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The other party to a contract.
The risk that a counterparty might fail to fulfil its contractual obligations.
Cash or securities pledged against the value/performance of a contract.
Agreement to buy a commodity or financial asset on a date in the future at a fixed price.
Gives the holder the right to buy or sell an underlying asset by a certain date at a fixed price.
A contractual agreement where two parties agree to exchange (swap) either a single payment or a series of payments in the future. The most widely used swaps are contracts relating to interest rates, inflation, or currencies.
A position that benefits from the value of the underlying assets going up.
A position that benefits from the value of the underlying assets going down.
A statistical estimate regarding the probability of portfolio losses in normal market conditions based on analysis of historical price movements, correlations and volatilities. This can be expressed as a percentage at a given level of confidence over a given time horizon. Regulated funds are required to calculate their 99% confidence over one month. For example, if a fund’s VaR is 5% over one month with 99% confidence, there is expected to be a 1% chance that over the forthcoming month the fund value could fall by over 5%.
Undertakings for Collective Investment in Transferable Securities – regulations which are set by the European Union and incorporated into the Financial Conduct Authority handbook. Recent updates to the UCITS regulations allows funds to invest in a wider set of financial instruments, including derivatives.
The largest drop in unit price since the launch of the fund, i.e. the drop in unit price from its highest point to the subsequent trough.