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.
 
commodity price index

Index or average, which may be weighted, of selected commodity prices, intended to be representative of the markets in general or a specific subset of commodities, e.g., grains or livestock.

commodity trading adviser

Individuals or organizations that directly or indirectly advise others as to the value or advisability of buying or selling futures contracts. In the US, certain commodity trading advisers are required to, or elect to, register with the CFTC and are generally required to be members of the National Futures Association.

comparative back-test

See back-test.

compound annual rate of return

See rate of return.

contango

Market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; the opposite of backwardation.

contract

(1) A term of reference describing a unit of trading for a commodity future or option; (2) an agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.

Contracts for Difference

CFDs or Contracts For Difference are a leveraged equity derivative security that allow users to speculate on share price movements, without the need for ownership of the underlying shares.

convergence

An approach that exploits discrepancies in the values of securities that have historically been almost identical - and assumes that they will ultimately become fairly priced and their values will converge.

convertible arbitrage

This strategy is based on hedged investing in the convertible securities of a company - typically long the convertible and short the common stock of the company issuing the convertible. Positions can generate profits from the bond and the short sale, while being hedged against directional market moves. These funds may invest in a single market (e.g. the US), or they may invest globally.

convertible bond

A corporate bond that has a set maturity date, pays interest in the form of a coupon and gives the holder the option to convert the bond into a specific number of shares of the issuing company - in other words, it has an 'embedded option'. As it has the features of both a bond and stock, its valuation reflects both types of instrument.

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