The Risk Limited Glossary
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Par - the stated face amount assigned to a security by the issuer.
Parametric - a term used to classify curves for which the path is described by a mathematical function rather than a set of coordinates.
Parametric VaR - linear Value at Risk.
Path Dependent Option - an option whose valuation and payoff depends on the realized price path of the underlying asset, such as an Asian option or a Lookback option.
Payoff Diagram - a graph of a transaction's payoff as a function of underlier value at expiration.
P/E Ratio - the latest closing price of a stock divided by the latest 12 months' earnings per share. Also known as the P/E Multiple.
PIPE's - (Private Investments in Public Equities) privately negotiated issuance of equity or equity-linked securities by a public company to a limited number of investors (PIPE's do not include Rule 144A equity private placements). PIPE's allow hedge funds, institutions and high net worth individuals to achieve much of the liquidity of investing in public securities, while letting the issuer avoid some of the burden of U.S. Securities and Exchange Commission (SEC) regulations. PIPE's have been a popular form of financing for growth or start-up operations, and may include embedded derivatives by virtue of structures with conversion options and warrants. See also FAS 133 regarding embedded derivatives. PIPE's, however, have a negative perception in some quarters because of the negative outcomes for some issuers following PIPE issuances.
Planned Commodity - typically referring to a planned-commodity economy that focuses on central planning of production and resource development based on public ownership of the means of production with state-controlled prices for strategic goods. A planned-commodity economy is the basic hallmark of a socialist economy; for example the Soviet-type economic planning system, in contrast to a market-based economy.
Precipitation Swaps (or Options) - instruments linked to the extent of rainfall or snowfall. The party taking out a precipitation swap would receive payment for precipitation above a certain level. Parties interested in this might include holiday resorts who rely on good weather to bring in revenue. The parties on the other side might include ski resorts which rely on a certain level of snow.
Public Company Accounting Oversight Board - U.S. entity established as a non-profit corporation by the Sarbanes-Oxley Act of 2002 to oversee the audit of public companies that are subject to the securities laws.
Public Utility Districts - a U.S. publicly-owned energy producer or distributor. Also referred to as PUD's. PUD's operate as special government districts under the authority of elected commissions. Public Utility Districts are typically not regulated by state public utility commissions.
PUHCA - an acronym for the Public Utility Holding Company Act of 1935, a U.S. federal law that governs electric utility organization and ownership structures, and regulates the functions, activities, expansion, and operations of utility holding companies.
The U.S. Federal Trade Commission investigation of electric and gas utilities in the late 1920's, and the FTC's subsequent report in 1935, which alleged that holding company abuses had caused the bankruptcy of some of the largest holding companies as well as the loss of investor savings led to passage of the Public Utility Act of 1935. Title I of the act was the Public Utility Holding Company Act.
PUHCA requires interstate holding companies that are engaged through their subsidiaries in the electric utility business or in the retail distribution of natural or manufactured gas to register with the U.S. Securities and Exchange Commission (SEC) and to file reports containing detailed information about their organization, financial structure, and operations. PUHCA requires these companies to operate as coordinated, integrated systems, confined to a single area or region.
PURPA - an acronym for the Public Utility Regulatory Policies Act, a U.S. federal law requiring a utility to buy the power produced by a qualifying facility at a price equal to that which the utility would otherwise pay if it were to build its own power plant or buy power from another source.
Put-Call Parity - a relationship between the prices of European put and call options on the same underlier.
Put Option - an option which gives the option buyer the right, but not the obligation, to sell a futures contract at a specific price within a specific period of time in exchange for a one-time premium payment. See also Call Option.
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