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KNOWLEDGE BASE

Grain Glossary

Get an overview of financial terms and their definitions.

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Sharpe Ratio

The Sharpe ratio is a measure of risk-adjusted return, which compares the expected returns of an investment to the risk it carries. It is calculated by dividing the expected excess return (the return of the investment minus the risk-free rate) by the standard deviation of returns. A higher Sharpe ratio indicates a better risk-to-return tradeoff.


Short

In finance, the term "short" refers to the selling of a security or other financial instrument that the seller does not own. This is also known as "short selling" or "going short." Short selling is typically done in anticipation of a decline in the price of the security or instrument. The seller borrows the security from someone else, sells it on the market, and then buys it back at a later time (hopefully at a lower price) in order to return it to the lender. If the price of the security does indeed decline, the seller can profit by buying it back at a lower price than they sold it for. If the price goes up instead, the seller incurs a loss.


S&P 500

Standard & Poor's 500 (S&P 500) is a stock market index containing 500 large publicly traded companies in the United States. It is widely considered a leading indicator of U.S. stock market performance. The companies in the S&P 500 are chosen by Standard & Poor's (S&P), a financial services company, based on their market size, liquidity, and industry group representation. The index is weighted by market capitalization, which means that the larger companies have a greater influence on the index's performance. The S&P 500 is typically used as a benchmark for the performance of actively managed large-cap mutual funds and exchange-traded funds (ETFs).


The Secured Overnight Financing Rate (SOFR)

The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for the U.S. dollar overnight lending market. It is calculated and published by the Federal Reserve Bank of New York (FRBNY) based on the interest rates at which banks lend overnight funds to each other using U.S. Treasury securities as collateral.


Speculator

Speculators buy and sell financial instruments to profit from changes in the price of the underlying asset. In order to achieve higher returns, speculators often take on greater risks than traditional investors. Speculators can trade a wide variety of financial instruments, including stocks, bonds, currencies, commodities, and derivatives.

Supply Chain

Supply chains refer to the flow of goods, services, and information from the raw material suppliers to the customer's final product. It involves all activities involved in the sourcing, procurement, production, and delivery of a product or service, as well as the coordination and collaboration of all parties involved, including suppliers, manufacturers, distributors, and customers. A successful supply chain delivers the right product, at the right time, in the right quantity, and at the lowest price.


Swaption

A swaption is a financial derivative that gives the holder the right, but not the obligation, to enter into an interest rate swap at a later date. An interest rate swap is a financial instrument that allows two parties to exchange a stream of fixed-rate payments for a stream of floating-rate payments, or vice versa.

Spot Rate

Spot rates are the current market prices at which financial instruments, such as currencies, commodities, and securities, can be bought or sold for immediate delivery. Spot rates are affected by market forces, such as supply and demand, and are commonly used as benchmarks for forward, futures, and options contracts. The spot rate can be quoted in either direct or indirect terms, depending on the conventions of the market in which the instrument is traded.


Straddle

The straddle strategy involves simultaneously purchasing a put option and a call option for the underlying security with the same strike price and expiration date. When the price of the security rises or falls from the strike price by more than the total premium paid, a trader will profit from a long straddle. As long as the underlying security's price moves sharply, the profit potential is virtually unlimited.

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