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Glossary of Investment Terms: I

ICCH
International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.

IFEMA
International Foreign Exchange Master Agreement

IMF
International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.

IMM
International Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures.

Implied Volatility
A measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.

Implied Volatility Skews
The implied volatility varies for different strikes of an option.

Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.

In-the-Money
A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price.

Inconvertible Currency
Currency which cannot be exchanged for other currencies, either because this is forbidden by the foreign exchange regulations.

Index Linking
The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.

Indicative Quote
A market-maker's price which is not firm.

Industrial Production Index
A coincident indicator measuring physical output of manufacturing, mining and utilities.

Inflation  
Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial Margin
The margin is a returnable deposit required to be lodged by buyers and sellers with the clearing house to secure a new futures or options position.

Instruction
The specification of the banks at which funds shall be paid upon settlement.

Inter-bank Rates
The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.

Inter-dealer Broker
A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.

Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.

Interest Parity
One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity.

Interest Rate Options
An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.

Interest Rate Cap
An agreement that provides the buyer of a cap with a maximum interest rate for future borrowing requirements.

Interest Rate Collar
A combination of a cap and a floor to provide maximum and minimum interest rates for borrowing or lending.

Interest Rate Floor
An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.

Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.

Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

Intra-Day limit
Limit set by bank management on the size of each dealer's Intra Day Position.

Intra-Day Position
Open positions run by a dealer within the day. Usually squared by the close.

Intrinsic Value
The amount by which an option is in-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security.

Inverted Market
Where short term instruments are trading at premiums to long term instruments.

IOM
Index and Options Market part of the Chicago Mercantile Exchange.