Page 86 - PRIAA Glossary

I
IMPLIED VOLATILITY
The volatility that must be fed into the Black-Scholes formula in order to return a theoretical value equal to the market price for European put and call options. It can be roughly described as the estimated future volatility of the underlying, until maturity, implied by the price of the option. In some markets, options prices are quoted in terms of their implied volatilities rather than their prices.
INDEPENDENT AMOUNT/INITIAL MARGIN
An additional amount which is paid above the mark-to- market value of the trade or portfolio. The Independent amount is required to offset the potential future exposure or credit risk between margin call calculation periods. Initial margin is the amount of collateral (in currency value) that must be posted up front to enter into a deal on day 1.
INDEPENDENT SYSTEM OPERATOR (ISO)
An organisation responsible for ensuring the efficient use and reliable operation of a supply network and, in some cases, power generation facilities. Individual ISOs may cover whole countries or regions. ISO responsibilities vary by jurisdiction, but may include coordinating capacity allocation, overseeing the balancing of inputs and outputs, managing system emergencies and reserves, ensuring new facilities are built when needed and settling charges for use of the network. In some cases, ISOs are also responsible for managing power exchange activities.
INDEX
A collection of weighted securities used to indicate market performance. An index sets a basis for comparing returns against a sector of the market such as large equity (S&P 500 Index) or bonds (Barclays Aggregate Capital Bond Index, JP Morgan Emerging Bonds Index).
84