Page 12 - PRIAA Glossary

B
BACK OFFICE SERVICES
A department in a financial firm which handles settlement of transactions, clearing activities, record keeping
and accounting.
BACK TESTING
Assessing a model portfolio or an investment thesis by applying historical data, back in time, to determine how the portfolio would have performed had it been bought and held through the historical timeframe of market data conditions.
BACKLOADING
The process of inputting existing/historical transactions (OTC & ETD) into a trade repository or central counterparty.
BACK-TO-BACK TRANSACTIONS
A pair of transactions (multiple if offsetting) with identical economic details but in opposite directions such that the risk position is flat. The entity with a back-to-back position will bear no other risk than the counterparty risk.
BACKWARDATION
Inverted market condition in commodities and foreign exchange trading when the contracts for future months are decreasing in value relative to the current and recent months. This occurs usually because of shortages caused by excess of demand over supply. This is the opposite of contango.
BAD BUSINESS DAY
A day on which banks (and normally exchanges) are closed.
BALANCING MECHANISM
A means of ensuring that supply and demand stay balanced in an electricity grid or natural gas pipeline network.
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