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.
 
VaR

See Value-at-Risk (VaR).

vertical spread

Any of several types of option spread involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices, including bull vertical spreads, bear vertical spreads, back spreads, and front spreads.

volatility

A statistical measurement of the rate of price change of a futures contract, security, or other instrument underlying an option. See Historical Volatility, Implied Volatility.

volatility arbitrage

An approach by which a manager seeks to take advantage of fluctuations and inefficiencies in financial markets, usually the stock market. A common form of volatility arbitrage is an option arbitrage investment strategy, which can be carried out as a market-neutral investment strategy or with a long bias toward volatility.

volatility trading

Strategies designed to speculate on changes in the volatility of the market rather than the direction of the market.

volume of trade

The number of contracts traded during a specified period of time. It may be quoted as the number of contracts traded or as the total of physical units, such as bales or bushels, pounds or dozens.

warrant

A contract that gives an investor the rights to purchase a security at a specific price (usually above the current price) on a future date. It is usually issued with a bond or preferred stock to provide additional incentive to the buyer. Warrants are similar to options contracts, but unlike options, they can stay in effect for a period ranging from a few years to eternity.

warrant or warehouse receipt for metals

Certificate of physical deposit, which gives title to physical metal in an exchange-approved warehouse.

weather derivative

A derivative whose payoff is based on a specified weather event, for example, the average temperature in Chicago in January. Such a derivative can be used to hedge risks related to the demand for heating fuel or electricity.

yield

The return earned on an investment with the annual income and present capital value taken into account.

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