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back months
Futures contracts with delivery dates in the more distant future.

bankruptcy futures
The futures contract based on the CME Quarterly Bankruptcy Index. The CME computes the index daily, based on personal and business bankruptcy filings, with personal bankruptcies getting 96% of the weight. (Aaron Luchetti, "Commodity Traders May Go for Broke With Novel Contract," WSJ, 4/3/98.)

basis point
One percent of one percent of a principal amount or Notional Value (q.v.). Also, known as "bp" – pronounced "bip". For example, the on-the-run Ten-year Treasury might have a coupon of 6.5%, and the 10-year Swap Spread over that might be 22 basis points.

basis risk
The name attached to the random gains or losses a hedger realizes, when he hedges with something that has an imperfect correlation with his underlying position.

benchmark notes
Agency notes aimed at filling the partial vacuum in the Treasury note market, now that the deficit appears somewhat under control. Fannie Mae began issuing benchmark notes, and Freddie Mac and other agencies have followed. Apparently, the U.S. Treasury is considering halting its auction of two-, three-,or five-year notes. (Guy Dixon and Ross A. Snel, "Bonds Stay Put as Traders Wait for Jobs Report; Fannie Mae to Offer Additional Benchmark Notes," WSJ, 5/5/98.)

Best-of-Two Option
A payoff which equals the maximum of two option payoffs, such as the maximum of a call on asset 1 and a put on asset two. Cf. Worst-of-Two Option.

Bet Option
A Binary Option. (q.v.)

bid
The price at which a dealer (market maker) stands ready to buy. Ordinarily the bid is less than the ask (q.v.), and the bid-ask spread is what the dealer stands to make by quickly turning around one unit of product.

big dogs
Traders who do large volume. As in "You can't pee like a puppy if you want to run with the big dogs."  

Binary Call (Put) Option
Typically, a Binary Call (Put) Option (q.v.) that pays off nothing if the underlying risk factor is below (above) the strike, and a constant amount if the risk factor exceeds (is below) the strike.

Binary Option
An option with a payoff function that has two levels, such as zero dollars or one million dollars.
blank check company
A public, shell company with few or no assets, income, products, services, activities, business plan, management team, employees, or anything else that an ongoing business ordinarily has -- except for registration with the SEC. A private company can use a blank check company to go public via a "reverse merger" without doing an expensive IPO. An unscrupulous stock promoter can also use a blank check company to defraud sleepy investors. (Schellhardt, Timothy D. "As 'Blank-Check' Firms Regain Allure, Businessman Lines Up Numerous Suitors." WSJ, 10/29/99.)
BISTRO
Definition: An acronym for either of the following, depending on who's talking and who might be listening.
1. Broad Index Secured Trust Offering. J.P.Morgan's preferred vehicle for transferring a significant amount of diverse credit risk to an SPV.
2. BIS Total Rip Off. An alternative definition of unknown meaning.

BOBL
German Federal Debt Obligations (BundesOBLigationen). (Source: http://www.exchange.de/dtb/BOBL-future.html)

BOBL Futures
The DTB Futures contract on a notional medium term (3.5 - 5 years) debt security of the German Federal Government or the Treuhandanstalt, with a notional interest rate of 6%. The BOBL (q.v.) and other instruments qualify. (Source: http://www.exchange.de/dtb/BOBL-future.html)

BOBL Futures Option
An American option that settles into a BOBL Futures (q.v.) contract. Payment of the option premium is "futures-style", which means none of it occurs immediately, and a piece of it occurs with each daily mark-to-market. An implication of this is that the "buyer" (really, the "long") may pay no premium and the "seller" (really, the "short") may pay all the premium! (Source: http://www.exchange.de/dtb/BOBL-future-option.html)

Boolean trades
Definition: Trades based on orders that contain Boolean logic, including the concepts of “if”, “if and only if”, “or”, and “and”.
Example: “I want to sell Microsoft at 75 if and only if I can buy IBM at 110 and buy Intel at 120.”
Source: Hal R. Varian, “Boolean Trades and Hurricane Bonds,” Wall Street Journal, 5/8/00.

Bowie Bond
A specific, $55 million issue of 10-year Asset-Backed Bonds (q.v.) that British rock star David Bowie issued and Prudential Insurance Co. bought. The specific collateral consists of royalties from 25 of Mr. Bowie's albums that he recorded before 1990.
Source: Bloomberg News, 2/20/97

B-Piece
Definition: A security from the riskier tranche of a two-tranche ABS (q.v.) deal. It receives the residual income from the underlying collateral and takes second place in line for the collateral in case of default. In terms of income and collateral, B-pieces are to the ABS’s assets as common shares are to a corporation’s assets. (The analogy breaks down when it comes to taxation and control.)

Example: A bank with large credit card operations issues ABS’s backed by credit card receivables. The A-piece has a AAA rating and little credit risk. If the economy heads south, then the B-piece may not pay off in full.

Application: Dividing an ABS issue into senior and junior pieces permits the issuer to tap two types of investor. The more (less) risk averse investor that wants to avoid (place) a bet on the performance of the underlying assets can buy the A-Piece (B-Piece).
Pricing and Risk Management: This is difficult. The whole point of having a B-piece is to have a place to put the return that is more difficult to price and the risk that is more difficult to manage. Then, people who are more talented at pricing derivatives and managing their risk will buy these pieces. Pricing the A-Pieces is nearly as easy as pricing Treasuries, and their risk is mainly market risk.

Source: Cecile Gutscher, "SEC Is Examining Whether Some Underwriters Are Marketing Bonds at Artificially Low Yields", Wall Street Journal, 5/2/97).

Bulldog bond
Definition: A bond, denominated in British pounds sterling, that a company or government that is foreign to the U.K. issues in the U.K. bond market.
Example: A Brazilian company might issue £100 million of debt in London.
Source: Edna Carew, The Language of Money.

Bullet Bond
Definition: A Bond that Amortizes (q.v.) fully on a single date. Its cash flows consist of regular coupon payments of interest and a final repayment of principal.
Example: An ordinary, 30-year, noncallable Treasury bond with a semiannual coupon.
Application: A Bullet Bond is a commonplace way of raising capital.
Pricing: A Bullet Bond is a portfolio of Zero Coupon Bonds (q.v.), so its value is the value of the portfolio.

Risk Management: A common way to measure a fixed income portfolio’s risk is by its Duration (q.v.) or DV01 (q.v.), and its Convexity (q.v.). Consequently, one might combine a Bullet Bond with other fixed income instruments in a portfolio, in an effort to control the portfolio’s Duration and Convexity.
Comment: When a layman thinks of a bond, this is the bond.

BUND German Federal Government Bonds (BUNDesanleihen) . 
BUND Futures
The DTB Futures contract on a notional long term (8.5 - 10 years) debt security of the German Federal Government or the Treuhandanstalt, with a notional interest rate of 6%. The BUND (q.v.) and other instruments qualify. (Source: http://www.exchange.de/dtb/BUND-future.html)
BUND Futures Option
An American option that settles into a BUND Futures (q.v.) contract. Payment of the option premium is "futures-style", which means none of it occurs immediately, and a piece of it occurs with each daily mark-to-market. An implication of this is that the "buyer" (really, the "long") may pay no premium and the "seller" (really, the "short") may pay all the premium! (Source: http://www.exchange.de/dtb/BUND-future-option.html)

Bundle
A Strip (q.v.,#2) of consecutive, quarterly Eurodollar or Euroyen futures contracts. Markets, such as Simex offer a Bundle as a convenient package of futures contracts, without the execution risk inherent in building up the Strip, contract by contract. A trader can use Bundles and Packs (q.v.) to implement bets on the change in shape of the Forward Curve.

Buy-Write
An investment strategy that consists of buying an asset and selling a call on it. Thus, the investor sells upside potential to elevate the rest of his payoff function.