Variant of
linear programming whereby the objective function is quadratic rather than linear. For example, in portfolio
selection, we will often minimize the variance of the portfolio (which is a quadratic function) subject to constraints on the mean return of the portfolio.
Also called
credit spread, the
spread between
Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. For instance, the difference between
yields on
Treasuries and those on single A-rated industrial
bonds.
Currency options with a guaranteed
exchange rate that enable buyers who like the
asset, German
bonds for example, but not the asset's pricing currency, to arrange to be paid in a different currency for a fee.
