Variable Interest Rate
What is a 'Variable Interest Rate' A variable interest rate is an interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically. The obvious advantage of a variable interest rate is that if the underlying interest rate or index declines, the...
Vega Neutral
What is 'Vega Neutral' A method of managing risk in options trading by establishing a hedge against the implied volatility of the underlying asset. A vega neutral option position will be not be sensitive to volatility fluctuations. These strategies are used to hedge against the risks of price sensitivity, second-order time price sensitivity and time sensitivity, respectively....
Value Deflation
What is value deflation and how does it work Value deflation occurs when the prices of goods and services decrease. This can happen when there is an increase in the supply of a good or service, or when there is a decrease in the demand for it. When Deflation happens, people have less money to spend, and businesses make less...
Variance Swap
Definition A variance swap is an over-the-counter financial derivative that allows one to speculate on or hedge risks associated with the magnitude of movement, i.e. volatility, of some underlying product, like an exchange rate, interest rate, or stock index. Benefits and Disadvantages of Variance Swaps A Variance Swap is an over-the-counter financial derivative that allows you to speculate on volatility and hedge...
Variable Price Limit
What is 'Variable Price Limit' A schedule of price variations above or below the accepted limits determined by the commodities exchanges for any one trading day. Explaining 'Variable Price Limit' Variable price limits allow contracts to trade past their maximum daily changes. Exchanges determine whether a futures contract be assigned a variable price limit...
Vega
What is 'Vega' Vega is the measurement of an option's sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. Volatility measures the amount and speed at which price moves up and down,...
Valuation Period
What is a valuation period A valuation period is a set period of time during which the value of an asset or security is calculated. This period can vary depending on the asset or security being valued, but is typically either daily, monthly, or yearly. The valuation period is used to determine the worth of an investment at a given...
Value Added
What is 'Value Added' Value-added describes the enhancement a company gives its product or service before offering the product to customers. Value-added applies to instances where a firm takes a product that may be considered a homogeneous product, with few differences (if any) from that of a competitor, and provides potential customers with a feature or add-on...
Valuation Reserve
What is 'Valuation Reserve' The funds set aside by life insurers as required by state law to compensate for declines in the value of investment instruments that are held by the insurance company as assets. Valuation reserves are required because life insurance contracts can be in effect for long periods of time, and the securities valuation reserve...
Value Added Monthly Index (VAMI)
What is 'Value Added Monthly Index - VAMI' An index that tracks the monthly performance of a hypothetical $1000 investment. The calculation for the current month's VAMI is: = Previous VAMI x (1 + Current Rate of Return) Explaining 'Value Added Monthly Index - VAMI' The value-added monthly index charts the total...