KEY TERMS

Derivative security

Forward contract

Forward price

Spot price

Long position

Short position

Settlement date

Counterparty

Spot market

Futures contracts

Futures exchange

Marking-to-market

Margin

Open interest

Initial margin

Maintenance margin

Margin call

Open-outcry

Hedgers

Speculators

Spreads (or straddles)

Traders

Stock-index futures

contracts

Basis risk

Cross-hedging

Short squeezes

Options

Strike (or exercise) price

Option premium

American-style option

European-style option

Call options

Put options

LEAPS

Covered options

Naked options

Intrinsic value

Stock-index options

Swap

Notional principals

Credit default swaps

(CDSs)

Mortgage-backed securities (MBSs)

Collateralized debt obligations (CDOs)

Tranches