I
Immunisation
The construction of an asset and a liability that are subject to offsetting changes in value.
Implied Distribution
A distribution for future asset prices implied from option prices.
Implied Repo Rate
The implied from the price of a Treasury Bill and a Treasury Bill's futures price. (see also Repo Rate).
Implied Volatility
Volatility implied from an option price using Black Scholes or similar model. (see also Black Scholes Option Pricing Model ).
Indexed Bonds
Bonds whose payments are linked to an index (eg consumer price index).
Index Futures
A futures contract based on an Index (eg a Stock Index).
Index Option
An option contract based on an Index (eg a Stock Index)
Initial Margin
Cash required by a futures Trader at the time of entering a trade. (see also Margin Call).
Interest-rate Cap
An option that provides a payoff when a specified interest rate is above a pre-defined level. The interest rate is a floating rate that is reset periodically.
Interest-rate Collar
The combination of an interest rate cap and an interest rate floor.
Interest-rate Derivative
A derivative with a payoff dependent upon future interest rates.
Interest-rate Floor
An option that provides a payoff when a specified interest rate is below a pre-defined level. The interest rate is a floating rate that is reset periodically.
Interest-rate Option
An option with a payoff dependent upon future interest rates.
Interest-rate Swap
The exchange of a fixed rate of interest on a notional principal for a floating rate of interest on the same notional principal.
Internal Rate of Return
Discount rate at which an investment has a zero net present value.
In-the-money Option
An option that would be worth exercising if it was exercised immediately, ie:Intrinsic Value
- A Call Option where the asset price is currently greater than the strike price; or
- A Put Option where the asset price is currently less than the strike price.
Ito Process
- For a call option this is the greater of the excess of the asset price over the strike price and zero;
- For a call option this is the greater of the excess of the strike price over the asset price and zero.
A stochastic process where the change in a variable during each short period of time, t, has a normal distribution. The mean and variance of the distribution are proportional to t, and are not necessarily constant.
Ito's Lemma
A result that allows the stochastic process for a function of a variable to be calculated for the variable itself.
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