Glossary - I
This section provides an explanation for some of the jargon used to describe structured retail products. If you would like us to add additional words then please let us know by clicking here.
The implied volatility of a share, index or any other asset price is the name given to the expected volatility that this share or index is anticipated as having over some future period (see Historic Volatility).
This term derives from the pricing of financial options as it is the number used by option traders to calculate the price of any option when all the other factors involved are known.
This is the term used to describe any option which has a strike price that is far below (for a call option) or above (for a put option) the current level of the underlying.
So for example a call option on the FTSE100 index with a strike price of 3500 would be called in-the-money if the current level of the FTSE100 was 4500.
This is the name given to any type of structured product that provides a periodic payment of income. Often the rate of income is higher than the general rate of interest available of fixed rate Deposits and there is therefore a risk that the initial capital invested may not be returned in full (see high income product and Reverse Convertible).
The income type category indicates whether the income is fixed or whether it is variable throughout the investment period. Mixed income refers to products with a combination of both fixed and variable income types.
The one-off charges levied when investment is made in the product. See the product description, for details on whether additional initial charges will apply (Continuous products).
Initial index level
With most structured products, the performance of the investment is linked to the movement of an underlying index or share. In order to measure this performance the level of the underlying is recorded at the start of the investment term. This recording is called the initial index level.
There are a wide variety of methods for calculating this level. It may simply be the level of the index at the close of business on one specific day or in other cases it could be the average level calculated over the first month or more.
Initial measurement period
Initial Strike Date
The date when the first fixing is taken for calculating the initial level of the underlying.
The return from some structured products is dependant on the level of the underlying measured at any time during the day during a specified period, usually near the end of the investment term.
An intra-day fixing is simply the level of the underlying sampled during the business day, as opposed to, for example, at the close.
An example of the use of intra-day fixings is when the final index level for a product is calculated as the lowest level of the underlying at any time during say the last six weeks of the investment term.
This is a term used when describing the premium of an option. The intrinsic value of an option is that element of the option’s premium that represents the value that the option would have were it to be exercised immediately.
So, for example, let us assume that HSBC shares were currently trading at a level of 750p per share. A call option on HSBC with a strike price of 700p per share would have an intrinsic value of 50p per share.
The value of an option i.e. its premium, is always at least equal to its intrinsic value.
Investment Certificate in the Czech Republic
A financial institution that raises capital, trades in securities and advises on mergers and acquisitions.
UK corporate structure designed for investments. Typically shares in the Trust are listed on the London Stock Exchange.
ISA (Individual Saving Account)
An Individual Savings Account (ISA) is a UK savings product that allows individuals to earn a tax-free return. The amount invested in an ISA is limited to a fixed amount in each tax year. In addition only certain qualifying investments are able to be held within an ISA and each has specific limits too.
The ISA product replaced the PEP and TESSA products previously available in the UK.
ISA - Cash
Cash type Individual Savings Account. A UK tax free deposit product.
ISA - Tessa Only
A cash type Individual Savings Account available only for investment of maturity TESSA money.
ISDA stands for the International Swaps Dealers Association. ISDA is a trade body that represents participants in the wholesale over-the-counter (OTC) derivatives market. ISDA has been primarily involved in standardising the documentation used for OTC derivative products and the ISDA master agreement, and its associated documentation, has become the industry standard.
International Securities Identification Numbers. The ISIN code is a 12-character alpha-numerical code that does not contain information characterising financial instruments but allows for uniform identification when trading or settling a security.