Palo Verde
The delivery point for one of the electricity futures contracts listed by the NYMEX. Chosen because Palo Verde is a high-voltage switchyard in Arizona which link the utilities of the southwestern US with those of California.

Parallel Shift

A movement in the yield curve where each point on the curve changes by the same amount.

Par Value

The principal amount of a bond.

Par Yield
The coupon on a bond that makes its price equal to its principal.

Paper Market
Expression used in commodity markets to describe contracts where delivery is settled in cash rather than by delivery of the physical product on which the contract is based.

Path-dependent Option
An option with a payout ratio dependent upon the price history of the underlying asset over all or part of the life of the option. Examples of path-dependent options include asian options and barrier options.


The holder of an option or other derivative at the end of its life.

Payout Ratio
Dividend as a proportion of earnings per share.

P/E Ratio
Share price divided by earnings per share.

Investment offering a level stream of cashflows in perpetuity.

A term used in commodity markets to differentiate contracts for the delivery of a product (ie physical delivery) from contracts that are cash settled ("paper contracts").

Plain Vanilla
A term used to describe a standard deal.

Unit of measure (parts per million), refer to g/t.

Physical commodity for immediate delivery.

Prompt Month
The first month for which a futures contract is being traded. Also known as front month.

Poisson Process
A process describing a situation where events happen at random.

Portfolio Immunisation
Making a portfolio relatively insensitive to interest rates.

Portfolio Insurance
Entering into trades to ensure that the value of a portfolio will not fall below a certain level.

Position Limit
The maximum position a trader (or a team of traders) is allowed to hold.

Present Value
Discounted value of future cashflows (see also net present value).

The price of an option.

Prime Rate
The rate at which banks lend to their most favoured customers.

The amount of debt that must be repaid (ie the par or face value of a debt instrument).

Program Trading
A procedure where trades are automatically generated by a computer and transmitted to the floor of an exchange.

Protective Put
A put option combined with a long position in the underlying asset.

Put-call Parity
The relationship between the price of a European call option and the price of a European put option when they have the same strike price and maturity date.

Put Option
An option to sell an asset at a certain price by a certain date.

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