R - Return to Index

RAD - Is the Receiver-Authorized Delivery service.

RAMS® - Is an enterprise-wide risk analysis and management software system which measures, monitors and manages positions in a real-time environment.

RAN - See Revenue Anticipation Note.

Random - Is a condition in finance or economics whereby changes occur on a probabilistic basis. The underlying probability function may be known or unknown.

Random Walk - Is the financial theory that asserts that changes in price or rate time series are unpredictable. However, the theory recognizes that there is a statistical interdependency between the data. This non-random stickiness is sometimes referred to as autocorrelation or serial correlation.

Range - Is the difference between the high and the low for a time series for a stated period. For example, it can refer to the daily, weekly, monthly, yearly or lifetime range in prices, interest rates or other economic indicator.

RAROC - Refers to the Risk Adjusted Return on Capital.

Ratio Spread - Is position where you sell more options relative to the number of options purchased. Compare to Backspread.

Ratio Writes - Refers to writing options against the underlying instrument in a greater- or less-than one-to-one relationship. Typically, it refers to writing multiple options against a position. Sometimes, this activity is explained as being delta neutral and at other times it is a more aggressive posture.

Real Estate Investment Trust - Is a special structure which holds real properties. These properties can be apartments, shopping malls, office buildings or other acceptable real assets. The trust must distribute 95 percent of its income to the shareholders in order to qualify for special tax treatment.

Real Estate Mortgage Investment Conduit - Is a vehicle to minimize double taxation of income from a pooling of mortgages.

Redemption Fee - Is a charge assessed against an invetor for redeeming shares or interests in a fund. Often this charge is used for early or premature withdrawals. This feature is more common for funds investing in illiquid securities or emerging market funds and annuity products.

Reflate - Is the economic and financial process whereby the monetary and fiscal authorities act to stabilize or reverse a downward trend in general price levels. Monetarists would view this activity as increasing the money supply.

Registered General Securities Person - See Account Executive. This person is Securities Series 7 licensed.

Registered Options Principal - Is a person deemed qualified to provide suggestions or recommendations regarding options to the public. Also, Branch Managers are required to be Registered Options Principals. This person is Securities Series 4 licensed.

Registered Securities Principal - Is a supervisor of Series 7 or specialty licensed brokers other than options. These principals supervise and review employees in the Front Office, Middle Office, and Back Office. For options supervision, see Compliance Registered Options Principal, Registered Options Principal, and Senior Registered Options Principal. A Registered Securities Principal is Series 24 licensed.

Registrar - Is typically a bank or trust company hired by a corporation to maintain a record of ownership for the company's securities. It other key responsibility is to account for the shares outstanding and avoid the issuance of new shares in excess of the authorized limit.

Regulation A - Governs the issuance of new securities. It provides a partial exemption from filing provisions of the Securities Act of 1933. The maximum allowable amount to qualify under Regulation A is $1,500,000.

Regulation D - Governs private placements. Private Placements occur when issuers directly sell securities to investors subject to strict qualifying requirements and provisions.

Regulation T - Governs the extension of credit by brokers and dealers to their clients for security transactions.

Regulation U - Governs the extension of credit by banks to its customers for purchasing listed securities.

Regulatory Capital - Is the amount of capital available for trading or position taking purposes by financial institutions. The total capital base is adjusted for memberships, various fixed assets, type and/or maturity of securities as well as other factors.

Reinvestment Risk - Is the situation whereby prepaid principal amounts will be reinvested in lower yielding securities.

REIT - See Real Estate Investment Trust.

Rejection - Is the refusal to accept securities. These securities did not conform to good delivery standards.

Relative Value - Is the comparative analysis between two or more assets. It is also a form of spread trading.

REMIC - See Real Estate Mortgage Investment Conduit.

Reoffering - Is the yield offered to the public for a new municipal security issue.

Replication - Is the approach that assumes derivative instruments can replicate the underlying security, basket of securities, currency, commodity or index. For example, see Synthetic Long and Synthetic Short. It is mostly true but important exceptions occur. For example, there can be differences in final returns due to tax considerations, possible extra transaction costs, and derivative securities do not include the shareholder vote. At times, such as proxy fights or other important issues, the replicated long position would have to be exercised into the actual security in order to be a timely shareholder of record. Expressed differently, increases in synthetic long positions do not increase the total number of votes or the total monetary amount of actual cash dividends.

Reporting Level or Reporting Position Level - Is the thresshold at which an account must formally document the size of open positions. There are different limits for each contract and exchange.

Repos - Are Repurchase Agreements.

Reset - Is the process which defines the benchmark, spread, timing, new coupon and other characteristics of a variable security.

Reset Date - Is the designated time for the reset event to occur. This timing feature can be monthly, quarterly, yearly or whatever is designed for the structure.

Reset Options or Reprice Options - Are options which have the terms such as price reset to different levels. Often this technique has been used to grant new and more favorable terms to the holder. For example, in a declining market for a company's stock, some executives or employees may have their options effectively repriced to lower strikes. Critics claim that this defeats the purpose of performance based options.

Resistance - Is a price level where stocks, bonds, currencies, and commodities are expected to receive sell orders. At its simplest application it is the ask or offer side of a quote. On a more complex level it refers to the upper boundary of some described trading range.

RESPA - Is the Real Estate Settlement Procedures Act.

RESPA Statement - Is the itemized listing of closing costs for buyers and sellers. It is required by the Real Estate Settlement Procedures Act.

Resting Order - Is an order waiting to be executed. Often it refers to a limit or other conditional order.

Revenue Anticipation Note - Is a security issued by a municipality against expected revenues. It has a maximum maturity of one year and is used as a cash management tool.

Revenue Bonds - Are debt securities which have a defined source of anticipated funds to pay both the principal and the interest. These funds come from an activity, project, or revenue source which is not related to a municipality's capacity to enact taxes. These bonds are sometimes viewed as more risky than General Obligation (GOs) Bonds.

Reversals - Are changes in direction for a time series for markets, such as, commodity, stock, currency or interest rates. Often these events are abrupt as prices suddenly change direction or trend.

Reverse - See Reverse Conversion.

Reverse Conversion - Is a strategy which consists of a long synthetic position and a short underlying position. In the futures markets, a trader would be synthetically long and actually short the underlying futures. It is essentially used for arbitrage purposes.

Reverse Crack - Is the sale of crude oil against the purchase of the refined products. In futures trading, it is the simultaneous sale of crude oil futures versus the purchase of heating oil and gasoline futures. The spread differentials reflect the potential refining margins, profitability, or loss. Here, the spread implies that the cost of the raw commodity input, crude oil, is relatively rich or expensive to its refined products. In fact, it suggests that it is economic to buy the products and sell the input. If this spread relationship persists, then refiners may reduce or cease production because it would be at a loss. Compare to Crack Spread.

Reverse Crush - Is the sale of soybeans against the purchase of the processed products. In futures trading, it is the simultaneous sale of soybean futures versus the purchase of soybean oil and soybean meal futures. The spread differentials reflect the potential processing margins, profitability, or loss. Here, the spread implies that the cost of the raw commodity input, soybeans, is relatively rich or expensive to its processed products. In fact, it suggests that it is economic to buy the products and sell the input. If this spread relationship persists, then crushers or processors may reduce or cease production because it would be at a loss. Compare to Crush Spread.

Reverse Floater - See Inverse Floater.

Reverse Repos - Are Reverse Repurchase Agreements. Depending on the context, they may be called Matched Sales.

Reverse Split - Occurs when a corporation reduces the number of shares outstanding by reorganizing its capitalization structure. Here, fewer shares may be an effort to have a higher unit share price. One motivation for this is that some exchanges have listing/delisting criteria of which share price is a factor. The proportional ownership of the shareholders does not change but the shares held do change.

Reverse TAC - Is a Targeted Amortization Class (TAC) tranche which has a long average life. This tends to provide some degree of protection against extension risk. However, rapid prepayments, which are greater than those stated in the TAC speed schedule, can quickly reduce the expected average life of the Reverse TAC.

Rho - Is the interest rate sensitivity of an option relative to a change in the interest rate option pricing variable. It measures an optionís change in value for a given change in the interest rate.

Rich - Is a term used in relative value analysis. The cash flow characteristics, when analyzed against a benchmark or comparison bond, suggest an over-valued security. This implies that the former security has arbitrage potential against the comparative security.

Right or Rights - Is the security which allows current shareholders to maintain their percentage of ownership in the corporation. Often the terms are such that one or more rights are required to purchase one share of common at a particular price. This price is at a discount to the current market. The time to expiration for a right or rights offering tends to be brief. It is related to a warrant, however the warrant tends to have a longer time to expiration.

Ring - Is the area on the floor of an exchange where trading occurs. It is also known as the pit.

Risk - Is the variability inherent in investment, speculative or trading activities. The greater the variability, the higher the risk. Risk can be attributed to many factors. As such, the specification of a risk can described with the use of an associated qualifying term. These terms include but are not limited to credit, counterparty, liquidity, market, fraud, currency, roll, agency, coupon, event, corporate and country.

Risk Arbitrage - Is a form of trading whereby the risk arbitrageur attempts to profit from issues involved in merger/acquisitions. The underlying rationale is that the current price after the announcement is still below the bid price. Also, the company may find itself subject to other bids for its stock in excess of the initial announced bid. These price differentials are the arbitrage part. The risk is that other bids do not materialize or the initial announcement fails due to other considerations.

Risk Arrays - Refer to how a specific derivative instrument will change in value, from the present to a specific point in time for a given set of market conditions. For SPAN® purposes, this time period is typically one day. Here, risk array values are calculated basis a single long position. Note that SPAN® views LONG as the purchase of a call or a put and not as market direction strategy. This contrasts to LONG usually referring to the side of the market and not the ownership of an instrument.

Risk Management - Is the practice of adjusting exposures for the firm's positions or portfolios. It tries to stabilize variability of returns while trimming large - dominant - net exposures as well. It can also be used to secure more favorable financing for inventories or pricing of securities or commodities.

See the following features for more information:

Illustrative RAMS® Graphics and Tables.

How Far with VAR (Value at Risk).

More about Risk Management.

Risk Management and Analysis Software.

RAMS® Executive Summary.

Risk Management Tutor 101.

Risk Management Document - Is a formal listing of trading and hedging processes, procedures and other activities related to position taking. See Powers and Authorities for a illustrative example of the scope of this important document.

Risk Transformation - Is the result of an effective hedge. Here, price, interest, or currency level risk is transformed into the more manageable and less volatile, basis risk. This volatility is measured in terms of comparative dollar value swings.

Risk Types - Include the following:

  • agency
  • bankruptcy
  • basis
  • capital restrictions
  • commodity
  • compliance
  • concentration
  • conversion
  • convexity
  • corporate
  • counterparty
  • country
  • coupon
  • credit
  • credit rating
  • currency
  • default
  • dilution
  • disaster
  • duration
  • environmental
  • event
  • exercise
  • force majeure
  • funding
  • hazards
  • legal
  • liquidity
  • market
  • nonsystematic
  • obsolescence
  • operational
  • option
  • pin
  • political
  • prepayment
  • price level
  • reinvestment
  • residual
  • roll
  • rule change
  • software, modelling, and financial assumptions
  • spread
  • systematic
  • technological
  • time value decay - theta
  • timing
  • volatility
  • weather
  • yield curve: shape, shift, tilt and twist.

The above risk terms relate to the capital and commodity markets. Other risk terms relate to the insurance industry.

RMD or RMDs - Refer to Required Minimum Distributions from retirement accounts/plans. The rules governing these distributions are complex and subject to changes, new interpretations or even definitions. This subject matter becomes more complicated in the event of a death.

Given those few caveats, RMDs are those distributions which must be made each period by the owner of the retirement account. Depending on the type of account factors such as life expectancy, over-funding, new contributions, actual age and its relationship to a statutory limit impact the calculation of Required Minimum Distributions.

ROA - Is the Return on Assets. It is calculated by dividing income by the total assets.

ROE - Is the Return on Equity. It is calculated by dividing income by the equity.

Rogue Trader - Is a person who operates outside the limits of his authority. There may or may not be criminal intent. Often these rogues try to hide losses but in the process incur even greater ones. Often these traders take on larger positions which are not authorized in order to recoup open losses.

ROI - Is the Return on Investment. It is calculated by dividing income by the total investment.

Roll Down - Is the movement out of a higher coupon or option strike price into a lower coupon or option strike price. It can also describe the movement down a yield curve from a relatively longer maturity security into a relatively shorter maturity security.

Rollover - Is the transfer of a position into a different delivery month.

Roll Up - Is the movement out of a lower coupon or option strike price into a higher coupon or option strike price. It can also describe the movement up a yield curve from a relatively shorter maturity security into a relatively longer maturity security.

RONA - Is Return on Net Assets.

ROP - See Registered Options Principal.

Rotation - Refers to the movement or flow of investments. Usually, it describes the flow into one sector of stocks and the reduction of positions in another stock sector.

Roth IRA - Is a retirement account created by the Taxpayer Relief Act of 1997. It is established with after-tax dollars but enjoys the benefits of nontaxable growth and nontaxable withdrawals. These nontaxable withdrawals are subject to certain criteria. Unlike the ordinary IRA account, the Roth IRA does not require minimum distributions at a specified age. Also, there may be favorable tax treatment for estate purposes.

Roundturn - Is a term used in the futures industry to reflect the commissions for a completed purchase and sale of a futures contract. Half of a roundturn represents the commission for either the purchase or the sale of a contract. Generally, it is important to specify that options will be charged a half of a roundturn because they may expire worthless or be exercises. Depending on the arrangement with the FCM, a customer may be charged for the roundturn immediately even though only a purchase or sale was transacted.

Royalties - Refers to income or payments derived from intellectual property or certain depletable assets such as oil and gas. Sometimes, there may be preferential income tax treatment.

RR - Registered Representative. See Account Executive Also known as an AE or IE.

RSAs - Are Risk Sensitive Assets.

RSLs - Are Risk Sensitive Liabilities.

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Copyright © 1998-2017 Barkley International, Inc. All Rights Reserved. - Page created Tuesday, May 19, 1998 by Oasis Management®. Last Modified on Tuesday, November 21, 2017.