Backwardation- Backwardation occurs when the price of futures with longer maturities are less than prices of futures with shorter maturities; it is the opposite of contango.

 

Bank- A bank takes deposits, makes loans, arranges payments, holds a banking license and is subject to regulatory supervision by a banking regulator.

 

Bank Panic- A bank panic occurs when a large number of depositors at multiple different banks simultaneously demand the return of their deposits.

 

Bank Run- A bank run occurs when a large number of depositors at one bank simultaneously demand the return of their deposits.

 

Banking Book- The banking book of a bank is the portfolio of assets, primarily loans, a bank expects to hold until maturity when the loan is repaid fully; typically refers to the loans the bank underwrites.

 

Banking License- A banking license, issued by a banking regulator or supervisor, allows a bank to engage in banking activities under the condition that the bank agrees to be supervised by regulatory or supervisory authorities.

 

Barrier Options- Barrier options are path-dependent options which come in many flavours and forms, but their key characteristic is that these types of options are either initiated or exterminated upon reaching a certain barrier level; that is, they are either knocked in or knocked out.

 

Basel Accords- The Basel Accords (Basel I Accord, the Market Risk Amendment and the Basel II Accord) are the cornerstones of international risk-based banking regulation, the results of a collaborative attempt by banking regulators from major developed countries to create a globally valid and widely applicable framework banks and bank risk management.

 

Basel Committee on Banking Supervision- The Basel Committee on Banking Supervision is a forum for regulatory cooperation between its member countries on banking supervision-related matters, was established by the central bank governors, and consists of senior representatives of bank supervisory authorities and central banks from major economies.

 

Basic Indicator Approach- The Basic Indicator Approach is an approach to calculate operational risk capital under the Basel II Accord, and uses the bank's total gross income as a risk indicator for the bank's operational risk exposure and sets the required level of operational risk capital as 15% of the bank's annual positive gross income averaged over the previous three years.

 

Basis Point- A basis point is one-hundredth of one percent, or 0.0001.Basis Risk Basis risk is the degree of imperfect change in the relationship between the price used to value a position and the price of the instrument used to hedge the position.

 

Basket Options- Option definitions and classifications often find themselves overlapping one another and certain options can be classified under various different categories. Basket options are an example which fit into this category. They often overlap other options such as Mountain Range options and Rainbow options because of its multi-asset characteristic.

 

Bermudan Options- Bermudan options are similar in style to American style options in that there is a possibility of early exercise, but instead of a single exercise date there are predetermined discrete exercise dates. They are commonly used in interest rate and FX markets but we generalise them in this case for any type of options.

 

Beta- Beta describes the return sensitivity of an individual stock or a portfolio of stocks to that of the market. For US firms: Estimated by regressing weekly returns on stock against NYSE composite, using 5 years of data or listed period (if less than 5 years). If data is available for less than 2 years, the beta is not estimated).For all other firms: Estimated by regressing weekly returns on stock against the local index (generally the most widely followed index in that market - CAC in France, Sensex in India and Bovespa in Brazil), using 5 years of data. I use a composite of the two year regression beta and the five year regression beta, weighting the former 2/3rds and the latter 1/3rds.

Beta = (2/3) 2 year regression beta + (1/3) 5 year regression beta

If the five year regression beta is missing, I replace it with one. I also apply an aggregate check to ensure that the global average across all the companies is close to one.

 

Beta (Market)- See Beta.

 

Beta (Total)- See Total Beta.

 

Beta (unlevered)- See Unlevered Beta.

 

Beta (unlevered and corrected for cash)- See Unlevered Beta corrected for cash.

 

Beta Factor (Operational Risk)- The beta factor is the fixed percentage of average positive annual gross income (over three years) of the eight different business lines a bank may have and is used to calculate its operational risk capital. 

 

Bid-Ask Spread- The bid-ask spread is the difference between the buy price or rate (bid) and sell price or rate (ask) of an financial instrument.

 

Binary Options- In computer or mathematics jargon, a binary number is one which is given a value of either 0 or 1 and nothing else; in the case of derivatives, a binary option, sometimes referred to as a digital option (hereon we use only the term binary), is an option which pays either an asset out at expiry, or nothing at all based on whether or not the option expires in the money.

 

Black-Scholes Model- The Black-Scholes model is a pricing approach, initially derived by Fisher Black and Myron Scholes, used to value various types of contingent and derivative securities, such as options.

 

Board of Directors- The board of directors has the ultimate responsibility for the management and performance of a company, is responsible for the bank's governance, and is elected by the shareholders.

 

Bond- A bond is a legally binding contract through which the borrower (also referred to as the issuer of the bond) borrows the principal, an amount specified in the bond, from an investor and in exchange pays a specified amount of interest, usually at regular intervals, and at maturity repays the principal.

 

Book Debt Ratio- This is the book estimate of the debt ratio, obtained by dividing the cumulated value of debt by the cumulated value of debt plus the cumulated book value of equity for the entire sector.

 

Borrower- A borrower receives money by borrowing money with the promise to repay the amount borrowed, or principal, and to pay compensation for borrowing the funds, or interest, to the lender.

 

Bucketing- Bucketing is the process of grouping similar types of exposures by type, size, kind, quality or time period.

 

Business Continuity Planning- Business continuity planning involves the task of identifying, developing, acquiring, documenting, and testing procedures and resources that will ensure continuity of a firm's key operations in the event of an accident, disaster, emergency, and/or threat.

 

Business Disruption and System Failure- Business disruption and System failure under the Basel II Accord includes operational risk events such as utility disruptions, software failures, hardware failure.

 

Business Risk- Business risk is the potential loss due to a weakening in competitive position.

 

BV of Capital- This is the book value of debt plus the book value of common equity, as reported on the balance sheet.

ר רועי פולניצר, MBA ,CRM , FRM הינו הבעלים של שווי פנימי - ייעוץ והדרכהשווי פנימי, רועי פולניצר, ניהול סיכונים, הערכות שווי, Intrinsic Value, Roi Polanitzer, Risk Management, Valuation, VaR, FRM. PRM, CRM. GARP, PRMIA, IARM