherwise identical bond with no call feature.
Callable swapコーラブル・スワップ: A callable swap is a swap in which one party, in exchange for a premium, holds the right to terminate the interest rate swap before maturity. Institutions with debt they can repay early use it to avoid a mismatch between the term of the debt and the term of the swap that hedges it.
Cap and tradeキャップ・アンド・トレード: Cap and trade is a system that sets a cap on the emissions of businesses, hands out emission allowances, and lets businesses trade the gap between their actual emissions and their allowances. It is also called an emissions trading system.
Capital adequacy ratio自己資本比率: The capital adequacy ratio is a bank's capital divided by its risk-weighted assets (RWA). The minimums under the international standard are 4.5% for the common equity Tier 1 ratio, 6% for the Tier 1 ratio, and 8% for the total capital ratio.
Capletキャップレット: A caplet is the option for a single interest period taken out of an interest rate cap. It pays, at the end of the period, the amount by which the floating rate fixed at the start of the period exceeds the strike rate, multiplied by the length of the period and the notional.
Cash flowキャッシュフロー: A cash flow is an amount of money received or paid as a result of a transaction or asset, described by who receives or pays it, when, and how much. Interest and principal payments are examples, and discounting future cash flows and adding them up gives the present value.
Cash flow hedgeキャッシュ・フロー・ヘッジ: A cash flow hedge is a hedging relationship that hedges the variability in the cash flows of a recognized asset or liability, or of a highly probable forecast transaction, and is one of the types of hedge accounting.
Cash settlement差金決済: Cash settlement is a method of settling by paying and receiving only the difference between the agreed price and the settlement price, without delivering the underlying asset or the principal.
Cat bond triggerキャットボンドのトリガー: A cat bond trigger is the event condition that decides whether the collateral passes to the sponsor instead of the investors. It can be defined by the sponsor's actual claims, by measured values such as wind speed or earthquake magnitude, or by industry-wide losses.
Catastrophe bondキャットボンド: A catastrophe bond is a bond issued through a special purpose vehicle (SPV) on behalf of a sponsor such as an insurer. If a specified event such as a natural disaster occurs, part or all of the investors' principal passes to the sponsor. If it does not, investors receive their interest and principal.
CDS auctionCDS のオークション: A CDS auction is a procedure, held after a credit event, that sets a single price for the reference entity's debt by bidding and settles all CDS on that entity at that price.
CDS indexCDS インデックス: A CDS index bundles CDS on multiple reference entities with equal weights under set rules, and the index itself is bought and sold as a single CDS trade.
Central counterparty清算機関: A central counterparty is an entity that steps in between the parties to a trade, becoming the buyer to the seller and the seller to the buyer, and guarantees settlement of the trade.
Characteristic function特性関数: The characteristic function of a random variable X is the function that returns the expected value of exp(iuX) for a real number u (i is the imaginary unit). It is defined for any random variable, and even for models whose probability density is hard to write in a formula, the characteristic function of the log stock price can have a simple form.
Cheapest-to-deliver (CTD)最割安銘柄: The cheapest-to-deliver (CTD) bond is the deliverable bond for JGB futures that is most favorable for the seller to deliver. It is the bond with the largest value of the invoice price (futures price × conversion factor) minus the cash bond price.
Clearing member清算参加者: A clearing member is a firm that participates directly in a central counterparty, clears trades there, and deposits margin and default fund contributions. It may also clear trades for customers that are not members.
Cliquetクリケット: A cliquet is an option whose payoff is set by dividing the term into periods such as one year each, applying a cap and a floor to the return in each period, adding the results, and applying a further cap and floor to the total to set the payoff.
Close-out netting一括清算: Close-out netting is the process by which, when a counterparty fails, the values of multiple derivatives and other trades entered into under a master agreement with that counterparty are added up and offset into a single claim or obligation.
CMSCMS: A CMS (constant maturity swap) is an interest rate swap whose floating rate references a swap rate of fixed tenor, such as the 10-year swap rate. Because it pays and receives interest that follows long-term rates, it is embedded in structured products such as CMS notes.
CMS spread optionCMS スプレッド・オプション: A CMS spread option is an option whose payoff is set by comparing the difference between two swap rates observed on the observation date (for example, the 10-year and the 2-year) with a strike. The call pays the amount by which the difference exceeds the strike, and the put pays the amount by which it falls below.
Co-terminal swaptionコ・ターミナル・スワップション: A co-terminal swaption is one of a set of swaptions whose underlying interest rate swaps end on the same date but whose exercise dates differ. They correspond to the European swaptions at each exercise date of a Bermudan swaption, and models are fitted to their market prices.
Collateral担保: Collateral is cash or bonds exchanged in derivatives and other transactions to cover losses if the other party defaults. In OTC derivatives, the party for which the trade has a positive market value receives collateral from the other party and pays interest on the cash collateral it receives.
Collateral substitution担保の差し替え: Collateral substitution refers to situations in which the party posting collateral changes the assets it has posted.
Collateral transformation担保の変換: Collateral transformation is a transaction that temporarily exchanges less liquid assets that a firm holds for high-quality assets that can be used as collateral. It takes the form of repo or securities lending.
Commodity derivativeコモディティ・デリバティブ: A commodity derivative is a derivative whose underlying asset is a commodity, such as crude oil, natural gas, metals, agricultural products, or electricity, or the price of that commodity.
Commodity Derivatives Transaction Act商品先物取引法: The Commodity Derivatives Transaction Act is the law that governs the organization of commodity exchanges and the management of transactions on commodity markets, and regulates the business of those who engage in commodity futures trading business. It sets out the definition of commodity derivatives transactions, the license for commodity futures trading business, and the conduct rules that protect customers.
Commodity exchange商品取引所: A commodity exchange is a membership commodity exchange or a joint-stock commodity exchange that, under the Commodity Derivatives Transaction Act, opens the market needed for futures trading in commodities or commodity indices. Its legal basis differs from that of a financial instruments exchange under the Financial Instruments and Exchange Act.
Commodity Futures Trading Commission (CFTC)米国商品先物取引委員会（CFTC）: The Commodity Futures Trading Commission (CFTC) is an independent US federal agency established under the Commodity Exchange Act (CEA). It regulates commodity futures trading, swaps and related markets.
Compound interest複利: Compound interest is a way of calculating interest in which interest is added to the principal and the next period's interest is charged on that total. Because interest also earns interest, at the same rate the amount ends up larger than under simple interest, which charges interest only on the principal. The gap widens as the period gets longer.
Compounding in arrears後決め複利: Compounding in arrears is a method that sets the rate for an interest period at the end of the period by compounding the daily overnight rates during the period. It is used to calculate floating-rate interest in OISs and loans that reference TONA.
Conduct riskコンダクト・リスク: Conduct risk is the risk that the actions of a financial institution's officers and employees lead to bad outcomes for customers, for the market, or for the institution itself. It covers actions that no law addresses, and actions that comply with the law but fall short of what society expects.
Confidence level信頼水準: The confidence level is the probability, set when calculating VaR, that the loss stays within VaR. At a 99% confidence level, the probability that the loss exceeds VaR is 1%.
Confirmation platform電子確認プラットフォーム: A confirmation platform is a system that confirms trades electronically after they are agreed. It receives the terms from the parties and establishes the confirmation through matching or affirmation.
Consumer price index消費者物価指数: The consumer price index (CPI) is an index that measures the average change in the prices of goods and services purchased by households. In Japan, the Statistics Bureau of the Ministry of Internal Affairs and Communications compiles the nationwide index every month.
Contangoコンタンゴ: Contango is the shape in which futures prices for the same commodity are higher for more distant (deferred) contract months.
Contract month限月: A contract month is the month that marks the deadline for trading a futures or options contract.
Convergence trade収束取引: A convergence trade is a trade that buys one of two related securities and sells the other, in the hope that the price gap between them moves in a favorable direction.
Conversion factor交換比率: A conversion factor is the multiplier applied in the delivery settlement of JGB futures to convert the price of the notional bond into a price for each deliverable bond. It is set for each bond and contract month, and the delivery settlement amount is found by multiplying the settlement price by the conversion factor.
Conversion price転換価額: The conversion price is the price per share used when a convertible bond (CB) is converted into shares. When you convert a CB into shares, you receive a number of shares equal to the face value divided by the conversion price.
Convertible bond転換社債: A convertible bond (CB), formally called a convertible bond with share options in Japan, is a corporate bond that can be converted into shares of the issuing company at a conversion price set in advance. When the share options are exercised, the full amount of the bond is redeemed in place of a cash payment for the shares, so the investor hands over the bond and receives shares.
Convexity adjustmentコンベキシティ調整: A convexity adjustment is an adjustment added to a forward rate implied by today's market, for products such as a CMS that pay or receive a swap rate of fixed tenor on a single payment date. It is needed because the rate viewed as its expected value at the payment date generally differs from the forward rate.
Copulaコピュラ: A copula is a function that builds the joint distribution of several random variables by specifying each variable's own distribution and the dependence between variables separately. In credit, it links the times to default of the reference entities.
Correlation相関: Correlation is the strength of the relationship in which two values move in the same direction or in opposite directions. It is expressed by the correlation coefficient, which takes values from -1 to 1.
Cost of hedgingヘッジのコスト: Cost of hedging is the name for the part, such as the time value of an option, the forward element of a forward contract, or a currency basis spread, that is excluded from the designation of the hedging instrument and accounted for separately as a cost.
Counterparty credit riskカウンターパーティ・クレジットリスク: Counterparty credit risk is the risk that the counterparty to a derivative or similar transaction fails before the transaction is fully settled. You then lose the value you expected to receive on a transaction with a positive value. Unlike the credit risk of a loan, the amount at risk changes with the market, and either party to the transaction can be the one exposed.
Covered callカバード・コール: A covered call is a combination in which you keep holding the underlying asset and sell a call option (call) on that asset. The premium received adds to the profit and loss, but the gain from a rise in the underlying is capped.
Covered interest parity金利平価: Covered interest parity is the relationship under which the forward exchange rate between two currencies is determined by the spot exchange rate and the interest rates of the two currencies. If the forward exchange rate deviates from it, deposits and FX forwards can be combined in an arbitrage.
Credit default swapクレジット・デフォルト・スワップ: A credit default swap is a trade in which the protection buyer pays a premium to the protection seller and receives a payment from the seller if a credit event occurs at the reference entity. It is a derivative on the credit risk of a company or a country, and is abbreviated as CDS.
Credit eventクレジット・イベント: A credit event is an event affecting the reference entity, such as bankruptcy, failure to pay, or restructuring, that obliges the protection seller in a credit default swap (CDS) to pay.
Credit limit与信枠: A credit limit is the maximum exposure (the amount that could be lost if the counterparty failed) that a financial institution allows itself to hold against a single counterparty. For derivatives, it is set per counterparty, and usage is compared with it before each trade and in daily measurement.
Credit risk信用リスク: Credit risk is the risk of loss when a borrower or a counterparty to a transaction becomes unable to meet its obligations under the agreed terms.
Credit spreadクレジット・スプレッド: The credit spread is the yield on a corporate bond minus the yield on a government bond of the same maturity. It expresses the extra yield for the issuer's credit risk and is the basis for estimating a counterparty's default probability in CVA.
Credit support annexクレジット・サポート・アネックス: A credit support annex (CSA) is a clause attached to the master agreement for OTC derivatives that sets the terms for exchanging collateral. It sets items such as the amount up to which no collateral is required (the threshold), the minimum transfer amount, how often positions are marked to market, and which assets can be used as collateral.
Credit-linked noteクレジット・リンク債: A credit-linked note is a bond that embeds a sale of protection under a credit default swap (CDS) and is redeemed at less than face value if a credit event occurs at the reference entity. In return for taking on the reference entity's credit risk, the investor receives extra interest.
Critical benchmark重要なベンチマーク: A critical benchmark, under the EU Benchmarks Regulation, is a benchmark on the European Commission's list, included because its cessation or loss of reliability could have a significant adverse impact on market integrity, financial stability or the real economy.
Crop year収穫年度: A crop year is the period from one harvest to the next, used for agricultural statistics and trading.
Cross-currency basis通貨ベーシス: The cross-currency basis is the deviation from covered interest parity when dollars are borrowed against yen or another currency through an FX swap or a cross-currency swap, expressed as a signed value from the side of the yen or other currency. It is zero when covered interest parity holds and negative when borrowing dollars is expensive.
Cross-currency swap通貨スワップ: A cross-currency swap is a trade in which two parties exchange interest and principal in different currencies over an agreed period. A version that exchanges only the interest, without the principal, is called a coupon swap.
Crypto-asset暗号資産: A crypto-asset, as Japan's Payment Services Act defines it, is proprietary value, recorded electronically, that can be used to pay unspecified persons as consideration, can be bought and sold with unspecified persons, and can be transferred through an electronic data processing system (excluding currency and similar items), or a value that can be exchanged for such an asset. In Japan, derivative transactions on crypto-assets are subject to the Financial Instruments and Exchange Act.
CS01CS01: CS01 (Credit Spread 01) is the change in the price of a credit default swap or similar instrument when the credit spread rises by 1bp (0.01%). It shows how much the value moves when the market price of credit risk moves.
Cubic spline3 次スプライン: A cubic spline is an interpolation that joins neighboring points with cubic polynomials so that the value, slope, and curvature (second derivative) are continuous at the points. Applied to the log discount factor, it makes the forward rate a piecewise quadratic that joins smoothly at the points.
Currency option通貨オプション: A currency option is a transaction in which one party buys, from another, the right to buy or sell a foreign currency at a rate fixed in advance (the strike) at a set time in the future. The right to buy dollars by paying yen is called a USD call / JPY put.
Currency risk為替リスク: Currency risk is the risk of loss from changes in exchange rates. The yen value of receivables and payables in foreign currencies changes with the exchange rate.
Current exposureカレント・エクスポージャー: Current exposure is the amount that would be lost if the counterparty defaulted, based on today's market value. It equals the market value of the netting set if positive, and zero if negative.
Custodianカストディアン: A custodian is an institution that holds securities and other assets in safekeeping on behalf of others. For derivatives collateral, the use of a custodian is given as an example of a way to keep initial margin received separate from the receiving party's own assets.
CVACVA: CVA (credit valuation adjustment) is the valuation adjustment that reflects, in the value of a derivative, the possibility that the counterparty defaults. It equals the difference between the value assuming the counterparty does not default and the value that takes the possibility of default into account.
CVA deskCVA デスク: A CVA desk is a unit (or a function that serves the same purpose) that an advanced financial institution sets up, independent of its other trading desks, to manage CVA centrally. It handles CVA hedging, risk management, pricing, and reviews of collateral agreements.

D

Day count convention日数計算の慣行: A day count convention is the rule for counting the days in an interest period and for deciding what fraction of a year those days represent when calculating interest. Examples include Act/360, Act/365F, and 30/360, and the parties choose one in each contract.
Dealerディーラー: A dealer is a firm that acts as the counterparty to trades with customers or other firms for its own account, using its own funds and bearing its own profits and losses.
Default auction会員の破綻時のオークション: A default auction is a method by which, when a clearing member defaults, a central counterparty disposes of the defaulting member's positions through an auction in which non-defaulting members take part. It is different from the auction that sets a settlement price after a CDS credit event.
Default correlationデフォルト相関: Default correlation is the degree to which the defaults of several reference entities tend to occur at the same time. The value of an FTD or a synthetic CDO depends on the assumption made about it.
Default fund清算基金: A default fund is a pool of resources that a central counterparty has its clearing members deposit in advance, in addition to margin, against the default of several members. It is used to cover losses that the defaulting member's margin does not cover, and non-defaulting members' contributions may also be used.
Default risk chargeデフォルト・リスクの資本賦課: The default risk charge is the capital the FRTB requires for losses on credit instruments and equities in the trading book if an obligor or issuer defaults. It exists in both the standardized approach and the internal models approach, and covers losses from default separately from price movements.
Default waterfall損失の負担の順序: A default waterfall is the order in which a central counterparty uses its resources to cover the losses from a clearing member's default. JSCC's basic approach is to use first the defaulting member's resources, then the CCP's own, then the non-defaulting members'.
Deferral hedge accounting繰延ヘッジ: Deferral hedge accounting is one of the hedge accounting methods under Japanese GAAP. It defers gains, losses, or valuation differences on the hedging instrument in net assets until gains or losses on the hedged item are recognized.
Degree dayデグリーデー: Degree days are the sum, over a set period, of the daily differences between the average temperature and a base temperature. Counted in Celsius, as temperatures are in Japan, the unit is °C days. Heating degree days (HDD) add up the differences on days when the average is below the base, and cooling degree days (CDD) add up the differences on days when it is above the base. They are used as indexes for weather derivatives.
Delivery date受渡日: The delivery date is the day on which a trade in a financial instrument is settled.
Deltaデルタ: Delta is the ratio of the change in an option's price to a small change in the price of the underlying asset. Its absolute value lies between 0 and 1, and the closer it is to 1, the more the option's price responds to moves in the price of the underlying asset.
Delta hedgingデルタ・ヘッジ: Delta hedging is a method of buying or selling the underlying asset in an amount that offsets the delta of an option position, so that the option's profit or loss from small moves in the underlying price is offset. Because the delta changes, the amount of the underlying is adjusted, for example at set times (rehedging).
Deposit with a foreign-currency repayment clause外貨償還特約付預金: A deposit with a foreign-currency repayment clause is a structured deposit on which the exchange rate on the determination date decides whether the principal is repaid in yen or in a foreign currency. If the yen is stronger than the conversion rate, the principal is converted into the foreign currency at the conversion rate and repaid in that currency.
Derivativeデリバティブ: A derivative is a trade whose profit or loss depends on the price or value of an underlying asset or indicator, such as a stock, a bond, an interest rate, or an exchange rate. Its basic forms are forwards and futures, swaps, and options.
Designated contract market指定契約市場: A designated contract market (DCM) is a board of trade that the US Commodity Futures Trading Commission has designated as a contract market under the Commodity Exchange Act. For swaps, it is one of the venues where a swap subject to the clearing requirement can be executed.
Development Bank of Japan Inc.日本政策投資銀行: Development Bank of Japan Inc. (DBJ) is a joint-stock company established under the Act on the Development Bank of Japan Inc. Its purpose is to ease the supply of long-term business funds, using methods such as combining equity investment and lending.
Digital coupon noteデジタル・クーポン債: A digital coupon note is a bond on which the issuer pays a fixed coupon if the level of an index or similar reference on a predetermined determination date is at or above a reference price, and pays no coupon (or a lower rate) if it is below. Only whether the coupon is paid depends on the level; how far the level is above the reference price does not change the amount received.
Digital optionデジタル・オプション: A digital option is an option whose payoff is either a fixed amount or nothing, depending only on whether the price of the underlying asset at expiry is above the strike price (below it for a put). The amount does not grow with how far the price ends above the strike price.
Discount factor割引係数: A discount factor is the value today of one unit of money to be received at a future date. Multiplying a future amount by it gives the present value.
Dispersion tradingディスパーション取引: Dispersion trading is a trade that takes opposite positions in options on a stock index and options on its constituent stocks. It uses the fact that the variance of the index depends on the size of the constituents' moves and the correlation among them, and aims to profit from the difference between realized correlation and implied correlation.
Dispute resolution (reconciliation)照合の紛争の解決: Dispute resolution in reconciliation is the process of identifying, recording, and resolving, within set time limits, disagreements with a counterparty over the recognition or valuation of a contract or the exchange of collateral.
Distributed ledger technology分散型台帳技術: Distributed ledger technology (DLT) refers to the protocols and supporting infrastructure that record information on a ledger shared by multiple parties. A blockchain is one form of DLT.
Dividend配当: A dividend is the part of the profit a company has earned that is distributed to shareholders in proportion to the number of shares they hold.
Dividend equivalent配当同等額: A dividend equivalent is a certain payment that references a dividend on a US stock. US tax law treats it as a US-source dividend and subjects it to withholding. The Internal Revenue Code sets the rule, and Treasury regulations decide which contracts are covered and how the amount is calculated.
Dividend future配当先物: A dividend future is a futures contract, traded on an exchange, whose underlying is an index of the dividends of a stock or stock index.
Dividend swap配当スワップ: A dividend swap is an over-the-counter derivative that exchanges the dividends actually paid over a set period for a fixed dividend rate agreed at the start of the contract. The buyer receives the realized dividends and pays the fixed dividend rate.
Dividend yield配当利回り: The dividend yield is the annual dividend per share of a stock expressed as a percentage of the share price.
Dodd-Frank Actドッド・フランク法: The Dodd-Frank Act is a US federal law (Public Law 111-203) enacted on July 21, 2010, that sets out wide-ranging rules to improve the stability and transparency of the financial system.
Driftドリフト: Drift is the coefficient of the term proportional to time when a small change in a stochastic process is written as the sum of a term proportional to time and a term proportional to the increment of Brownian motion. For Brownian motion with a constant drift, the expected value at time t is the drift times t.
DTCCDTCC: DTCC (Depository Trust & Clearing Corporation) is a holding company based in New York that operates post-trade market infrastructure for the clearing and settlement of securities. It also provides trade repository services that collect derivatives trade data.
Dupire formulaデュピールの式: The Dupire formula is a formula that gives the local volatility of a local volatility model from the derivatives of call option prices with respect to expiry and strike. If market call prices are available at all strikes and expiries, it determines the local volatility that matches all of those prices.
Duty to explain説明義務: The duty to explain is the obligation of a seller of financial instruments to explain important matters to the client before the contract, such as the risk that changes in market prices could cause a loss below the principal. The explanation must use the method and depth needed for the client to understand it, in light of the client's knowledge, experience, financial situation, and purpose of the contract.
DV01DV01: DV01 is the change in the present value of a trade or asset when all market interest rates rise by 1bp (0.01%). It shows how much the value moves when rates move, and is used to measure the size of interest rate risk.
DVADVA: DVA (debt valuation adjustment) is the valuation adjustment that reflects, in the value of a derivative, the possibility that the firm itself defaults. It grows as the firm's creditworthiness falls and works to raise the value of the derivative.

E

Early termination期限前解約: Early termination is ending a derivatives trade before its scheduled maturity date. It can happen at the client's request (mid-term cancellation) or because of an event set out in the contract, such as a default.
Economic sanctions経済制裁: Economic sanctions are measures that restrict payments, transactions, and other dealings with sanctioned parties, in order to carry out international commitments or contribute to international peace. In Japan, the competent minister implements them under the Foreign Exchange and Foreign Trade Act by making payments and transactions subject to permission.
Electronic trading platform電子取引基盤: An electronic trading platform is a venue where over-the-counter derivative trades are concluded on a system. Japan's Financial Instruments and Exchange Act calls this system an electronic data processing system, and requires financial instruments business operators and similar entities to use it for specified OTC derivative transactions.
Embedded derivative組込デリバティブ: An embedded derivative is a derivative built into a contract such as a bond, deposit, or loan, and that changes the contract's interest, redemption amount, or maturity according to the value of an index or rate.
Emission allowance排出枠: An emission allowance is a permit, issued under a system that caps emissions, to emit the equivalent of one tonne of carbon dioxide. An allowance in the EU system is also written as an EUA.
End-of-day batch processing夜間のバッチ処理: End-of-day batch processing is the set of jobs a financial institution runs together after the day's trades are closed, such as calculating valuations and risk measures, calculating collateral amounts, and preparing data for reporting. The term separates these jobs from the online processing that runs on the spot during the day in response to user actions.
Equity index futures株価指数先物: Equity index futures are futures whose underlying is an equity index, such as the Nikkei Stock Average or the Tokyo Stock Price Index (TOPIX).
Equity index option株価指数オプション: An equity index option is an option whose underlying asset is an equity index, such as the Nikkei Stock Average or the Tokyo Stock Price Index (TOPIX). It trades the right to buy or sell the index at a set price.
Equity index-linked note株価指数連動債: An equity index-linked note is a bond whose redemption amount at maturity or coupon is determined by the movement of an equity index such as the Nikkei Stock Average. There are so-called principal-protected notes, whose terms provide for redemption at face value at maturity, and notes with a knock-in feature, whose redemption amount falls below face value if the index falls to a set level and the index at maturity is also below the initial price.
Equity swapエクイティ・スワップ: An equity swap is a trade in which two parties exchange the return on a stock or a stock index for interest based on a floating rate over an agreed period. The party receiving the equity return can receive payments linked to the stock's price moves without buying the stock.
ESG-linked derivativeESG 連動のデリバティブ: An ESG-linked derivative is a conventional derivative, such as an interest rate swap or a cross-currency swap, with a condition added so that payments change depending on whether an environmental or social target is met. It is also called a sustainability-linked derivative.
European Central Bank欧州中央銀行: The European Central Bank is the central bank of the euro area, with price stability as its main task, and it supervises euro area banks. It was established on June 1, 1998.
European Market Infrastructure Regulation欧州市場インフラ規則: The European Market Infrastructure Regulation (EMIR) is an EU regulation that requires EU financial institutions and companies to clear certain over-the-counter derivatives, manage the risks of uncleared trades, and report derivative contracts, and that sets requirements for central counterparties and trade repositories.
European optionヨーロピアン・オプション: A European option is an option that the buyer can exercise only on the expiry date.
European Securities and Markets Authority欧州証券市場監督機構: The European Securities and Markets Authority is an independent EU authority that regulates and supervises EU financial markets, with the mission of enhancing investor protection, promoting orderly markets, and safeguarding financial stability.
Event of default債務不履行事由: An event of default is an event, set out in the master agreement for derivatives trades, that allows the trades to be ended before their scheduled date when, for example, the other party becomes insolvent or fails to pay.
Exchange-traded derivative上場デリバティブ: An exchange-traded derivative is a derivative bought and sold on an exchange market under the contract specifications and trading methods set by the exchange.
Exchangeable bondEB 債: An exchangeable bond (EB) is a bond that, if set conditions are met, is redeemed at maturity in shares of a company other than the issuer (the underlying shares) instead of cash equal to the face value. The investor is in the same position as having sold a put option on the underlying shares, and in return receives a higher coupon than on an ordinary bond.
Exercise権利行使: Exercise is the act by which the holder (buyer) of an option actually carries out the trade in the underlying asset at the strike price, as provided in the option contract.
Exotic optionエキゾチック・オプション: An exotic option is an option that adds conditions, such as how the payoff is determined or when the right becomes valid, to a standard call or put (a vanilla option).
Expected exposure期待エクスポージャー: Expected exposure is the average exposure at a future date. The positive part of the market value is taken in each scenario before averaging, and the result is used to calculate CVA.
Expected positive exposure期待エクスポージャーの平均: Expected positive exposure is the average of expected exposure at future dates, weighted by the length of time between the dates. Regulation uses effective EPE, which replaces expected exposure with its running maximum and then averages over the first year.
Expected shortfall期待ショートフォール: Expected shortfall is a measure of market risk equal to the average loss when the loss exceeds VaR. It is used to measure the size of losses in the tail of the distribution, which VaR does not show.
Exposureエクスポージャー: Exposure is the amount that could be lost if a counterparty fails. For derivatives, it is the positive part of the value of the transactions with the counterparty (zero if the value is negative), which is the amount lost if nothing is recovered.
Exposure at defaultデフォルト時エクスポージャー: Exposure at default is the amount of exposure when the counterparty defaults. It is used to calculate credit risk under the capital adequacy rules, and for derivatives it is calculated by methods set by regulation.

F

Fair value時価（公正価値）: Fair value is the value that accounting standards define as the price received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Fair value hierarchy時価のレベル: The fair value hierarchy is a classification that divides the inputs used to measure fair value into three levels by how observable they are. Level 1 is a quoted price in an active market for an identical asset or liability, Level 2 is an observable input, and Level 3 is an unobservable input.
Fallbackフォールバック: A fallback is the switch of a contract's reference rate to a successor rate agreed in advance, which takes effect when the benchmark rate the contract references stops being published. The contract clause that sets out the switch is called a fallback provision.
Fat-tailed distribution裾の厚い分布: A fat-tailed distribution is a probability distribution in which values far from the mean, such as very large losses, are more likely than in a normal distribution.
Federal Reserve Bank of New Yorkニューヨーク連邦準備銀行: The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the Federal Reserve System, the central bank of the United States, and serves the Second District, which includes New York State. It conducts open market operations under the direction of the Federal Open Market Committee and also publishes US dollar benchmark rates.
Feller conditionフェラー条件: The Feller condition is a condition on the parameters of a CIR (square-root) process, as used in the Heston model, under which the variance never reaches zero and stays strictly positive. With κ the speed of mean reversion, v̄ the long-run level and ξ the coefficient on the random moves of the variance, it reads 2κv̄ ≥ ξ².
Financial Action Task Force金融活動作業部会: The Financial Action Task Force (FATF) is an international body that sets the international standards on measures against money laundering, terrorist financing, and proliferation financing, known as the 40 Recommendations, and conducts mutual evaluations of how its members implement them.
Financial ADR金融 ADR（裁判外紛争解決）: Financial ADR (alternative dispute resolution) is a system in which a dispute resolution organization designated by the authorities for each type of business seeks to resolve disputes between a financial institution and a user by means other than court, through settlement proposals from dispute resolution mediators such as lawyers.
Financial Conduct Authority英国金融行為監督機構: The Financial Conduct Authority is an independent public body that regulates the conduct of financial services firms in the UK, with the operational objectives of protecting consumers, protecting the integrity of the UK financial system, and promoting effective competition in the interests of consumers.
Financial counterparty金融カウンターパーティ: A financial counterparty is a category listed in the European Market Infrastructure Regulation (EMIR), covering investment firms, credit institutions, insurance undertakings, investment funds, and similar parties. It is one of the two categories that divide the parties subject to EMIR's obligations. The other is the non-financial counterparty.
Financial instruments business operator金融商品取引業者: A financial instruments business operator is a person that has registered under the Financial Instruments and Exchange Act to carry out financial instruments business. For derivatives transactions, a person that conducts OTC derivatives transactions as a business registers for Type I financial instruments business.
Financial service intermediary business金融サービス仲介業: Financial service intermediary business is carrying out, as a business, any one of deposit-related, insurance-related, securities-related, or money-lending intermediary services, and only a person registered with the Prime Minister may carry it out (a financial service intermediary).
Financial Services Agency金融庁: The Financial Services Agency is an administrative agency, set up as an external agency of the Cabinet Office, whose mission is to ensure the stability of the financial system, to protect depositors and investors, and to facilitate finance. It plans financial systems and inspects and supervises firms such as banks and financial instruments business operators.
Financial Services Authority金融サービス機構: The Financial Services Authority was the UK regulator of financial services under the Financial Services and Markets Act 2000. On April 1, 2013, the Financial Conduct Authority took over its conduct regulation and some of its prudential regulation. It was abbreviated FSA, the same as the English abbreviation of Japan's Financial Services Agency.
Financial Services Commission金融委員会: The Financial Services Commission is a central administrative agency in Korea, under the jurisdiction of the Prime Minister, that handles financial policy and financial supervision, among other duties.
Financial Services Provision Act金融サービス提供法: The Financial Services Provision Act is the Japanese law that requires a person selling a financial instrument to explain important matters to the customer, sets out liability for damages when the explanation is not given, and establishes a registration system for financial service intermediaries. Its official name is "金融サービスの提供及び利用環境の整備等に関する法律" (in English, the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, a translation of the meaning), and its former title is the "Act on Sales, etc. of Financial Instruments".
Financial Stability Board金融安定理事会: The Financial Stability Board is an international body that coordinates the work of national financial authorities and international standard-setting bodies, and develops and promotes the implementation of financial regulatory and supervisory policies.
Finite difference method有限差分法: The finite difference method solves a partial differential equation numerically by replacing its derivatives with differences between values at grid points. In option valuation, it solves the partial differential equation that the price satisfies, point by point on a grid, from expiry back to today.
FINMACFINMAC（証券・金融商品あっせん相談センター）: FINMAC (Financial Instruments Mediation Assistance Center) is a non-profit organization and a designated dispute resolution organization under the Financial Instruments and Exchange Act that resolves complaints from clients of securities firms and similar institutions and mediates their disputes with financial institutions.
First-to-defaultファースト・トゥ・デフォルト: A first-to-default (FTD) swap is a CDS on a basket of reference entities in which the seller compensates the loss on only the first entity to default. The trade ends at that first default.
Fixed rate固定金利: A fixed rate is an interest rate that stays at the level agreed in the contract for the whole term of a trade or loan.
Floating rate変動金利: A floating rate is an interest rate that is reset during the term of a trade or loan to follow the level of a reference rate. In an interest rate swap, it is set for each interest period from a benchmark rate such as TONA or TIBOR.
Forward contract先渡取引: A forward contract is a transaction in which a buyer and a seller exchange an underlying asset for cash on a set future date at a price agreed today.
Forward exchange rate先物相場: The forward exchange rate is the rate used in a foreign exchange trade in which the funds are exchanged on a day other than the second business day after the trade is agreed. It is set by the interest rates of the two currencies and is quoted as the difference from the spot exchange rate.
Forward freight agreement (FFA)運賃先物: A forward freight agreement (FFA) is a transaction in which two parties, such as a shipowner and a ship operator, fix the freight rate for a specified future period on a chosen route and vessel type, and pay or receive in cash the difference between the contract rate and a freight index over that period.
Forward measureフォワード測度: The forward measure is the probability measure obtained when the zero-coupon bond maturing at T is chosen as the numeraire; under it, a zero-coupon bond price divided by the price of that bond maturing at T is a martingale. In pricing interest rate derivatives, it is used to write a price as the bond price times the expected value of a payoff at a single future date.
Forward pointsフォワード・ポイント: Forward points are the difference between the forward exchange rate and the spot exchange rate. They reflect the interest rate differential between the two currencies, and the forward exchange rate is obtained by adding the forward points to, or subtracting them from, the spot exchange rate.
Forward rateフォワードレート: A forward rate is the interest rate for a period that starts at one future date and ends at another, derived from today's spot rates.
Forward-start optionフォワード・スタート・オプション: A forward-start option is a right to receive, on a future reset date and at no additional cost, an option whose strike price is proportional to the price of the underlying asset on that date.
FpMLFpML: FpML (Financial products Markup Language) is an open-source XML standard for exchanging and processing information on trades in OTC derivatives and similar products electronically. It was developed under the sponsorship of the International Swaps and Derivatives Association.
FRAFRA: An FRA (forward rate agreement) is a transaction in which the parties exchange, for a set future period, the difference between a contract rate agreed today and the benchmark rate fixed at the start of the period. The difference is calculated on a notional amount and is exchanged once, at the start of the period.
Freight index運賃指数: A freight index is an index that expresses the freight rate for seaborne cargo transport by route and vessel type, and is used as the underlying of forward freight agreements (FFAs) to determine the amounts paid and received.
Front officeフロント・オフィス: The front office is the part of a financial institution that enters into trades with clients and counterparties and manages the resulting positions. Sales and trading staff belong to it.
FRTBFRTB: The FRTB (Fundamental Review of the Trading Book) is the framework for banks' minimum capital requirements for market risk, published by the Basel Committee on Banking Supervision in January 2016 and revised in January 2019. Under the internal models approach, it replaces VaR with stressed expected shortfall (ES calibrated to a stress period).
Funding liquidity risk資金流動性リスク: Funding liquidity risk is the risk that a financial institution or other firm cannot meet expected or unexpected payments, or deliver the collateral it is asked for, without harming its daily operations or financial condition.
Funding spreadファンディング・スプレッド: The funding spread is the amount by which the rate at which a financial institution can fund itself, given its own creditworthiness, exceeds the risk-free rate. FVA and MVA are found by applying this spread to the funding of collateral and of initial margin.
Funds transfer pricing (FTP)資金移転価格（FTP）: Funds transfer pricing (FTP) is the process by which a financial institution's central management function allocates the costs and benefits of funding and contingent liquidity risks, measured at the inception of a transaction, to business lines, products, and activities within the firm. It is distinct from transfer pricing in tax.
Futures contract先物取引: A futures contract is a promise to buy or sell an underlying asset on a set future date at a price fixed today, traded on an exchange under standard specifications set by the exchange.
FVAFVA: FVA (funding valuation adjustment) is the valuation adjustment that reflects, in the value of a derivative, the funding cost that arises from an uncollateralized trade. It is found by applying the firm's funding spread to the positive part of the value not covered by collateral.
FX forward為替予約: An FX forward is a transaction in which a customer, such as a company, and a bank agree to exchange a foreign currency and yen on a set future date or within a set period, at a rate fixed today.
FX swap為替スワップ: An FX swap is a transaction in which two parties exchange two currencies, such as a foreign currency and yen, at a rate agreed today and, on a set date, exchange the same amount of the foreign currency back in the opposite direction at a different rate also agreed today. It works in the same way as borrowing one currency for a set period using another currency as collateral.

G

Gammaガンマ: Gamma is a measure of how much an option's delta changes when the price of the underlying asset moves a little. It is positive for a bought option and is large when the underlying price is near the strike price.
Gaussian copulaガウシアン・コピュラ: The Gaussian copula is the copula that builds the dependence from correlated standard normal variables. In credit, the one-factor form, in which each name's variable is built from a common factor and a name-specific factor, is used to value tranches.
General ledger総勘定元帳: The general ledger is the book that sorts all transactions by type of account and tallies them. At financial institutions, derivative transactions are recorded in this book too.
General wrong-way risk一般誤方向リスク: General wrong-way risk is the risk that arises when a counterparty's PD is positively correlated with general market risk factors such as interest rates, equity prices and exchange rates, so that the counterparty's PD also rises in the scenarios where the exposure increases.
Geometric Brownian motion幾何ブラウン運動: Geometric Brownian motion is a stochastic process in which the logarithm of the price follows Brownian motion with drift. The price at any given time is lognormally distributed, and the process is used in the Black-Scholes model to describe the movement of prices such as stock prices.
Give-upギブアップ: A give-up is the transfer of a trade that one broker executed for a client to another broker at the client's instruction.
Greeksグリークス: The Greeks are the collective name for the measures of how much an option's price changes when the underlying price, volatility, the passage of time, or the interest rate moves a little. They are delta, gamma, vega, theta, and rho; gamma alone measures the change in delta rather than in the price.
Greenwashingグリーンウォッシュ: Greenwashing is a practice in which sustainability-related statements or actions do not clearly and fairly reflect the actual sustainability profile of an entity, a financial product, or a financial service, and may mislead investors or others.
Gross market valueグロスベースの市場価値: Gross market value is the total market value of derivatives transactions before amounts are netted with each counterparty under a netting agreement. Positive market values, from transactions where the holder is a net receiver, and negative market values, from transactions where it is a net payer, are totaled separately.

H

Haircutヘアカット: A haircut is the percentage deducted from the market value of a bond or other asset when valuing it as collateral. It is set for each type of collateral to allow for changes in the asset's price and the time needed to sell it for cash.
Hazard rateハザード率: The hazard rate is the probability, expressed as an annual rate, that a reference entity defaults in the short period just after a given time, given that it has not defaulted up to that time. In CDS pricing, it is used to find survival probabilities and the value of the protection leg.
Hedge accountingヘッジ会計: Hedge accounting is an accounting treatment that recognizes the gains and losses on a hedging instrument (such as a derivative) and on the hedged item in the same period. It can be used only for hedging relationships that meet the criteria set by the accounting standards.
Hedge effectivenessヘッジの有効性: Hedge effectiveness is the degree to which changes in the value or cash flows of a hedging instrument and a hedged item offset each other for the hedged risk, and it is the basis for the criteria for applying hedge accounting.
Hedge fundヘッジファンド: A hedge fund is a fund that seeks to increase its returns by holding positions larger than its own capital through borrowing or derivatives, or by combining long and short positions.
Hedge ratioヘッジ比率: The hedge ratio is the share of an amount exposed to changes in exchange rates, interest rates, or other prices that is hedged with derivatives or other instruments.
Hedgingヘッジ: Hedging is taking an opposite position in futures or options to limit losses from price moves in assets you hold or plan to hold.
Hedging setヘッジ集合: A hedging set is a group of trades in a netting set that share the same risk driver under SA-CCR. It is the unit within which trades may offset each other in the add-on calculation.
Heston modelヘストン・モデル: The Heston model is a stochastic volatility model in which the variance that measures how much the stock price fluctuates itself follows a mean-reverting process that returns to a long-run level. The stock price and the variance are linked by a correlation, and prices of European options are obtained from a semi-analytical solution based on the characteristic function.
High-quality liquid assets高品質流動資産: High-quality liquid assets (HQLA) are assets that are highly liquid and can be turned into cash under stress without losing much value. They make up the numerator of the liquidity coverage ratio (LCR). The Financial Services Agency's notice calls them eligible liquid assets and divides them into Level 1, Level 2A, and Level 2B.
Historical simulationヒストリカル法: Historical simulation is a method that applies each day's market moves in a past observation period to the current position to build profit and loss figures, ranks them from the largest loss, and takes VaR from that ranking.
Historical volatilityヒストリカル・ボラティリティ: Historical volatility is the volatility calculated from how the underlying asset's price moved over a fixed past period. It is the standard deviation of the percentage change in price for each business day, converted to an annual figure.
Holding period保有期間: The holding period is the future period, set when calculating VaR, over which the loss is measured. VaR measures the loss if the current position is held unchanged for that period.
Hong Kong Monetary Authority (HKMA)香港金融管理局（HKMA）: The Hong Kong Monetary Authority (HKMA) is a Hong Kong authority that hosts the trade repository to which OTC derivative reports are submitted, and whose consent is required for the rules made by the Securities and Futures Commission.
Hull-White modelハル・ホワイト・モデル: The Hull-White model is a short-rate model in which the short rate is normally distributed and reverts toward a level as it moves, with a time-dependent drift function chosen to match today's yield curve. Prices of European bond options, caps, and swaptions can be calculated with formulas.
Hurdle rateハードル・レート: The hurdle rate is the rate applied to regulatory capital to find its cost in KVA (the cost of capital). It is also used as a profitability benchmark.

I

IFRS Accounting StandardsIFRS 会計基準: IFRS Accounting Standards are the accounting standards developed by the International Accounting Standards Board (IASB), and more than 140 jurisdictions require their use. They also apply to financial instruments, including derivatives.
Implied volatilityインプライド・ボラティリティ: Implied volatility is the volatility you get by putting an option's market price into a pricing formula (such as the Black-Scholes model) and solving it backward. The higher the volatility, the higher the premium, and because the two correspond one to one, the currency option market quotes prices as implied volatilities.
In the moneyイン・ザ・マネー: In the money (ITM) is the state in which, when the buyer of an option exercises, the difference from exercising (the difference between the price of the underlying asset and the strike price) is a profit. For a call, the strike price is below the price of the underlying asset, and for a put, the strike price is above it.
Independent price verification独立した時価の検証: Independent price verification is the regular re-checking of market prices and valuation inputs, separate from daily marking to market, by a person or unit independent of those who benefit from the trading book.
Inflation capインフレ・キャップ: An inflation cap is an option that gives the buyer the right to receive the notional amount times the part by which the rate of increase in a price index exceeds an agreed level (the strike). It is used to put a ceiling on the burden of rising prices.
Inflation floorインフレ・フロア: An inflation floor is an option that gives the buyer the right to receive the notional amount times the part by which the rate of increase in a price index falls below an agreed level (the strike). It is used to put a floor under income or principal when prices fall.
Inflation swapインフレ・スワップ: An inflation swap is a trade in which two parties exchange an amount linked to the rate of increase in a price index over an agreed period for an amount based on a fixed rate set in advance. It is used to transfer inflation risk.
Inflation-linked bond物価連動国債: An inflation-linked bond is a government bond whose principal rises and falls with a price index, and which pays interest at a fixed rate on that inflation-adjusted principal. Because interest and redemption amounts increase when prices rise, it is used to hedge inflation risk.
Initial margin当初証拠金: Initial margin is margin deposited in advance to cover losses that could arise from changes in market value after a participant defaults, until its trades are closed out.
Insider tradingインサイダー取引: Insider trading is trading in a listed company's shares or similar securities, before the information is made public, by a person who has learned undisclosed material information about the company. In Japan, the Financial Instruments and Exchange Act prohibits this trading by certain persons, as well as passing on the information or recommending trades to others.
Institutional investor機関投資家: Under Japan's Stewardship Code, institutional investors are investors broadly divided into asset managers, which are entrusted with funds and invest them, and asset owners, which include the providers of those funds. The list published by the Financial Services Agency groups them into trust banks, investment trust and investment advisory companies, life and non-life insurers, pension funds, and others.
Insurance-linked security保険リンク証券: An insurance-linked security (ILS) is a financial instrument whose payments to investors depend on whether a disaster such as a typhoon or an earthquake occurs. Besides catastrophe bonds, ILS include collateralized reinsurance, industry loss warranties, and sidecars.
Interest rate cap金利キャップ: An interest rate cap is an option that gives the buyer the right to receive, for each interest period in which a floating rate is above an agreed level (the strike rate), the difference multiplied by the notional amount and the length of the period. Companies that borrow at a floating rate use it to put a ceiling on their interest payments.
Interest rate floor金利フロア: An interest rate floor is an option that gives the buyer the right to receive, for each interest period in which a floating rate is below an agreed level (the strike rate), the difference multiplied by the notional amount and the length of the period. Parties that receive a floating rate use it to put a lower limit on the rate they receive.
Interest rate futures金利先物: Interest rate futures are exchange-traded futures on a short-term interest rate for a set future period, quoted as a price of "100 minus the rate."
Interest rate risk金利リスク: Interest rate risk is the risk of loss from changes in interest rates. For a company that borrows at a floating rate, a rise in rates increases the interest it pays.
Interest rate swap金利スワップ: An interest rate swap is a trade in which two parties exchange fixed-rate interest for floating-rate interest on the same notional amount in the same currency.
Internal audit内部監査: Internal audit is an arrangement in which a unit inside a financial institution, independent of the units it audits, examines how business is carried out and whether internal management and controls are appropriate and effective, and gives advice and recommendations to management. In the three lines model it is the third line.
Internal model method内部モデル方式: The internal model method (IMM) is the approach in capital adequacy regulation that derives the exposure at default of derivative trades from future exposures that a bank calculates with its own model. Using it requires supervisory approval, and the Japanese notice calls it the "expected exposure method."
International Organization of Securities Commissions証券監督者国際機構: The International Organization of Securities Commissions is an international body whose members include securities regulators and securities exchanges from many countries and regions, and it develops international standards for securities regulation and supervision. It is abbreviated as IOSCO.
Interpolation補間: Interpolation is a method of finding values between known points using a stated assumption. For a rate curve, it fills in the gaps between the discount factors or zero rates found from market rates, and so fixes the values at maturities with no market rate.
Intrinsic value本質的価値: Intrinsic value is what an option would be worth if it were exercised now. For a call option (call), it is the price of the underlying asset minus the strike price; for a put option (put), it is the strike price minus the price of the underlying asset. If the result is negative, the intrinsic value is zero.
ISDAISDA: ISDA (the International Swaps and Derivatives Association) is an industry body of the main participants in the over-the-counter derivatives market. Established in 1985, it produces the master agreement, the standard contract for OTC derivatives.
ISDA CDMISDA CDM: The ISDA CDM (Common Domain Model) is a standard data model that represents financial products, trades in those products, and the lifecycle events of those trades in a form that machines can both read and execute. It is published as an open-source specification.
ISDA Master AgreementISDA マスター契約: The ISDA Master Agreement is a standard form of master agreement for OTC derivatives, created by the International Swaps and Derivatives Association (ISDA). It sets the terms common to all trades with the same counterparty, and the terms of each trade are written in a confirmation.
ISDA protocolISDA プロトコル: An ISDA protocol is a mechanism in which parties adhere to a contract-amendment document prepared by ISDA (the International Swaps and Derivatives Association), and the covered contracts between the parties that have adhered are amended all at once. It is used to change existing contracts, such as ISDA Master Agreements and CSAs, to the same terms with many counterparties.
Ito's lemma伊藤の補題: Ito's lemma is a formula that expresses the small change in a function f(t, X) of a quantity X driven by Brownian motion as the ordinary chain rule plus one second-derivative term. It is used to derive the solution of geometric Brownian motion and the Black-Scholes partial differential equation.

J

Japan Financial Literacy and Education Corporation金融経済教育推進機構: The Japan Financial Literacy and Education Corporation is an authorized corporation under the supervision of the Financial Services Agency, established in April 2024 under the Act on Provision of Financial Services and Development of the Environment for Their Use. It is described as the only public institution that promotes financial and economic education, in cooperation between the public and private sectors, from a neutral and fair standpoint. It is abbreviated as J-FLEC.
Japan Securities Clearing Corporation日本証券クリアリング機構: The Japan Securities Clearing Corporation is a joint-stock company licensed under the Financial Instruments and Exchange Act as a financial instruments clearing organization. It assumes the obligations arising from exchange-traded transactions, over-the-counter credit default swaps and interest rate swaps, and over-the-counter transactions in Japanese government bonds.
Japan Securities Dealers Association日本証券業協会: The Japan Securities Dealers Association is an authorized financial instruments firms association that received the Prime Minister's authorization under the Financial Instruments and Exchange Act. Its members are securities firms and similar institutions across Japan, and its purpose is to make their transactions fair and smooth and to contribute to investor protection.
Japanese Bankers Association全国銀行協会: The Japanese Bankers Association is a general incorporated association that most private banks operating in Japan have joined, with the purpose of contributing to Japan's economic growth through the sound development of banks. It works on consumer protection, planning and operating payment systems, and research and policy proposals on banking business. It is abbreviated as JBA.
Japanese GAAP日本基準: Japanese GAAP is the set of corporate accounting standards generally accepted as fair and appropriate in Japan, made up mainly of the Accounting Standards that the Accounting Standards Board of Japan (ASBJ) publishes.
JGB futures国債先物: JGB futures are futures whose underlying is not an actual issued Japanese government bond but a notional bond whose coupon and time to maturity are set by the exchange.

K

Key information document (KID)基本情報文書（KID）: A key information document (KID) is a document that, under the EU PRIIPs Regulation, the manufacturer of the product draws up and the seller gives to a retail investor before the contract, showing the nature, risks, costs, and possible gains and losses of the product.
Key rate sensitivity年限別の感応度: A key rate sensitivity is the change in the market value of a position when the interest rate for a single maturity rises by 1bp (0.01%). Adding the values for all maturities gives approximately the DV01, and they are used to capture the profit or loss when the shape of the curve changes.
Knock-in putノックイン・プット: A knock-in put is a put option that comes into effect only when the price of the underlying asset reaches a set level (the knock-in level). In structured notes such as autocallables, the investor is in effect selling this put through the note.
Knock-out forwardノックアウト付きフォワード: A knock-out forward is a transaction that buys or sells a currency at a set rate on a set date, with a condition that the transaction is cancelled if the exchange rate touches a set level (the barrier) even once. If the barrier is not touched, it settles as agreed, and if it is touched, there is no settlement.
Know your customer (KYC)本人確認: Know your customer (KYC) is the work a financial institution or similar business does when it starts dealing with a client to confirm who the client is, why it wants to trade, and similar matters. In Japan, the Act on Prevention of Transfer of Criminal Proceeds requires banks, financial instruments business operators, and others to carry it out as "verification at the time of transaction."
KVAKVA: KVA (Capital Valuation Adjustment) is the valuation adjustment that expresses, as a present value, the cost of the regulatory capital held to keep a derivative trade until maturity. It is found by multiplying the future required capital by the hurdle rate, discounting, and summing, and it lowers the value.

L

Legal opinionリーガル・オピニオン: A legal opinion is a written legal view, given by a legal professional, on whether a contract or transaction is valid under the relevant laws. For derivatives, it is used to check, jurisdiction by jurisdiction, whether close-out netting would be recognized if a counterparty failed.
LEILEI: The LEI (Legal Entity Identifier) is a 20-character alphanumeric code under ISO 17442 used worldwide to identify legal entities that enter into transactions. In trade reporting of over-the-counter derivatives, it identifies the reporting entity and the counterparties to the trade.
Leverageレバレッジ: Leverage is the use of borrowing or derivatives to hold positions larger than your own capital (net assets, for a fund). Its size is expressed as a multiple, calculated by dividing positions by net assets.
Leverage ratioレバレッジ比率: The leverage ratio is a bank's Tier 1 capital divided by its exposure measure, which combines on-balance-sheet and off-balance-sheet items. It uses no risk weights, and the international minimum is 3%.
LIBORLIBOR: LIBOR (London Interbank Offered Rate) was a benchmark rate published by currency and tenor. Panel banks submitted the rates at which they would borrow unsecured funds in the London interbank market, and the administrator compiled them. Publication ended entirely on September 30, 2024.
LIBOR market modelLIBOR マーケット・モデル: The LIBOR market model is a model that values interest rate derivatives by moving simple forward rates over a fixed period, such as 3 or 6 months, randomly through time as observable market rates.
Lifecycle eventライフサイクル・イベント: A lifecycle event is an event that occurs between the start and end of a derivatives trade and changes its payments or status. Examples include interest payments, option exercise, early termination, novation, and credit events.
Liquidity coverage ratio流動性カバレッジ比率: The liquidity coverage ratio (LCR) is a regulation that requires banks to hold high-quality liquid assets so that they can meet cash outflows under 30 days of stress. The ratio of those assets to the net cash outflows over 30 days must be at least 100%.
Local volatility modelローカル・ボラティリティ・モデル: A local volatility model is a model in which the volatility of the underlying asset price is a function of the current underlying price and time. This function is called the local volatility, and it is chosen to match market option prices.
Lockoutロックアウト: A lockout is a convention for compounding in arrears that repeats the overnight rate of a day a number of business days before the end of the interest period for the remaining days of the period. Because the rate is known before the end of the period, the interest payment can be prepared.
Lognormal distribution対数正規分布: The lognormal distribution is a probability distribution in which the natural logarithm of the value follows a normal distribution. The values it can take are limited to the range greater than 0.
Longevity risk長寿リスク: Longevity risk is the risk that pensioners, policyholders, and similar beneficiaries, taken together, live longer than expected, so that pension and similar payments continue for longer and add up to more than expected.
Longevity swap長寿スワップ: A longevity swap is a contract in which a pension fund or other party that owes pensions and a taker, such as an insurer or reinsurer, exchange an agreed fixed payment for the actual pension payments (or an amount based on a population index). It is used to move the risk that pensioners live longer than expected to the taker.
Lookbackルックバック: A lookback is a convention for compounding in arrears that uses, for each day in the interest period, the overnight rate from a number of business days earlier. Because the rate is known before the end of the period, the interest payment can be prepared.
Lookback optionルックバック・オプション: A lookback option is an option whose payoff is set by the highest or lowest price of the underlying asset observed over the period up to expiry. In one form the strike is fixed in advance and compared with the highest or lowest price. In the other, a call buys at the lowest price over the period and a put sells at the highest.

M

Made available to trade (MAT)取引可能の判定（MAT）: Made available to trade (MAT) is a determination in the United States that a swap execution facility or a designated contract market makes a swap available for trading on its own trading system. A swap subject to the clearing requirement must, once so determined, be executed on a designated contract market or a swap execution facility.
Major swap participant主要スワップ参加者: A major swap participant, under the US Commodity Exchange Act (CEA), is a person that is not a swap dealer but meets criteria such as maintaining a substantial swap position excluding hedging and similar positions, and must register with the Commodity Futures Trading Commission (CFTC).
Mandatory clearing清算集中義務: Mandatory clearing is the obligation, under Japan's Financial Instruments and Exchange Act, for a financial instruments business operator or a registered financial institution that enters into an OTC derivative transaction designated by the Commissioner of the Financial Services Agency to have its own obligations and its counterparty's obligations assumed by a financial instruments clearing organization (for interest rate swaps, including a foreign financial instruments clearing organization).
Margin証拠金: Margin is cash or securities placed with a counterparty, a securities company or a clearing house so that settlement is performed even if a loss arises on a transaction.
Margin callマージンコール: A margin call is a request, in a collateralized trade, for the other party to post collateral (margin) or return it as the market value of the trades changes.
Margin period of riskマージン・ピリオド・オブ・リスク: The margin period of risk (MPOR) is the period from when collateral stops being exchanged with a counterparty until the trades are closed out after the counterparty's default and the market risk is hedged again. Changes in market value during this period are not covered by variation margin and remain as exposure.
Margin requirements for uncleared derivatives証拠金規制: Margin requirements for uncleared derivatives are Japanese rules that require financial instruments business operators, etc., to take measures to exchange variation margin and initial margin with their counterparties on OTC derivative transactions not cleared through a central counterparty.
Mark-to-market値洗い: Mark-to-market is the revaluation of open transactions at the latest value. For futures, open positions are revalued daily at the settlement price to calculate that day's profit or loss.
Market data市場データ: Market data is the values observed in the market, such as interest rates, exchange rates, prices and volatilities, that a financial institution uses to calculate the market value and the risk measures of its positions. It is gathered from exchange prices, distributed prices, broker quotes and the institution's own inputs.
Market makerマーケット・メイカー: A market maker is a firm that keeps quoting a buy price (bid) and a sell price (ask) and stands ready to take either side of other participants' trades at those prices.
Market manipulation相場操縦: Market manipulation is conduct that distorts the prices formed in a market, by making trading look active or by moving a market price artificially through trades or the spread of information. The laws of Japan, the United States, the EU, and others prohibit it.
Market risk市場リスク: Market risk is the risk of loss when movements in markets such as interest rates, exchange rates, and stock prices reduce the value of the assets and liabilities you hold.
Markets in Financial Instruments Directive II (MiFID II)金融商品市場指令（MiFID II）: The Markets in Financial Instruments Directive II (MiFID II) is the EU directive of 2014 that sets the authorization and operating conditions for investment firms, and rules on regulated markets, data reporting services providers, and the supervision and cooperation of authorities.
Markets in Financial Instruments Regulation (MiFIR)金融商品市場規則（MiFIR）: The Markets in Financial Instruments Regulation (MiFIR) is the EU regulation of 2014 that covers the publication of trade data, transaction reporting to authorities and the trading of derivatives on trading venues, among other matters, and applies directly in Member States.
Martingaleマルチンゲール: A martingale is a stochastic process whose expected future value, given the information known at each time, equals its current value. It is the property underlying the expression of a derivative price as an expected value.
Material nonpublic information未公表の重要情報: Material nonpublic information is information that has not been made public and that affects investors' decisions or the prices of securities and similar instruments. Insider trading rules differ, country by country, in how they define which information falls within them.
Mean reversion平均回帰: Mean reversion is the tendency of a variable such as an interest rate to be pulled back toward a certain level while it moves randomly. The further it is from that level, the stronger the pull back.
Memory couponメモリー付きクーポン: A memory coupon is a coupon that pays, all at once on a later observation date, the coupons that were not paid because the share price fell short of the level on earlier observation dates. How it pays is set by the terms of each product, and it is used in structured notes, such as autocallables, where each observation date decides whether a coupon is paid.
Middle officeミドル・オフィス: The middle office is the part of a financial institution that, independently of the trading units, identifies and reports risk and verifies prices produced by the front office, among other tasks. The risk management function is at its center.
Minimum transfer amount最低受渡額: The minimum transfer amount is the smallest amount of collateral that is transferred under a collateral agreement. If the difference between the required collateral and the collateral already held is below this amount, no collateral is transferred.
Model riskモデル・リスク: Model risk is the risk that a decision based on a model error, or on inappropriate use of a model, leads to an undesirable outcome. It arises when the model's design has a fundamental error, and when a model is used inappropriately, for example outside the range it was assumed to cover.
Model validationモデルの検証: Model validation is the set of activities that check whether a model performs as expected in line with its design objectives and intended use, and that make its limitations and assumptions clear.
Monetary Authority of Singaporeシンガポール金融管理局: The Monetary Authority of Singapore is the body that Singapore's Securities and Futures Act 2001 names the "Authority."
Monte Carlo methodモンテカルロ法: The Monte Carlo method is a way of calculating a target value by repeating numerical experiments with random numbers many times and working from the many results. In derivative valuation, it estimates the price by generating many paths for the price of the underlying, discounting the payoff on each path, and taking the average.
Multi-curve frameworkマルチカーブ: The multi-curve framework is the approach of valuing interest rate swaps and similar instruments with separate curves for discounting future cash flows and for projecting floating rates, using a different projection curve for each reference rate and tenor. For collateralized trades, the discount curve is an OIS curve that matches the interest paid on the collateral.
Multilateral trading facility多角的取引システム: A multilateral trading facility (MTF) is a multilateral system defined in the EU's Markets in Financial Instruments Directive II, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in accordance with non-discretionary rules in a way that results in a contract.
MVAMVA: The MVA (margin valuation adjustment) is the valuation adjustment that reflects, in the value of a derivative, the cost of funding the initial margin the firm posts. It is found by multiplying the expected initial margin at each future date by the funding spread and adding up over the life of the trade.

N

National Futures Association (NFA)全米先物協会: The National Futures Association (NFA) is the self-regulatory organization for the US derivatives industry, designated by the Commodity Futures Trading Commission (CFTC) as a registered futures association. It is also where an application to register as a swap dealer is filed.
NDFNDF: The NDF (non-deliverable forward) is a transaction in which two parties pay or receive, in a single currency such as the US dollar, only the difference between an exchange rate published on a set future date and the rate they agreed.
Net stable funding ratio安定調達比率: The net stable funding ratio (NSFR) is a regulation that requires banks holding assets with long remaining maturities or low market liquidity to back them with stable medium- to long-term funding. The ratio of available stable funding to required stable funding must be at least 100%.
Netting setネッティング・セット: A netting set is the group of trades that are offset against each other through close-out netting when a counterparty fails. Trades under a legally effective bilateral netting agreement form one group, and any other trade forms a netting set on its own.
New-product approval新商品承認: New-product approval is the process by which a financial institution has the relevant units, such as risk management, legal and accounting, review and approve a new product, transaction or market, and keeps a record of the approval, before it launches it.
No-arbitrage無裁定: No-arbitrage means that the market offers no opportunity to earn a profit without capital and without risk (an arbitrage opportunity). The theory of derivative prices starts from this condition.
Non-modellable risk factorモデル化できないリスクファクター: A non-modellable risk factor is a risk factor that fails the risk factor modellability test under the FRTB internal models approach and so cannot be included in the expected shortfall model. Its capital is measured separately, with stress scenarios.
Nonperformance risk不履行リスク: Nonperformance risk is the risk that an entity will not fulfill an obligation. It includes the entity's own credit risk, and accounting standards require the fair value of a liability to reflect its effect.
Normal distribution正規分布: The normal distribution is a probability distribution with a symmetric bell shape centered on its mean. Its shape is set by the mean and the standard deviation, and the probability of falling within one standard deviation of the mean is about 68.3%, rising to about 95.4% within two standard deviations.
Normal volatility正規ボラティリティ: Normal volatility is the volatility used in the Bachelier model (normal model). It is the standard deviation of changes in the value of the underlying, expressed as an annual figure. For interest rate options, it is quoted in bp.
Notes to the financial statements注記: The notes to the financial statements are the part of the statements, separate from the primary statements (the balance sheet, the income statement and so on), that adds accounting policies, breakdowns of line items and risk information. For derivatives, contract amounts, fair values and the status of hedging are disclosed there.
Notional amount想定元本: The notional amount is the principal on which the interest to be exchanged in an interest rate swap or similar trade is calculated.
Notional bond標準物: A notional bond is a hypothetical bond, with a coupon rate and a term fixed at standard values, that JGB futures are traded on. Because no such bond exists, actual government bonds that are permitted for delivery (deliverable bonds) are delivered at final settlement.
Novationノベーション: Novation is the replacement of one party to a derivatives trade by a third party that steps into its position. The original trade ends, and a new trade is formed between the remaining party and the party that stepped in.
Nth-to-defaultn 番目のデフォルト: An nth-to-default swap is a CDS on a basket of reference entities in which the seller compensates the loss on the nth entity to default. The trade ends at the nth default, and the case n = 1 is first-to-default.
Numeraireニューメレール: A numeraire is an asset whose price is always positive and is used as the unit for dividing, and so comparing, the prices of other assets. A portfolio of assets may also serve as one.

O

Objective function目的関数: An objective function is the quantity to be minimized in an optimization, written as a function of the parameters being searched. In calibration, it is typically a weighted sum of squared differences between model prices and market prices.
Office of the Comptroller of the Currency通貨監督庁: The Office of the Comptroller of the Currency (OCC) is a bureau within the U.S. Department of the Treasury that supervises the safety and soundness of national banks, federal savings associations, and federal branches and agencies of foreign banks, among others.
Office of the Superintendent of Financial Institutionsカナダ金融機関監督庁: The Office of the Superintendent of Financial Institutions (OSFI) is an agency within the Government of Canada, established under the Office of the Superintendent of Financial Institutions Act, that regulates and supervises federally regulated financial institutions and pension plans.
Offsetting trade反対売買: An offsetting trade is a trade in the opposite direction to an open position held in futures or options, made to settle that open position. A bought open position is resold, and a sold open position is bought back.
OISOIS: The OIS (overnight index swap) is an interest rate swap that exchanges a fixed rate for a floating rate calculated by compounding the overnight rate over a set period. A Japanese yen OIS references the uncollateralized overnight call rate, and its fixed rate is called the OIS rate.
Open position建玉: An open position is the quantity of executed trades in exchange-traded futures or options that have not yet been settled. An open position held as a buy is called a long open position, and one held as a sell is called a short open position.
Operational riskオペレーショナル・リスク: Operational risk is the risk that a financial institution incurs losses because its business processes, the activities of its officers and employees, or its systems are inadequate or fail, or because of external events. The definition used in capital adequacy regulation includes legal risk and excludes strategic risk and reputational risk.
Optionオプション: An option is a trade in the right to buy or sell an underlying asset at a price fixed in advance, at a set time in the future. The buyer pays a price (the premium) to hold the right, and the seller takes on the obligation to comply if the buyer uses the right.
Option premiumプレミアム: The option premium is the price of an option, which the buyer pays the seller to acquire the right. It is the equivalent of the share price in stock trading.
Option spreadオプションのスプレッド: An option spread is a trade that combines bought and sold options that differ in expiry or strike price.
Organised trading facility組織的取引システム: An organised trading facility (OTF) is a multilateral system defined in the EU's Markets in Financial Instruments Directive II that is neither a regulated market nor a multilateral trading facility, and in which buying and selling interests in bonds, structured finance products, emission allowances, or derivatives can interact in a way that results in a contract.
OTC derivative店頭デリバティブ: An OTC derivative is a derivative entered into directly between two parties, who agree on terms such as the price and quantity without going through an exchange.
Out of the moneyアウト・オブ・ザ・マネー: Out of the money (OTM) is the state in which, when the buyer of an option exercises, the difference from exercising (the difference between the price of the underlying asset and the strike price) is a loss. For a call, the strike price is above the price of the underlying asset, and for a put, the strike price is below it.

P

P&L explain損益の説明: P&L explain is the breakdown of daily profit and loss into sources such as market moves, the passage of time and new trades, to show where the result came from. When a large part of the P&L cannot be explained by these sources, the firm investigates it as a possible sign of valuation errors or unidentified risks.
Panel bankパネル銀行: A panel bank is one of several banks selected to submit market-based rates to the administrator of an interbank benchmark rate such as LIBOR or TIBOR.
Par rateパーレート: The par rate is the fixed rate at which an interest rate swap has zero value when it is traded. It is computed from the discount factors of the current curve, as the rate at which the present values of the fixed and floating payments are equal.
Partial differential equation偏微分方程式: A partial differential equation is an equation in which the unknown function depends on two or more independent variables. In the Black-Scholes model, the option price is treated as a function of the underlying price and time, and the relation it satisfies is written as a partial differential equation.
Path-dependent option経路依存型オプション: A path-dependent option is an option whose payoff depends not only on the price of the underlying asset at expiry but also on the prices it passed through before expiry.
Payment netting決済額のネッティング: Payment netting is offsetting the amounts paid and received with the same counterparty on the same day in the same currency, so that only the difference is paid. It is used to reduce the number and size of payments and the amount that could be lost by paying without receiving.
Payoffペイオフ: An option's payoff is the amount the holder receives by exercising the option, for each price of the underlying at expiry. It is zero when the option is not exercised, and subtracting the premium paid from the payoff gives the profit or loss at expiry.
Permanent establishment恒久的施設: A permanent establishment is a branch, factory, or other fixed place of business that a foreign company has in a country, a place of construction or installation work, or a person with authority to conclude contracts on its behalf.
Perpetual swap無期限スワップ: A perpetual swap is a transaction linked to the price of a crypto-asset that has no expiry and can be closed out at any time. The long and short sides periodically exchange a funding rate based on the gap between the perpetual swap price and the spot price, which pulls the price toward spot.
Pin riskピン・リスク: Pin risk is the risk that, when the price of the underlying asset moves back and forth around the strike price near maturity, the trades in the underlying that a hedge calls for become so large that losses from small price moves and trading costs can exceed the maximum liability of the digital option that was sold.
Portfolio compressionポートフォリオ・コンプレッション: Portfolio compression is a process in which financial institutions pool information on their trades and terminate several derivatives trades at once, keeping the amount of risk roughly unchanged, so that the balance measured by total notional amount becomes smaller.
Portfolio reconciliationポートフォリオの照合: Portfolio reconciliation is the process in which the two counterparties to derivatives exchange the material terms and valuations of their trades, compare them, and resolve any discrepancies.
Position持ち高: A position is a trade, in foreign exchange, margin, or futures and options trading, that has been made and left open, neither ended by an opposite trade nor settled. A long position is one in which the bought side exceeds the sold side, a short position is one in which the sold side exceeds the bought side, and a square position is one in which the two balance.
Potential future exposureポテンシャル・フューチャー・エクスポージャー: Potential future exposure is a high percentile, such as 95% or 99%, of the distribution of exposure at a future date. It is used to manage credit limits for each counterparty.
Power futures電力先物: Power futures are futures contracts on the price of electricity for a set future period. Power futures on Tokyo Commodity Exchange are settled in cash, with a final settlement price equal to the average of an area price on the Japan Electric Power Exchange spot market.
PRDCPRDC: The PRDC (power reverse dual currency) is a foreign exchange and interest rate swap over a long period. One side pays a coupon whose amount is set by the exchange rate on each payment date, and the other side pays a floating rate such as a yen rate.
Pre-contract document契約締結前交付書面: A pre-contract document is a document that a financial institution gives a client before concluding a derivatives or other contract, under Article 37-3 of the Financial Instruments and Exchange Act, setting out an outline of the contract, the fees, the risk of loss, and other matters.
Precious metal貴金属: Precious metals are gold, silver, platinum and palladium, which commodity trading treats separately from base metals. A Bank of Japan Institute for Monetary and Economic Studies paper describes them as having more of the character of a financial asset than of a consumable commodity.
Present value現在価値: Present value is the value today of money to be received or paid in the future.
PRIIPsPRIIPs: PRIIPs (packaged retail and insurance-based investment products) is the collective name for the products covered by EU Regulation (EU) No 1286/2014, namely investments where the amount repayable to a retail investor changes with reference values or with the performance of assets the investor does not buy directly, and insurance products whose maturity or surrender value is exposed to market fluctuations.
Product controlプロダクト・コントロール: Product control is the function within a financial institution that validates trading profit and loss, and the positions and valuations behind it, independently of the people who trade. To do so, it does not simply accept the front office's figures but recalculates valuations and P&L itself.
Product explanation取引説明書: A product explanation is a document that a financial institution gives a client to explain, in specific and easy-to-understand terms, how an OTC derivative works, its risks, early termination, and the termination payment.
Professional investor特定投資家: A professional investor is a client listed in the Financial Instruments and Exchange Act, namely a qualified institutional investor, the State, the Bank of Japan, the Investor Protection Fund, or another corporation specified by Cabinet Office Order. When the client is a professional investor, some provisions of the Act do not apply, except in cases specified by Cabinet Office Order.
Property derivative不動産デリバティブ: A property derivative is a transaction on the value of an index of property prices or returns. It is used to reduce the risk of property price swings, or to earn the same return as a property investment, without buying or selling the property itself.
Proprietary trading自己勘定取引: Under the Volcker Rule, proprietary trading means a banking entity engaging as principal for its trading account in the purchase or sale of financial instruments.
Protective putプロテクティブ・プット: A protective put is a combination in which you keep holding the underlying asset and buy a put option (put) on that asset. The premium paid reduces the profit and loss, but the loss from a fall in the underlying is capped.
Prudent valuationプルーデント・バリュエーション: Prudent valuation is the approach, in regulatory capital calculations, of valuing positions measured at fair value at a conservative value that allows for price uncertainty. Under European Union rules, the difference from the accounting valuation is calculated as an additional valuation adjustment and used to adjust Common Equity Tier 1 capital.
Prudential Regulation Authority健全性規制機構: The Prudential Regulation Authority is the authority that, as part of the Bank of England, regulates and supervises the prudential soundness of UK banks, building societies, credit unions, insurers, and major investment firms.
Put optionプット・オプション: A put option (put) is an option that gives its holder the right to sell the underlying asset at a price fixed in advance (the strike price). The buyer of a put makes a profit if the price of the underlying asset at expiry is below the strike price minus the premium.
Put-call parityプット・コール・パリティ: Put-call parity is the relationship for a European call and put with the same underlying asset, strike price and expiry, under which the call price minus the put price equals the price of the underlying asset minus the present value of the strike price.

Q

Quadratic variation二次変動: Quadratic variation is the value that the sum of the squared increments over the small subintervals of a partition approaches as the partition is made finer. The quadratic variation of Brownian motion equals the elapsed time, and that of a smooth function is 0.
Qualified financial contract適格金融契約: A qualified financial contract (QFC) is a category of contracts, such as derivatives, repos and securities lending, defined in the United States by section 210(c)(8)(D) of Title II of the Dodd-Frank Act, whose termination and set-off rights receive special treatment in resolution and insolvency proceedings.
Quanto optionクオント・オプション: A quanto option is an option on an underlying asset priced in a foreign currency, whose payoff is converted into the domestic currency at an exchange rate fixed at the start of the trade.

R

Random walkランダムウォーク: A random walk is a stochastic process whose value moves at fixed intervals by an amount determined independently of its past moves. In a symmetric random walk, which moves +1 or −1 with equal probability at each step, the mean after n steps is 0 and the variance is n.
Range accrualレンジアクルーアル: A range accrual is a product that accrues interest daily at a higher rate on days when a reference index (such as an interest rate) is inside a range set in advance, and at a lower rate (sometimes 0%) on days when it is outside. The interest depends on the share of days spent inside the range.
Rate fixing金利の確定: Rate fixing is setting the value of the benchmark rate used to calculate the interest for each interest period of a floating-rate trade. Depending on when the value is set, a fixing is either in advance, as for TIBOR, or in arrears just before the payment date, as for TONA compounded in arrears.
Realized volatility実現ボラティリティ: Realized volatility is the size of the actual price changes of an underlying asset observed over a period, expressed as an annualized figure. Its square is realized variance, which determines the payments on variance swaps and volatility swaps.
Rebalancing of a hedging relationshipヘッジ比率の調整: Rebalancing of a hedging relationship is, under IFRS Accounting Standards, the adjustment of the designated quantity of the hedging instrument or the hedged item when a hedging relationship no longer meets the hedge ratio requirement but the risk management objective is unchanged, so that it meets the requirement again.
Reconciliation照合: Reconciliation is the process of comparing two records of the same trades or cash movements to find and resolve differences. Examples include comparing a firm's own records with the counterparty's confirmation, comparing the records in different departments' systems, and comparing expected cash flows with the actual movements in an account.
Record keeping記録の保存: Record keeping is the duty of a financial institution, set by law, to create records of its business and transactions and to retain them for set periods and in set ways. Supervisors use the retained records in inspections and investigations.
Recovery rate回収率: The recovery rate is the share of the face value of a reference entity's bonds that can be recovered when the entity defaults. In a CDS, the amount the protection seller pays on default is the notional × (1 − recovery rate).
Redemption before maturity期限前償還: Redemption before maturity is a redemption that the issuer chooses to make ahead of maturity, as opposed to automatic early redemption (autocall). In a callable bond, the issuer chooses whether to redeem it.
Reference entity参照組織: A reference entity is the company or country whose credit risk a credit default swap (CDS) covers. If a bankruptcy, a failure to pay or a similar event at the reference entity is recognized as a credit event, the protection seller makes a payment to the protection buyer.
Regional bank地域銀行: In Financial Services Agency documents, regional banks are first-tier regional banks and second-tier regional banks taken together. Regional banks plus shinkin banks and credit cooperatives are called regional financial institutions.
Registered financial institution登録金融機関: A registered financial institution is a bank, cooperative financial institution, or other financial institution specified by Cabinet Order that has registered under the Financial Instruments and Exchange Act. For derivatives transactions, it registers in order to conduct derivatives transactions that are not related to securities as a business.
Replacement cost再構築コスト: Replacement cost is the amount it costs, when a counterparty fails, to enter into the same transaction again at current market prices. It equals the value of the transaction when that value is positive, and is zero when the value is negative.
Replication複製: Replication is building, by trading other instruments with known prices, a combination (a replicating portfolio) whose future cash flows match those of a given instrument in every outcome. In a market with no arbitrage opportunities, the cost of building the combination is the price of the instrument.
Repoレポ取引: A repo is a transaction in which funds and bonds are exchanged for a fixed period. It is used to invest or raise funds, and also to lend or borrow bonds.
Request for quote見積り要求: A request for quote is a trading method in which a participant on a trading platform asks several other participants for quotes to buy or sell a specific instrument. CFTC rules in the US require a request for quote on a swap execution facility to go to three or more participants.
Resolution plan破綻処理計画: A resolution plan is a plan, set by the authorities in advance, that guides an orderly resolution of a failing financial institution while keeping its critical functions running, covering the resolution options, the conditions for using them, and the information needed.
Resolution stay早期解約の一時停止（ステイ）: A resolution stay is a measure that, when a financial institution enters resolution, temporarily prevents its counterparties from terminating contracts solely because of that resolution. It can be set by law, or brought into contracts through clauses and protocols.
Reverse dual currency bondリバースデュアル債: A reverse dual currency bond is a bond whose principal is redeemed in yen and whose coupon is denominated in a foreign currency. A bond that embeds coupon swaps to raise the coupon is, in the Bank of Japan's material, the form called a PRD note.
Reverse stress testingリバース・ストレステスト: Reverse stress testing is a stress test that first fixes an unacceptable outcome, such as the capital ratio falling below the regulatory minimum or funding running out, and then searches for the events that would lead to that outcome. It is used to find weaknesses that ordinary scenarios tend to miss.
Rhoロー: Rho is a measure of how much an option's price changes when the interest rate moves a little. It is usually stated as the change in price for a 1% change in the interest rate.
Right-way risk正方向リスク: Right-way risk is the relationship in which the exposure to a counterparty becomes smaller as the counterparty's creditworthiness declines. Because the exposure is small in the scenarios where the counterparty defaults, CVA is smaller than when the two are unrelated.
Risk appetiteリスク・アペタイト: Risk appetite is the aggregate level and types of risk that a financial institution is willing to assume, within its risk capacity, to achieve its strategy and business plan. A risk limit is the upper bound that allocates the risk appetite to business units and risk types.
Risk factorリスクファクター: A risk factor is a market variable, such as an interest rate, an exchange rate or a stock price, whose movement changes the value of a position. Sensitivities and VaR derive the change in a position's market value from the movements of risk factors.
Risk limit限度枠: A risk limit is a cap on the risk or loss that a financial institution allows a trading unit or trader to take. For market risk, limits include position limits on sensitivities or notional amounts, risk limits on VaR and similar measures, and loss limits, and the risk management department checks their usage every day.
Risk reversalリスクリバーサル: A risk reversal is a trade that combines buying a call option and selling a put option whose deltas have the same absolute value. In the currency option market, it is quoted as the difference between the implied volatilities of the call and the put at a delta such as 25-delta.
Risk-free rateリスク・フリー・レート: A risk-free rate (RFR) is a benchmark rate that contains almost no bank credit risk. For the Japanese yen, the Study Group on Risk-Free Reference Rates identified TONA (Tokyo Overnight Average Rate), which the Bank of Japan calculates and publishes, as the yen RFR in 2016.
Risk-neutral probabilityリスク中立確率: A risk-neutral probability is a computational probability used to express a derivative's price as a discounted expected payoff, and it is set so that the underlying's expected return equals the risk-free rate. It is separate from the real-world probability that investors forecast.
Risk-neutral valuationリスク中立評価: Risk-neutral valuation is the approach of pricing a derivative by taking the expected value of its future payoff under risk-neutral probabilities and discounting it at the risk-free rate. For products that can be replicated with the underlying and other instruments, it gives the same price as replication.
Risk-weighted assets (RWA)リスク・アセット（RWA）: Risk-weighted assets (RWA) is the size of the risks a bank bears, expressed as an amount, and is the denominator of the capital adequacy ratio. It adds up amounts such as asset values multiplied by risk weights, plus the market risk and operational risk equivalents divided by 8% (market risk can be left out if conditions are met).
Rogue trading不正取引: Rogue trading is when a trader enters into trades beyond the authority or limits given to them and hides the resulting positions or profits and losses with fictitious trades or manipulated bookings. Losses tend to grow before it is found, and banks manage it as one type of operational risk.

S

SA-CCRSA-CCR: The SA-CCR (standardized approach for measuring counterparty credit risk exposures) is the standardized approach in capital adequacy regulation that calculates the exposure at default of derivative trades from the replacement cost and the potential future exposure.
SA-CVASA-CVA: The SA-CVA (standardized approach for CVA risk) is the method in the CVA risk capital charge that multiplies the risk sensitivities of CVA and of the hedging instruments by risk weights and aggregates them with correlations to obtain capital. Using it requires the approval of the Commissioner of the Financial Services Agency.
SABR modelSABR モデル: The SABR model is a stochastic volatility model that assumes the forward and its volatility move with two correlated Brownian motions. Because the approximation formula that Hagan and coauthors presented in 2002 gives the implied volatility for each strike, the model is used to interpolate the volatility smile of interest rate options.
Securities and Exchange Commission (SEC)米国証券取引委員会（SEC）: The Securities and Exchange Commission (SEC) is a US federal agency established under the Securities Exchange Act of 1934. It regulates securities trading, security-based swaps and related markets.
Securities and Futures Commission (SFC)証券先物事務監察委員会（SFC）: The Securities and Futures Commission (SFC) is the Hong Kong authority that, under the Securities and Futures Ordinance, makes the rules on reporting and clearing of OTC derivatives, designates central counterparties and other entities, and grants licenses to corporations.
Security-based swap証券ベースのスワップ: A security-based swap is, under the US Securities Exchange Act definition, in principle a swap based on a single security or loan, a narrow-based security index, or an event relating to a single issuer. The Securities and Exchange Commission (SEC) regulates it.
Segregation of duties職務の分離: Segregation of duties is the internal control principle that the same person or unit should not both execute trades and record, confirm or settle them. It lets other people detect hidden losses or misappropriated assets.
Sensitivityセンシティビティ: A sensitivity is the change in the market value of a position when a single risk factor, such as an interest rate, a stock price or volatility, moves by a small amount. DV01, delta and vega are examples, and sensitivities are used to measure the size of market risk position by position and to set limits.
Settlement fail決済の不履行: A settlement fail is a payment due from a counterparty on the settlement date that does not arrive. It can arise not only from the counterparty's default but also from operational errors such as a payment sent to the wrong place.
Short-rate model短期金利モデル: A short-rate model is an interest rate model that describes how the short rate, the interest rate over a very short period, moves randomly over time, and derives prices of zero-coupon bonds and options from it. The Hull-White model and the CIR model are examples.
SIMMSIMM: The SIMM (Standard Initial Margin Model) is a model that calculates initial margin for OTC derivatives not cleared through a central counterparty by multiplying the sensitivities of the trades by risk weights and adding them up using correlations. It is an industry-standard model published by the International Swaps and Derivatives Association.
Single stock option個別株オプション: A single stock option is a trade in the right to buy or sell the stock of an individual company at a set price, with that stock as the underlying asset.
Skin in the gameスキン・イン・ザ・ゲーム: Skin in the game is an arrangement in which a central counterparty places part of its own resources ahead of the non-defaulting members' default fund to cover the losses from a clearing member's default. It gives the CCP an incentive to manage risk properly.
Snowballスノーボール: A snowball is a product that sets each period's coupon from the previous period's coupon, adjusted by a floating rate and other terms. It is used for the coupons of notes and for one leg of a swap.
SOFRSOFR: The SOFR (Secured Overnight Financing Rate) is a US dollar benchmark rate that the Federal Reserve Bank of New York calculates and publishes every business day from the rates on overnight repo transactions collateralized by U.S. Treasury securities. It is a volume-weighted median, published on the business day after the transactions.
Soft commodityソフト・コモディティ: A soft commodity is an agricultural commodity that is grown and harvested rather than mined or extracted, such as sugar, coffee, cocoa, and cotton.
SONIASONIA: SONIA (Sterling Overnight Index Average) is a sterling benchmark rate that the Bank of England calculates and publishes every business day from the rates on unsecured overnight sterling deposit transactions. It is a trimmed mean that removes the top and bottom 25% of transactions by volume, published on the business day after the transactions.
Special quotation特別清算数値: The special quotation (SQ value) is the value used for the final settlement of equity index futures and the exercise of equity index options. For Nikkei 225 Volatility Index Futures, the value used for final settlement (the final settlement value) is called the SQ value, and it is calculated from the average of the Nikkei Stock Average Volatility Index over the first 30 minutes of the SQ day.
Specific wrong-way risk個別誤方向リスク: Specific wrong-way risk is the risk that, because of the nature of a transaction, the exposure to a particular counterparty moves in the same direction as that counterparty's PD. It arises, for example, when there is a legal connection between the counterparty and the reference entity.
Specified financial transaction特定金融取引: A specified financial transaction is a transaction that Japan's close-out netting act (the Act on Close-Out Netting of Specified Financial Transactions Conducted by Financial Institutions) covers, such as over-the-counter derivative transactions, forward foreign exchange transactions, and repurchase agreements on securities, as listed in its enforcement regulations.
Speculation投機: Speculation is taking a position in futures or other contracts based on a view of whether the market will rise or fall, aiming to profit by closing it out if prices move as expected.
Spoofing見せ玉: Spoofing is the placing of buy or sell orders that the person has no intention to have executed, in order to mislead other investors into thinking that the price has formed naturally and to draw them into trading. It is treated as one of the methods of market manipulation.
Spot exchange rate直物相場: The spot exchange rate is the rate used in a foreign exchange trade in which the funds are exchanged on the second business day after the trade is agreed.
Spot rateスポットレート: A spot rate is the interest rate for the period from today to a future date, defined as the compound yield on a discount bond that has no interest payments before maturity. Discounting an amount due at that date at the spot rate gives its present value.
Spread adjustmentスプレッド調整値: A spread adjustment is a fixed value added to the fallback rate to close the gap in level between a benchmark rate and its successor rate when a fallback switches the reference rate. For fallbacks from LIBOR, it was set at the median of the difference over the past 5 years, and the values were fixed on March 5, 2021.
Standard deviation標準偏差: The standard deviation is a measure of how widely the values of data are spread around the mean, and is the positive square root of the variance.
Standard error標準誤差: The standard error measures how much an estimate calculated as the mean of a sample varies from sample to sample. It is found by dividing the standard deviation of the sample values by the square root of the number of samples.
Standard settlement instructions標準決済指図: Standard settlement instructions are instructions that the parties agree for each product and currency and use for settling all trades in that product and currency. They are used to reduce differences caused by misdirected funds.
Static hedgeスタティック・ヘッジ: A static hedge is a hedging method in which, when a transaction such as a barrier option is started, a combination of vanilla options or similar instruments is set up and is not rebalanced, except for unwinding it when the option's rights are extinguished.
Stochastic differential equation確率微分方程式: A stochastic differential equation is an equation that expresses the small change in a stochastic process X as the sum of a term proportional to time (the drift) and a term proportional to the increment of Brownian motion. It is used to write models of the movement of prices such as stock prices in terms of their short-time changes.
Stochastic volatility確率的ボラティリティ: Stochastic volatility is the treatment of volatility as something that changes with its own random movement, separate from the underlying asset's, rather than as a constant or a function of time or of the underlying asset's price. It is one of the ideas used to represent the volatility smile.
STPSTP: Straight-through processing (STP) is the handling of a trade from execution to settlement as one continuous process without manual intervention, with systems linked automatically through messages in a standard format.
Straddleストラドル: A straddle is a combination in which you buy both, or sell both, a call option (call) and a put option (put) with the same expiry and the same strike price. Its profit and loss depends on how far the price of the underlying moves from the strike price by expiry, not on the direction.
Strangleストラングル: A strangle is a combination in which you buy both, or sell both, a call option (call) and a put option (put) with the same expiry but different strike prices. It is usually built from a put with a strike price below the current price and a call with a strike price above it, and the range between the two prices at which profit turns into loss is wider than for a straddle.
Stress testingストレステスト: Stress testing is a method that assumes large market moves or severe economic conditions and estimates how much a financial institution's positions would lose and how much its capital would be eroded under them. It is used to show rare, large losses that VaR, which relies on past data, has difficulty capturing.
Stressed VaRストレス VaR: Stressed VaR is VaR calculated with data from a continuous one-year stress period in which markets were highly volatile. Basel 2.5 added it to the calculation of banks' market risk capital.
Strike price行使価格: The strike price is the trade price, fixed in advance, at which the holder of an option can exercise the right to buy or sell the underlying asset.
Structured deposit仕組預金: A structured deposit is a general term for deposits with an embedded derivative transaction. In return for giving the bank the right to decide the maturity, or for accepting a repayment currency set by the exchange rate, the depositor can expect a higher interest rate than on an ordinary deposit.
Structured loan仕組ローン: A structured loan is an ordinary loan combined with a derivative transaction such as a swap or an option.
Structured note仕組債: A structured note is a bond combined with derivatives such as swaps or options, so that its interest or redemption amount depends on an index or rate such as a share price, an equity index, an interest rate, or an exchange rate.
Suitability principle適合性原則: The suitability principle is the rule that financial instruments business operators and registered financial institutions must not solicit clients in a way that is inappropriate in light of the client's knowledge, experience, financial situation, and purpose in entering into the contract.
Summary risk indicator (SRI)リスクの総合指標（SRI）: The summary risk indicator (SRI) is the indicator shown in the key information document (KID) that expresses the risk of a product as a number from 1 to 7, set by combining the market risk class and the credit risk class.
Supervisory guidelines監督指針: Supervisory guidelines are manuals that the Financial Services Agency (FSA) publishes for its staff who inspect and supervise banks, financial instruments business operators, and other institutions. For each type of institution they compile the basic approach to supervision, points to note in administrative procedures, and evaluation items (points of focus). Examples of evaluation items are market risk management and explanation to clients.
Swapスワップ: A swap is a trade in which two parties exchange cash flows, calculated by methods agreed in advance, at regular intervals over an agreed period.
Swap data repositoryスワップ・データ・リポジトリ: A swap data repository (SDR) is a person that, under the US Commodity Exchange Act (CEA), collects and maintains information and records on the transactions, positions and terms of swaps entered into by third parties, providing a centralized recordkeeping facility for swaps.
Swap dealerスワップ・ディーラー: A swap dealer, under the US Commodity Exchange Act (CEA), is a person that holds itself out as a dealer in swaps, makes a market in swaps, or regularly enters into swaps for its own account in the ordinary course of business, among other activities, and must register with the Commodity Futures Trading Commission (CFTC).
Swap dealer de minimis exceptionスワップ・ディーラーのデミニミス除外: The swap dealer de minimis exception is a CFTC rule that exempts a person from swap dealer registration when its swap dealing activity is small. It applies to a person whose swaps connected with dealing activity over the preceding 12 months total no more than USD 8 billion in aggregate gross notional amount, among other conditions.
Swap execution facilityスワップ執行ファシリティ: A swap execution facility (SEF) is a trading system or platform on which multiple participants can execute swaps by accepting bids and offers made by multiple participants, and which, under the US Commodity Exchange Act, is not a designated contract market, a category of US exchange registration.
Swaptionスワップション: A swaption is an option that gives the buyer the right to enter into an interest rate swap at a future date at a fixed rate agreed in advance (the strike rate). The right to become the fixed-rate payer is a payer swaption, and the right to become the fixed-rate receiver is a receiver swaption.
Synthetic CDOシンセティック CDO: A synthetic CDO is a transaction that divides the losses on a portfolio of CDS on several reference entities into tranches ranked by the order in which they absorb losses, and trades each tranche. Unlike a cash CDO, which bundles bonds or loans, its reference portfolio is made of CDS.
Synthetic forward合成先物: A synthetic forward is a combination of a call option and a put option with the same expiry and the same strike price, built to give a profit and loss close to that of buying or selling a futures contract. Buying the call and selling the put gives a profit and loss close to that of buying the futures.
Systematic internaliserシステマティック・インターナライザー: A systematic internaliser (SI) is a MiFID II category of investment firm that executes client orders on own account outside trading venues, without operating a multilateral system.
Systemic riskシステミック・リスク: Systemic risk is the risk that an impairment of all or part of the financial system disrupts the flow of financial services and has serious negative consequences for the real economy.

T

TARFTARF: A TARF (target redemption forward) is an FX derivative that strings together several forwards to buy or sell a currency at a set rate on set dates, and cancels all remaining forwards once the accumulated gain reaches or exceeds a target set in advance.
Tax treaty租税条約: A tax treaty is a treaty that Japan concludes with another country, and each treaty provides maximum rates for withholding tax. In Japanese withholding, the recipient files an "application form for income tax convention" to claim a reduction or exemption under a treaty.
Term rateターム物金利: A term rate is an interest rate for a period longer than one day, such as one week or three months. Some benchmark rates, such as Japanese Yen TIBOR and TORF, are term rates whose value is set at the start of the interest period.
Termination payment解約清算金: A termination payment is the amount one party pays the other when a derivatives trade is cancelled before its maturity date. The amount is based on the market value of the remaining trade, and items such as the cost of replacing the trade may be added.
The Investment Trusts Association, Japan投資信託協会: The Investment Trusts Association, Japan was a general incorporated association and an authorized financial instruments firms association under the Financial Instruments and Exchange Act, and it set rules including those on the management of investment trusts. It merged with the Japan Investment Advisers Association in April 2026 and became the Investment Management Association of Japan.
The Japanese Institute of Certified Public Accountants日本公認会計士協会: The Japanese Institute of Certified Public Accountants is the only body of certified public accountants in Japan, made up of certified public accountants and audit firms, and is a special private-sector corporation under the Certified Public Accountants Act. It guides, coordinates, and supervises its members and handles the registration of certified public accountants. It is abbreviated as JICPA.
Theoretical price理論価格: The theoretical price is the price of a futures contract or an option calculated from conditions such as interest rates and the number of days to maturity.
Thetaセータ: Theta is a measure of how much an option's price changes as time passes and the time to expiry gets shorter. Because an option's time value decreases as time passes, the theta of a bought option is negative in most cases.
Three lines model三線管理: The three lines model is an approach that divides the management and oversight of risk among three lines, namely the business units (first line), functions that support and challenge risk management with specialist expertise (second line) and independent internal audit (third line). It is used as a framework for operational risk management.
Three-zone approach3 ゾーン・アプローチ: The three-zone approach sorts a VaR model into green, amber, or red zones according to how many times losses exceeded VaR over the most recent 250 business days in backtesting.
Threshold閾値: A threshold is the amount, set in a collateral agreement, up to which no collateral is required from the counterparty. Collateral is exchanged only for the part of the market value above this amount, so exposure up to the threshold is not covered by collateral.
TIBORTIBOR: TIBOR (Tokyo Interbank Offered Rate) is a yen benchmark rate, calculated and published every business day by the JBA TIBOR Administration, that reflects the prevailing rates for unsecured funding between banks. It has five tenors from one week to 12 months, and its value is set before the interest period begins.
Tick size呼値の単位: The tick size is the increment of the price shown in orders for listed derivatives and other products, and the exchange sets it for each product.
Time value時間的価値: Time value is the part of an option's premium above its intrinsic value, and it is the value of the expectation that the price of the underlying asset will move in a favorable direction before expiry. It tends to be larger the longer the time to expiry and the higher the volatility, and it falls as expiry approaches.
TLACTLAC: TLAC (total loss-absorbing capacity) is an international standard for the amount of capital and liabilities that a global systemically important bank (G-SIB) must hold in advance so that it can absorb losses and be recapitalized in resolution.
Tokenizationトークン化: Tokenization is the use of new technologies, such as distributed ledger technology (DLT), to issue or represent assets in electronic forms known as tokens. Assets such as equities, bonds and bank deposits can be tokenized.
TONATONA: TONA (Tokyo Overnight Average Rate) is a benchmark rate that the Bank of Japan publishes every business day as the volume-weighted average rate on funds that financial institutions borrow from each other today without collateral and repay the next business day. As the risk-free rate for the Japanese yen, it is used for OIS and for floating rates compounded in arrears.
TORFTORF: TORF (Tokyo Term Risk Free Rate) is a benchmark of 1-month, 3-month, and 6-month term rates that QUICK Benchmarks calculates and publishes.
Total return swapトータル・リターン・スワップ: A total return swap is a trade that exchanges the total return on a reference asset, meaning its price appreciation or depreciation plus income such as dividends or interest, for interest based on a floating rate. Reference assets include stocks, stock indexes, bonds and loans, and a total return swap on a stock is also called an equity swap.
Trade capture約定の入力: Trade capture is the recording, in the institution's internal systems, of the terms of an executed trade. Staff independent of the unit that did the trade check the record against the trade records, and it then serves as the basis for accounting entries, valuation, and settlement.
Trade confirmation取引確認書: A trade confirmation is a record of the terms of a derivatives or other trade that each party sends to the other after the trade is agreed and before it settles. It is checked against the other party's records to catch errors in the terms and serves as evidence of the agreed terms.
Trade matching取引のマッチング: Trade matching is the step in which a system matches the trade details that the parties to a trade have submitted, to check whether they agree. A trade whose terms agree is confirmed electronically.
Trade report取引報告書: A trade report is a document that a financial instruments business operator, etc., such as a securities firm, gives a client when a trade with the client is concluded, to inform the client of the details of the trade. It is used for the provision of information upon conclusion of a contract, etc. required by Article 37-4 of the Financial Instruments and Exchange Act.
Trade repository取引情報蓄積機関: A trade repository is an entity designated by the Prime Minister to collect and store trade information on over-the-counter derivatives. It receives trade information from financial institutions and central counterparties, prepares and keeps records of it, and reports it to the authorities.
Trading book and banking book boundaryトレーディング勘定と銀行勘定の境界: The boundary between the trading book and the banking book is the line that decides whether a bank holds an instrument in the trading book or in the banking book. The risks of trading book instruments are subject to market risk capital.
Trancheトランシェ: A tranche is one layer of a portfolio's losses in a synthetic CDO or similar structure, defined by the order in which losses hit it. Losses hit the equity, mezzanine, and senior tranches in that order.
Transfer price移転価格: A transfer price is the price that enterprises in the same corporate group set for transfers of goods and intangibles, services, financial transactions, and similar dealings with each other. For tax purposes, those prices are compared with the prices of transactions between unrelated parties.

U

Underlying asset原資産: An underlying asset is the asset or indicator on which the profit or loss of a derivative is based. Besides financial instruments such as stocks, bonds, and foreign currencies, indicators such as the level of interest rates, temperature, and rainfall can be underlying assets.
Unsolicited solicitation不招請勧誘: Unsolicited solicitation is the act of visiting or calling a client who has not asked to be solicited, in order to solicit a financial instruments transaction contract. The Financial Instruments and Exchange Act prohibits it for the contracts set by the Order for Enforcement of the Act.
UPIUPI: The UPI (Unique Product Identifier) is a code under ISO 4914 that identifies the product traded in trade reporting of over-the-counter derivatives. It is assigned to a set of product reference data elements and values, and in Japan's reporting items it is 12 characters long, with the value determined by the Derivatives Service Bureau.
US GAAP米国会計基準: US GAAP is the set of generally accepted accounting principles in the United States, and the Financial Accounting Standards Board, the US standard setter, sets its standards.
UTIUTI: The UTI (unique transaction identifier) is a unique code assigned to each trade subject to trade reporting of over-the-counter derivatives. It is an alphanumeric string of up to 52 characters under ISO 23897:2020, and its first 20 characters are the Legal Entity Identifier of the entity that generated it.

V

VaRVaR: VaR (value at risk) is the largest loss that can occur within a set probability (the confidence level) when a position is held for a set period (the holding period).
Variance swapバリアンス・スワップ: A variance swap is a trade in which two parties exchange, at maturity, the difference between realized variance (the square of volatility) over the period and a strike set at the start, multiplied by a notional amount. Unlike a volatility swap, it can be replicated with a portfolio of options weighted in inverse proportion to the square of the strike.
Variance-covariance method分散共分散法: The variance-covariance method assumes profit and loss follow a normal distribution and calculates VaR by multiplying the standard deviation of profit and loss by a factor set by the confidence level.
Variation margin変動証拠金: Variation margin is margin that covers changes in the market value of trades.
Vegaベガ: Vega is a measure of how much an option's price changes when the volatility of the underlying asset moves a little. A call option and a put option with the same strike price and expiry have the same vega, and vega is large when the underlying price is near the strike price.
VIXVIX: The VIX (Cboe Volatility Index) is an index that Cboe calculates from S&P 500 Index option prices. It shows the market's expected volatility of the US stock market over the next 30 days as an annualized percentage.
Volatilityボラティリティ: Volatility is a measure of how much an asset's price moves, expressed as the standard deviation of its returns. It is usually quoted as an annual percentage. There are two kinds: historical volatility, calculated from past prices, and implied volatility, backed out from option market prices.
Volatility risk premiumボラティリティ・リスク・プレミアム: The volatility risk premium is the difference between realized volatility (variance) and the volatility (variance) priced into options. It represents the extra amount option buyers pay as compensation for protection against changes in volatility.
Volatility smileボラティリティ・スマイル: A volatility smile is the shape formed by lining up the implied volatilities of options with the same expiry by strike price or by delta. If the assumptions of the pricing formula held, it would be flat, but in actual markets the value differs by strike price.
Volatility surfaceボラティリティ・サーフェス: A volatility surface is the surface formed by arranging the implied volatilities of options on the same underlying along two axes, strike and expiry. A slice at a single expiry is the volatility smile, and a slice at a single strike shows how implied volatility changes with expiry (the term structure).
Volatility swapボラティリティ・スワップ: A volatility swap is a trade in which two parties exchange, at maturity, the difference between realized volatility over the period and a strike set at the start, multiplied by a notional amount per volatility point.
Volcker Ruleボルカールール: The Volcker Rule is a US regulation that requires banking entities not to engage in proprietary trading and restricts their ownership and sponsorship of hedge funds and private equity funds.

W

Warrantワラント: A warrant is a security that represents the right to buy or sell a stock or other asset at a set price. Warrants include share option certificates, which a company issues on its own shares, and covered warrants, which a third party such as a securities company issues on another company's shares.
Weather derivative天候デリバティブ: A weather derivative is a contract in which the parties pay or receive amounts based on how far an index built from weather observations, such as temperature or rainfall, differs from an agreed value. Companies whose sales volumes or costs depend on the weather use them to reduce swings in their profits.
Withholding tax源泉徴収: Withholding tax is a system in which the person paying income deducts the tax when making the payment and remits it to the government. Japan's Income Tax Act requires the payer to withhold and remit tax on interest and dividends, on Japan-source income paid to nonresidents and foreign corporations, and on certain other payments.
World Bank世界銀行: The World Bank is an international development finance institution made up of the International Bank for Reconstruction and Development and the International Development Association, providing loans, guarantees, and advice to developing countries. The International Bank for Reconstruction and Development raises most of its funds in the world's financial markets.
Worst-case scenario最悪のシナリオ: A worst-case scenario, in explaining a derivatives trade, is the case in which the level of the underlying financial indicator or similar variable moves in the direction most unfavorable to the client, assumed on reasonable grounds such as data from past periods of stress. Financial institutions explain to the client the estimated maximum loss and the estimated termination payment under this scenario.
Worst-of optionワースト・オブ: A worst-of option is a structure whose payoff is set by the value of the worst performing of several shares or stock indices. The call is also called a call-on-min.
Written acknowledgment of explanation説明を受けたことの確認書: A written acknowledgment of explanation is a document that a financial institution obtains from a client before concluding a derivatives or other contract. It records that the client has received the explanation (supervisory guidelines) and that the client understands and will trade on its own judgment and responsibility (the Japan Securities Dealers Association's rules).
Wrong-way risk誤方向リスク: Wrong-way risk is the risk that the exposure to a counterparty grows at the same time as the counterparty's creditworthiness declines. It is sometimes divided into general wrong-way risk, where the counterparty's probability of default moves with market-wide factors, and specific wrong-way risk, where the probability of default and the exposure to a particular counterparty rise together.
WTI crude oilWTI 原油: WTI crude oil is a light, sweet crude oil produced in the United States. Its price at the trading hub of Cushing, Oklahoma, is one of the main crude oil price benchmarks, along with Brent crude oil and Dubai crude oil.

X

XVAXVA: XVA is the collective name for the valuation adjustments that reflect, in the value of a derivative, the credit risk of the counterparty and of the firm itself, and the costs of funding, initial margin, and regulatory capital.

Y

Yield curveイールドカーブ: A yield curve shows the relationship between interest rates and the remaining time to maturity. It lists the rate for each maturity, and each type of underlying rate, such as swap fixed rates or OIS fixed rates, has its own curve.

Z

Zero-coupon bond割引債: A zero-coupon bond is a bond that pays no coupon (interest) and is issued at a price below its face value. Its yield is set by the difference between the face value and the issue price and by the time to maturity.
Zhongguo Zhengjianhui (中国证监会)中国证监会: Zhongguo Zhengjianhui (中国证监会) is the authority in China that regulates derivatives trading in the industries it supervises, such as securities and futures companies.

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€STR€STR: €STR (euro short-term rate) is a euro benchmark rate that the European Central Bank calculates and publishes every business day from the rates at which euro area banks borrow euros overnight without collateral. It is a trimmed mean that removes the top and bottom 25% of transactions by volume, published on the business day after the transactions.