Glossary

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D

Daily Price Fluctuation Limit

The maximum price fluctuation of a contract allowed by the stock exchange in a session in comparison to the end-of-day valuation rate of the previous day on the stock exchange.

Daily Price Fluctuation Limits

The maximum price fluctuation of a contract allowed by the stock exchange in a session in comparison to the end-of-day valuation rate of the previous day on the stock exchange.

Daily Revaluation

Each open position is reassessed daily based on the end-of-day valuation rate, from which result the potential profit or loss and the margin to be remargined or credited.

Daily Settlement

Each open position is reassessed daily based on the end-of-day valuation rate, from which result the potential profit or loss and the margin to be remargined or credited.

Daily Settlement Price

The rate set by the stock exchange at the end of each trading day base don the prices paid during the last trading minutes, which serves to calculate the change in value of the open position compared to the previous day at the stock exchange.

Day Trading

The position, which is to be offset again at the opening day.

DCM

A member of the clearing house of a futures market, who is authorised to clear individual deals and its clients deals.

Delivery

Meeting the contractual obligations of a futures market position.

Delivery Month

The month during which the basic security is delivered on a set day.

Delta

A measure for the change in the option price with a change of the basic security by one unit.

Delta Factor

A measure for the change in the option price with a change of the basic security by one unit.

Delta Hedging

A hedging strategy whereby an option position is built up whose value develops depending on the basic security price so that profits or losses in the hedged position are settled through profits or losses in the option position.

Deport

The market situation in which the futures contracts, which mature soon, are traded at higher prices than the contracts with a later maturity date. This situation often emerges if the supply does not satisfy the demand.

Derivative Financial Tool

A financial tool, which refers to another tool, for example shares, indices, goods etc.

Derivative Product

A financial tool, which refers to another tool, for example shares, indices, goods etc.

Designated Sponsor

The market-wide and predominantly very liquid securities in the German Stock Index (DAX) hardly need specific specialists to look after the liquidity in the markets and accordingly the fair prices for investors. Yet beyond the large title, it makes a lot of sense and is practised in all the large stock exchanges in the world that specialists operate as liquidity providers. Sometimes they are called Designated Sponsors, sometimes Animators and sometimes also Specialists or Market Makers. The specialists set binding prices for the purchase and sale of shares. Through this the probability of executing the order increases. The investors can assume that they can buy and sell such looked after shares at any time at fair prices, therefore their securities will be valued in line with the market. On the new market, each share must have at least two Designated Sponsors. The Designated Sponsor in turn can look after several shares as a liquidity provider. And this is generally also the case because otherwise the business is not worthwhile for the specialists. At the start of 2000 it was observed that some banks abandoned Designated Sponsor Mandates, since for them it did not pay. These were subsequently often taken over by other specialists, for example brokers, to round off their business activities. So that investors and issuers can reconstruct the work and quality of these specialists, the stock exchange publishes a quarterly performance rating for these Designated Sponsors. In the last quarterly assessment at the end of April 2002, 48 out of 62 people received the highest performance rating “AA”. The German Shares Institute advises investors to also include these quality criteria for a share when making an investment decision. The rating can be found on the Internet at www.xetra.de.

Diagonal Spread

A spread position, where the bought and sold options show different exercise prices and expiry dates.

Direct Clearing Member

A member of the clearing house of a futures market, who is authorised to clear individual deals and its clients deals.

Disagio

The difference between the nominal and parity values and the lower market value. In a futures contract, disagio means that the agreement price is lower than the spot price of the basic value. In an option, it means that the optional premium is lower than the intrinsic value of the option.

Dividends

A dividend is the distribution of company profits, which is carried out once a year if at all. Dividends, like interest rates, are traded by fixed interest securities. Setting up an exemption order is therefore recommended.

Dynamic Hedging

A hedging strategy whereby an option position is built up whose value develops depending on the basic security price so that profits or losses in the hedged position are settled through profits or losses in the option position.

Current share price

 

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