Z - Return to Index

Z - Is the Commodity Futures Symbol which represents the December Delivery Month.

Z or Accrual Bond - Is a security which has accretion characteristics. Its balance grows much in the sense of a zero coupon bond, however it is subject to prepayments or other events.

Z PACs - Are bonds in the Z tranche that accrue or accrete interest similar to the plain Z bond. However, the Z PAC repays principal as well. This principal repayment is defined and conditioned by a prepayment schedule or collar.

Zero or 0 - Refers to the binary complement of One or 1. Sometimes it is an expression to represent “nothing” or “nil”. It is also the last symbol of the following sequence: 1, 2, 3, 4, 5, 6, 7, 8, 9, 0.

Zero Cost Collar - Is a transaction which has little or zero cash outlay or cost for the initiating person. Often, a security is held and some protection is sought via a hedging transaction. One example, would be the purchase of an out-of-the-money put (debit) and the sale of an out-of-the-money call (credit). Here, the premiums for the debit and credit are nearly the same. Therefore, there would be little or no cost for the person seeking the hedge. However, this position places a cap on the potential reward for holding the underlying asset. Essentially, the protection does not kick-in until the price of the underlying instrument goes below the exercise price for the put.

Generally speaking, it should be noted that if the hedge occurred with both options at-the-money, then the person replicated a synthetic short against an actual long position. For the latter, the hedge would be considered as delta neutral whereas using two out-of-the-money options, the hedge at the origination would not be delta neutral. Rather, it would be computed as a partial hedge when placed.

Zero Coupon Bond - Is a security which the interest and/or principal has been discounted to be offered at less than the stipulated principal or coupon amount due at maturity or early option payment. These securities effectively behave like treasury bills or other paper offered at an original discount. Zero coupon bonds can have conversion factors and other features implicitly embedded or explicitly stated.

Zero Curve - Is a yield curve comprised of the yields of zero coupon bonds arranged over time. Frequently, this arrangement is graphically portrayed starting with the shortest maturities and progressing to the longest maturities. This curve would provide the basis for pricing other securities using iterative or interpolation techniques.

Zero-Minus-Tick - Refers to a trading transaction made at the same price as the preceding one but the preceding one was lower than its predecessor.

Zero-Plus-Tick - Refers to a trading transaction made at the same price as the preceding one but the preceding one was higher than its predecessor.

ZIRP - Refers to Zero Interest Rate Policy. Essentially, this is a policy that attempts to target zero or near-zero interest rates with the hope or preferably expectation that such behavior increases lending and its companion borrowing. However, reluctance by banks to lend or borrowers to take on more debt can neutralize these efforts at increasing systemic credit usage. If the banks have effectively risk-free alternatives for borrowing funds and then (re-)depositing those funds with a banking system institution rather than lending to more risky prospects or clients then the banks may choose to take the “sure thing” and collect interest on deposits or government guaranteed obligations. These obligations can be Sovereign or Treasury bills, notes, bonds and so forth.

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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 Thursday, October 19, 2017.