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Capital Markets Glossary

A short explanation of commonly used terms, used in these courses

Valuation

A method for finding the value of a trade. The valuation could be positive meaning a profit, or negative meaning a loss.


VaR

Value at Risk is a statistical approach to measuring the possible losses (or profits) on a portfolio. There are variations of VaR including Variance-Covariance, Historical Simulation and Monte Carlo.


Variation Margin

VM is calculated once a day and is the change on net portfolio value from day to day.


Volatility

The amount by which a measure such as price changes in time. When a market such as FX sees rate moves rapidly within a day, you might describe that market as volatile. Volatility means there is profit to be made on the up and down swings. A flat market means no change in prices or rates, stifling the chance to make profits.