Backtesting: Interpreting the Past Backtesting is a key component of effective trading-system development. It is accomplished by reconstructing, with historical data, trades that would have occurred in the past using rules defined by a given strategy. The result offers statistics that can be used to gauge the effectiveness of the strategy. Using this data, traders can … [Read more...]
Weighted Average Rating Factor – WARF [Explained]
A measure that is used by credit rating companies to determine the credit quality of a portfolio. This measure allows rating companies to look at a portfolio as a single security, and assign it a single rating.WARFs are most often calculated by rating companies for collateralized debt obligations (CDOs). To calculate the WARF on a CDO the rating agencies must first calculate … [Read more...]
What is a Mini-Sized Dow Options?
Mini-Sized Dow Options is a highly leveraged index option on a futures contract in which the underlying index is the Dow Jones Industrial Average. The option has a multiplier of five, meaning that the option allows one to buy (for a call) or sell (for a put) up to five times the value of the DJIA. This allows one to profit from the option for a lower price than one would … [Read more...]
London International Financial Futures And Options Exchange – LIFFE
The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') is a futures exchange based in London. LIFFE is now part of NYSE Euronext following its takeover by Euronext in January 2002 and Euronext's merger with New York Stock Exchange in April 2007.A futures and options exchange in London, England that was modeled after the Chicago Board of Trade … [Read more...]
Globally Floored Contract
Globally Floored Contract is a guarantee found in structured investment products that provides a minimum payoff at maturity. A globally floored contract will protect the investor or minimize his loss in case the underlying investment loses its value. With principal-protected notes, an investor receives a guarantee providing downside protection on the investment. A cost … [Read more...]