Grain Glossary

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z S 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. Spot Exchange Rate Spot exchange rates represent the current value of one currency against another at a given point in time. The price at which a trader will pay to buy another currency on the open market. Spot exchange rates are regulated by the global foreign exchange market, where organizations, countries, and traders settle financial transactions. 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. SWIFT Message The SWIFT international payment network generates SWIFT messages when funds are transferred internationally. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is renowned as the fastest, most secure way to transmit financial messages internationally. Settlement Date A settlement date is the day when a trade in the securities industry is finalized, and the transfer of cash or assets is completed. It's usually a few days after the trade was made. Stagflation When slow growth, high unemployment, and rising prices occur simultaneously in an economy, it is called stagflation. In the developed world, stagflation has repeatedly occurred since the 1970s, once thought impossible by economists. Slow-growth policy solutions tend to worsen inflation, and vice versa. It is therefore difficult to fight stagflation. Shorting Currency Currency traders take long positions on one currency and short positions on another when trading currencies. The value of currencies in relation to each other determines whether a trader makes a profit in forex trading since currencies are always traded in pairs. A constant aspect of forex trading is being long on one currency and short on another. Settle date Settle date is a securities industry term describing the date on which a trade (bonds, equities, foreign exchange, commodities, etc.) settles . That is, the actual day on which transfer of cash or assets is completed and is usually a few days after the trade was done. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z N Negative Carry A negative carry occurs when the cost of holding a financial asset exceeds the income generated by it. It occurs typically when an asset pays a lower return than what it costs to finance its purchase. Nominal Effective Exchange Rate An unadjusted weighted average rate at which one country's currency exchanges for a basket of multiple foreign currencies is called the nominal effective exchange rate (NEER). Nominal exchange rates indicate the amount of domestic currency needed to purchase foreign currency. Non-Deliverable Forward Non-deliverable forwards (NDF) are cash-settled, and usually short-term, forward contracts. The notional amount is never exchanged, hence the name "non-deliverable." Two parties agree to take opposite sides of a transaction for a set amount of money—at a contracted rate, in the case of a currency NDF. Notional Value The notional value of an underlying asset is often used by derivatives traders to refer to the contract's value. This can be the total value of a position, the amount that a position controls, or an agreed-upon amount. A financial asset's face value is used to determine its payment. In the options, futures, forward, and currency markets, this term describes derivative contracts. Notional Currency Notional currency refers to the currency in which the nominal or face value of a financial instrument—such as a derivative contract—is denominated. It is not necessarily the currency that changes hands, but rather the reference amount used to calculate payments or the value of a position. Natural Hedge A risk management strategy that reduces exposure by aligning assets with inherent negative correlations or by matching operating expenses and revenues in the same currency to minimize exchange rate risk. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z L Landed cost A landed cost is the total cost of bringing a product from the origin to its destination, including transportation, insurance, duties, tariffs, and other fees. Importing businesses must consider the landed cost, as it affects the final price of the product and ultimately their competitiveness. By calculating the landed cost, companies can determine the true cost of their imports, make informed purchasing decisions, and price their products accurately. Letter of credit A Letter of Credit (LOC) is a document issued by a bank on behalf of a buyer, guaranteeing payment to a seller under the terms and conditions agreed upon by the buyer and seller. The seller can use the LOC as a guarantee of payment as long as they meet the conditions outlined in it. If the buyer fails to pay the seller, the issuing bank will pay the seller. It is commonly used in international trade transactions to mitigate the risk of non-payment by the buyer. Liquidity Liquidity refers to the ease with which an asset can be bought or sold in the market without affecting its price. Highly liquid assets, such as cash, can be easily bought or sold with minimal impact on the price, while less liquid assets, such as real estate or collectibles, may take longer to sell and may be subject to larger price fluctuations. There are several measures of liquidity, including the bid-ask spread (the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept), the volume of trading activity, and the speed at which an asset can be bought or sold. Local currency payment Local currency payments are financial transactions that are conducted in the local currency of a client or supplier, rather than the company's own functional currency. These payments can be made for sales transactions, exports, or purchases transactions, imports. Operating in the local currency allows companies to avoid costly markups and expand sales by avoiding passing on exchange rate markups to clients. Effective currency hedging is necessary for companies to protect against exchange rate risk when making local currency payments. London Interbank Offered Rate (LIBOR) The London Interbank Offered Rate (LIBOR) is a benchmark interest rate that is used as a reference rate for short-term interest rates around the world. It is calculated and published daily by the ICE Benchmark Administration (IBA), a financial services company, based on the interest rates at which a panel of banks in London are willing to lend to each other. There are different LIBOR rates for different currencies and maturities, ranging from overnight to one year. The most commonly quoted LIBOR rate is the three-month U.S. dollar rate. LIBOR is used as a reference rate for a wide variety of financial products, including adjustable rate mortgages, student loans, and floating rate bonds. It is also used as a benchmark for the pricing of derivatives such as interest rate swaps. Live exchange rate The live exchange rate is a currency exchange rate that is updated in real time. The current exchange rate on the market or between banks. Customers of money transfer companies receive exchange rates that change in real time, but also include a small margin. Long In finance, the term "long" refers to the buying of a security or other financial instrument with the intention of holding it for an extended period of time. The term "going long" or "taking a long position" refers to investing in a security with the expectation that it will appreciate in value over the long term. By holding the security, the investor hopes to sell it at a higher price in the future and make a profit. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z V Value at Risk (VaR) Value at Risk (VaR) measures the risk of loss on an investment or portfolio over a specified period. Based on the performance of the investment or portfolio over a given period, it estimates the likelihood of a loss of a certain magnitude over a given period. VaR is typically expressed as a dollar amount or as a percentage of the total value of the investment or portfolio. Vega In finance, vega measures how sensitive an option price is to changes in the volatility of the underlying asset. It is a Greek letter used in options pricing formulas to represent the amount by which the price of an option is expected to change in response to a 1% change in the volatility of the underlying asset. Vega is typically expressed as a percentage, and it reflects the impact that changes in volatility can have on the value of an option. Volatility In finance, volatility refers to the amount of risk or uncertainty associated with the price of a security. It is a measure of how much the price of a security, such as a stock or bond, fluctuates over time. A security with high volatility experiences significant price changes over a short period of time, while a security with low volatility experiences less significant price changes. Volatility can be measured using a variety of statistical techniques, such as standard deviation or the variance of returns. Volatility Surface In finance, a volatility surface is a graphical representation of the implied volatilities of a group of options on a particular underlying asset, as a function of the options' expiration dates and strike prices. The volatility surface is used to help visualize the relationships between the implied volatilities of options with different expiration dates and strike prices, and can be used to model the expected volatility of the underlying asset over time. < PREVIOUS NEXT >

Simplify FX hedging with Grain, an embedded currency solution designed to protect your platform against currency volatility. Grow Your Business with Embedded Hedging Gain certainty, save costs and drive higher sales with our embedded cross-currency solution Book a Demo Watch Video BACKED BY INDUSTRY LEADERS Discover Grain's Solution Explore the powerful capabilities of our solution designed to simplify and enhance your cross-currency transactions. Easy Integration via Flexible API Customize our flexible API for your platform's unique needs. Experience easy, adaptable integration for effective FX protection. Cross-Currency Protection Shield your transactions from currency fluctuations. Our solution offers robust FX risk protection, ensuring stability in your financial planning. Visibility and Control via the Grain Dashboard Manage and monitor your FX activities with our Grain Dashboard, offering essential insights for informed decision-making. AI-Powered Models for Adaptive Rates Our AI models adjust hedging costs based on customer profiles, considering factors like cancellation history and currency preferences, ensuring efficient and custom-fit pricing. Perfect For Any Industry Our industry specific solutions are engineered to fit your needs and goals. Travel Platforms Supply Chain Payment Providers Marketplaces Discover Our Solution See the video to learn more about Grain Watch The Full Video Why Choose Grain? Unveiling the Key Benefits for Your Business Reduce FX Pains Grain assumes 100% of your currency risk, guaranteeing your FX rates without the hassle of managing FX volatility on your own. Save Costs Lower your cost of hedging and cross-border payments by a typical factor of 80% relative to existing solutions. Boost Sales Integrate a menu of FX modules that brings measurable financial value to your customers. Simplify Financials Enable your customers to pay you over their local rails without any FX risk and without requiring expensive markups. See Grain in Action Add currency certainty - without the complexity. Get Started Why is currency protection crucial for my business? Currency volatility can lead to unpredictable financial outcomes, affecting your bottom line. Grain's currency protection ensures stability in your international transactions, allowing for more consistent financial planning and reduced risk exposure. How does Grain protect my business from currency volatility? Grain protects your business from currency volatility through our innovative embedded currency hedging solution. Our data-driven cross-currency approach is designed to shield your transactions from currency fluctuations, ensuring stability on future accounts receivables or payables. Using a straightforward data stream via API or file sharing, Grain assumes all currency risks away from you. What kind of data does Grain require to provide currency protection? Grain focuses on transactional data related to your cross-currency activities. This includes details of international transactions, payment histories, and related financial data. We are committed to maintaining the highest standards of data security and privacy. How does Grain's Machine Learning model enhance FX protection? Our Machine Learning model analyzes past transaction patterns to create FX protection strategies specifically for your business or your end users. This includes creating pricing based on customer behavior, like cancellations and payment delays, thereby minimizing risk and maximizing efficiency. What security measures does Grain take to protect my data? At Grain, we prioritize your data's security and privacy. We use advanced encryption and security protocols to ensure that all data processed through our system is protected. Our commitment to data privacy is backed by continuous monitoring and adherence to the latest security standards. Which currencies does Grain support for transactions? Grain supports a wide range of currencies, facilitated by our multi-currency wallet feature. This allows you to create and manage accounts in various currencies, enhancing your ability to conduct and receive payments globally. Whether you're dealing in major world currencies or more localized ones, our platform is designed to cater to your diverse currency needs. How does Grain currency volatility protection work? Grain's currency volatility protection works through an AI-driven solution. Firstly, it integrates with your platform to report transactions. Then, it provides real-time local currency quotes to your users, ensuring exchange rate certainty. Grain assumes 100% of the FX risk, guaranteeing the rates promised. Finally, on the due date, Grain automates the currency exchange at the guaranteed rate, completing the transaction seamlessly. Do I need the entire payment amount to be processed via Grain? No. You can elect whether to convert the entire transaction amount via Grain, or to only settle the currency offsets How does the Grain Local Collection functionality work? Grain opens multiple cross-currency bank accounts, facilitating seamless local collections for global business operations. FAQs

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z U.S. Dollar Index U.S. Dollar Index measures the dollar's value relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies. Universal Currency Converter Universal currency converters provide the convenience of converting currency values using current exchange rates through software applications or websites. It is easy to find free currency converters on the Internet, which are capable of converting the value of one currency to another, such as dollars to euros and euros to pounds. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z C Cash flow hedge A cash flow hedge is a type of hedge that is used to protect against potential losses or gains on a company's future cash flows. It involves using financial instruments, such as derivatives, to offset the impact of changes in foreign exchange rates, interest rates, or commodity prices on the value of the company's cash flows. Consumer Price Index (CPI) Consumer Price Index (CPI) measures the average price level of a basket of goods and services consumed by households. The Consumer Price Index (CPI) is a critical indicator of pricing pressures in an economy and provides a gauge of inflation. Forex traders monitor the CPI, as it can lead to changes in monetary policy by the central bank that will either strengthen or weaken the currency against others in the markets. Collateral In the context of foreign exchange (FX), collateral refers to assets that are pledged as security for a financial obligation, such as a loan or a derivative contract. Collateral is often used in FX transactions to reduce the risk of default by one of the parties. Collateral can be used in other types of FX transactions as well, such as currency forwards, options, and non-deliverable forwards. In these cases, the collateral may be used to cover the potential risk of loss due to changes in exchange rates or other market conditions. Counter Currency In a currency pair, the counter currency is the second or reference currency. In ISO currency code pairs, the counter currency follows the base currency. The base currency of a pair is usually a major currency, especially when trading exotic currencies. Commodity Commodities are raw materials or primary agricultural products that can be bought and sold, such as copper, oil, wheat, gold, etc. Because commodities are standardized products with little differentiation between their qualities, they can be interchanged with other commodities of the same type. They are often produced and traded in large quantities and can be used as inputs for further production or as sources of energy. Calendar Spread A calendar spread, also called a time spread or a horizontal spread, involves simultaneously buying and selling options on the same underlying asset but with different expiration dates. Calendar spreads aim to profit from differences in option time decay. Call Option Call options are financial contracts that give the holder the right, but not the obligation, to buy a specific asset at a predetermined price (the strike price) before or on a certain date (the expiration date). The underlying asset is the asset that the call option gives the holder the right to purchase. Call Spread The call spread is an option strategy where one call option is purchased and another call option is simultaneously sold on the same underlying asset. Call options have different strike prices, and the option that is purchased has a lower strike price than the option that is sold. Call spreads are designed to profit from an upward move in the price of the underlying asset while limiting losses. CAPS Caps are financial contracts used to hedge against currency fluctuations, similar to options. By using it, a currency's upside potential is limited while the holder benefits from its potential depreciation. The holder of a cap has the right to buy or sell a currency, but is not obligated to do so, at a specific strike price, on a specific date or period of time. A cap rate is the strike price that determines a currency's maximum rate. Credit Default Swap (CDS) Credit default swaps (CDS) are financial derivatives that are used to transfer credit risk from one party to another. A CDS provides protection against the risk of debt default by the issuer. Cross rate In the context of foreign exchange (FX), a cross rate is the exchange rate between two currencies, both of which are not the official currency of the country in which the exchange rate quote is given. It is calculated by using the exchange rates of the two currencies relative to a third currency, which is typically a more widely traded currency such as the US dollar. Cross border payment A cross border payment is a financial transaction that involves the transfer of money between countries, typically in different currencies. Cross border payments can be made for a variety of purposes, such as to pay for goods or services, to transfer money to or from foreign bank accounts, or to make international wire transfers. There are a number of factors to consider when making a cross border payment, such as exchange rates, fees, and regulatory requirements. Cross border trade As defined by the OCDE, cross-border trade is the exchange of goods and services between residents and non-residents. It is measured in USD as a percentage of GDP for net trade (exports minus imports) and also in annual growth for imports and exports. Convertible Bond Convertible bonds are bonds that can be converted into shares of the issuer's stock or another security at the holder's discretion. Convertible bonds are a hybrid security that combine the features of both bonds and stocks. They offer the stability and regular income of a bond, as well as the opportunity to participate in the company's potential growth. Corporate Bond Corporate bonds are debt securities issued by corporations to raise capital. There are a variety of maturities available for corporate bonds, ranging from a few months to more than 30 years. The bondholder receives periodic interest, known as a coupon, and the principal is returned at maturity. Currency forward (FX forward) A currency forward is a financial contract that involves the exchange of two currencies at a predetermined exchange rate on a future date. It is a type of derivative instrument that is used to hedge against the risk of fluctuations in exchange rates. Currency hedging Currency hedging is the practice of using financial instruments or strategies to reduce the risk of losses due to fluctuations in foreign exchange rates. It is a common risk management strategy for companies and investors with international operations or exposures, as it can help to protect against the impact of currency fluctuations on the value of their assets, liabilities, and cash flows. Currency volatility Currency volatility refers to the fluctuations in the value of a currency relative to other currencies. It is a measure of the risk associated with holding or trading assets in a particular currency, and is an important consideration for companies and investors with international operations or exposures. Currency exposure Currency exposure refers to the potential impact of changes in foreign exchange rates on the value of a company's assets, liabilities, and cash flows. It is a measure of the extent to which a company is exposed to risk from movements in foreign exchange rates. A company with significant foreign currency exposure may be at risk of losses due to changes in exchange rates, which can impact the value of its assets and liabilities, as well as the cash flows from its international operations. Currency depreciation Currency depreciation occurs when the value of a currency falls against other currencies. The depreciation of currencies can be caused by economic fundamentals, interest rate differentials, political instability, or investor risk aversion. Currency convertibility In terms of foreign transactions, currency convertibility refers to the ability to exchange one currency for another at a given conversion rate. A range of degrees of convertibility can be identified, ranging from total convertibility to total inconvertibility. Convertible currency A currency is said to be freely convertible when it has an immediate value on the different international markets, and few restrictions on the manner and amount that can be traded for another currency . Free convertibility is a major feature of a hard currency. Cross currency triangulation In cross currency triangulation, monetary amounts are first converted from one national currency unit (source currency) into an intermediate currency (anchor currency). Calculation then converts the intermediate currency amount into the designated national currency unit (target currency). Cash Collection In cash collection, companies recover money from other businesses (or individuals) to whom they have previously provided invoices. Cash collection primarily aims to get invoices paid by the due date. Currency controls Currency controls (or exchange controls) limit the purchase and/or sale of currencies by governments. By limiting inflows and outflows of currency, these controls help countries stabilize their economies. Exchange controls are not available to every nation, at least not legitimately; the 14th article of the IMF's Articles of Agreement only permits their use in transitional economies. Carry Trade Carry trades involve borrowing at a low interest rate and reinvesting in a currency or financial product at a higher rate of return. Carry trades are appropriate only for investors with deep pockets due to the risks involved. Currency Score A currency score typically refers to a metric or rating system used to assess the relative strength or performance of a currency. This score can be based on several factors, including economic indicators, interest rates, inflation rates, trade balances, geopolitical stability, and market sentiment. It is commonly used by investors, traders, and economists to make decisions regarding foreign exchange (FX) markets or to analyze a country's economic health. Currency block A currency block refers to a group of countries that peg their currencies to a common standard or closely coordinate their exchange rate policies to maintain stability in international trade and finance. These arrangements can involve fixing exchange rates to a dominant currency (e.g., the U.S. dollar or euro) or managing exchange rates collectively within a region. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z Japanese Yen Carry Trade Carry trades involve borrowing money in one currency at a low interest rate and investing it in another currency at a high interest rate. The currency you borrow in a Japanese Yen carry trade is the Yen - the currency of Japan. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z Quote Currency In foreign exchange (Forex), the quote currency, also known as the counter currency, is the second currency in both direct and indirect currency pairs. A quote currency determines the value of a base currency. When currency exchange rates are quoted, the quote currency is listed after the base currency. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z T Take Rate A take rate is the fee that a marketplace charges for a transaction that is carried out by a third-party seller or service provider. The take rate is a determining factor in a marketplace's revenue as reported on its income statement: Take rate * GMV (gross merchandise volume) = revenue. Tenor Tenor refers to the time between the maturity date and the maturity date of a financial instrument, such as a bond or loan. The tenor of a financial instrument can be expressed in various ways, such as years, months, or even days. Theta In finance, theta is a measure of an option's sensitivity to time-based changes in price. The Greek letter used in options pricing formulas to represent the amount by which the price of an option is expected to decline over a given period of time, due to the passage of time and the decay of the option's extrinsic value.Theta is typically expressed as a negative number, and it reflects the impact that the passage of time can have on the value of an option. Tick Ticks are units of measurement that represent the minimum price change for a security. Ticks are commonly used for expressing changes in a financial instrument's price, such as a stock, bond, commodity, or derivative, and they represent the smallest increment in a security's price. The value of a tick can vary depending on the security being traded and the market in which it is traded, but it is typically very small. For example, in the stock market, a tick may be equal to one cent for some stocks and $0.01 for others. Ticks are often used by traders and investors to track the performance of a security and to make decisions about buying and selling. Treasury bill (T-bill) T-bills are short-term debt securities issued by the U.S. government. T-bills are sold in denominations ranging from $100 to $1,000,000, and their maturities range from a few days to 52 weeks. Since T-bills are backed by the full faith and credit of the United States government, they are considered to be very safe investments. Investors often use them to park money or diversify their portfolios for a short period of time. T-bills do not pay interest, but they are sold at a discount to their face value, and the difference between the purchase price and the face value represents the return to the investor. T-bills are issued through competitive and noncompetitive bidding processes. Transaction Exposure Transaction exposure is the potential loss a company may incur due to changes in foreign exchange rates on existing financial obligations or expected future cash flows. Companies can use a variety of financial instruments and strategies to manage transaction exposure. Transaction exposure is also known as economic exposure. Trader A trader is a person who buys and sells financial instruments such as stocks, bonds, currencies, commodities, or derivatives in an attempt to make a profit. Traders can work on their own or as part of a larger financial institution, such as a bank or brokerage firm. Translation Exposure / Transaction Risk The translation exposure (also known as the translation risk) is the possibility that an organization's assets, liabilities, or income will change in value as a result of changes in exchange rates. Translation risk occurs when a company has equities, assets, liabilities, or income denominated in a foreign currency. Target redemption forwards (TARFs) Target redemption forwards (TARFs) are complex financial instruments that allow holders to exchange currencies at a better rate than the standard forward rate. Corporate organizations often use TARFs in foreign exchange (FX) markets. With multiple partial settlement dates, they combine a barrier (knock-out) call option and a barrier (knock-out) put option. If the enhanced rate reaches a target level, the product automatically expires if the holder hasn't paid an upfront premium. Tied Gold Tied gold in finance refers to a system where a country's currency is directly linked to gold reserves. Under this system, the value of the currency is backed by a fixed quantity of gold, and the government promises to exchange the currency for a specific amount of gold upon request. It is a form of gold standard. < PREVIOUS NEXT >

Get an overview of financial terms and their definitions. < BACK KNOWLEDGE BASE Grain Glossary Get an overview of financial terms and their definitions. ALL A A B B C C D D E E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V W W X X Z Z B Balance sheet hedging A balance sheet hedging technique involves using financial instruments to offset potential losses or gains on the balance sheet of a company. Companies typically use it to protect themselves against adverse movements in foreign exchange rates, interest rates, or commodity prices, which can affect the value of their assets and liabilities. Base currency The base currency is the primary currency that is used to quote prices for financial instruments, such as currency pairs in the foreign exchange market. It is also the currency in which financial statements, such as balance sheets and income statements, are typically reported. Bid Bids are offers made by buyers to purchase securities at a specified price. In an auction-style market, such as a stock exchange, bids are made by buyers who want to purchase securities, and offers (also called "asks") are made by sellers who want to sell them. "Bid-ask spread" refers to the difference between prices at which buyers and sellers are willing to buy at a particular moment. Bid prices are typically lower than ask prices, and spreads are the difference between them. Bill of Landing A Bill of Lading (B/L) is a document used in shipping to acknowledge the receipt of goods and to serve as proof of title. The B/L is issued by the carrier (such as a shipping company or a trucking firm) and lists the type, quantity, and destination of the goods being transported. It also serves as a contract between the carrier and the shipper, setting out the terms and conditions of the shipment. Basis Points (bps) Basis points are used to measure a percentage change in a financial instrument's value or rate. One basis point is equal to 1/100th of 1% or 0.01%, which is used to express very small changes in value. A basis point represents a very small percent change in an easy-to-understand manner and is often used to describe changes in interest rates, yields, and other financial metrics. Bond A bond is a debt security issued by a government, municipality, or corporation for the purpose of raising capital. An investor who purchases a bond is essentially lending money to the issuer in return for interest payments and the return of principal at maturity. Companies and governments often use bonds to finance long-term projects and to smooth out their cash flow. Bonds come in many types, including corporate, municipal, and government bonds. Binary Option Binary options are financial instruments that allow speculating on the movement of various assets, such as stocks, commodities, currencies, and indices. It is called a binary option because the outcome is either a fixed payout or a loss. Broken Date Broken dates refer to contracts and financial instruments that have a non-standard or irregular tenor, or length of time until maturity. It is possible to use broken dates in a variety of financial instruments, such as bonds, loans, and derivatives. Butterfly Option The butterfly option is a type of option strategy that involves combining two vertical spreads, which each have four different options with three different strike prices. This strategy takes advantage of a neutral market environment, where the underlying asset's price is expected to remain stable. It involves purchasing two call options at a lower strike price, two put options at a higher strike price, and selling one call option and one put option at the same middle strike price. Budget rate In the context of foreign exchange (FX), a budget rate is a financial projection that estimates the expected exchange rate for a particular currency pair at a future point in time. It is used to help plan and manage resources for international transactions, and to ensure that the costs of the transactions are within the allocated budget. Blocked currency Block currencies are effectively non-convertible or inconvertible. Generally, currencies are blocked because of government restrictions, such as foreign exchange regulations, physical barriers, political sanctions, or extremely high volatility. Barrier option A barrier option is a type of derivative where the payoff depends on whether or not the underlying asset has reached or exceeded a predetermined price. A barrier option can be a knock-out, or a knock-in. Bretton Woods System According to the Bretton Woods system, the dollar was pegged to gold, which in turn was pegged to the price of gold. Despite its collapse in the 1970s, Bretton Woods had a lasting impact on currency exchange and trade through the development of the International Monetary Fund and the World Bank. Bound Bound was launched in 2020 with the vision of making currency conversion and hedging cheap, fair, and most of all, easy. Today, our platforms help hundreds of businesses protect themselves from currency risk across the world. Broker Currency Trading A Forex Broker is an intermediary between retail traders and the foreign exchange market in the international trading arena . Forex brokers allow people to buy and sell currencies for the participation of individuals and institutions in the global financial system. < PREVIOUS NEXT >