Ludzie pragną czasami się rozstawać, żeby móc tęsknić, czekać i cieszyć się z powrotem.
Similar to a warrant
flows like a river and is not divided into
to buy stock and often called a bond
natural intervals. The calculus on which
warrant.
many valuation models are developed
assumes continuous time. This was the
continuous auction market Any market
approach that Black, Scholes, and Mer-
in which orders to buy and orders to
ton took in developing the first com-
sell are channeled upon receipt to an
plete closed form option valuation
exchange for immediate execution at
model. Continuous time modeling con-
currently prevailing and ever-changing
trasts with discrete time modeling,
prices. This is in contrast to a call mar-
which assumes that time can be di-
ket system in which buy orders and sell
vided into discrete intervals (e.g., years,
orders are aggregated for some period
months, weeks, days, hours, minutes,
of time and then matched in batches at
etc.). As discrete time intervals are di-
designated times of the day.
vided into ever smaller time incre-
ments, discrete time models become
continuous compounding A system of
more like continuous time models. In
compounding interest in which the
fact, the results of the two approaches
Marshall_001_108 9/27/00 7:29 AM Page 46
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contract for difference–convergence
converge as the discrete time intervals
(2) No minimum holding period is al-
become infinitesimally small.
lowed. (3) The number of shares that
may be sold by a holder within a three-
contract for difference Often called a
month period is subject to volume lim-
difference contract or a diff contract. These itations equal to the greater of 1% of the
are contracts, whether forwards, fu-
shares of the same class outstanding or
tures, or options, that pay off based on
the average weekly trading volume
the difference between two prices or
(averaged over the prior four calendar
rates.
weeks). All Rule 144 sales of securities
of the same class (restricted or non-
contract rate The fixed rate of interest
restricted) by or on behalf of the owner
(or fixed exchange rate) that serves as
and certain persons related to the
the basis of a cash settlement on a for-
owner must be aggregated. (4) Sales
ward contract or an option contract. In
must be made by the owner to a mar-
the case of an option, this rate is often
ket maker in the stock or by a broker
called a strike rate. On a forward, the
on behalf of the owner to purchase in
cash settlement will be the difference
unsolicited agency transactions and
between the reference rate and the con-
(5) Form 144 Notice of Sale must be
tract rate.
filed with the SEC and the principal ex-
change (if any) for the stock no later
contraction (1) In the context of corpo-
than the day on which the sell order is
rate restructuring, the downsizing of a
entered.
corporation. This can be accomplished
through divestitures, spin offs, or
convenience yield The value that ac-
carve-outs. (2) In macroeconomics, a
crues to the holder of a position in a
reference to negative economic growth
cash asset, as opposed to the holder of
as measured by a shrinkage in gross do-
a futures contract on the asset. This con-
mestic product (GDP). If it goes on for
cept was rather abstract until the intro-
a sufficient period of time, it is called a
duction of stock index futures and
recession. (3) The shortening of the
bond futures. The holder of cash stocks
average life of a mortgage portfolio as
receives dividends and the holder of
a consequence of a decline in interest
cash bonds accrues interest. Stock index
rates, which triggers refinancings.
futures and bond futures holders de-
rive no such benefits.
contraction risk The risk that when
interest rates fall, large numbers of
conventional mortgages Also known as
homeowners may refinance their mort-
level payment mortgages. Mortgages hav-
gage loans.
ing a fixed term and a fixed coupon rate
with all payments of equal size. While
control stock Any stock of an issuer (in-
the payments are of equal size, the in-
cluding registered and unregistered
terest component gets smaller and the
shares) that is owned by an affiliate of
principal component gets larger with
the issuer (i.e., an officer, a director, or
each payment.
other person who, through stock own-
ership or otherwise, controls the man-
convergence The tendency of certain
agement policies of the issuer). Rule 144
things to come together. These may
of the Securities Act of 1933 places the
include a convergence of ideas, a con-
following restrictions on the sale of
vergence of market prices, or a conver-
such stock: (1) Current public infor-
gence of the values generated by
mation on the issuer must be available.
valuation models. For example, in the
Marshall_001_108 9/27/00 7:29 AM Page 47
conversion arbitrage–convertible adjustable preferred stock
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47
futures markets, a futures price should
vertible’s sensitivity to common stock
converge to the spot price of the un-
movements.
derlying asset as the futures contract
approaches its delivery date. This is a
conversion price The price of common
consequence of a gradual reduction in
stock above which, at maturity, a holder
the cost of carry. As a second example,
of a convertible security should convert
the values generated by a discrete time
the security into common stock rather
binomial option pricing model should
than accept the security’s redemption
converge to the values generated by an-
value. If the common stock trades be-
alytical models as discrete time is di-
low the conversion price at maturity,
vided into very small increments.
the holder should accept the redemp-
tion value. If the common stock trades
conversion arbitrage Any strategy that
above the conversion price, the con-
seeks to combine (or to disassemble) in-
vertible is in-the money. The conver-
struments having one set of investment
sion price is computed by dividing the
characteristics in order to obtain one or
convertible’s par value by its conver-
more instruments having a different set
sion ratio. Therefore, a $1,000 face value
of investment characteristics. The re-
convertible bond that converts into 50
sultant instruments are often described
shares has a $20 conversion price. Re-
as synthetic. Such strategies are exe-
member, corporate bond prices are
cuted in order to exploit a pricing dis-
quoted as a percentage of par so care
crepancy between the real and the
must be taken to express the bond price