Page 3 - PRIAA Glossary

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ABANDONMENT
The process whereby the buyer will elect not to exercise the contract because it is out-of-the-money or otherwise not economically beneficial (e.g., with an option transaction, allowing the contract to expire or lapse unexercised or
with a forward transaction, forgoing the purchase of an underlying asset).
ACCRETING SWAP
A swap with an increasing notional amount as depicted in a predefined schedule. An accreting swap is useful to companies that plan to borrow increasing amounts at floating rates and want to swap them for fixed-rate funds; accreting swaps are particularly popular in construction financing.
ACCRUED INTEREST
Interest earned on the notional amount of an investment between two payment dates. For example, the accrued interest on a bond would be the amount of interest owed to the buyer since the last coupon payment.
ACCUMULATED BENEFIT OBLIGATION (ABO)
An approximate measure of a pension liability assuming that the plan is terminated immediately. Therefore, it does not account for future salary increases.
ACCUMULATOR
A financial instrument in which the issuer sells underlying security at a predetermined value, usually at a discounted rate from the spot value. The buyer is obligated to buy the shares at the specified rate periodically until expiry or until the security reaches a knock-out value.
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