Organization for Economic Cooperation and Development,
an international organization helping governments tackle
the economic, social and governance challenges of a
Offer The rate at which a dealer is willing to sell the base
Offered Market Temporary situation where offers exceed bid.
A US balance of payments measure based on movement of
dollars in foreign official holdings and US reserves. Also
referred to as reserve transaction account.
Offset The closing-out or liquidation of a futures position.
page 97 of 110
The operations of a financial institution which although
physically located in a country, has little connection with
that country's financial systems. In certain countries a bank
is not permitted to do business in the domestic market, but
can do business with other foreign banks. This is known as
an off-shore banking unit.
Old Lady Old lady of Threadneedle Street, a term for the Bank of
One Cancels Other Order
Where the execution of one order automatically cancels a
previous order - also referred to as OCO or "One cancels the
The total number of outstanding option or futures contracts
that have not been closed out by offset or fulfilled by
Open Market Committee See Federal Open Market Committee.
Open Market Operations Central bank operations in the markets to influence
exchange and interest rates.
Any deal which has not been settled by physical payment or
reversed by an equal and opposite deal for the same value
date. It can be termed as a high risk, high return
A contract conferring the right but not the obligation to buy
(call) or to sell (put) a specified amount of an instrument at
a specified price within a predetermined time period.
Option Class All options of the same type - calls or puts -listed on the
same underlying instrument.
Option Series All options of the same class having the same
exercise/strike price and expiration date.
Original Margin See Initial Margin.
OTC See - "Over the Counter".
A put option is out-of-the-money if the exercise/strike price
is below the price of the underlying instrument. A call
option is out-of-the money if the exercise/strike price is
higher than the price of the underlying instrument.
Outright Deal A forward deal that is not part of a swap operation.
A foreign exchange transaction involving either the
purchase or the sale of a currency for settlement at a
Outright Rate The forward rate of a foreign exchange deal based on spot
price plus forward discount/premium.
Over Bought or Over Sold See long and short.
page 98 of 110
Over The Counter (OTC)
A market conducted directly between dealers and principals
via a telephone and computer network rather than a
regulated exchange trading floor. These markets have not
been very popular because of the risks both the parties face
in case the other party fails to honor the contract. They
have never been part of the Stock Exchange since they were
seen as "unofficial".
Is an economy on a high growth rate trajectory placing
pressure on the production capacity, resulting in increased
inflationary pressures and higher interest rates.
Overnight A deal from today until the next business day.
Net long or short position in one or more currencies that a
dealer can carry over into the next dealing day. Passing the
book to other bank dealing rooms in the next trading time
zone reduces the need for dealers to maintain these
Package Deal When a number of exchange and /or deposit orders have to
be fulfilled simultaneously.
Par (1) The nominal value of a security or instrument. (2) The
official value of a currency.
Parities The value of one currency in terms of another.
(1) Foreign exchange dealer's slang for "your price is the
correct market price". (2) Official rates in terms of SDR or
other pegging currency.
Payment Date The date on which a dividend or bond interest payment is
scheduled to be delivered.
Payroll employment is a measure of the number of people
being paid as employees by non-farm business
establishments and units of government. Monthly changes in
payroll employment reflect the number of net new jobs
created or lost during the month. Changes are widely
followed as an important indicator of economic activity.
Large increases in payroll employment are seen as signs of
strong economic activity that could eventually lead to
higher interest rates that are supportive of the currency at
least in the short term.
It means a foreign currency which is freely convertible, i.e.
a currency which is permitted by the rules and regulations
of the country concerned to be converted into major
reserve currencies, and for which a fairly active and liquid
market exists for dealing against the major currencies.
Petrodollars Foreign exchange reserves of oil producing nations arising
from oil sales.
PIBOR Paris Inter-bank Offered Rate.
Pip See point. (0.0001 of a unit).
Plaza Accord The 1985 Plaza Hotel agreement by the G5 to lower the
(1) 100th part of a per cent, normally 10,000 of any spot
rate. Movements of exchange rates are usually in terms of
points. (2) One percent of an interest rate, e.g. from 8-9%.
(3) Minimum fluctuation or smallest increment of price
The potential for losses arising from a change in government
policy or due to the risk of expropriation (nationalization by
The netted total exposure in a given currency. A position
can be either flat or square (no exposure), long, (more
currency bought than sold), or short (more currency sold
The maximum position, either net long or net short, in one
future or in all futures of one currency or instrument one
person is permitted to hold or control.
PPI Producer Price Indices. See Wholesale Price Indices.
(1) The amount by which a forward rate exceeds a spot
rate. (2) The amount by which the market price of a bond
exceeds its par value. (3) In regard to options, the price a
put or call buyer must pay to a put or call seller for an
option contract. (4) The margin paid above the normal price
(1) The rate from which lending rates by banks are
calculated in the US. (2) The rate of discount of prime bank
bills in the UK.
Principal A dealer who buys or sells stock for his/her own account.
Producer Price Index (PPI)
PPI is a measure of the average level of prices of a fixed
basket of goods received in primary markets by producers. A
rising PPI is normally expected to lead to higher CPI, and
thereby to potentially higher short term interest rates.
Profit Taking The unwinding of a position to realize profits.
Purchasing Power Parity
Model of exchange rate determination stating that the price
of a good in one country should equal the price of the same
good in another country after adjusting for the changes in
the price due to the change in exchange rate. Also known as
the law of one price.
Put Call Parity The equilibrium relationship between premiums of call and
put options of the same strike and expiry.
A put option confers the right but not the obligation to sell
currencies, instruments or futures at the option exercise
price within a predetermined time period.