Financial Derivative Terms - N
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
- Naked Option
- An unhedged option strategy where the buyer or seller has no offsetting or risk-reducing position in another option or the underlying security. Very risky and is the opposite of a covered option.
- Napoleon Options
- Financial instruments, with the underlying usually a single index, that give their traders the opportunity to play with the volatility of a market. The main factors of the payoff of a Napoleon option is a fixed coupon and the worst return of an index over specified time periods.
- Net Asset Value
- The total value of a portfolio’s assets less its liabilities divided by the number of outstanding shares.
- Net Present Value
- The present value of expected future cash flows from an investment less the cost of that investment.
- Normal Backwardation
- The relationship between the futures price of an asset being less than the expected spot price of the asset on the delivery date of the contract.
- Normal Contango
- The relationship between the futures price of an asset being greater than the expected spot price of the asset on the delivery date of the contract.
- Normal Probability Distribution
- A symmetrical “bell" shaped probability distribution of data with the average or mean in the centre and the variations on each side. Most examples in a set of data are close the average while relatively few examples are at each extreme.
- Notional Value
- The total value of a derivative’s underlying assets at the current (spot) price.
- Notional/Principal
- The value that the counterparties agree to in order to determine the size of future cash flow and interest payments for a derivative. The amount is notional because there is no exchange of actual principal.
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