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Glossary of Investment Terms: P

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.

Paris
A term for USD FRF Spot Rate.

Parity
(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.

Parities
The value of one currency in terms of another.

Parity Grid
A term used in the context of the European Monetary System which consists of the upper, central and lower intervention points between member currencies.

Pegged
The date on which a dividend or bond interest payment is scheduled to be paid.

Payment Date
A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.

Petrodollars
Foreign exchange reserves of oil producing nations arising from oil sales.

Philadelphia Stock Exchange (PHLX)
The oldest U.S. securities exchange which offers currency futures and options on currency futures.

Pip
See point.

Point
(1) 100th part of a per cent, normally 10,000 of any spot rate. Movement of exchange rates are usually in terms of points.
(2) One percent on an interest rate e.g. from 8% -9%.
(3) Minimum fluctuation or smallest increment of price movement.

Political Risk
Exposure to changes in governmental policy which will have an adverse effect on an investor's position.

Portfolio Insurance
An option hedging strategy to protect long cash market positions.

Position
The netted total commitments 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 than bought).

Position Clerk
A clerk who assist the dealer in recording a dealers position and ensures that all deal tickets are completed and transferred to the back office or input into the books in a position keeping system.

Position Limit
The maximum position, either net long or net short, in one future or in all futures of one currency or instrument combined which may be held or controlled by one person.

Pre-Spot Dates
Quoted standard periods that fall between the transaction date and the current spot value date.

Premium
(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) 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 level.

Price Transparency
Describes quotes to which every market participant has equal access.

Primary Reserves
Gold related monetary reserves, being gold, SDR, etc.

Prime Rate
(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
An economic indicator which gauges the average changes on prices received by domestic producers for their output at all stages of processing.

Profit Graph
A graphical representation of the profits to a given options strategy for different underlying asset prices.

Profit Taking
The unwinding of a position to realise profits.

Proxy Hedge
A term to describe when it is necessary to hedge against a currency where there is no market but it follows a major currency, the hedge is entered against the major currency.

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, exchanged at the current rate. Also known as the law of one price.

Put Option
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.

Put Call Parity
The equilibrium relationship between premiums of call and put options of the same strike and expiry.

Pyramiding
The use of cash generated by positive variation margins on a futures position to increase the size of the position, each reinvestment in successively smaller increments.