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.Most valuable alternative that is given up. 102Dictionary of Finantial and Business TermsLico Reis Consultoria & Línguaslicoreis@terra.com.brOpportunity set The possible expected return and standard deviation pairs of all portfolios that can beconstructed from a given set of assets.Optimal contract The contract that balances the three types of agency costs (contracting, monitoring, andmisbehavior) against one another to minimize the total cost.Optimal portfolio An efficient portfolio most preferred by an investor because its risk/reward characteristicsapproximate the investor's utility function.A portfolio that maximizes an investor's preferences with respectto return and risk.Optimal redemption provision Provision of a bond indenture that governs the issuer's ability to call thebonds for redemption prior to their scheduled maturity date.Optimization approach to indexing An approach to indexing which seeks to Optimize some objective, suchas to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.Option Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before agiven date.Investors, not companies, issue options.Investors who purchase call options bet the stock will beworth more than the price set by the option (the strike price), plus the price they paid for the option itself.Buyers of put options bet the stock's price will go down below the price set by the option.An option is part ofa class of securities called derivatives, so named because these securities derive their value from the worth ofan underlying investment.Option elasticity The percentage increase in an option's value given a 1% change in the value of theunderlying security.Option not to deliver In the mortgage pipeline, an additional hedge placed in tandem with the forward orsubstitute sale.Option premium The option price.Option price Also called the option premium, the price paid by the buyer of the options contract for the rightto buy or sell a security at a specified price in the future.Option seller Also called the option writer , the party who grants a right to trade a security at a given price inthe future.Option writer Option seller.Option-adjusted spread (OAS) (1) The spread over an issuer's spot rate curve, developed as a measure ofthe yield spread that can be used to convert dollar differences between theoretical value and market price.(2)The cost of the implied call embedded in a MBS, defined as additional basis-yield spread.When added to thebase yield spread of an MBS without an operative call produces the option-adjusted spread.Options contract A contract that, in exchange for the option price, gives the option buyer the right, but notthe obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within aspecified time period, or on a specified date (expiration date).Options contract multiple A constant, set at $100, which when multiplied by the cash index value gives thedollar value of the stock index underlying an option.That is, dollar value of the underlying stock index = cashindex value x $100 (the options contract multiple).Options on physicals Interest rate options written on fixed-income securities, as opposed to those written oninterest rate futures contracts. 103Dictionary of Finantial and Business TermsLico Reis Consultoria & Línguaslicoreis@terra.com.brOrganized exchange A securities marketplace wherein purchasers and sellers regularly gather to tradesecurities according to the formal rules adopted by the exchange.Original face value The principal amount of the mortgage as of its issue date.Original issue discount debt (OID debt) Debt that is initially offered at a price below par.Original margin The margin needed to cover a specific new position.Related: Margin, security deposit(initial)Original maturity Maturity at issue.For example, a five year note has an original maturity of 5 years; oneyear later it has a maturity of 4 years.Origination The making of mortgage loans.OTC See: over-the-counter.Other capital In the balance of payments, other capital is a residual category that groups all the capitaltransactions that have not been included in direct investment, portfolio investment, and reserves categories.Itis divided into long-term capital and short-term capital and, because of its residual status, can differ fromcountry to country.Generally speaking, other long-term capital includes most non-negotiable instruments of ayear or more like bank loans and mortgages.Other short-term capital includes financial assets of less than ayear such as currency, deposits, and bills.Other current assets Value of non-cash assets, including prepaid expenses and accounts receivable, duewithin 1 year.Other long term liabilities Value of leases, future employee benefits, deferred taxes and other obligationsnot requiring interest payments that must be paid over a period of more than 1 year.Other sources Amount of funds generated during the period from operations by sources other thandepreciation or deferred taxes.Part of Free cash flow calculation.Out-of-the-money option A call option is out-of-the-money if the strike price is greater than the market priceof the underlying security.A put option is out-of-the-money if the strike price is less than the market price ofthe underlying security.Outright rate Actual forward rate expressed in dollars per currency unit, or vice versa.Outsourcing The practice of purchasing a significant percentage of intermediate components from outsidesuppliers.Outstanding share capital Issued share capital less the par value of shares that are held in the company'streasury.Outstanding shares Shares that are currently owned by investors.Overbought\oversold indicator An indicator that attempts to define when prices have moved too far and toofast in either direction and thus are vulnerable to reaction.Overfunded pension plan A pension plan that has a positive surplus (i.e., assets exceed liabilities).Overlay strategy A strategy of using futures for asset allocation by pension sponsors to avoid disrupting theactivities of money managers. 104Dictionary of Finantial and Business TermsLico Reis Consultoria & Línguaslicoreis@terra.com.brOvernight delivery risk A risk brought about because differences in time zones between settlement centersrequire that payment or delivery on one side of a transaction be made without knowing until the next daywhether the funds have been received in an account on the other side.Particularly apparent where deliverytakes place in Europe for payment in dollars in New York [ Pobierz caÅ‚ość w formacie PDF ]