Final Word from Wednesday, June 12, 2019

In finance, a put option is a device allowing the owner to sell an asset at a given price by a given date in the future. The buyer expects to make a profit when the price of the underlying asset falls. In the 1990s, the "Greenspan put" was an investment strategy based on the belief that informed investors could anticipate the actions of the Federal Reserve in times of crisis. This encouraged risk-taking and caused asset prices to inflate. The "Powell put," as now being used by the Financial Times and others, is a strategy based on the belief that the Fed under Jerome Powell will lower interest rates and take other action to avoid a crisis. Likewise, the "Rusnok put," as we now coin it, is a strategy based on the belief that the Czech National Bank under Jiří Rusnok will follow the Fed and reverse its own policy of raising interest rates, thereby giving a boost to the Czech economy as dark clouds start forming over Germany. You're not buying the idea of a Rusnok put? Listen closely to what the governor himself told the media on May 2 (at 8:30) about how in such uncertain times, an interest-rate cut can't be ruled out. [ Czech Republic Alan derivative ]

Glossary of difficult words

underlying asset - financial assets upon which a derivative’s price is based;

to coin (a new word or phrase) - to invent.

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