Page 39 - PRIAA Glossary

CORPORATE
A term used in the credit derivative market to describe a borrower that is a limited company (or similar entity), but that is not a government, bank or insurer.
CORPORATE ACTION
Actions undertaken by a corporate entity that affect all stakeholders in the entity is defined as corporate action.
The actions are usually approved by the board of directors. Certain actions require the approval of majority stakeholders in the company. Examples of corporate actions include dividends, splits and reverse splits.
CORRECTION
A reduction in the price/value of an asset/commodity. It is an adjustment of the overvaluation of the asset/commodity. It can either be a minor reversal in the upward trend or can sometimes also signal a change in the trend of the price of the asset/commodity.
CORRECTIVE CONTROL
A control that occurs after an event and restores the system or process back to the state prior to a harmful event. A corrective control mitigates consequences of events (e.g., fines and reputation) and may become action plans.
CORRELATION
A statistical measure of the extent to which the movements of two variables are related. In finance, it is normally used
to describe the relationship between the price movements
of two financial instruments. Correlations range from -1 (perfectly anticorrelated) to 1 (perfectly correlated). The value of 0 signifies that the price movement/return is independent.
CORRELATION SWAP
A correlation swap is a forward contract whose value is based upon the average correlation between members of a basket of underlyings. The final payoff is proportional to the difference between the realised average correlation between basket members and a pre-agreed strike correlation.
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