Range forward: A zero-cost collar where the customer is obliged to deal with the same bank at spot if neither limit of the collar is breached at expiry.

Rate of recovery: Estimate of the percentage of the amount exposed to default - that is, the credit risk exposure - which is likely to be recovered if a counterparty defaults.

Record date: A coupon or other payment due on a security is paid by the issuer to whoever is registered on the record date as being the owner. See cum-dividend, ex-dividend date.

Redeem: A security is said to be redeemed when the principal is repaid.

Redemption yield: The rate of interest at which all future payments (coupons and redemption) on a bond are discounted so that their total equals the current price of the bond (inversely related to price). The redemption yield is also known as the yield to maturity (YTM) or gross redemption yield and is the most frequently used measure of return from holding a bond.
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Redenomination: A change in the currency unit in which the nominal value of a security is expressed (in context, from sterling to euro). Also the gross redemption yield.

Reduced-cost option: Generic term for options for which there is a reduced premium, either because the buyer undertakes to forgo a percentage of any gain, or because the buyer offsets the cost by writing other See also zero-premium option.

Refer: The practice whereby a trader instructs a broker to put "under reference" any prices or rates he has quoted to him, meaning that they are no longer "firm" and the broker must refer to the trader before he can trade on the price initially quoted.

Register: Record of ownership of securities. For gilts, excluding bearer bonds, entry in an official register confers title.

Registered bond: A bond for which the issuer keeps a record (register) of its owners. Transfer of ownership must be notified and recorded in the register. Interest payments are posted (more usually electronically transferred) to the bondholder.

Registrar's Department: Department of the Bank of England which maintains the register of holdings of gilts.

Reinvestment rate: The rate at which interest paid during the life of an investment is reinvested to earn interest-on-interest, which in practice will generally not be the same as the original yield quoted on the investment.

Relative performance option: Option whose value varies in line with the relative value of two assets.

Replacement cost: The present value of the expected future net cash flows of a derivative instrument. Aside from various conventions dealing with the bid/ask spread, synonymous with the "market value" or "current exposure" of an instrument.

Repo: A collateralised loan. Usually refers in particular to classic repo. Also used as a term to include classic repos, buy/sell-backs and securities lending.

Repo rate: The return earned on a repo transaction expressed as an interest rate on the cash side of the transaction.

Repurchase agreement: See repo.

Return: The return on an investment, put simply, the ratio of the asset price at the start of the investment (P0) and the asset price at the maturity of the investment (PT), that is P0/PT. The market convention is to quote annualised returns.

Return on assets: The net earnings of a company divided by its assets.

Return on equity: The net earning of a company divided by its equity.

Return on value-at-risk: An analysis conducted to determine the relative rates of return on different risks, allowing corporations to compare different risk capital allocations and capital structure decisions effectively.

Revaluation: An official one-off increase in the value of a currency in terms of other currencies. See devaluation.

Reverse: See reverse repo.

Reverse repo: The other side of a repo.

Rho: The change in an option's value relative to a change in interest rates.

Risk reversal: Changing a long (or short) position in a call option to the same position in a put option by selling (or buying) forward, and vice versa.

Risk weighting: Assigning risk exposure according to specified levels, according to the type of institution that is the counterparty. For example, bank risk capital, as applied under the Basle rules, assigned varying degrees of risk weighting depending on whether the counterparty is an OECD sovereign, banking institution or corporate.

Risk-free arbitrage: An arbitrage opportunity arising whenever it is possible to create two portfolios that have identical payoff profiles but different prices.

Risk-free return: Also known as riskless return, the return available to the holder of a risk-free asset, such as a gilt or US Treasury security. The interest rate on these instruments is the risk-free interest rate. The risk-free interest rate used in market analysis is the rate observed on a Treasury bill, this being the shortest-dated risk-free instrument available in any market.

Rollover: See tom/next. Also refers to the renewal of a loan.

Rump: A gilt issue so designated because it is illiquid, generally because there is a very small nominal amount left in existence.

Running yield: Same as current yield.

S/N: See spot/next

SAFE: See synthetic agreement for forward exchange.

Secondary market: The market in instruments after they have been issued. Bonds are bought and sold after their initial issue by the borrower, and the marketplace for this buying and selling is referred to as the secondary market. The new issues market is the primary market.

Securities and Exchange Commission (SEC): The central regulatory authority in the United States, responsible for policing the financial markets including the bond markets.

Securities lending: When a specific security is lent against some form of collateral. Also known as stock lending.

Securitisation: The process of raising finance, via a framework in which liquid or illiquid assets of an institution are transformed into a package of debt securities backed by these assets. Assets can include mortgages, corporate loans, credit card receivables, lease receivables and so on. To remove the assets from the originating company's balance sheet, securities are often issued by a special purpose vehicle (SPV), an incorporated entity created specially for the process. The SPV is bankruptcy-remote, so that any financial difficulties of the originating institution will not affect the pool of financial assets held by the SPV.

Security: A financial asset sold initially for cash by a borrowing organisation (the "issuer"). The security is often negotiable and usually has a maturity date when it is redeemed.

Sell/buy-back: Simultaneous spot sale and forward purchase of a security, with the forward price calculated to achieve an effect equivalent to a classic repo.

Settlement: The process of transferring stock from seller to buyer and arranging the corresponding movement of funds between the two parties.

Settlement bank: Bank which agrees to receive and make assured payments for gilts bought and sold by a CGO member.

Settlement date: Date on which transfer of bonds and payment occur, usually one, two or three days after the trade is conducted.

Settlement risk: The risk that occurs when there is a non-simultaneous exchange of value. Also known as "delivery risk" and "Herstatt risk".

Sharpe ratio: A measure of the attractiveness of the return on an asset by comparing how much risk premium the investor can expect it to receive in return for the incremental risk (volatility) the investment carries. It is the ratio of the risk premium to the volatility of the asset.

Short: A short position is a surplus of sales over purchases of a given currency or asset, or a situation which naturally gives rise to an organisation benefiting from a weakening of that currency or asset. To a money market dealer, however, a short position is a surplus of money lent out over borrowings taken in (which give rise to a benefit if that currency strengthens rather than weakens). See long.

Short date: The interest rate for short-term deposits, up to one month in maturity. Also a deal for value on a date other than spot but less than one month after spot.

Simple interest: When interest on an investment is paid all at maturity or not reinvested to earn interest on interest, the interest is said to be simple. See compound interest.

Simple yield to maturity: Bond coupon plus principal gain/loss amortised over the time to maturity, as a proportion of the clean price per 100. Does not take time value of money into account. See current yield, yield to maturity.

Special: A security which for any reason is sought-after in the repo market, thereby enabling any holder of the security to earn incremental income (in excess of the General Collateral (GC) rate) through lending them via a repo transaction. The repo rate for a special will be below the GC rate, as this is the rate the borrower of the cash is paying in return for supplying the special bond as collateral. An individual security can be in high demand for a variety of reasons; for instance, if there is sudden heavy investor demand for it, or (if it is a benchmark issue) it is required as a hedge against a new issue of similar maturity paper.

Speculation: A deal undertaken because the dealer expects prices to move in his favour, as opposed to hedging or arbitrage.

Spot: In the money market, a deal to be settled on the day after the customary value date for that particular instrument. In the foreign exchange market, standard settlement for value in two working days' time.

Spot price: The price of an asset for delivery today, or at the earliest possible delivery date. Compare to the forward price, which is the price agreed today for delivery of the asset at a specified date in the future.

Spot/next: A transaction from spot until the next working day.

Spread: The difference between the bid and offer prices in a quotation. Also a strategy involving the purchase of an instrument and the simultaneous sale of a similar related instrument, such as the purchase of a call option at one strike and the sale of a call option at a different strike.

Square: A position in which sales exactly match purchases, or in which assets exactly match liabilities. See long, short.

Standard deviation: A measure of how much the values of something fluctuate around its mean value. Defined as the square root of the variance.

Step-down swap: Swap in which the fixed-rate payment decreases over the life of the swap.

Step-up swap: Swap in which the fixed-rate payment increases over the life of the swap.

Stock index future: Future on a stock index, allowing a hedge against, or bet on, a broad equity market movement.

Stock index option: Option on a stock index future.

Stock lending: See securities lending.

Stock option: Option on an individual stock.

Straddle: A position combining the purchase of both a call and put at the same strike for the same date. See strangle.

Strangle: A position combining the purchase of both a call and a put at different strikes for the same date. See straddle.

Street: The "street" is a term for the market, originating as "Wall Street". A US term for market convention, so in the US market it is the convention for quoting the price or yield for a particular instrument.

Stress testing: Analysis that gives the value of a portfolio under a range of worst-case scenarios.

Strike: The strike price or strike rate of an option is the price or rate at which the holder can insist on the underlying transaction being fulfilled.

Strip: A zero-coupon bond which is produced by separating a standard coupon-bearing bond into its constituent principal and interest components. To strip a bond is to separate its principal amount and its coupons and trade each individual cash flow as a separate instrument ("separately traded and registered for interest and principal"). Also, a strip of futures is a series of short-term futures contracts with consecutive delivery dates, which together create the effect of a longer term instrument (for example, four consecutive 3-month futures contracts as a hedge against a one-year swap). A strip of FRAs is similar.

Swap: A foreign exchange swap is the purchase of one currency against another for delivery on one date, with a simultaneous sale to reverse the transaction on another value date. See also currency swap, interest rate swap.

Swaption: An option on an interest rate swap or currency swap.

Switch: In the gilt market, exchanges of one gilt holding for another, sometimes entered into between the DMO and a GEMM as part of the DMO's secondary market operations.

Synthetic: A package of transactions which is economically equivalent to a different transaction (for example, the purchase of a call option and simultaneous sale of a put option at the same strike is a synthetic forward purchase).

Synthetic agreement for forward exchange: A generic term for ERAs and FXAs.