Trading Glossary

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Face value

Related: Par value

Fair price

The equilibrium price for futures contracts. Also called the theoretical futures price.

Feasible portfolio

A portfolio that an investor can construct given the assets available.

Federal funds

Deposits held in reserve for depository institutions at their district Federal Reserve Bank.

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow reserves from banks that have excess reserves.

Federal funds rate

The interest rate charged to borrow funds in the federal funds market.

Fill

The price at which an order is executed.

Fill or kill order

A trading order that is canceled unless executed within a designated time period. Related: Open order

Filter

The percentage by which the price of a security must change in order to trigger its purchase or sale.

Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.

Financial risk

The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.

First-in-first-out (FIFO)

A method of valuing the costs of goods sold that uses the cost of the oldest item in inventory first.

First notice day

The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized.

Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight security because the optioned common stock is trading low.

Fixed-income instruments

Assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed-income market

The market for trading bonds and preferred stock.

Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.

Flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.

Floatingprate contract

A guaranteed investment contract where the crediting rate is tied to some variable ("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment

Floor broker

A member who is paid a fee for executing orders for clearing members of their customers. A floor broker executing customer orders must be licensed by the CFTC.

Floor trader

A member who generally trades only for his own account, for an account controlled by him or who has such a trade made for him. Also referred to as a "local".

Foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. Compare external market and domestic market.

Forward contract

A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. It is not standardized and is not traded on organized exchanges.

Forward rate

A projection of future interest rates calculated from either the spot rates or the yield curve.

Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and large cities which have diverse funding sources.

Full price

Also called dirty price, the price of a bond including accrued interest.

Fundamental beta

The product of a statistical model to predict the fundamental risk of a security using not only price data but other market-related and financial data.

Fundamental descriptors

In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data.

Fund family

Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.

Funding ratio

The ratio of a pension plan's assets to its liabilities.

Funding risk

Related: Interest rate risk.

Futures

A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.

Futures commission merchant

A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC. Related: Commission house, Omnibus account

Futures contract

A standardized, transferable legal agreement to make or take delivery of a specified amount of a certain commodity of a certain grade or type at a specific point in the future. The price is determined at the time the agreement is made. Futures contracts must be traded on organized futures exchanges.

Futures contract multiple

A constant, set by an exchange, which when multiplied by the futures price gives the dollar value of a stock index futures contract.

Futures option

An option on a futures contract. Related: Options on physicals

Futures price

The price at which the parties to a futures contract agree to transact on the settlement date.