Glossary

The vocabulary of markets — over 150 terms, defined in plain English. Every term links into the atlas where a full page exists. Like everything on this site, these definitions are for information and education only — they are not advice, and they simplify on purpose. See the full disclaimer. For a guided route through the atlas, try the learning paths.

A

Accrued interest: Interest a bond has earned since its last coupon but not yet paid out. Buyers pay it to sellers on top of the quoted ("clean") price — the all-in amount is the "dirty" price.
Alpha: Return above what a portfolio's market exposure alone would have delivered — the part attributable to skill (or luck). The industry's scarcest commodity and its most-claimed one.
American / European option: Exercise styles, not geographies: American options can be exercised any time before expiry, European only at expiry. Most index options are European; most single-stock options American.
Amortisation: Paying down a loan's principal gradually over its life rather than all at maturity — the reason a mortgage payment is part interest, part repayment.
Arbitrage: Profiting from the same thing trading at two prices, with no risk in theory. Pure arbitrage is nearly extinct; what practitioners call "arb" is usually a bet that two prices will converge — which is a risk, not an arbitrage.
Ask / Offer: The price at which the market will sell to you. You buy at the ask, sell at the bid; the gap between them is the market maker's compensation.
Asset allocation: The split of a portfolio across asset classes — equities, bonds, cash, alternatives. Decades of evidence say this choice drives most of a portfolio's risk and return; security selection fights over the remainder.
Asset class: A family of investments that behave similarly and are analysed alike — equities, fixed income, commodities, currencies. The eleven sections of this atlas.
At the money (ATM): An option whose strike sits at the current market price. The point of maximum uncertainty — and maximum time value.
Asset-swap spread (ASW): The spread over the floating rate you can lock in by buying a bond and swapping its fixed coupons to floating. A traded package, not just a calculation — the bank book's natural credit measure. See the spread measures concept page.

B

Basis: The price difference between two closely related instruments — a future versus its spot, a bond versus its CDS, onshore versus offshore pricing. Small in calm markets, informative in stressed ones; see basis swaps.
Basis point (bp): One hundredth of a percentage point: 0.01%. The natural unit of rates and spreads — "the Fed cut 25 basis points" means 0.25%.
Basis risk: The risk that a hedge and the thing it hedges don't move identically. Hedging jet fuel with crude futures works — until the gap between them moves against you.
Bear / Bull market: Falling / rising market, conventionally −20% / +20% from the last turning point. Bears sell, bulls buy; both are certain.
Benchmark: The index a portfolio is measured against. Choosing it is half the battle: beat a badly chosen benchmark and you've measured nothing.
Beta: How much an asset moves per 1% move of the overall market. Beta 1.3: amplifies the market; beta 0.5: dampens it. Cheap to obtain — which is why paying alpha fees for beta is the classic investor mistake.
Bid: The price at which the market will buy from you. See Ask.
Bid–ask spread: The gap between the best buying and selling price — the visible cost of trading and the market maker's income. Tight in liquid markets, a chasm in stressed or obscure ones.
Buyback: A company repurchasing its own shares, shrinking the share count and concentrating ownership — economically a flexible cousin of the dividend, and the dominant form of payout in US markets.
Breakeven inflation: Nominal bond yield minus the real yield of an inflation-linked bond of the same maturity — the inflation rate at which both pay the same. The market's inflation forecast, updated by the second.

C

CAGR: Compound annual growth rate — the single yearly rate that would turn the starting value into the ending value. The honest way to average multi-year returns; arithmetic averages flatter volatile paths.
Call option: The right — not the obligation — to buy at a fixed price by a set date. The basic unit of upside. See equity options.
Capital structure: The ranking of everyone with a claim on a company: secured loans, senior bonds, subordinated debt, preferred, equity. In distress the order becomes destiny — recovery is decided by where you stand in the queue.
Carry: What a position earns (or costs) just by existing, before any price move: coupons, rate differentials, funding costs. "Positive carry" pays you to wait; most blow-ups start as beautiful carry.
Central counterparty (CCP): The clearing house that steps between buyer and seller after a trade, becoming everyone's counterparty and demanding margin from both. Post-2008 plumbing that concentrates risk in order to manage it.
Collateral: Assets pledged to secure an obligation, seized if you fail to pay. The plumbing of modern markets: derivatives, repo and lending all run on collateral moving around.
Compounding: Earning returns on past returns. Slow, then sudden: 7% a year doubles money in a decade and quadruples it in two. The most consequential arithmetic in finance — try the calculator on the equities page.
Contango / Backwardation: A futures curve above the spot price (contango) or below it (backwardation). Decides whether rolling a futures position costs or earns money — the silent driver of commodity fund returns.
Convexity: Curvature in how a price responds to its driver: a position whose gains accelerate and losses decelerate has positive convexity. Bonds have it in yields; options are convexity for sale.
Correlation: How much two assets move together, from −1 (opposite) to +1 (lockstep). The foundation of diversification — and its betrayal, since correlations rise toward 1 in crises.
Counterparty risk: The risk that whoever owes you performance fails before delivering. The reason clearing houses, collateral and the phrase "Lehman moment" exist.
Coupon: The periodic interest a bond pays, quoted as a percent of face value. Named after the paper coupons investors once physically clipped.
Covenant: A promise written into loan or bond documents restricting what the borrower may do — cap leverage, limit dividends, protect collateral. Lender protection that the last decade's "cov-lite" wave largely negotiated away; see leveraged loans.
Credit rating: An agency's letter-grade opinion of default risk, from AAA down to D. Investment grade ends at BBB−; below that is high yield. Ratings move markets — usually after markets have already moved.
Credit spread: The extra yield a borrower pays over the risk-free rate for the same maturity — the market's price for default risk, quoted in basis points.
Custodian: The institution that holds securities on investors' behalf, keeping ownership records separate from the manager who trades them — the boring separation that turns out to matter enormously when a manager fails.
Carry and roll-down: What a bond position earns if the curve doesn't move: its yield (carry) plus the repricing gain as it ages into lower-yielding maturities (roll-down). The bond desk's baseline expected return — calculator on the yield curve page.
Curve steepener / flattener: Duration-neutral trades on the yield curve's slope: a steepener wins when the long-short gap widens, a flattener when it narrows. How rates desks bet on shape without betting on level.

D

Day count convention: The rulebook for counting days between payments — 30/360, actual/365, actual/actual. Sounds like trivia until two systems disagree about a coupon; every market has its own habits.
Default: Failing to pay debt as promised. For companies it leads to restructuring or bankruptcy court; for sovereigns, to negotiation — nobody can liquidate a country.
Delta: How much an option's price moves per unit move of the underlying — also, loosely, its equivalent position ("100 calls, delta 0.5 ≈ 50 shares"). First of the Greeks.
Derivative: A contract whose value derives from something else — a stock, a rate, a currency, a default. Not inherently dangerous; leverage makes it so.
Discount rate: The interest rate used to translate future cash into today's value. Small changes compound across decades — the reason long-duration assets swing hardest when rates move.
Diversification: Spreading risk across assets that don't fail together. The only free lunch in finance — with the fine print that in a crisis, correlations rise exactly when you need them low.
Dividend: The share of profits a company pays out to shareholders, typically quarterly or annually. The cash flow that dividend futures turn into a tradable asset.
Dividend yield: Annual dividends divided by share price. A valuation signal and an income measure — and a trap when a collapsing price, not a generous payout, is what made it high.
Drawdown: The fall from a portfolio's peak to its subsequent trough. The number investors actually feel: a 50% drawdown needs a 100% gain to recover.
Duration: A bond's price sensitivity to interest rates, expressed in years: duration 7 loses roughly 7% when yields rise one point. Long duration = big rate bet, in either direction.
Discount margin (DM): The floating-rate world's yield measure: the constant margin over the reference rate that reprices a floater or loan to its market price. Loans quote "S+350 at 99" — spread and price, DM implied.
DV01 / PV01: The money a position gains or loses per one basis point move in rates. The unit rates desks think in — notional says how big a trade sounds; DV01 says how big it is.

E

Earnings per share (EPS): A company's profit divided by its share count — the "E" in the P/E ratio, and the number quarterly earnings season revolves around.
Efficient market hypothesis: The claim that prices already reflect available information, making consistent outperformance nearly impossible. Fiercely debated, approximately true — true enough to make index funds sensible, false enough to keep active managers employed.
ETF (exchange-traded fund): A fund that trades on an exchange like a single share, tracking an index or strategy. The wrapper that moved indexing from theory to trillions. See ETFs.
Ex-dividend date: The cutoff: buy the share on or after this date and the next dividend goes to the seller. Prices drop by roughly the dividend at the open — no free money at the boundary.
Exercise / Assignment: Using an option's right (exercise) — and being on the other side when someone does (assignment). Sellers of American options can be assigned any day the option is in the money.
Expense ratio: A fund's annual cost as a percent of assets. The single most reliable predictor of relative fund performance — negatively.
Exposure: How much you stand to gain or lose from a given risk — market exposure, currency exposure, credit exposure. Position size viewed through what can hurt you.
Efficient frontier: The set of portfolios offering the most expected return per unit of risk — the upper edge of everything attainable. Portfolios below it waste risk; the concept behind every allocation debate. See diversification.

F

Face value / Par: The amount a bond repays at maturity, conventionally 100. Prices quote relative to it: "trading at 96.5" means below par.
Fair value: What a model or replication argument says something should cost. Markets deviate from it constantly — the deviations are either your opportunity or your model's error, and telling those apart is the job.
Fed funds rate: The US policy interest rate — the overnight rate the Federal Reserve steers, and the reference point global markets reprice against eight times a year.
Forward: A private agreement to trade something at a fixed price on a future date. The oldest derivative; a future is a forward standardised for an exchange. See FX forwards.
Free float: The share of a company's stock actually available to trade — excluding founders, governments and locked-up insiders. Index weights use it; low float makes prices jumpy.
Fundamental analysis: Valuing assets from their economics — earnings, cash flows, balance sheets, competitive position — rather than their price history. The counterpart of technical analysis.
Fungibility: Interchangeability: any one share of a class equals any other, one barrel of a grade equals another. What makes markets liquid — and what money launderers and sanctions both fight over.
Future: An exchange-traded, standardised forward with daily settlement of gains and losses through a clearing house. See equity futures.

G

Gamma: How fast delta itself changes as the underlying moves — the Greek that measures how quickly your hedge goes stale. High gamma near expiry is what makes option desks sweat.
Greeks: The sensitivities of an option's price: delta (spot), gamma (delta's change), vega (volatility), theta (time), rho (rates). The dashboard of every options book.
Gross / Net return: Before and after costs — fees, taxes, transaction costs. The gap compounds: 2% of annual costs consumes roughly a third of a portfolio's final value over 30 years.
G-spread: Bond yield minus the interpolated government yield at the same maturity — the simplest credit spread. Quick, universal, and blind to curve shape between the two points.

H

Haircut: The margin of safety subtracted from collateral's value when lending against it: a 2% haircut lends 98 against 100. Its inverse sets maximum leverage — the little number that runs the repo market.
Hawkish / Dovish: Central-bank body language: hawks lean toward higher rates to fight inflation, doves toward lower rates to support growth. Markets parse every speech for which bird is speaking.
Hedge: A position taken to offset an existing risk, accepting a cost or a capped upside in exchange. Insurance, built from instruments instead of policies.
High-water mark: The rule that a fund manager earns performance fees only above the fund's previous peak — no getting paid twice for recovering losses.
Hurdle rate: The minimum return before performance fees kick in, or the minimum a project must earn to be worth doing. Below the hurdle, activity is motion without progress.

I

Illiquidity premium: The extra return demanded for money you can't get back quickly — the theoretical justification for private markets' fees and lock-ups, and a number easier to promise than to measure.
Implied volatility: The volatility number that makes an option's model price match its market price — the market's traded forecast of turbulence. What option traders actually buy and sell.
Index: A rule-based basket standing in for a market — S&P 500, DAX, Bloomberg Aggregate. The benchmark most portfolios are measured against and, via ETFs and futures, directly investable.
Inflation: The general rise of prices — the silent tax on cash and fixed coupons, the reason "real" (inflation-adjusted) returns are the only returns that matter over decades. See inflation-linked bonds.
In / Out of the money: An option that would pay off if exercised now (in) versus one that wouldn't (out). Out-of-the-money options are pure time value — lottery tickets with quoted prices.
Intrinsic value / Time value: An option's price splits in two: what exercising now would yield (intrinsic), plus everything paid for the remaining possibilities (time value). Time value melts to zero at expiry — see theta.
IPO: Initial public offering — a private company selling shares to the public for the first time. Priced by negotiation, famous for first-day pops that transfer money from issuer to allocated buyers.
ISIN: The 12-character International Securities Identification Number that uniquely tags a security (DE000…, US037833…). The licence plate of every listed instrument.
I-spread: Bond yield minus the swap rate at the same maturity — the corporate desk's default spread quote, since credit hedges live in swap-land.

J

J-curve: The shape of a private equity fund's cumulative cash flows: negative for years (capital calls, fees) before exits turn it positive. Nothing is wrong in year four — the J is the design. See private equity.
Junk bond: The blunt name for a high-yield bond — debt rated below investment grade. The label stuck in the 1980s; the market grew up anyway.

K

Kelly criterion: The formula for the bet size that maximises long-run growth: edge over odds. Full Kelly is a wild ride; practitioners run fractions of it. Its deepest lesson: beyond the optimal size, more risk reduces long-term returns.
Knock-in / Knock-out: Barrier features: an option that only starts existing when a level trades (knock-in), or dies instantly when one does (knock-out). The machinery inside barrier options, turbos and bonus certificates.

L

Leverage: Controlling more exposure than your capital — via borrowing, derivatives or structure. Multiplies gains, losses and, above all, the speed at which you can be forced out. See knock-out certificates and CFDs.
LIBOR → SOFR / €STR: The old survey-based interbank rates, retired after manipulation scandals, and the transaction-based overnight rates that replaced them as the reference for floating payments. See overnight index swaps.
Limit order / Market order: The two basic instructions: a limit order names your price and waits; a market order takes whatever the book offers now. Limit orders risk missing the trade; market orders risk the price — in thin markets, badly.
Liquidation: The forced closing of a position — by a margin call, a barrier, or a bankruptcy trustee. Markets are at their most violent when liquidations chain: forced sellers meet vanishing bids.
Liquidity: How much you can trade, how fast, without moving the price. Ample in calm markets, gone in stressed ones — liquidity is a fair-weather friend, and its disappearance is itself the crisis.
Long / Short: Positioned to profit from a rise (long) or a fall (short). Shorting borrows the asset, sells it, and hopes to buy it back cheaper — with theoretically unlimited downside.

M

Margin / Margin call: Collateral posted to support a leveraged position, and the demand for more when the position moves against you. Unmet margin calls end positions — and, at scale, firms.
Initial vs. variation margin: The two flavours: initial margin is the deposit that opens a position; variation margin settles each day's gains and losses in cash. The 2022 UK pension crisis was a variation-margin story on a national scale.
Mark-to-market: Revaluing positions at current market prices, usually daily. The discipline that makes losses visible immediately — and the mechanism that turns falling prices into forced selling.
Market capitalisation: Share price times share count — what the market says the whole company is worth. The sorting variable behind "large cap" and "small cap", and the weighting scheme of most indices.
Market maker: A firm quoting both a buy and a sell price continuously, earning the spread and providing the liquidity everyone else consumes. In modern markets, mostly algorithms with risk limits.
Maturity: The date a contract ends or a bond repays. Everything on this site has one, except shares, perpetuals — and, in theory, AT1 bonds, which is part of their problem.
Mean reversion: The tendency of a variable to drift back toward its average — real for valuations, spreads and volatility over years; routinely imagined by traders over days. "It has to come back" is not a mechanism.
Momentum: The empirical tendency of recent winners to keep winning over months — one of the most persistent return patterns on record, and the strategy equivalent of driving by the rear-view mirror, profitably, until the road bends.

N

NAV (net asset value): A fund's assets minus liabilities, per share — what one share is "worth" as opposed to what it trades at. The gap between the two is the story in closed-end funds and ETF arbitrage.
Netting: Offsetting mutual obligations so only the difference changes hands. Legal netting agreements shrink trillions of gross derivative exposure into manageable net amounts — plumbing that decides who owes what when a counterparty fails.
Nominal vs. real: Before and after inflation. A 5% return with 4% inflation is a 1% real return; over decades, confusing the two is the costliest error in personal finance.
Notional: The reference amount a derivative's payments are calculated on — not the amount at risk. "A $100m swap" moves cash flows worth a fraction of that; headlines confusing notional with risk are a genre of their own.

O

Open interest: The number of derivative contracts currently outstanding — positions opened and not yet closed. Rising open interest means new risk being taken; volume without it is just positions changing hands.
Option: The right, without the obligation, to buy (call) or sell (put) at a fixed price by a set date. Asymmetry as a product: limited loss for the buyer, premium income and open-ended risk for the seller.
Order book: The live list of resting buy and sell orders at each price — the market's visible queue. Depth in the book is what "liquidity" looks like on a screen.
OTC (over the counter): Traded bilaterally between two parties rather than on an exchange — customised, private, and dependent on the counterparty's survival. Most of the world's derivatives, by notional, live here.
Overweight / Underweight: Holding more or less of something than the benchmark does — how professional portfolios express views. "Underweight France" is a sentence only relative to an index.
OAS (option-adjusted spread): The spread left after a model removes the value of a bond's embedded options (callability, prepayment). For MBS and callables, the only spread that isn't partly the borrower's option mislabelled as yield.

P

P/E ratio: Price divided by annual earnings per share — how many years of current profits you pay for the business. A valuation shorthand, most useful when compared across time or peers, most dangerous when used alone.
Pari passu: Latin for "on equal footing": claims that rank equally in the repayment queue. Two words that have decided billion-dollar sovereign-debt lawsuits — see EM bonds.
Passive investing: Buying the whole market via index funds instead of picking winners — accepting the average return, which after costs beats most attempts to do better. The definitive market-structure shift of the past 30 years.
Portfolio: The collection of everything you hold, viewed as one thing. The insight of modern finance: risk lives at the portfolio level, not in the individual holding.
Position: What you currently hold, with sign and size: long 200 shares, short 5 contracts. The unit of account of trading — P&L happens to positions, not opinions.
Premium: The price of an option, paid up front — or, more generally, any amount paid above a reference value ("trading at a premium to NAV").
Price discovery: The process by which trading turns scattered information into a public price. The social function markets perform while everyone in them is trying to do something else.
Primary / Secondary market: Where securities are born (issuer sells to investors — IPOs, bond auctions) versus where they live (investors trade with each other). Almost all daily volume is secondary.
Prime broker: The bank department that services hedge funds — custody, financing, securities lending, margin. Concentrated enough that one fund's failure (Archegos) can hit five banks at once.
Put option: The right to sell at a fixed price by a set date. Downside protection when bought; an insurance business when sold — see reverse convertibles for that trade in retail packaging.

Q

Quantitative easing (QE): Central banks buying bonds at scale to push down long-term rates once the policy rate hits zero — balance-sheet policy. Its reversal (QT) drains the reserves QE created; both move every curve in this atlas.
Quote currency: In a currency pair, the second currency — the one prices are expressed in. EUR/USD at 1.10 means 1 euro costs 1.10 dollars: euro is base, dollar is quote.

R

Rally / Correction: A sustained rise; a fall of roughly 10% from a peak. Market weather vocabulary — descriptive, not predictive.
Rebalancing: Periodically restoring a portfolio's target weights — selling what grew, buying what shrank. Mechanical discipline that quietly enforces "buy low, sell high" without requiring a forecast.
Recovery rate: The share of a claim actually recovered after a default, historically ~40% for senior unsecured bonds. The other half of credit risk, alongside default probability. See CDS.
Rehypothecation: A broker reusing clients' collateral for its own borrowing. Efficient in calm times; in a failure, the same asset turns out to have several claimants — a core 2008 lesson relearned periodically, most recently on-chain.
Risk premium: The extra expected return demanded for bearing a risk — equity over cash, corporate over government, illiquid over liquid. The engine of long-run investment returns; collecting it requires surviving the reason it exists.
Risk-free rate: The return on the safest available asset, in practice short government debt — see T-bills. The zero point every other return is measured from.
Roll: Replacing an expiring contract with a later one to maintain a position — futures quarterly, options monthly. In commodities the roll's cost or gain (see contango) often outweighs the price view; see commodity futures.
Real yield: The yield of an inflation-protected bond — return above inflation, locked in. The nominal-minus-real gap is breakeven inflation; the real yield itself is the economy's true price of long-term money.

S

Securitisation: Bundling loans — mortgages, auto loans, card receivables — into bonds backed by their payments, usually sliced into tranches. The machinery behind MBS, ABS, CLOs and CDOs.
Seniority: Your place in the repayment queue — secured before senior, senior before subordinated, everyone before equity. Priced in every credit spread and tested in every default.
Settlement: The actual exchange of cash for assets after a trade, typically one or two business days later (T+1, T+2). Invisible until it fails.
Sharpe ratio: Return above the risk-free rate, divided by volatility — return per unit of risk taken. The standard score for comparing strategies; gameable by strategies that sell rare disasters.
Short squeeze: A rising price forcing short sellers to buy back, pushing the price higher still — losses generating the very demand that deepens them. GameStop 2021 made it a household word; the mechanics are as old as shorting.
Skew: The pattern of implied volatility across strikes: in equities, downside protection costs more vol than upside — the market's permanent memory of 1987. Structured products are largely machines for harvesting it.
Slippage: The gap between the price you expected and the price you got — the cost of your own market impact plus everyone else's speed. Small per trade, decisive per strategy.
Spot price: The price for delivery now, as opposed to forward and futures prices for delivery later. The anchor the entire curve hangs from — except in power, where nothing can be stored and the anchor drags.
Spread: Any difference between two prices or rates: bid–ask, credit spread, curve spread. Markets earn on spreads, hedge in spreads and think in spreads.
Stop-loss order: An instruction to sell once the price falls to a trigger — automated damage control. In gaps and flash crashes it becomes a market order into the void, filling far below the trigger.
Stress test: Asking "what happens to this portfolio in a specified disaster" — 2008 replayed, rates +300bp, a currency peg breaking. Regulation runs on them; so should personal leverage decisions.
Strike: The fixed price at which an option can be exercised. Together with expiry, the coordinates of every option contract — and half of this site's name.
Swap: An exchange of payment streams — fixed for floating, one currency for another, total return for financing. The workhorse OTC derivative. See interest rate swaps.
Systemic risk: The risk that one failure cascades through the system's connections — counterparties, collateral chains, fire sales — until the system itself is the casualty. What regulation since 2008 is mostly about.
Specialness (repo): When a specific bond is in such borrowing demand that lenders of cash against it accept below-market interest. Watching which collateral "goes special" is watching where short sellers crowd.
Systematic vs. idiosyncratic risk: Market-wide risk (undiversifiable — the floor) versus single-name risk (diversifies away across ~20-30 holdings). Only bearing the first is reliably paid.

T

Technical analysis: Reading price charts and patterns to forecast prices. Its evidence base is thin and its vocabulary is everywhere — worth knowing as language even if you never trade a "head and shoulders".
Term premium: The extra yield for holding long bonds beyond what expected short rates explain — compensation for duration uncertainty. Invisible, model-estimated, and the subject of every "why are long yields rising" debate.
Theta: An option's daily loss of value from time passing, all else equal. The rent option buyers pay and sellers collect.
Tick: The smallest price increment an instrument can move on its exchange. Market microstructure's atom.
Total return: Price change plus all income — dividends, coupons — ideally reinvested. The only fair basis for comparing assets; price-only charts quietly understate equity history by percentage points a year.
Tracking error: How far a fund's returns wander from its benchmark's, measured as a volatility. For index funds a defect; for active funds, the license fee for the chance to differ.

U

Underlying: The asset a derivative references — the stock under the option, the index under the future, the borrower under the CDS. Every derivative on this site is a claim written on some underlying.
Unwind: Closing out a position or strategy, especially a large or crowded one. "The unwind" is what turns a crowded trade's exit into everyone's problem — see the carry trade.

V

Value at Risk (VaR): A statistical loss threshold: "1-day 99% VaR of $10m" means losses should exceed $10m only one day in a hundred. Ubiquitous, useful, and silent about how bad that hundredth day gets — its blind spot has a crisis named after it.
Vega: An option's sensitivity to implied volatility: how much its price changes per volatility point. The Greek that makes options a bet on turbulence, not just direction.
Volatility: The size of an asset's price fluctuations, annualised as a percentage. Realised volatility is measured from history; implied is traded in options. Finance's stand-in for risk — imperfect, but priceable. See variance swaps.
Volume: How much traded in a period — shares, contracts, notional. Price moves on high volume carry conviction; moves on none are rumours with a chart.
Volatility risk premium: The persistent gap between implied volatility (what option buyers pay) and subsequently realised volatility (what markets deliver). Harvesting it is the insurance business of markets — steady premiums, occasional catastrophe. See the volatility page.

W

Writer (of an option): The seller — the party who collects the premium and owes the payoff. Writing options is running an insurance book: steady income, occasional catastrophe, sizing is everything.
Window dressing: Tidying a portfolio or balance sheet just before a reporting date — banks shrinking repo at quarter-end, funds buying the quarter's winners. Visible as a sawtooth in the data; see the cross-currency basis.

Y

Yield: An investment's income return as a percent of its price — bond yields, dividend yields, rental yields. The other half of this site's name.
Yield curve: Yields plotted across maturities, from overnight to 30 years. Normally upward-sloping; inversion — short rates above long — is the market's classic recession signal.
Yield to maturity (YTM): The single discount rate at which a bond's future cash flows equal its price today — the yield you lock in by holding to maturity, if coupons reinvest at the same rate. Try the solver on the fixed income page.

Z

Zero-coupon bond: A bond with no coupons: buy at a discount, receive face value at maturity — the purest expression of the time value of money, and maximum duration for its maturity. See zero-coupon bonds.
Zero lower bound: The floor near 0% below which policy rates barely work (cash yields zero by definition). The 2010s were spent pinned to it — the era that produced QE, negative Bund yields and much of this atlas's stranger pricing history.
Z-spread: The constant spread that, added to every point of the reference curve, reprices a bond exactly — the cash-flow-faithful credit spread, workhorse of relative value. Calculator on the spread measures page.