Lancer Offshore Fund A hedge fund that defrauded investors during the early 2000s.

Lauer, Michael Manager of the Lancer Offshore Fund, a hedge fund that defrauded investors during the early 2000s.

law of one price The notion that, if two assets have identical cash flows, they should have the same market value.

Lay, Kenneth Chairman of energy trading firm Enron, which failed spectacularly in 2001.

lead bank A bank that takes the lead in originating and arranging a loan syndication.

lead lender A bank or other institution that takes the lead in originating and arranging a loan syndication.

least squares Method of least squares.

least squares remapping A global remapping implemented using the method of least squares.

Leeson, Nick The rogue trader who brought down Barings Bank in February 1995.

legal personality A legal concept under which corporations are treated as artificial people, with a similar capacity for legal rights and obligations.

legal risk Risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations.

leptokurtosis Kurtosis in excess of 3.

leverage Debt financing or anything that can similarly magnify the risk and reward of an investment.

leveraged inverse floater An inverse floater with coupon leverage greater than one.

Levine, Dennis Investment banker who formed an insider trading ring during the 1980s.

liability sensitive Having liabilities that reprice earlier than assets.

liability swap A non-vanilla swap customized to change the character of a specific liability.

Libid London interbank bid rate.

Libor London Interbank Offered Rate.

Libor-swap curve A spot curve constructed from Libor rates and swap rates.

Limean The average of Libor and Libid

limit Risk limit.

limit utilization Given a risk limit, the amount of risk being taken as a fraction of the limit.

limit violation Risk taken in excess of that permitted by a risk limit.

limited liability A legal provision applicable to corporations and certain other business forms under which liabilities of the firm are not liabilities of the owners.

linear derivative A derivative instrument whose payoff diagram is liner or almost linear.

linear interpolation Interpolation using a linear polynomial as an interpolation function.

linear polynomial A polynomial of the form p(x) = bx + a.

linear polynomial of a random vector A random variable or random vector that is defined as a linear polynomial of a random vector.

linear position An instrument or position whose payoff or market value as a function of some underlier is either linear or almost linear.

linear remapping A global remapping that replaces a portfolio mapping function with a linear polynomial.

linear transformation In the context of value-at-risk, a transformation procedure applicable to linear polrtfolios.

linear VaR A category of VaR measures applicable to linear portfolios.

Lipper Convertible Fund A hedge fund whose manager misrepresented performance to investors.

liquidity Term used in various senses, all relating to availability of, access to, or convertibility into cash.

liquidity black hole A condition where liquidity dries up, and selling pressure causes more selling pressure, or buying pressure causes more buying pressure.

liquidity gap A net cash outflow projected for a given period.

liquidity risk Risk due to uncertain liquidity.

liquidity spread A yield or interest rate spread due to lack of liquidity.

load A charge applied at the time an investor buys or sells shares in an open-end mutual fund to cover marketing expenses or commissions.

loan guarantee Commitment by a third party to meet a debtor's obligations in the event that the debtor is unable to do so.

local volatility model Any of a category of option pricing models that can be calibrated to volatility skew.

log return A standard metric of return.

lognormal distribution A probability distribution.

London interbank bid rate A rate at which banks bid for deposits from other banks.

London interbank offered rate A rate at which banks offer to lend to other banks.

long holding an asset or otherwise having positive exposure to some financial quantity.

long position A position that is long an asset or otherwise has positive exposure to some financial quantity.

long-short position A position that is long one asset and short another.

long/short strategy Market timing, usually in an equity market.

Long Term Capital Management A hedge fund that failed spectacularly in 1998.

long volatility Holding a positive vega position.

lookback option A path dependent option whose payout depends upon the maximum or minimum underlier value achieved during the entire life of the option.

Lore, Marc Co-founder of the scandal-rocked Global Association of Risk Professionals.

loss given default The fraction of credit exposure that will not be recovered in the event of default on a specified obligation.

LTCM Long Term Capital Management.

Lynch, Peter Former manager of the famous Magellan mutual fund.

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