Quant finance terms in plain language.

Use this glossary alongside the interactive lessons. Definitions are educational summaries, not legal or regulatory interpretations.

DV01

The local change in value for a one-basis-point interest-rate move. The app uses a signed upward-move P&L convention.

CS01

The local change in value for a one-basis-point credit-spread move, holding risk-free rates fixed.

Gamma

How delta changes as the underlying moves: the local bend in the value curve.

Delta

A measure of how a position’s value changes when an underlying market factor moves a little.

Vega

A measure of how an option’s value changes when implied volatility changes.

Curvature

The nonlinear part of a large shock after the linear delta effect is removed.

Expected shortfall (ES)

The average loss in the tail beyond a chosen confidence threshold.

Value at Risk (VaR)

A loss threshold at a stated confidence level and horizon.

RRAO

The residual risk add-on in FRTB SA for designated exotic underlyings and other residual risks.

DRC

Default risk charge for losses caused by an issuer defaulting, after permitted netting and weighting.

NMRF

A non-modellable risk factor that receives stress-scenario treatment in FRTB IMA.

RFET

The risk factor eligibility test for determining whether price evidence supports modellability.

PLAT

Profit and loss attribution testing comparing hypothetical and risk-theoretical P&L.

Liquidity horizon

The regulatory time horizon used to reflect how long a risk may take to hedge or exit.

Martingale

A process whose conditional expected future value equals its current value, given available information.