European style options
An option contract that can only be exercised upon its expiration date. Compare to American-style options.

Excess equity
The value of cash or securities held in a margin account that exceeds the federal requirement. (NASD)

Exercise price (Strike price)

The cost per share at which the holder of an option may buy or sell the underlying security. (NASD/Options)

The residual dollar value of a futures trading account, assuming it’s liquidated at the going market price.

Equity Swap (see also Interest Rate Swap)
A contract in which counterparties agree to exchange payments related to indices, at least one of which (and possibly both of which) is an equity index.

U.S. dollar deposits held abroad. Holders may include individuals, companies, banks and central banks.

Evening Up
Buying or selling to offset an existing market position.

Exchange For Physicals (EFPs)
A technique in which a physical commodity position is traded for a futures position.

Exchange Rate
The value of one currency stated in terms of another currency.

The date or month in which the contract expires, or is no longer traded.

Ex-Pit Transactions
Trades executed, for certain technical purposes, in a location other than the regular exchange trading pit.

Equity Linked Securities (sm). Salomon Brothers Inc’s proprietary Equity Linked Debt Security (q.v.). A debt obligation of Corporation A, equivalent to a buy-write on one share of Corporation B. The ELKS is like a PERCS (q.v.), except that the company that issues the stock issues the PERCS, and another company issues the ELKS. Salomon Brothers Inc issued the first ELKS in 1993.

Embedded option

Endowment Warrant
A Call Options on shares, where the strike price grows at the rate of interest, but shrinks by the amount of the dividends that the share pays. In essence, the buyer of an Endowment Call Warrant uses the dividends from the shares to pay off the strike price, but is not obligated to complete the transaction. If at expiration the balance reaches zero, then the buyer may take delivery without further payment. If the balance reaches a positive amount, then the buyer may pay that amount and take delivery. If the balance reaches a negative amount, then the buyer may settle in cash for the value of the shares plus the absolute value of the balance.

Equity-Linked Debt Security
Fixed-income, equity-linked debt securities of corporation A, that participate in the change in price of the “linked” common stock of corporation B.
Four main examples, listed on the American Stock Exchange, include Salomon Brothers’ ELKS (sm) (q.v.), Bear Stearns’ CHIPS (sm) (q.v.), Lehman Brother’s YEELDS (sm) (q.v.), and Morgan Stanley’s PERQ’s (sm) (q.v.). These four pay quarterly interest at a fixed percentage rate.

Equity Swap
A Swap (q.v.) in which one of the payment streams derives from an equity instrument. For example, in one sort of ordinary Equity Swap, each period, Party A receives (and Party B pays) the capital gains on an equity investment of a given notional amount, while Party B receives (and Party A pays) a floating interest payment based on LIBOR and the same notional amount. This swap is practically equivalent to buying the underlying equity with 100% borrowing (zero margin) and realizing the gain or loss each period.
Equity Swaps are useful for obtaining leverage, avoiding withholding taxes, and enjoying the returns from ownership without legally owning anything.


A major system settling securities trades.

High-yield corporate bonds of European companies. Of course, the high yield is compensation for a high probability of default.
For example, Richard Branson’s Virgin Group financed its new, V2 Music Holdings PLC label with L74 million in high yield bonds, rather than using a venture capitalist.

The British Bankers Association’s Euro-denominated analog to dollar LIBOR. As of January, 1999, the European Banking Federation’s Euribor (q.v.) seems to be winning its battle for acceptance over Euro LIBOR, but London still hopes to win the war for the financial business. On 1/7/99 LIFFE announced plans for new contracts, based on five- and ten-year Euribor swaps.

European Central Bank
The institution that the European Monetary Union has put in charge of maintaining the value of its currency, the euro. (Dagmar Aalund, “What’s the Euro?”, The Wall Street Journal, 9/28/98.)

European Style Option
An option that can be exercised only at expiry as opposed to an American Style option that can be exercised at any time from inception of the contract. European Style option contracts can be closed out early, mimicking the early exercise property of American style options in most cases.

Exotic Derivatives
Any derivative contract that is not a plain vanilla contract. Examples include barrier options, average rate and average strike options, lookback options, chooser options, etc.

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