rainbow option A category of option linked to two or more underliers.

RAN Revenue anticipation note.

random walk A discrete stochastic process whose increments form a white noise.

random walk hypothesis Financial model based on the empirical observation that stock and commodity prices behave like a random walk.

range forward A type of derivatives hedge.

RAPM risk-adjusted performance metric.

RAROC Risk-adjusted return on capital.

RARORAC risk-adjusted return on risk-adjusted capital.

ratchet cap A cap whose strike is reset to the current rate for each caplet.

ratchet floor A floor whose strike is reset to the current rate for each floorlet.

ratchet option An option that periodically "locks in" profits.

rate of return Annualized return.

ratings migration model A default model based upon historical patterns of changes in bonds' credit ratings.

ratings transition matrix A matrix indicating probabilities of upgrades or downgrades in bonds' credit ratings.

ratio call spread A call spread in which there is not a one-to-one ratio between the numbers of long and short calls

ratio put spread A put spread in which there is not a one-to-one ratio between the numbers of long and short puts.

real numbers The set of all numbers that form the number line.

real set Any set, all of whose elements are real numbers.

receiver swaption An option to receive fixed on an interest rate swap.

record date The date on which the owners of a security are identified for the purpose of making an upcoming interest or dividend payment.

recovery rate In the event of a default, the fraction of the outstanding obligation expected to be recovered through bankruptcy proceedings or some other form of settlement.

redeemable bond Callable bond.

redeemable security Callable security.

reduced form model Intensity model.

reduced stable distribution Standardized stable distribution.

refunded bond Municipal bond for which assets have been set aside in an escrow account or trust to fully retire the debt.

refunding A transaction in which bonds are called so they can be replaced with new debt, usually at a lower interest rate.

regime switching model A category of stochastic processes.

registered bond a bond for which ownership is evidenced by both a certificate and the issuer's records.

regular-way settlement Settlement on the third trading day after the trade date.

Regulation Q A Depression era regulation that limited the interest commercial banks could credit on savings account balances.

regulatory capital Capital held in accordance with statutory or regulatory requirements.

rehypothecation The reuse of collateral for one's own purposes.

reinvestment risk Risk from uncertainty in the interest rate at which future cash flows may be invested.

relative pricing model An asset pricing model that assigns prices based on prices of other instruments quoted in the market.

relative value strategy Market neutral strategy.

remapping In value-at-risk, the approximation of one risk vector with another.

Rembrandt A foreign bond issued in the Netherlands.

reopening A Treasury securities auction in which previously issued securities are again offered.

replacement cost The cost of replacing an obligation of a counterparty.

repo Repurchase agreement.

repo rate The rate of interest on a general collateral repo transaction.

repricing Resetting of an interest rate.

repricing date Any date on which an interest rate is reset.

repricing risk Term structure risk.

repricing gap Interest rate gap.

repurchase agreement An agreement to sell and subsequently repurchase a security.

required capital Capital a financial institution or trading organization must hold against the specific risks it takes.

reset date Any date on which the floating rate payable on a floater is reset.

reset option Ratchet option.

residual claim The claim of stockholders on corporate assets after claims to all other parties have been met.

resiliency, market The speed with which prices return to equilibrium following a large trade.

retail investor Individual investor.

return Any of a number of metrics of the change in an asset's or portfolio's accumulated value over some period of time.

return on assets A standard accounting performance metric.

return on capital A risk-adjusted performance metric.

return on equity A standard accounting performance metric.

return on investment return.

return on risk-adjusted capital A risk-adjusted performance metric.

revenue anticipation note A type of municipal security.

revenue bond Municipal bond issued to finance a specific revenue-producing projects, such as a toll road, airport or public housing.

reverse floater Inverse floater.

reverse inquiry A request by an investor that a medium-term note be issued based on terms other than those offered.

reverse repo The opposite side of a repo transaction.

rho The Greek factor sensitivity measuring a portfolio's first order (linear) sensitivity to the risk-free rate.

risk Comprises two components: uncertainty and exposure.

risk-adjusted capital ratio A firm's capital ratio with an adjustment made to the denominator to reflect the riskiness of its assets.

risk-adjusted performance metric Any metric of performance that balances reward against risk.

risk-adjusted return on capital A RAPM based on ROC.

risk-adjusted return on risk-adjusted capital A RAPM based on ROC.

risk arbitrage Merger arbitrage.

risk averse Preferring less risk to more.

risk-based capital Capital requirements for US insurers developed by the National Association of Insurance Comissioners.

risk committee A board level committee with responsibility for issues related to financial risk management.

risk factor A random variable whose value will affect the value of a portfolio.

risk limit A limit placed upon risk taking activity for the purpose of avoiding excessive risk.

risk loving Alternative word for "risk seeking."

risk management Generally means financial risk management, but other meanings are possible.

risk management department A department within a firm that is responsible for financial risk management.

risk manager A professional who performs duties related to risk management.

risk measure An operation for quantifying a risk.

risk measurement A number obtained from applying a risk measure.

risk metric An interpretation of the measurements obtained from a risk measure.

risk neutral Indifferent to risk.

risk neutral valuation A concept that underlies many techniques for pricing options and other derivatives.

risk oversight committee A committee of senior managers with responsibilities related to financial risk management.

risk seeking Preferring more risk to less.

risk vector A random vector whose components are risk factors.

RiskMetrics A free service launched by JP Morgan in 1994 to promote the use of value-at-risk.

ROA Return on assets.

robber barons A term used disparagingly to refer to industrialists of America's Gilded Age.

ROC Return on capital.

rocket scientist A financial engineer.

ROE Return on equity.

rollover risk Risk that an issuer will be unable to roll over its maturing commercial paper into new commercial paper.

RORAC Return on risk-adjusted capital.

Rule 12b-1 SEC rule allowing mutual funds to pay marketing and sales expenses directly out of fund assets.

Rule 18f-3 SEC rule allowing mutual funds to issue multiple classes of shares.

Rule 415 SEC rule allowing shelf registration of medium-term notes.

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