AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

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Glossary

AIMA's Glossary has been developed for all those with an interest in the alternative investment industry - from the beginner to the advanced practitioner.

You will find a considerable overlap of content with the traditional fund management industry - the instruments used, the service providers employed, etc.  However, the hedge fund industry is individual in the way in which it uses these resources.

For reasons of law and accuracy, this is not a wiki.  It is a work-in-progress, however, and we invite you to submit new items for inclusion below (including the proposed definition).

  • We express our sincere thanks to Stanley Marchon, Vincent Kuhn, Nicolas Watin-Augouard, Stephen Foster and Sunil Gopalan for the creation of this resource. 
  • Special thanks are also extended to Anne Taulbut and Jennifer Nye of Katten Muchin Rosenman Cornish for the extensive legal review.
 
FCM
See Futures Commission Merchant (FCM).
fees

See Incentive fee. See Performance Fee. See Management fee. See Redemption fee.

fixed income arbitrage

Fixed Income Arbitrage funds try to exploit pricing anomalies within Fixed Income Markets. They generally attempt to hedge out most interest rate risk by taking offsetting positions in similar securities (government bonds, corporate bonds, asset-backed securities, etc.). There are two major categories of fixed income arbitrage strategies: see Relative value and Market neutral.

floor broker

A person with exchange trading privileges who, in any it, ring, post, or other place provided by an exchange for the meeting of persons similarly engaged, executes for another person any orders for the purchase or sale of any commodity for future delivery.

floor trader

A member of a stock or commodities exchange who trades on the floor of that exchange for his or her own account. May also execute trades for third parties and may be referred to as a "local".

foreign exchange market

Also known as Forex.

Forex
Refers to the OTC market for foreign exchange transactions. Also called the Foreign exchange market.
forward

A private, over-the-counter (OTC) derivative instrument that requires one party to sell and another party to buy a specific security or commodity at a pre-set price on an agreed-upon date in the future. Similar to a futures contract, which is traded on an exchange.

forward rate agreements

A forward rate agreement (FRA) is an agreement whereby the seller guarantees the buyer a specific rate of interest for a specific period of time commencing on a specified date in the future. A FRA is frequently used to hedge the floating rate risk in a swap transaction. FRAs are conceptually similar to interest rate futures, offering advantages of precise tailoring to specific transactions such as swaps, but having the disadvantages that they do not trade on an exchange, are not marginable and (as with a swap) are susceptible to counterparty credit risk.

FRA
See Forward rate agreements.
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