Page 84 - PRIAA Glossary

HISTORICAL VOLATILITY
The annualised standard deviation of daily price returns for an underlying security. Lognormal historical volatility is the annualised standard deviation of the natural log of daily price returns for an underlying security.
HOLDINGS
The individual stocks, bonds or derivative securities that a portfolio manager has purchased for a portfolio/account. Each holding has a market value, which is the price of the security times the quantity within that account. Also known as positions.
HO-LEE MODEL
A normal, one-factor, short-rate model used to price interest rate (IR) derivatives. The Ho-Lee model can be used to price some exotic IR derivatives.
HONG KONG MONETARY ASSOCIATION (HKMA)
An association established on 1 April 1993 after the merger of the Exchange Fund with the Office of the Commissioner of Banking. HKMA’s objectives are to maintain monetary and banking stability.
HORIZONTAL SPREAD
A trading strategy where one option is purchased and another option is sold on the same underlying asset. The options have the same strike price but different expiration dates. Also known as a “calendar spread” or “time spread”.
HULL-WHITE MODEL
A normal, one or two-factor short-rate model used to price interest rate (IR) derivatives. The main difference between the Hull-White model and the Ho-Lee model is the inclusion of a mean-reversion term for the short rate. The Hull-
White model is generally regarded to take more market information into account than the Ho-Lee model, so it is used to price a broader range of exotic IR derivatives.
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