The Risk Limited Glossary
Sarbanes-Oxley Act of 2002 - U.S. legislation enacted in response to the accounting scandals of 2001-2002. The Act was named after Senator Paul Sarbanes and Representative Michael Oxley and is arranged in eleven titles. Compliance with provisions of the Act is mandatory.|
The Sarbanes-Oxley Act of 2002 is generally considered the single most important piece of legislation affecting corporate governance, financial disclosure, and public accounting since the U.S. securities laws enacted in the 1930's. The Act is often referred to variously as SOX, S-O, or SOA. The full text of the Sarbanes-Oxley legislation is shown here in a PDF format. A summary of the Act is provided by the American Institute of Certified Public Accountants.
Scenario Planning - a methodology that attempts to build plausible views of a small number of different possible futures for an organisation operating in conditions of high uncertainty.
SEC - an acronym for the United States Securities and Exchange Commission.
SEC Form 8-K - United States Securities and Exchange Commission (SEC) required current report filing. This form is required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock.
SEC Form 10-K - United States Securities and Exchange Commission (SEC) required annual report filing. An audited document required by the SEC and sent to a public company's or mutual fund's shareholders at the end of each fiscal year, reporting the financial results for the year (including the balance sheet, income statement, cash flow statement and description of company operations) and commenting on the outlook for the future.
SEC Form 10-Q - United States Securities and Exchange Commission (SEC) required quarterly report filing. This is an unaudited document required by the SEC for all U.S. public companies, reporting the financial results for the quarter and noting any significant changes or events in the quarter. Quarterly reports contain financial statements, a discussion from the management, and a list of "material events" that have occurred with the company (such as a stock split or acquisition).
Settlement Price - the closing range of prices after a trading session, used to calculate gains and losses, margin calls, and invoice prices for deliveries in futures market accounts.
SFAS 133 - Statement of Financial Accounting Standard 133. See FAS 133.
SFE - an acronym for the Sydney Futures Exchange.
SIMEX - an acronym for the Singapore International Monetary Exchange.
Six Sigma - terminology used to designate a quality measure or characteristics such as defects-per-unit, parts-per million defective, and the probability of a failure/error. The term "sigma" is used to designate the distribution or spread about the mean (average) of any process or procedure. Six Sigma denotes a failure rate of 3.4 parts per million or 99.99966% good. Sigma is a letter in the Greek alphabet.
Skewness - indicates any asymmetric "leaning" to either left or right of a probability distribution. Skewness is the third 'moment' of a distribution.
SOX - an acronym for the Sarbanes-Oxley Act of 2002. See above.
Spark Spread - the relationship between the price of electricity and the price of natural gas or other fuel used to generate electricity. The spark spread reflects the costs, or anticipated costs, of producing power.
It can be used as a method of converting millions of British thermal units (Btu's) to megawatt hours, and vice versa. The spread is simply the heat rate (a proxy for efficiency) of a specific generating plant or power system (the number of Btu's needed to make one kilowatt hour of electricity), multiplied by the cost of energy expressed as dollars per Btu's.
Standard Deviation - the square root of the variance of a probability distribution. The Standard Deviation is one of several indices of variability that characterize the dispersion among the measures in a given population.
Stochastic - a process that is random.
Straddle - an option trading strategy using a combination of a put and a call with the same epiration date and same strike price. This strategy is based on an expectation that the price volatility level of the underlying asset will increase and generate a potential trading profit on the options position.
Stress Test - a test of a model for pricing or risk management, using an extreme scenario or range of scenarios.
Structured Note - a derivative instrument whose value is based on that of an underlying index.
Sunshine Option - a derivative instrument that is triggered by the number of hours of sunshine during some defined period for the life of the option. Such options (weather derivatives) can be of use as hedges of revenues, for example, by summer holiday resorts that could be compensated if the number of hours of sunshine fell below a certain specified level.
Swap - a contract between two counter parties to exchange future cash flows in accordance with a specified formula for exchange.
Swaption - an option to enter into a swap—i.e., the right, but not the obligation, to enter into a specified type of swap at a specified future date.
Swing Options - an option contract that provides a volume range, rather than a fixed quantity, for the specified underlying. Swing options have wide application in commodity markets since these options can provide an effective match to underlying exposures where there is uncertainty as to quantity (volumetric risk), however, valuing and trading such options is highly complex quantitatively.
SWOT Analysis - an analysis of Strengths, Weaknesses, Opportunities and Threats. This methodology is widely used in strategic assessments and planning.
Systemic Risk - the risk that the entire financial system collapses due to some catastrophic market event triggering the failure.
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