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Glossary of Investment Terms: R

Rally
A recovery in price after a period of decline.

Random Walk Theory
An efficient market hypothesis, stating that prices move randomly versus their intrinsic value. Therefore, no one can forecast market activity based on the available information.

Range
The difference between the highest and lowest price of a future recorded during a given trading session.

Rate
(1) The price of one currency in terms of another, normally against USD
(2) Assessment of the credit worthiness of an institution.

Ratio Spread
Buying a specific quantity of options and selling a larger quantity of out of the money options.

Ratio Calendar Spread
Selling more near-term options than longer maturity options at the same strike price.

Reaction
A decline in prices following an advance.

Real
A price, interest rate or statistic that has been adjusted to eliminate the effect of inflation.

Realignment
Simultaneous and mutually co-ordinated re- and devaluation of the currencies of several countries. An activity that mostly refers to EMS activity.

Reciprocal Currency
A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.

Reinvestment Rate
The rate at which interest earned on a loan can be reinvested. The rate may not attract the same level of interest as the principal amount.

Report
French term for premium.

Reporting Dealer
Term for U.S. Primary Dealers.

Repo Rate
See Repurchase Agreement.

Repurchase Agreement
Agreements by a borrower where they sell securities with a commitment to repurchase them at the same rate with a specified interest rate.

Reserve Currency
A currency held by a central bank on a permanent basis as a store of international liquidity, these are normally Dollar , Deutschemark, and sterling.

Reserves
Funds held against future contingencies., normally a combination of convertible foreign currency, gold, and SDRs. Official reserves are to ensure that a government can meet near term obligations. They are an asset in the balance of payments.

Reserve Requirement
The ratio of reserves to deposits, expressed as a fraction prescribed by national banking authorities, including the United States.

Reserve Tranche  
The 25% of its quota to which a member of the IMF has unconditional access, and for which there is no obligation to repay.

Resistance Point or Level 
A price recognised by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.

Rescheduling
The renegotiation of the terms of existing debts. The term is usually used with reference to LDC debt. The term rescheduling is considered to be refinancing to avoid any implication of default. Major sovereign debt rescheduling for Brazil, and Mexico have been undertaken in recent years.

Retail Price Index
Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.

Reversal
Process of changing a call into a put.

Reversal
Reversal Patterns Patterns that occur at the end of the trend, signalling the trend change.

Revaluation
(1) Increase in the exchange rate of a currency as a result of official action.
(2) The rate for any period or currency which is used to revalue a position or book.

Revaluation Rate  
Revolving credit Upon repayment by the borrower the credit becomes automatically available.

Right-hand Side 
To do a deal on the right hand side of a two way quote, normally to buy the currency and sell dollars. See Left-hand Side.

Ring
An area on a trading floor where futures or equities are traded.

Risk
The degree of uncertainty associated with an investment. The main elements that contribute to the riskiness of an investment are volatility, liquidity and leverage. All things being equal, a high degree of volatility and leverage makes an investment more risky. An illiquid market, where buyers are not always matched by sellers, also increases risk—investors can be left holding an asset that is falling in price.

Risk/Return
The relationship between the risk and return on an investment. Usually, the more risk you are prepared to take, the higher the return you can expect. Depositing your money in a bank is safe and therefore a low return is regarded as sufficient. Investing in stock market exposes you to more risk (from capital losses) and so investors will expect a higher return.

Risk Factor
The risk factor (delta) indicates the risk of an option position relative to that of the related futures contract.

Risk Management
The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.

Risk Position
An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.

Risk Premium
Additional sum payable or return to compensate a party for adopting a particular risk.

Risk Reversal
(1) A combination of purchasing put options with the sale of call options.
(2) The put limits downside, while the call limits the upside.

Rollover
An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).

Rollover Credit
Medium term credit with a variable interest rate, which is governed by the currently prevailing rates on the Euromarket.

Round Trip
Buying and selling of a futures or options contract.

Running a Position
Keeping open positions in the hope of a speculative gain.