PAC bond A type of CMO bond that has minimal prepayment risk.

PAC II bond A support bond for a PAC bond that is itself structured as a PAC bond.

PAC III bond A support bond for a PAC II bond that is itself structured as a PAC bond.

pack Eurodollar pack.

pairs trading Statistical arbitrage based on trading long-short pairs of stocks.

paper market A market in which transactions are cash settled.

paperwork crisis A crisis in the US brokerage industry during the late 1960s.

par value A stated value for a security.

parametric VaR Linear VaR.

parity value Conversion value of a convertible security.

participating preferred stock Preferred stock that pays additional dividends when earnings distributions to common shareholders are high.

pass-through A security issued by a special purpose vehicle that pays investors whatever net cash flows the special purpose vehicle's assets generate.

path dependence A property of certain exotic options whose terminal value depends upon the path taken by the underlier during the life of the option.

payee The part to receive payment under a draft.

payer swaption An option to pay fixed on an interest rate swap.

payment-in-kind bond A bond that give the issuer the option of paying coupons in cash or in more bonds.

payment netting Netting of cash flows.

payoff The net P&L from an options spread.

payoff diagram A graph of an options spread's payoff as a function of underlier value at expiration.

PCA principal component analysis

Peek-a-Boo Public Company Accounting Oversight Board

percentile A type of quantile.

perfected interest A claim that is senior to any existing or future third-party claims in the event of bankruptcy.

Perold's implementation shortfall A metric of total transaction costs.

physical delivery A derivative instrument has physical delivery if it settles with actual delivery of some underlier.

physical market A market in which transactions are physically settled.

physical settlement Settlement of a derivative instrument with physical delivery of an underlier.

planned amortization bond A type of CMO bond that has minimal prepayment risk.

platykurtosis Kurtosis that is less than 3.

PO A type of mortgage-backed security.

portfolio credit risk The sum credit risk of a portfolio of obligations.

portfolio credit risk model A model of portfolio credit risk.

portfolio management Investment management.

portfolio manager Investment manager.

portfolio mapping A functional relationship specified by a VaR measure between a portfolio's value and the key vector.

portfolio mapping function The function that defines a portfolio mapping.

portfolio remapping A remapping that simplifies a portfolio mapping by replacing the mapping function and/or key vector.

portfolio theory A body of theory relating to how investors optimize portfolio selections.

positive definite matrix A real symmetric matrix, all of whose eigenvalues are real and positive.

positive semidefinite matrix A real symmetric matrix, all of whose eigenvalues are real and nonnegative.

potential exposure Credit exposure that may develop on an obligation due to possible changes in its market value.

pre-settlement risk Credit risk of default on a derivative instrument prior to final settlement.

preference option Chooser option.

preferred stock Stock that is senior to common stock and pays a fixed dividend.

prepayment The payment of a debt prior to its being due.

prepayment protection band A range of prepayment rates between which a PAC bond will redeem principal according to schedule.

prepayment risk Risk to holders of mortgage-backed securities arising from uncertainty in the rates at which mortgagors will prepay.

prerefunded bond Refunded bond.

primary capital A bank's permanent capital.

primary dealer Primary government securities dealer.

primary government securities dealer A Treasury securities dealer with whom the New York Fed transacts in its open market activities.

primary instrument A financial instrument whose value is not derived from that of another instrument, but instead is determined directly by a market.

primary mapping A portfolio mapping constructed directly from the portfolio's holdings.

prime broker A brokerage firm that provides bundled services to a hedge fund.

principal An amount of invested capital.

principal component An output of principal component analysis.

principal component analysis A technique for orthogonalizing a random vector.

principal component remapping A portfolio remapping implemented using principal component analysis.

principal strip A Treasury strip formed from the principal cash flow of a Treasury security.

prior lien bond A senior mortgage bond issued as part of a reorganization.

priority The order in which financial claims are to be paid in a corporate liquidation.

private activity bond A taxable municipal bond issued to finance some private-sector purpose.

private-label mortgage-backed security An MBS issued by an entity that is not a quasi-agency of the US Government.

private placement A non-public offering of securities.

PRM certification Professional certification offered by PRMIA.

PRMIA Professional Risk Managers' International Association

process Short for stochastic process.

professional indemnity D&O insurance A special form of D&O insurance covering professional directors or officers for professional errors or omissions.

Professional Risk Managers' International Association Controversial organization that claims to represent the risk management community.

project finance Off-balance sheet financing of a power plant, infrastructure or other project.

PSA A metric for projecting prepayments over the life of a mortgage-backed security.

Public Company Accounting Oversight Board A US federal agency tasked with overseeing external auditors.

publicani 1) Ancient Roman precursors of the modern business corporation. 2) Owners of those Roman firms.

put An option to sell an asset.

put-call parity A relationship between the prices of European put and call options on the same underlier.

put spread An options spread comprising a long-short position in put options.

putting on a spread The act of purchasing and/or selling instruments to comprise an options or futures spread.

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