Forex glossary of terms
Forex glossary - V
Value Date - For exchange contracts it is the day on which the two contracting parties exchange the currencies which are being bought or sold. For complete description see the chapter on trading. For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month If the one month date falls on a non-banking day in one of the centers then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not effect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also referred to as maturity date.
Value Spot - Normally settlement for two working days from the date the contract is entered into. Value Today Transaction executed for same day settlement; sometimes also referred to as "cash transaction."
Vanilla - A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. To compare with exotic options which have additional terms.
Variance - Measures the volatility of a data set/data points from the mean. It is calculated by adding the squares of the standard deviations from the mean and dividing by the number of data points, i.e. taking the average of the standard deviations.
Variation Margin - Funds required to be deposited by a client when a price movement has caused funds to fall below the stipulated percentage of the value of the contract.
Vega - Expresses the price change of an option for a one per cent change in the implied volatility.
Velocity of Money - The speed with which money circulates or turnover in the economy. It is calculated as the annual national income - average money stock in the period.
V Formation - See Spike
Vertical spread - The purchase of a call (put) and the sale of a call (put), where the options have the same expiration and different strike prices.
Volatility - A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes (historic). Can be implied from futures pricing, implied volatility.
Volume - The number of transactions in futures or options on futures made during a specified period of time.
Vostro Account - A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
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