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Investment Banking Jargon > Core Course > Flashcards

Core Course Flashcards

1
Q

Arbitrage

A

The process where a gap between two market makers prices is exploited by buying from one while simultaneously selling to the other to lock in profit.

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2
Q

Ask

A

The quoted offer to which someone can buy; also called the offer.

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3
Q

Auction

A

The process of competitive or open bidding at exchanges for a particular financial product where the price is not set by negotiation.

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4
Q

Auto Sales (US)

A

Important to the US economy, shows consumer confidence.

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5
Q

Backwardation

A

A market condition where futures price is trading lower than the expected spot price at contract maturation.

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6
Q

Balance of payments

A

Accounting record of all monetary transactions between a country and the rest of the world.

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7
Q

Balance of trade

A

Largest component of the balance of payments.

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8
Q

Base rate

A

Interest rate set by the central bank to lend other banks.

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9
Q

Bear market

A

A market distinguished by declining markets.

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10
Q

Bid price

A

The price at which a stock, index or commodity can be sold.

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11
Q

Bid-ask price

A

The difference between what buyers are willing to pay and what sellers are asking for in terms of price.

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12
Q

Blue chip stock

A

Stock of a financially sound company that has demonstrated the ability to pay dividends in both good and bad times.

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13
Q

Bond

A

A certificate of debt issued by a government or corporation that guarantees payment of the original payment plus interest by a specified date.

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14
Q

Broker ratings

A

Buy, sell or hold recommendations or ratings given to individual company stocks by securities analysts, depending on how the stock will perform in the short or the long term.

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15
Q

BUND

A

Long term (10 year) German government bond.

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16
Q

Bull market

A

A market distinguished by rising prices.

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17
Q

Business inventories and sales

A

Total output produced but remaining unsold of the GDP.

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18
Q

Cable

A

Sterling / US dollar exchange rate. Derived from the fact that the GDP / USD exchange rate was transmitted via transatlantic cable laid under the Atlantic Ocean in 1858.

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19
Q

Capital gains tax

A

A tax on investment profits. Spread betting winnings are free of any UK capital gains tax under current laws.

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20
Q

Cash price

A

The price of an asset for immediate delivery. In other words, the actual price of an instrument right now; this term is often used for stock indices, whereas the synonymous term of ‘spot’ is more often applied to forex and commodity prices.

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21
Q

CBI Survey

A

Monthly business confidence, output sales, prices, inventories, export and import.

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22
Q

Chicago PMI

A

Purchasing managers index

The largest survey nationally

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23
Q

Commodity

A

A basic good used in commerce which is usually uniform across producers and can be traded on an exchange. Soft commodities are goods that are grown, such as coffee and sugar, while hard commodities are extracted through mining, such as gold and coal.

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24
Q

Consumer price index (CPI)

A

Measurement of inflation, higher the CPI = higher inflation.

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25
Q

ADR

A

American depository receipt

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26
Q

Corporate action

A

Means any event initiated by a corporation which impacts its shareholders. Examples include stock splits, consolidations, mergers and spinoffs.

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27
Q

Derivatives

A

Financial contracts, such as futures and options, whose value is derived from an underlying asset, rate or index.

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28
Q

Dividend

A

That part of a company’s after tax earnings that is distributed to shareholders. Dividends are paid at a company’s discretion. They may be distributed as cash or by script dividend.

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29
Q

Dow Jones Industrial Index

A

The bench mark US stock market index that tracks the performance of a selection of thirty US blue-chip stocks.

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30
Q

Durable Goods Orders

A

Large ticket items such as machinery and plant equipment. Transportation and military orders.

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31
Q

ECB

A

European Central Bank. Central bank for the eurozone that decides interest rates.

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32
Q

Ex-Dividend

A

A share brought without the right to receive the next dividend which is retained by the seller.

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33
Q

Existing Homes Sales

A

Number and value of old homes sold, measure of consumer confidence and spending power.

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34
Q

Expiration date

A

The date that a spread bet expires.

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35
Q

Fair value

A

This is the theoretical price at which a futures contract should trade when compared to the cash or spot price.

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36
Q

FOMC

A

Federal Open Market Committee. Body that sets interest rates and credit policy.

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37
Q

FSA

A

Financial Services Authority. The governing body that regulates the financial services industry including spread betting.

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38
Q

FTSE

A

Financial times stock exchange. These firms are jointly responsible for the compilation and maintenance of the main stock indices reflecting the performance of the UK’s top shares.

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39
Q

FTSE 100

A

The index that highlights the performance of the UK’s top 100 companies, as ranked by their market capitalisation. We refer to this as the UK100 in the literature.

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40
Q

FTSE All Share

A

An index covering about 800 shares representing 98% of UK market value. There are indices for business sub-sectors as well.

41
Q

FTSE Mid 250

A

The index of the next 250 companies, after the top 100.

42
Q

FTSE 350

A

The index of the top 350 companies by market capitalisation. It is a combination of the FTSE 100 and FTSE 250 stocks.

43
Q

Futures

A

A financial contract obligating the buyer/seller to purchase/sell an asset such as a physical commodity or a financial instrument, at a predetermined future date and price.

44
Q

GDP

A

Gross Domestic Product. Measure of market activity, value of goods and services produced by an economy.

45
Q

Gearing

A

The relationship between potential profit or loss and the initial outlay. A position with high gearing or leverage stands to make or lose a large amount from a small outlay.

46
Q

Gilts

A

U.K. Government bonds. So called because the certificates used to be gilt edged.

47
Q

Good For The Day (GFD)

A

An order, which if not filled, expires at close of business on the day it is received.

48
Q

Good Till Cancelled (GTC)

A

An order that will be carried forward indefinitely until it is either filled or cancelled by you.

49
Q

Good Till Date

A

An order, which if not filed, expires at close of business on a date specified by you.

50
Q

Hedging

A

A strategy used to reduce the risk of an open position.

51
Q

Housing Starts and Building Permits.

A

Number of new family homes and buildings that were constructed, strength of the economy.

52
Q

IFO

A

German leading survey for business conditions.

53
Q

Index

A

A statistical indicator that represents the total value of stocks that constitute it. Eg. The FTSE or the Dow Jones. It often serves as a barometer for a given market or industry and acts as a benchmark from which financial or economic performance is measured.

54
Q

Illiquid market

A

A market which it is difficult to buy or sell in due to lack of interested buyers/sellers.

55
Q

Initial jobless claims

A

Weekly change in the number of claims to unemployment benefit.

56
Q

Interbank rates

A

Foreign exchange rates at which large international banks quote other large international banks.

57
Q

Interim dividends

A

A company’s distribution of profits halfway through a financial year.

58
Q

Interim report

A

All companies quoted on the London stock exchange must release an interim report after the first six months of their financial year. It tends to concentrate on profitability, and may be used to justify an interim dividend.

59
Q

IPO

A

Initial Public Offering. The offering of shares making their market debut.

60
Q

ISM

A

Institute of supply management. Leading survey of us manufacturing activity, 50 and above indicates expansion.

61
Q

Leverage or Gearing

A

Leverage or gearing allows traders to gain large exposure with a relatively small outlay.

62
Q

Limit order

A

An order to buy or sell a product when it hits a certain price. A limit order is placed when you want to place a trade at a better price than the current quote. Limit orders can be filled at better levels than expected. This can occur when markets do not move smoothly. They “gap” from one price to another at times and your limit order will be filled at the next available price for ETX Capital.

63
Q

Margin

A

The amount required from a client - in addition to any deposit due - to cover losses when a price moves adversely.

64
Q

Market hours

A

Hours during which a market can be traded with ETX Capital.

65
Q

Market feed

A

Means the automated live streaming prices of underlying markets from their respective exchanges.

66
Q

Market order

A

A financial contract which is executed at the current available market price.

67
Q

Michigan Consumer Sentiment Index

A

Survey carried out by Michigan university at a national level.

68
Q

Mid-Price

A

The price derived by the average of bid and ask rate.

69
Q

MPC

A

U.K. Monetary Policy Committee. Body that sets interest rates.

70
Q

NASDAQ

A

The National Association of Securities Dealers’ Automated Quotation System is an electronic stock exchange based in New York listing many leading high-tech companies.

71
Q

New Home Sales

A

National data for new home sales, prices and number of sales.

72
Q

Non-Farm Payrolls

A

Number of new jobs created.

73
Q

Offer price

A

The price at which a stock, index or commodity can be bought

74
Q

Opening level

A

Means the price or market level at which a position was initiated.

75
Q

Open Position

A

Trades that are currently open within a portfolio.

76
Q

Options

A

A financial derivative instrument that gives the contractual right, but not obligation, to buy (a call) or sell (a put) an investment at a specified price within a set period of time.

77
Q

Personal Consumption

A

Amount spent on goods or services in a given month.

78
Q

Philly Fed Survey of Manufacturers

A

Philadelphia, New Jersey, and Delaware.

79
Q

PPI

A

Producer Price Index. Good measure of inflation.

80
Q

Purchasing managers Index

A

Business confidence survey

81
Q

Resistance

A

A term used in technical analysis indicating a price level at which analysis suggests a predominance of selling and hence the greater likelihood that the price will fall to break through the level.

82
Q

Retail sales

A

The percentage change month on month

83
Q

Rights issue

A

A privilege allowing existing shareholders to buy shares shortly before they are offered to the public at a specified and usually discounted price and usually in proportion to the number of shares already owned. Such corporate actions mean that ETX Capital will adjust any position accordingly.

84
Q

Script dividend

A

A script dividend is a script or bonus issue of shares made at no charge to the shareholders in proportion to their holdings in lieu of a cash dividend.

85
Q

SETS

A

Stock Electronic Trading Service. The order driven system used to trade FTSE 100, ex FTSE 100 and reserve shares

86
Q

Settlement price

A

The last traded price for a financial contract on any trading day.

87
Q

Shares

A

Shares represent ownership of a part of a company. They are also known as equities.

88
Q

Shorting

A

Refers to selling an asset that you do not own with the aim of buying it back cheaper at a later date. In spread betting, it refers to placing a ‘down bet’ or a trade in anticipation of a falling market.

89
Q

Spread

A

The difference between our buy and sell price.

90
Q

Stop loss

A

A pre-determined level at which you would like to close your bet to limit your loss if the price moves against you.

91
Q

Stop order

A

Stops are ordered to sell below, or buy above, the current price. Stop orders can be used to close or open a new position if the price breaks through a perceived support/resistance level.

92
Q

Support level

A

A technique used in technical analysis to indicate a price floor at which you would expect the price to ‘bounce off’. Opposite to resistance.

93
Q

Tic

A

Or ‘pip’ or ‘point’, means the smallest possible movement (up or down) in the price of a contract.

94
Q

Underlying market

A

The market upon which the derivative market price is dependent.

95
Q

Volatility

A

A statistical measure of a market’s price movements over time.

96
Q

Watch list

A

A list of markets selected for surveillance.

97
Q

Quadruple Witching

A

On the third Friday in March, June, September and December index futures, index options, stock options and single stock options all expire at the same time. Futures and options investors must close out their positions on those days which invariably leads to vastly increased volumes and can increase volatility significantly.

98
Q

Shuttering

A

The process by which a fund closes to new investors, stops existing members from withdrawing money and then the subsequent unwinding of the portfolio which is followed by the return of whatever proceeds are left to original investors (if any!).

Investment Banking Jargon (5 decks)

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