Abandon
The act of an option holder in electing not to exercise or offset an option.

A.B.S.
Asset backed security. A term describing certain finance structures where the underlying obligation and the source of interest and capital repayment is generated from the cash flow from a particular financial asset or pool of assets or from the predetermined proceeds from the disposal of the asset.

Active Premium
The return on an investment's annualized return minus the benchmark's annualized return.

Actuals
The physical or cash commodity, as distinguished from a commodity futures contract. Also see Cash and Spot Commodity.

Add-on Method
A method of paying interest where the interest is added onto the principal at maturity or interest payment dates.

Adjusted Futures Price
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g. bond or note) being delivered.

Advisory Board
A group whose functions include approval of valuations of investments and dealing with conflicts of interest. They may also approve distributions, review audits and consider requested exemptions from partnership covenants.

Against Actuals
See Exchange For Physicals.

Aggregation
Also called netting. Refers to a portfolio perspective when calculating the carried interest between general partners and limited partners.

Aggregation in Futures
The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative limits.

Aggressive
Aggressive growth invests in equities expected to enjoy higher than normal growth in EPS. Typically have high P/E ratios, low or no dividends, often smaller capitalization. Often concentrates in sectors like technology, banking or biotechnology. Hedges by shorting equities where an earnings disappointment is expected or by shorting stock indexes. Normally has a long bias.

Alpha
Alpha measures the non-systematic return, that which cannot be attributed to the market. It shows the difference between a fund's actual return and its expected return, given its level of systematic (or market) risk (as measured by beta). A positive alpha indicates that the fund has performed better than its beta would predict. Alpha is widely viewed as a measure of the value added or lost by a fund manager.

Altman-Salomon Center Index
This is a benchmark which measures the performance of issues which have defaulted. The index includes " all public, non-convertible corporate debt issues that have either filed for bankruptcy or defaulted on a scheduled interest or principal payment". A weighted average of market value is used to calculate the yields and returns. The weighted average is calculated by each issue being weighted according to the product of its face amount outstanding and its price (as a percentage of par) as of the beginning of the measurement period.

Approved Delivery Facility
Any bank, stockyard, mill, storehouse, plant, elevator or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

Arbitrage
The simultaneous purchase and sale of a security, currency or market at different prices to capture the price spread. See Merger Arbitrage, Convertible Arbitrage, Fixed Income Arbitrage, Risk Arbitrage, Index Arbitrage, Volatility Arbitrage, MBS Arbitrage, International Credit Arbitrage.

Asset Protection Trust
A trust established offshore to protect the settlor's assets against those who may make claims against them, including creditors, former spouses and dependents on death. Some offshore jurisdictions provide protection from creditor claims against persons who have guaranteed bank loans.

Asset swap
The term used for interest rate swap or cross-currency swap transactions for hedging interest rate and foreign exchange risk in fixed income securities. Convertible arbitrage managers often 'swap out' of the debt portion of the convertible leaving only the equity derivative. This effectively removes the interest-rate risk and credit risk.

Assign
To make an option seller perform his obligation to assume a short futures position (as a seller of a call option) or a long futures position (as a seller of a put option).

Assignable Contract
One which allows the holder to convey his rights to a third party. Exchange-traded contracts are not assignable.

At-the-Money
When an option's exercise price is the same as the current trading price of the underlying commodity, the option is at-the-money.

Average Gain (Gain Mean)
This is the arithmetic mean of the periods with a gain. It is calculated by summing the returns for the gain periods (where return > 0) and dividing by the number of gain periods.

Average Loss (Loss Mean)
The arithmetic mean of the periods with a loss.