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Glossary of Investment Terms: C

Cable/Sterling
A term used in the foreign exchange market for the US Dollar/British Pound rate.

Call
(1) An option that gives the holder the right to buy the underlying instrument at a specified price during a fixed period.
(2) A period of trading.
(3) The right of an bond issuer to pre-pay debt and demand the surrender of its bonds.

Calendar Spread
An option position comprised of purchase and sale of two option contracts of the same type with different expiration dates at the same exercise price.

Calendar Combination
A compound option strategy which consists of simultaneous buying of a longer-term straddle and near term straddle with a common strike price.

Candlestick Chart
A type of chart which consist of four major prices: high, low, open, close. The body (jittai) of the candlestick bar is formed by the opening and closing prices. To indicate that the opening was lower than the closing, the body of the bar is left blank. If the currency closes below its opening , the body is filled. The rest of the range is marked by two "shadows": the upper shadow (uwakage) and the lower shadow (shitakage).

Capital Account
Juxtaposition of the long and short term capital imports and exports of a country.

Carry
The interest cost of financing securities or other financial instruments held.

Carry-Over Charge
A finance charge associated with the storing of commodities (or foreign exchange contracts) from one delivery date to another.

Cash Market
The market in the actual financial instrument on which a futures or options contract is based.

Cash Settlement
A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.

Central Bank
A central bank provides financial and banking services for a country's government and commercial banks. It implements the government's monetary policy, as well, by changing interest rates.

Central Rate
Exchange rates against the ECU adopted for each currency within the EMS. Currencies have limited movement from the central rate according to the relevant band.

CHIPS
(Clearinghouse House Interbank Payment System) A computerised system used for foreign exchange dollar settlements.

CHAPS
Clearing House Automated Payment System.

Chartist
An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.

Cleared Funds
Funds that are freely available, sent in to settle a trade.

Clearing
The process of settling a trade.

Closed position
A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Closing purchase transaction
The purchase of an option identical to one already sold to liquidate a position.

Contagion
The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.

Collateral
Something given to secure a loan or as a guarantee of performance.

Commission
A transaction fee charged by a broker.

Confirmation
A document exchanged by counterparts to a transaction that states the terms of said transaction.

Contract
The standard unit of trading.

Counter Currency
The second listed Currency in a Currency Pair.

Counterparty
One of the participants in a financial transaction.

Country Risk
Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

Cross Currency Pairs or Cross Rate
A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP

Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc

Correlation
A statistical measure referring to the relationship between two or more variables (events, occurrences etc.). A correlation between two variables suggests some causal relationship between these variables. Typically the Swiss Franc is closely correlated with the German Mark.

Cost of Carry
The interest rate parity, where the forward price is determined by the cost of borrowing money in order to hold the position.

Covered Interest Rate Arbitrage
An arbitrage approach which consists of borrowing currency A, exchanging it for currency B, investing currency B for the duration of the loan, and, after taking off the forward cover on maturity, showing a profit on the entire set of deals.

Cross-Rate
The exchange rate between two currencies, e.g., Yen /French franc.

Currency
The type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another. If one US dollar can buy 1.55 Deutschmarks, then one Deutschmark can buy 0.65 US dollars.

Currency Pair
The two currencies that make up a foreign exchange rate.
For Example, EUR/USD

Currency Risk
the probability of an adverse change in exchange rates.