For example, what does "outright" mean in outright OIS swap? Another similar question, what does "USD fedfund is marked as outright" mean? Thank you
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2$\begingroup$ You can think of "outright" as meaning "simple", "straightforward" (in the sense of no complications or qualifications needed). An outright OIS swap would be based on a single interest rate, such as SOFR. A spread or basis swap would be based on the difference between 2 rates (for ex SOFR vs Fed Funds) and could be implemented by having two outright swaps in opposite directions one for each rate , or could be a customized contract. See also this post quant.stackexchange.com/questions/25320/… $\endgroup$– nbbo2May 21 at 6:57
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1$\begingroup$ @nbbo2 why not just say vanilla or plain vanilla which essentially means the same? The abundance of jargon really do puzzles me sometimes. $\endgroup$– HasekMay 21 at 9:32
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$\begingroup$ @Hasek I think outright is narrower than vanilla i.e. outright $\subset$ vanilla. I have only seen it used to designate vanilla, spot-starting swaps (I think the origin is that outright means "immediately" in standard English). So for example options are excluded when somebody says "I hedged the trade using outright purchases". $\endgroup$– Daneel OlivawMay 21 at 10:07
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$\begingroup$ @hasek: I think Vanilla : US English, Outright: British English but I am not sure of this $\endgroup$– nbbo2May 21 at 14:31
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$\begingroup$ Thank you all for your answers $\endgroup$– ice_fox21May 21 at 17:46
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1 Answer
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When trading derivatives via "voice" sometimes you got asked if the position is outright. The intention behind this is to understand if your trade idea and your request is part of a larger construction.
Simply speaking: If you ask me for a bid/ask for X I'll might ask you if this trade is "outright". Your reaction could be "no i'd like to trade X vs. Y as a pair trade" Then I would price you both instruments at the same time.
A different case could be if you had a fixed income portfolio (consisting from swaps and bonds) and the risk manager asks you "why do you have swap X open?". Your answer could be "This is an outright trade". Therefore the RM knows that this position is not for hedging purposes.
