Page 9 - PRIAA Glossary

ASIAN OUT
An Asian option whereby the settlement price is the average level of an underlying instrument over a predetermined period.
ASK
The price at which a trader or market maker is willing to sell a contract. The ask price will always be larger than the bid price, to ensure there is a spread which is profitable.
ASSET ALLOCATION
An investment strategy where the investor attempts to achieve returns by investing in different asset classes and different countries. Asset allocation can be done either tactically or strategically.
ASSET BACKED SECURITY (ABS)
A structured security backed by a pool of non-real estate assets such as credit card receivables, auto loans and others.
ASSET SWAP
A structure involving both the sale of an asset to a counterparty and an interest rate swap packaged as a
single transaction. In the case of asset swaps with respect
to bonds, the asset will usually be a fixed rate instrument where the investor is seeking a floating rate return. The investment bank will therefore package the fixed rate bond together with an interest rate swap, swapping the fixed return on the bond for a floating return, thereby providing the investor with a synthetic floating asset.
ASSIGNMENT
The process by which one counterparty (transferor) agrees to transfer to a third party (transferee) its obligations under an existing transaction with another counterparty (the remaining party). The transferor, transferee and remaining party all need to agree to the novation. See also “stepping in”, “stepping out” and “novation”.
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