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I

Implied forward yield estimates

A forecast of future interest rates based on rates implied by futures prices.

 

Implied repo rate

The rate of return before financing costs implied by a transaction where a longer term cash security is purchased and a futures contract is sold (or vice versa).

 

Implied volatility

The value for volatility embedded in the market price of an option. The market price of the option is used to derive the level of volatility implied in it. This represents the markets best estimate of future volatility, and can be compared with historical volatility to determine whether this view has changed.

 

Individual Clearing Members (ICM)

An individual clearing member (public order) is entitled to clear transactions made for his own account and for clients. Individual clearing members (non public order) are entitled to clear transactions for their own account only.

 

Initial margin

The returnable collateral deposited when initiating an open position. This is required by the clearing house from clearing members as protection against default of a futures or options contract. The exchange requires the level of initial margin set by the clearing house to be the minimum required by (clearing) members from their clients. The level is subject to changes in line with market conditions. See Margining.

 

Interest rate swap

An agreement between two counterparties to exchange cash on a notional principal sum which is not exchanged. The most common structure is the fixed-for-floating swap in which one counterparty agrees to pay a rate over the term of the swap in exchange for a floating-rate payment by the other counterparty.

 

International Securities Markets Association (ISMA)

Incorporates the Association of International Bond Dealers (AIBD) whose members comprised organisations in 40 nations and which acted as a forum for questions concerning international securities markets and issued and enforced rules governing operations. Responsibilities are now widened out from purely bond dealers to encompass Euromarket bond dealers and managers in the international securities markets. The Association changed its name from Association of International Bond Dealers (AIBD) to the International Securities Market Association (ISMA) in January 1992. Based in Zurich.

 

In-the-money

An option which has intrinsic value because the market price of the underlying is above (below) the strike price of a call (put).

 

Intra day bid/offer prices

Bid and Offer prices occurring at different intervals within the trading day.

J

Japanese Government Bond (JGB) Future

Future contract based on notional Japanese Government Bond with a 6% coupon and a ten year maturity.

K

Kappa

See Vega