No, seriously folks out there in Internetland. The financial markets are much more
complicated than just stock market price-earnings ratios and bond market
interest rates. Thanks to complex
statistics-based theories and the explosion of derivatives, reports analyzing
the financial markets are now riddled with incredibly intimidating jargon:
1.
Crack spread - Definition: The "crack spread" is
the difference between cost of crude oil and price of a refined petroleum
product, usually using gasoline and distillate fuel…
2.
Contango - Definition: "Contango" is
when the prices along a futures curve rises successively as the contracts'
expiration increases. More basically, it is when the futures price is trading
above the spot price for a commodity….
3.
Backwardation - Definition: Backwardation is the
opposite of a contango. It occurs when
prices in the futures chain fall as the contracts grow more distant in time.
The futures price will be below the spot price….
4.
Duration - Definition: Duration is a weighted
average of the times that interest payments and the final return of principal
are received. The weights are the amounts of the payments discounted by the
yield-to-maturity of the bond…..
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