Page 58 - PRIAA Glossary

EFFICIENT FRONTIER
A mathematical concept developed by Harry Markowitz and modern portfolio theorists in the 1950s which determines a portfolio’s most efficient balance between risk and reward. The efficient frontier is plotted as a curve on a graph and takes into account the standard deviation of the return on all investments with some level of risk over a period of time. The most efficient make-up of a portfolio for the amount of risk will lie on the curve. The overarching take-away for portfolio managers and investors has been to diversify their portfolios.
ELECTRONIC COMMUNICATION NETWORK (ECN)
A financial term for a type of trading system that facilitates trading of financial products outside of stock exchanges. An ECN is generally an electronic system that widely disseminates orders entered by market makers to third parties and permits the orders to be executed in whole or in part. The primary products that are traded on ECNs are stocks and currencies.
ELECTRONIFICATION
The process by which derivative post-trade processes are automated. Electronification is often used specifically to refer to the process of making transactions electronically eligible for matching.
ELIGIBLE COLLATERAL
Collateral that fulfil given requirements in terms of quality and nature in order to be accepted by a central counterparty (CCP), central banks or market participants bilaterally.
ELIGIBLE CREDIT SUPPORT
Collateral, including its proceeds, that is acceptable under Paragraph 11(b)(ii) of the ISDA Credit Support Annex to the ISDA Master Agreement, to satisfy credit support obligations.
ELIGIBLE CURRENCY
Currency that is acceptable under Paragraph 11(a)(ii) of the ISDA Credit Support Annex to the ISDA Master Agreement.
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