Word of the Day
Futures Terms that begin "R"
Random Walk
An economic theory that market price movements move randomly. This assumes an efficient market. The theory also assumes that new information comes to the market randomly. Together, the two assumptions imply that market prices move randomly as new information is incorporated into market prices. The theory implies that the best predictor of future prices is the current price, and that past prices are not a reliable indicator of future prices. If the random walk theory is correct, technical analysis cannot work.
Redemptions
The time period in which an investor in a fund may withdraw his or her capital from the fund. For example, quarterly redemption allows an investor to withdraw capital every quarter.
Regulated Exchange
A registered national securities exchange, a national securities association registered under section 15(a) of the Securities Exchange Act of 1934, a designated contract market, a registered derivatives transactions execution facility, or an alternative trading system registered as a broker dealer.
Relative Value Arbitrage
Relative Value Arbitrage attempts to take advantage of relative pricing discrepancies between instruments, including equities, debt, options and futures. Managers may use mathematical, fundamental or technical analysis to determine misvaluations. Securities may be mispriced relative to the underlying security, related securities, groups of securities or the overall market. Many funds use leverage and seek opportunities globally. Arbitrage strategies include dividend arbitrage, pairs trading, options arbitrage and yield curve trading.
Reporting Level
Sizes of positions set by the exchanges and/or the CFTC at or above which commodity traders or brokers who carry these accounts must make daily reports about the size of the position by commodity, by delivery month, and whether the position is controlled by a commercial or non-commercial trader.
Risk-adjusted Performance
Risk relative to return - the return achieved per unit of risk or the risk associated with a particular level of reward, typically represented by the Sharpe ratio. Improving the risk-adjusted return depends either on increasing returns and maintaining the level of risk, or maintaining the level of returns and lowering the associated risk.
Round Turn
The complete transaction of a closed out futures contract, i.e both the buying and selling operations. Commission rates are sometimes quoted on a round turn basis.