Page 77 - PRIAA Glossary

FUNDED STATUS
A measure of how well a pension plan’s current portfolio of assets meets its projected future benefit obligations. If the value of the pension’s portfolio is less than the projected benefits, the funded status will be negative. If the value of the pension’s portfolio is greater than the projected benefits, the funded status will be positive. The funded status should appear in the pension’s financial statements.
FUNDING VALUATION (OR VALUE) ADJUSTMENT (FVA)
The difference between a portfolio valued without the cost of hedging one’s own positive exposure to the portfolio (taking one’s own funding costs into account), and a portfolio valued with this cost taken into account.
FUTURES
An exchange-traded agreement to take or make delivery of an asset at a specific time in the future for a specific price agreed today. Contracts are standardised in order to facilitate trading on a futures exchange.
FUTURES AND OPTIONS ASSOCIATION (FOA)
A trade association dedicated to promoting the smooth functioning of exchange-traded derivative contracts through the publication of standardised documentation and guidelines.
FUTURES COMMISSION MERCHANT (FCM)
An organisation that solicits or accepts orders for the purchase or sale of any financial instrument for future delivery. FCMs can solicit business directly, but most act as exchange liaisons for introducing brokers. An FCM can be either a clearing member of an exchange (a clearing FCM) or a non-clearing member of an exchange (a non-clearing FCM).
FUTURISATION
A term used to describe an apparent shift from trading
some highly liquid derivatives or swaps over the counter (OTC) to exchanges. To achieve this shift, exchanges have started offering swap futures which mimic more liquid OTC swaps. This trend was initiated and is accelerated due to the ever-increasing regulation of the swaps market under Dodd- Frank and the associated costs.
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