Definitions Flashcards
1
Q
Trend
A
A long-term pattern of movement in a particular direction.
2
Q
European-style
A
Said of an option contract that can only be exercised on the option’s expiration date.
3
Q
Triple bottoms
A
In technical analysis, a reversal pattern that is formed when the price forms three troughs at roughly the same price level; used to predict a change from a downtrend to an uptrend.
4
Q
Ratio scales
A
A measurement scale that has all the characteristics of interval measurement scales as well as a true zero
point as the origin.
5
Q
Average revenue
A
Total revenue divided by quantity sold.
6
Q
Universal owners
A
Long-term investors, such as pension funds,
that have significant assets invested in globally diversified
portfolios.
7
Q
Free trade
A
When there are no government restrictions on a country’s ability to trade.
8
Q
Plain vanilla bond
A
Bond that makes periodic, fixed coupon payments during the bond’s life and a lump-sum payment of principal at maturity. Also called conventional bond.
9
Q
Loss aversion
A
The tendency of people to dislike losses more than they like comparable gains.
10
Q
Total cost
A
The summation of all costs, for which costs are classified as fixed or variable.
11
Q
Asset utilization ratios
A
Ratios that measure how efficiently a
company performs day-to-day tasks, such as the collection
of receivables and management of inventory.
12
Q
Reverse repurchase agreement
A
A repurchase agree- ment viewed from the perspective of the cash lending counterparty.
13
Q
Effective interest rate
A
The borrowing rate or market rate that a company incurs at the time of issuance of a bond.
14
Q
Grouping by nature
A
With reference to the presentation of expenses in an income statement, the grouping together of expenses by similar nature, e.g., all depreciation expenses.
15
Q
Peak
A
The highest point of a business cycle
16
Q
Prior probabilities
A
Probabilities reflecting beliefs prior to the
arrival of new information.
17
Q
Overlay/portfolio tilt
A
An ESG investment style that focuses
on the use of certain investment strategies or products to change specific aggregate ESG characteristics of a fund or investment portfolio to a desired level (e.g., tilting an investment portfolio toward a desired carbon footprint).
18
Q
Nominal rate
A
A rate of interest based on the security’s face value.
19
Q
Valuation allowance
A
A reserve created against deferred tax
assets, based on the likelihood of realizing the deferred
tax assets in future accounting periods.
20
Q
Discount margin
A
See required margin.
21
Q
Grouping by function
A
With reference to the presentation of expenses in an income statement, the grouping together of expenses serving the same function, e.g. all items that are costs of goods sold.
22
Q
Option
A
A financial instrument that gives one party the right, but not the obligation, to buy or sell an underlying asset from or to another party at a fixed price over a specific period of time. Also referred to as contingent claim or option contract.
23
Q
Covariance
A
A measure of the co-movement (linear association)
between two random variables.
24
Q
Deferred tax assets
A
A balance sheet asset that arises when an excess amount is paid for income taxes relative to account- ing profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recover the difference during the course of future operations when tax expense exceeds income tax payable.
25
Lockbox system
A payment system in which customer pay- ments are mailed to a post office box and the banking institution retrieves and deposits these payments several times a day, enabling the company to have use of the fund sooner than in a centralized system in which customer payments are sent to the company.
26
Pseudo-random numbers
Numbers produced by random number generators
27
European option
An option that can only be exercised on its expiration date.
28
What is ACCOUNTS PAYABLE ?
Amounts that a business owes to its vendors for goods and services that were purchased from them but which have not yet been paid
29
Pretax margin
A profitability ratio calculated as earnings before taxes divided by revenue.
30
Open interest
The number of outstanding contracts in a clearinghouse at any given time. The open interest figure changes daily as some parties open up new positions, while other parties offset their old positions.
31
Small country
A country that is a price taker in the world
| market for a product and cannot influence the world market price.
32
Look-ahead bias
A bias caused by using information that was unavailable on the test date.
33
Unsecured debt
Debt which gives the debtholder only a
| general claim on an issuer’s assets and cash flow.
34
Fiat money
Money that is not convertible into any other commodity.
35
Bond yield plus risk premium approach
An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company’s stock relative to its bonds. The additional yield is often estimated using historical spreads between bond yields and stock yields.
36
Reserve accounts
Form of internal credit enhancement that relies on creating accounts and depositing in these accounts cash that can be used to absorb losses. Also called reserve funds.
37
Convertible bond
Bond that gives the bondholder the right
| to exchange the bond for a specified number of common shares in the issuing company.
38
Data mining
The practice of determining a model by extensive searching through a dataset for statistically significant patterns. Also called data snooping.
39
First lien debt
Debt secured by a pledge of certain assets that
could include buildings, but may also include property and
equipment, licenses, patents, brands, etc.
40
Day order
An order that is good for the day on which it is submitted. If it has not been filled by the close of business,
the order expires unfilled.
41
Back simulation
Another term for the historical method of
estimating VaR. This term is somewhat misleading in that the method involves not a simulation of the past but rather what actually happened in the past, sometimes adjusted to reflect the fact that a different portfolio may have existed in the past than is planned for the future.
42
What is AGGREGATE DEMAND?
The quantity of goods and services that households, businesses, government, and foreign customers want to buy at any given level of prices.
43
Defined contribution pension plans
Individual accounts to which an employee and typically the employer makes con- tributions during their working years and expect to draw on the accumulated funds at retirement. The employee bears the investment and inflation risk of the plan assets.
44
Repurchase agreement
A form of collateralized loan involv- ing the sale of a security with a simultaneous agreement by the seller to buy the same security back from the purchaser at an agreed-on price and future date. The party who sells the security at the inception of the repurchase agreement and buys it back at maturity is borrowing money from the other party, and the security sold and subsequently
repurchased represents the collateral.
45
Technical analysis
A form of security analysis that uses price
| and volume data, which is often displayed graphically, in decision making.
46
Currency option bonds
Bonds that give the bondholder the right to choose the currency in which he or she wants to
receive interest payments and principal repayments.
47
Break point
In the context of the weighted average cost of capital (WACC), a break point is the amount of capital at which the cost of one or more of the sources of capital changes, leading to a change in the WACC.
48
Extra dividend
A dividend paid by a company that does not pay dividends on a regular schedule, or a dividend that supplements regular cash dividends with an extra payment.
49
Liquidity
The ability to purchase or sell an asset quickly and easily at a price close to fair market value. the ability to meet short-term obligations using assets that are the most readily converted into cash
50
Capital deepening investment
Increases the stock of capital relative to labor.
51
Solvency ratios
Ratios that measure a company’s ability to meet its long-term obligations.
52
Private placement
Typically, a non-underwritten, unregis- tered offering of securities that are sold only to an inves- tor or a small group of investors. It can be accomplished directly between the issuer and the investor(s) or through an investment bank.
53
Return on sales
An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses. Also referred to as net profit margin.
54
Treasury stock method
A method for accounting for the effect of options (and warrants) on earnings per share (EPS) that specifies what EPS would have been if the options and warrants had been exercised and the company had used the proceeds to repurchase common stock.
55
Probability density function
A function with non-negative values such that probability can be described by areas under the curve graphing the function.
56
Decreasing returns to scale
When a production process leads
to increases in output that are proportionately smaller than
the increase in inputs.
57
Dependent
With reference to events, the property that the probability of one event occurring depends on (is related to) the occurrence of another event.
58
Degree of total leverage
The ratio of the percentage change
in net income to the percentage change in units sold; the sensitivity of the cash flows to owners to changes in the number of units produced and sold.
59
Quick assets
Assets that can be most readily converted to cash (e.g., cash, short-term marketable investments, receivables).
60
Valuation ratios
```
Ratios that measure the quantity of an asset
or flow (e.g., earnings) in relation to the price associated with a specified claim (e.g., a share or ownership of the enterprise).
```
61
Population
All members of a specified group.
62
What is AGGREGATE INCOME?
The value of all the payments earned by the suppliers of factors used in the production of goods and services
63
Security market index
A portfolio of securities representing
| a given security market, market segment, or asset class.
64
Neural networks
Computer programs based on how our own
| brains learn and process information.
65
Carrying amount
The amount at which an asset or liability is valued according to accounting principles.
66
Distributed ledger technology
Technology based on a distributed ledger.
67
Put-call-forward parity
The relationship amount puts, calls, and forward contracts
68
Option contract
see option
69
Closed-end fund
A mutual fund in which no new investment
money is accepted. New investors invest by buying existing shares, and investors in the fund liquidate by selling their shares to other investors.
70
Free cash flow
The actual cash that would be available to the company’s investors after making all investments necessary to maintain the company as an ongoing enterprise (also referred to as free cash flow to the firm); the internally generated funds that can be distributed to the company’s investors (e.g., shareholders and bondholders) without impairing the value of the company.
71
Ordinal scale
A measurement scale that sorts data into cat- egories that are ordered (ranked) with respect to some characteristic.
72
Elasticity
The percentage change in one variable for a per- centage change in another variable; a general measure of how sensitive one variable is to a change in the value of another variable.
73
Continuation patterns
A type of pattern used in technical
analysis to predict the resumption of a market trend that
was in place prior to the formation of a pattern.
74
Event
Any outcome or specified set of outcomes of a random variable.
75
Debt-rating approach
A method for estimating a company’s
before-tax cost of debt based upon the yield on comparably rated bonds for maturities that closely match that of the company’s existing debt.
76
Bond market vigilantes
Bond market participants who might reduce their demand for long-term bonds, thus pushing up their yields.
77
DuPont analysis
An approach to decomposing return on investment, e.g., return on equity, as the product of other financial ratios.
78
Counterparty risk
The risk that the other party to a contract will fail to honor the terms of the contract.
79
Capital expenditure
Expenditure on physical capital (fixed assets).
80
Capital market line
(CML) The line with an intercept point equal to the risk-free rate that is tangent to the efficient frontier of risky assets; represents the efficient frontier
when a risk-free asset is available for investment.
81
Private equity fund
A hedge fund that seeks to buy, optimize, and ultimately sell portfolio companies to generate profits. See venture capital fund.
82
Stated annual interest rate
A quoted interest rate that does not account for compounding within the year. Also called
quoted interest rate.
83
Asset class
A group of assets that have similar characteristics,
| attributes, and risk/return relationships.
84
Risk transfer
Actions to pass on a risk to another party, often, but not always, in the form of an insurance policy.
85
Law of demand
The principle that as the price of a good rises, buyers will choose to buy less of it, and as its price falls, they will buy more.
86
Free trade areas
One of the most prevalent forms of regional integration, in which all barriers to the flow of goods and services among members have been eliminated.
87
Solvency risk
The risk that an organization does not survive or succeed because it runs out of cash, even though it might otherwise be solvent.
88
Simulation trial
A complete pass through the steps of a simulation
89
Crowding out
The thesis that government borrowing may divert private sector investment from taking place.
90
Conversion value
For a convertible bond, the current share
| price multiplied by the conversion ratio.
91
Repo
A form of collateralized loan involving the sale of a security with a simultaneous agreement by the seller to buy the same security back from the purchaser at an agreed-on price and future date. The party who sells the security at the inception of the repurchase agreement and buys it back at maturity is borrowing money from the other party, and the security sold and subsequently repurchased represents the collateral.
92
Secured debt
Debt in which the debtholder has a direct claim—a pledge from the issuer—on certain assets and their associated cash flows.
93
Float factor
An estimate of the average number of days it takes deposited checks to clear; average daily float divided by average daily deposit.
94
Committed lines of credit
A bank commitment to extend credit up to a pre-specified amount; the commitment is considered a short-term liability and is usually in effect for 364 days (one day short of a full year).
95
Forward rate
The interest rate on a bond or money market instrument traded in a forward market. A forward rate can be interpreted as an incremental, or marginal, return for extending the time-to-maturity for an additional time period.
96
Central bank funds rates
Interest rates at which central bank funds are bought (borrowed) and sold (lent) for maturities ranging from overnight to one year. Called Federal or Fed
funds rates in the United States.
97
Strategic groups
Groups sharing distinct business models or catering to specific market segments in an industry.
98
Externality
An effect of a market transaction that is borne by parties other than those who transacted.
99
Non-accelerating inflation rate of unemployment
Effective unemployment rate, below which pressure emerges in labor markets.
100
Consistent
With reference to estimators, describes an esti- mator for which the probability of estimates close to the value of the population parameter increases as sample size increases.
101
Number of days of payables
An activity ratio equal to the number of days in a period divided by the payables turnover ratio for the period; an estimate of the average number of days it takes a company to pay its suppliers.
102
Stock split
An increase in the number of shares outstanding with a consequent decrease in share price, but no change to the company’s underlying fundamentals.
103
Artificial intelligence
Computer systems that exhibit cognitive and decision-making ability comparable (or superior) to that of humans
104
Average accounting rate of return (ARR)
(ARR) Over the life of a project, the AAR can be defined as the average net income divided by the average book value.
105
Period costs
Costs (executives salaries - example) that can’t be directly matched with the timing of revenue and which are thus expensed immediatly
106
Auction
A type of bond issuing mechanism often used for
| sovereign bonds that involve bidding.
107
Bid
The price at which a dealer or trader is willing to buy an asset, typically qualified by a maximum quantity.
108
Sample skewness
A sample measure of degree of asymmetry of a distribution.
109
Asset-based loan
A loan that is secured with company assets.
110
Total probability rule
A rule explaining the unconditional probability of an event in terms of probabilities of the event conditional on mutually exclusive and exhaustive scenarios.
111
Out-of-sample test
A test of a strategy or model using a sample outside the time period on which the strategy or model was developed.
112
Direct method
See direct format.
113
Game theory
The set of tools decision makers use to incorpo-
| rate responses by rival decision makers into their strategies.
114
Discount interest
A procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance.
115
Credit curve
A curve showing the relationship between time to maturity and yield spread for an issuer with comparable bonds of various maturities outstanding, usually upward
sloping.
116
Safety stock
A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.
117
Alternative investment markets
Market for investments other than traditional securities investments (i.e., traditional common and preferred shares and traditional fixed income instruments). The term usually encompasses direct and indirect investment in real estate (including timber- land and farmland) and commodities (including precious metals); hedge funds, private equity, and other investments requiring specialized due diligence.
(google: Asset that doesn't fall in one of the conventional investment categories ' equity / income / cash category'
example: hedge fund, venture capital, real property, commodities.
SEC have them unregulated
118
Short position
A position in an asset or contract in which one has sold an asset one does not own, or in which a
right under a contract can be exercised against oneself.
119
Sinking fund arrangement
Provision that reduces the credit
risk of a bond issue by requiring the issuer to retire a por-
tion of the bond’s principal outstanding each year.
120
Limit up
A limit move in the futures market in which the price at which a transaction would be made is at or above the upper limit.
121
London interbank offered rate (Libor)
Collective name for multiple rates at which a select set of banks believe they could borrow unsecured funds from other banks in the London interbank market for different currencies and different borrowing periods ranging from overnight to one year.
122
Extreme value theory
A branch of statistics that focuses primarily on extreme outcomes.
123
Per capita real GDP
Real GDP / (divided) by the size of the population , often used as a measure of the average standard of living in a country
124
Performance bond
See margin bond
125
Support
In technical analysis, a price range in which buying
activity is sufficient to stop the decline in the price of a
security.
126
Neo-Keynesians
A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages.
127
Binomial model
A model for pricing options in which the underlying price can move to only one of two possible
new prices.
128
Security selection
The process of selecting individual securities; typically, security selection has the objective of generating superior risk-adjusted returns relative to a portfolio's benchmark
129
Bond
Contractual agreement between the issuer and the
| bondholders.
130
Economic costs
All the remuneration needed to keep a pro- ductive resource in its current employment or to acquire the resource for productive use; the sum of total accounting
costs and implicit opportunity costs.
131
Price return index
An index that reflects only the price appre- ciation or percentage change in price of the constituent
securities. Also called price index.
132
Overcollateralization
Form of internal credit enhancement
| that refers to the process of posting more collateral than needed to obtain or secure financing.
133
Call money rate
The interest rate that buyers pay for their margin loan.
134
Operating leverage
The use of fixed costs in operations.
135
Property, plant, and equipment
Tangible assets that are expected to be used for more than one period in either the production or supply of goods or services, or for admin- istrative purposes.
136
January effect
Calendar anomaly that stock market returns in January are significantly higher compared to the rest of the months of the year, with most of the abnormal returns reported during the first five trading days in January. Also called turn-of-the-year effect.
137
Basic EPS
Net earnings available to common shareholders (i.e., net income minus preferred dividends) divided by the weighted average number of common shares outstanding.
138
Diminishing marginal productivity
Describes a state in which each additional unit of input produces less output than previously.
139
Passive strategy
IN reference to short-term cash management, it is an investment strategy characterized by simple decision rules for making daily investments
140
Hypothesis
With reference to statistical inference, a statement
| about one or more populations.
141
TRIN
A flow of funds indicator applied to a broad stock market index to measure the relative extent to which money is moving into or out of rising and declining stocks
142
Securitization
A process that involves moving assets into a special legal entity, which then uses the assets as guarantees
to secure a bond issue.
143
Capital lease
See finance lease.
144
Execution instructions
Instructions that indicate how to fill an order.
145
Pairs arbitrage trade
A trade in two closely related stocks involving the short sale of one and the purchase of the other
146
Arbitrage-free pricing
The overall process of pricing derivatives by arbitrage and risk neutrality.
Also called the principle of no arbitrage
147
Profit margin
An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses.
148
Subordinated debt
A class of unsecured debt that ranks below a firm’s senior unsecured obligations.
149
Unsupervised learning
A machine learning approach that
| does not make use of labeled training data.
150
Law of diminishing marginal returns
The observation that a variable factor’s marginal product must eventually fall as more of it is added to a fixed amount of the other factors.
151
Competitive strategy
A company’s plans for responding to
the threats and opportunities presented by the external
environment.
152
Cost-push
Type of inflation in which rising costs, usually
| wages, compel businesses to raise prices generally.
153
Demand curve
Graph of the inverse demand function. A graph showing the demand relation, either the highest quantity willingly purchased at each price or the highest price willingly paid for each quantity.
154
Cartel
Participants in collusive agreements that are made openly and formally.
155
Sample mean
The sum of the sample observations, divided
| by the sample size.
156
Expansionary
Tending to cause the real economy to grow.
157
Real GDP
The value of goods and services produced, measured at base year prices.
158
Tracking error
The standard deviation of the differences between a portfolio’s returns and its benchmark’s returns; a synonym of active risk.
159
Linear interpolation
The estimation of an unknown value on the basis of two known values that bracket it, using a straight line between the two known values.
160
Balance sheet ratios
Financial ratios involving balance sheet items only.
161
Dividend discount model based approach
An approach for estimating a country’s equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated market return produces an estimate for the equity risk premium.
162
Real interest rate
Nominal interest rate minus the expected rate of inflation.
163
Estimate
The particular value calculated from sample obser- vations using an estimator.
164
Percentiles
Quantiles that divide a distribution into 100 equal parts
165
Primary bond markets
Markets in which issuers first sell
| bonds to investors to raise capital.
166
FIFO method
The first in, first out, method of accounting for inventory, which matches sales against the costs of items of inventory in the order in which they were placed in inventory.
167
Combination
A listing in which the order of the listed items
| does not matter.
168
Liquid market
Said of a market in which traders can buy or sell with low total transaction costs when they want to trade.
169
Operating risk
The risk attributed to the operating cost struc- ture, in particular the use of fixed costs in operations; the risk arising from the mix of fixed and variable costs; the risk that a company’s operations may be severely affected by environmental, social, and governance risk factors.
170
What is the definition of: ABNORMAL RETURN?
The amount by which a security's actual return differs from its expected return.
Sometime triggered by "events" like the security's risk and the market's return.
171
Credit-worthiness
The perceived ability of the borrower to
pay what is owed on the borrowing in a timely manner; it represents the ability of a company to withstand adverse impacts on its cash flows.
172
Expansionary fiscal policy
Fiscal policy aimed at achieving
| real economic growth.
173
Return on total capital
A profitability ratio calculated as EBIT divided by the sum of short- and long-term debt and equity.
174
Probability distribution
A distribution that specifies the probabilities of a random variable’s possible outcomes.
175
Economies of scale
Reduction in cost per unit resulting from increased production.
176
Bernoulli random variable
A random variable having the outcomes 0 and 1.
177
Bar chart
A price chart with four bits of data for each time interval—the high, low, opening, and closing prices. A vertical line connects the high and low. A cross-hatch left indicates the opening price and a cross-hatch right indicates the close.
178
Deductible temporary differences
Temporary differences
that result in a reduction of or deduction from taxable income in a future period when the balance sheet item is recovered or settled.
179
Grey market
The forward market for bonds about to be issued. Also called “when issued” market.
180
Type II error
The error of not rejecting a false null hypothesis.
181
Contraction risk
The risk that when interest rates decline, the
security will have a shorter maturity than was anticipated at the time of purchase because borrowers refinance at the new, lower interest rates.
182
American depository receipt
A US dollar-denominated security that trades like a common share on US exchanges.
183
Organized exchange
A securities marketplace where buyers and seller can meet to arrange their trades.
184
Budget surplus/deficit
The difference between government
| revenue and expenditure for a stated fixed period of time.
185
Secured bonds
Bonds secured by assets or financial guaran- tees pledged to ensure debt repayment in case of default.
186
Risk governance
The top-down process and guidance that directs risk management activities to align with and support the overall enterprise.
187
Empirical probability
The probability of an event estimated
| as a relative frequency of occurrence.
188
Horizontal demand schedule
Implies that at a given price, the response in the quantity demanded is infinite.
189
Relative/best-in-class screening
An ESG investment style
| that focuses on sectors, companies, or projects selected for ESG performance relative to industry peers.
190
Laddering strategy
A form of active strategy which entails scheduling maturities on a systematic basis within the investment portfolio such that investments are spread out equally over the term of the ladder.
191
Settlement
The process that occurs after a trade is completed, the securities are passed to the buyer, and payment is received by the seller.
192
Longitudinal data
Observations on characteristic(s) of the same observational unit through time.
193
Discount
To reduce the value of a future payment in allowance for how far away it is in time; to calculate the present value of some future amount. Also, the amount by which an instrument is priced below its face (par) value.
194
Precautionary stocks
A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case
of greater than expected demand.
195
Bitcoin
A cryptocurrency using blockchain technology that
| was created in 2009.
196
What is AMORTIZING BOND ?
Bond with a payment schedule that calls for periodic payments of interest and repayments of principal
197
Conditional expected value
The expected value of a stated event given that another event has occurred.
198
Time value of money
The principles governing equivalence
| relationships between cash flows with different dates.
199
Support tranche
A class or tranche in a CMO that protects the PAC tranche from prepayment risk.
200
Long-run average total cost
The curve describing average total cost when no costs are considered fixed.
201
Asset-based valuation models
Valuation based on estimates
| of the market value of a company’s assets.
202
Growth investors
With reference to equity investors, investors who seek to invest in high-earnings-growth companies.
203
Double declining balance depreciation
An accelerated depreciation method that involves depreciating the asset at double the straight-line rate. This rate is multiplied by the book value of the asset at the beginning of the period (a declining balance) to calculate depreciation expense.
204
Straight-line method
A depreciation method that allocates
| evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.
205
Constant-yield price trajectory
A graph that illustrates the change in the price of a fixed-income bond over time assuming no change in yield-to-maturity. The trajectory shows the “pull to par” effect on the price of a bond trading at a premium or a discount to par value.
206
Float-adjusted market-capitalization weighting
An index weighting method in which the weight assigned to each constituent security is determined by adjusting its market
capitalization for its market float.
207
Degree of financial leverage
(DFL) The ratio of the percentage change in net income to the percentage change in operating income; the sensitivity of the cash flows available to owners when operating income changes.
208
Economic order quantity–reorder point (EOQ–ROP)
An approach to managing inventory based on expected demand and the predictability of demand; the ordering point for new inventory is determined based on the costs of ordering and carrying inventory, such that the total cost associated with inventory is minimized.
209
Deferred coupon bond
Bond that pays no coupons for its first few years but then pays a higher coupon than it otherwise normally would for the remainder of its life. Also called split coupon bond.
210
Convertible preference shares
A type of equity security that entitles shareholders to convert their shares into a specified number of common shares.
211
Real income
Income adjusted for the effect of inflation on the purchasing power of money. Also known as the purchasing power of income. If income remains constant and a good’s price falls, real income is said to rise, even though the num- ber of monetary units (e.g., dollars) remains unchanged.
212
Cross-sectional analysis
Analysis that involves comparisons across individuals in a group over a given time period or at a given point in time.
213
Labor force
The portion of the working age population (over the age of 16) that is employed or is available for work but not working (unemployed).
214
Strong-form efficient market
A market in which security prices reflect all public and private information.
215
Equipment trust certificates
Bonds secured by specific types of equipment or physical assets.
216
What are the two other name of the balance sheet ?
A- Statement of financial position
B- statement of financial condition
C- Both A & B
D- none
217
Fill or kill
See immediate or cancel order.
218
Total return swap
A swap in which one party agrees to pay the total return on a security. Often used as a credit derivative, in which the underlying is a bond.
219
Price weighting
An index weighting method in which the weight assigned to each constituent security is determined by dividing its price by the sum of all the prices of the
constituent securities.
220
What is the other term / name for Weighted average life?
Average Life
221
Trough
The lowest point of a business cycle.
222
Put/Call ratio
A technical analysis indicator that evaluates market sentiment based upon the volume of put options traded divided by the volume of call options traded for a particular financial instrument
223
Target independent
A bank’s ability to determine the defi- nition of inflation that they target, the rate of inflation that they target, and the horizon over which the target is to be achieved.
224
Gross profit
Sales minus the cost of sales (i.e., the cost of goods sold for a manufacturing company).
225
Liquidity premium
An extra return that compensates investors for the risk of loss relative to an investment’s fair value if the investment needs to be converted to cash quickly.
226
Business risk
The risk associated with operating earnings.
Operating earnings are uncertain because total revenues and many of the expenditures contributed to produce those revenues are uncertain.
227
Covenants
The terms and conditions of lending agreements that the issuer must comply with; they specify the actions that an issuer is obligated to perform (affirmative covenant)
or prohibited from performing (negative covenant).
228
Responsible investing
The practice of identifying companies that can efficiently manage their financial, environmental, and human capital resources to generate attractive long- term profitability; often synonymous with sustainable
investing.
229
Double bottoms
In technical analysis, a reversal pattern that is formed when the price reaches a low, rebounds, and then sells off back to the first low level; used to predict a change from a downtrend to an uptrend.
230
Dark pools
Alternative trading systems that do not display the orders that their clients send to them.
231
Blue chip
Widely held large market capitalization companies
that are considered financially sound and are leaders in
their respective industry or local stock market.
232
Net present value
NPV) The present value of an investment’s cash inflows (benefits) minus the present value of its cash outflows (costs).
233
Loss severity
Portion of a bond’s value (including unpaid interest) an investor loses in the event of default.
234
Standards of conduct
Behaviors required by a group; estab- lished benchmarks that clarify or enhance a group’s code
of ethics.
235
Finance lease
From the lessee perspective, under US GAAP,
a type of lease which is more akin to the purchase of an asset by the lessee. From the lessor perspective, under IFRS, a lease which “transfers substantially all the risks and rewards incidental to ownership of an underlying asset.”
236
Term maturity structure
Structure for a bond issue in which
| the bond’s notional principal is paid off in a lump sum at maturity.
237
Common stock
See common shares.
238
Put option
An option that gives the holder the right to sell an underlying asset to another party at a fixed price over a specific period time
239
Units-of-production method
A depreciation method that allocates the cost of a long-lived asset based on actual
usage during the period.
240
Candlestick chart
A price chart with four bits of data for each time interval. A candle indicates the opening and closing price for the interval. The body of the candle is shaded if the opening price was higher than the closing price, and the body is clear if the opening price was lower than the closing price. Vertical lines known as wicks or shadows extend from the top and bottom of the candle to indicate the high and the low prices for the interval.
241
Exchanges
Places where traders can meet to arrange their trades.
242
Financial leverage
The extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income; also, short for the financial leverage ratio.
243
Unexpected inflation
the component of inflation that is a surprise
244
Subjective probability
A probability drawing on personal or subjective judgment.
245
Golden cross
A technical analysis term that describes a situa-
tion where a short-term moving average crosses from below a longer-term moving average to above it; this movement is considered bullish.
246
Priority of claims
Priority of payment, with the most senior or highest ranking debt having the first claim on the cash flows and assets of the issuer.
247
Normal profit
The level of accounting profit needed to just cover the implicit opportunity costs ignored in accounting costs.
248
Exhaustive
Covering or containing all possible outcomes.
249
Floaters
See floating-rate notes.
250
Fractional reserve banking
Banking in which reserves con- stitute a fraction of deposits.
251
Legal tender
Something that must be accepted when offered in exchange for goods and services.
252
Narrow money
The notes and coins in circulation in an econ- omy, plus other very highly liquid deposits.
253
Treasury Inflation-Protected Securities
A bond issued by the United States Treasury Department that is designed to protect the investor from inflation by adjusting the principal of the bond for changes in inflation.
254
GDP deflator
A gauge of prices and inflation that measures the aggregate changes in prices across the overall economy.
255
Relative strength analysis
A comparison of the performance of one asset with the performance of another asset or a benchmark based on changes in the ratio of the securities' respective prices over time.
256
Level of significance
The probability of a Type I error in testing a hypothesis.
257
Customs union
Extends the free trade area (FTA) by not only allowing free movement of goods and services among members, but also creating a common trade policy against nonmembers.
258
Exercise value
The value obtained if an option is exercised based on current conditions. Also known as intrinsic value.
259
Transparency
Said of something (e.g., a market) in which information is fully disclosed to the public and/or regulators.
260
Cross-default provisions
Provisions whereby events of default such as non-payment of interest on one bond trigger default on all outstanding debt; implies the same default probability for all issues.
261
What is ACCELERATED BOOK BUILD?
An offering of securities by an investment bank acting as principal that is accomplished in only one or two days
262
Terms of trade
The ratio of the price of exports to the price of imports, representing those prices by export and import price indexes, respectively.
263
Automated Clearing House (ACH)
An electronic payment
network available to businesses, individuals, and finan- cial institutions in the United States, US Territories, and Canada.
264
Off-the-run
Seasoned government bonds are off-the-run securities; they are not the most recently issued or the most actively traded.
265
What is Asset allocation?
The process of determining how investment funds should be distributed among asset classes.
266
Economic loss
The amount by which accounting profit is less than normal profit.
267
Carrying value
The net amount shown for an asset or liabil- ity on the balance sheet; book value may also refer to the company’s excess of total assets over total liabilities. For a bond, the purchase price plus (or minus) the amortized amount of the discount (or premium).
268
Unsponsored
A type of depository receipt in which the foreign company whose shares are held by the depository has no
involvement in the issuance of the receipts.
269
Asset-backed securities
A type of bond issued by a legal entity called A SPECIAL PURPOSE ENTITY (SPE) on a collection of assets that the SPE owns. Also, securities backed by receivables and loans other than mortgages.
270
Non-current assets
Assets that are expected to benefit the company over an extended period of time (usually more than one year).
271
Operationally efficient
Said of a market, a financial system, or an economy that has relatively low transaction costs.
272
Stop order
An order in which a trader has specified a stop price condition. Also called stop-loss order.
273
What is ACTIVITY RATIOS?
Ratios that measure how efficiently a company performs day to day task, such as the collection of receivables and management of inventory.
Also called ASSET UTILIZATION RATIOS or OPERATING EFFICIENCY RATIOS
274
Parametric test
Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generating the SAMPLE
275
Delta
The sensitivity of the derivative price to a small change in the value of the underlying asset.
276
Continuous trading market
A market in which trades can be arranged and executed any time the market is open.
277
Descriptive statistics
The study of how data can be summa-
| rized effectively.
278
Fundamental analysis
The examination of publicly available information and the formulation of forecasts to estimate the intrinsic value of assets.
279
Payments system
The system for the transfer of money
280
Second lien
A secured interest in the pledged assets that ranks below first lien debt in both collateral protection and priority of payment.
281
Full price
The price of a security with accrued interest; also called the invoice or dirty price.
282
On-the-run
The most recently issued and most actively traded sovereign securities.
283
Shutdown point
The point at which average revenue is equal
| to the firm’s average variable cost.
284
Free-cash-flow-to-equity models
Valuation models based on discounting expected future free cash flow to equity.
285
Split coupon bond
See deferred coupon bond.
286
Univariate distribution
A distribution that specifies the prob-
| abilities for a single random variable.
287
Efficient market
A market in which asset prices reflect new information quickly and rationally.
288
Capital structure
The mix of debt and equity that a company uses to finance its business; a company’s specific mixture of long-term financing.
289
Factor
A common or underlying element with which several variables are correlated.
290
Bid size
The maximum quantity of an asset that pertains to a specific bid price from a trader.
291
Binomial tree
The graphical representation of a model of asset price dynamics in which, at each period, the asset moves
up with probability p or down with probability (1 – p).
292
Estimation
With reference to statistical inference, the sub- division dealing with estimating the value of a population parameter.
293
Triangle patterns
In technical analysis, a continuation chart pattern that forms as the range between high and low prices narrows, visually forming a triangle.
294
Value at risk
(VaR) A money measure of the minimum value of losses expected during a specified time period at a given level of probability.
295
Official interest rate
An interest rate that a central bank sets and announces publicly; normally the rate at which it is willing to lend money to the commercial banks. Also called
official policy rate or policy rate.
296
Exports
Goods and services that an economy sells to other countries.
297
Green bonds
A bond used in green finance whereby the proceeds are earmarked towards environmental-related products.
298
Bid–ask spread
The difference between the prices at which
dealers will buy from a customer (bid) and sell to a cus- tomer (offer or ask). It is often used as an indicator of liquidity.
299
Federal funds rate
The US interbank lending rate on overnight borrowings of reserves.
300
Current ratio
A liquidity ratio calculated as current assets divided by current liabilities.
301
What is ANNUITY?
A finite set of level sequential cash flows
Google : a fixed amount of money that is paid to someone each year.
302
Risk management framework
The infrastructure, process, and analytics needed to support effective risk management in an organization.
303
Rule of 72
The principle that the approximate number of years necessary for an investment to double is 72 divided by the
stated interest rate.
304
Point and figure chart
A technical analysis chart that is con- structed with columns of X’s alternating with columns of O’s such that the horizontal axis represents only the num- ber of changes in price without reference to time or volume
305
Basis point
Used in stating yield spreads, one basis point equals one-hundredth of a percentage point, or 0.01%.
306
Underwriter
A firm, usually an investment bank, that takes the risk of buying the newly issued securities from the issuer, and then reselling them to investors or to dealers, thus guaranteeing the sale of the securities at the offering price negotiated with the issuer.
307
Realizable (settlement) value
With reference to assets, the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal; with reference to liabilities, the un-discounted amount of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.
308
What is MULTILATERAL TRADING FACILITIES ?
see alternative trading system
309
Flotation cost
Fees charged to companies by investment bankers and other costs associated with raising new capital.
310
Wealth effect
An increase (decrease) in household wealth increases (decreases) consumer spending out of a given level of current income.
311
Contra account
An account that offsets another account.
312
Logarithmic scale
A scale in which equal distances represent equal proportional changes in the underlying quantity.
313
Dual-currency bonds
Bonds that make coupon payments in one currency and pay the par value at maturity in another currency.
314
VaR
See value at risk
315
What is the other name sport market is referred too?
Underlying
316
Sunk cost
A cost that has already been incurred.
317
Statement of financial condition
The financial statement that presents an entity’s current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as of a particular point in time (the date of the balance sheet).
318
Risk aversion
The degree of an investor’s inability and unwillingness to take risk.
319
Default probability
The probability that a borrower defaults or fails to meet its obligation to make full and timely pay- ments of principal and interest, according to the terms of the debt security. Also called default risk.
320
Zero volatility spread (Z-spread)
Calculates a constant yield spread over a government (or interest rate swap) spot curve.
321
High-water mark
The highest value, net of fees, that a fund has reached in history. It reflects the highest cumulative return used to calculate an incentive fee.
322
Sample
A subset of a population.
323
Operating profit
A company’s profits on its usual business activities before deducting taxes. Also called operating income.
324
LIFO method
The last in, first out, method of accounting for inventory, which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (i.e., inventory produced or acquired last are assumed to be sold first).
325
Cost of preferred stock
The cost to a company of issuing preferred stock; the dividend yield that a company must commit to pay preferred stockholders.
326
Barter economy
An economy where economic agents as house-holds, corporations, and governments “pay” for goods and services with another good or service.
327
Time tranching
The creation of classes or tranches in an ABS/MBS that possess different (expected) maturities.
328
Tracking risk
The standard deviation of the differences
between a portfolio’s returns and its benchmarks returns.
Also called tracking error.
329
Over-the-counter (OTC) markets
A decentralized market where buy and sell orders initiated from various locations
are matched through a communications network.
330
Laspeyres index
A price index created by holding the com- position of the consumption basket constant.
331
Current account
A component of the balance of payments account that measures the flow of goods and services.
332
Economic profit
Equal to accounting profit less the implicit opportunity costs not included in total accounting costs; the difference between total revenue (TR) and total cost (TC). Also called abnormal profit or supernormal profit.
333
At the money
An option in which the underlying’s price
| equals the exercise price.
334
Structural (or cyclically adjusted) budget deficit
The deficit that would exist if the economy was at full employment (or full potential output).
335
Just-in-time (JIT) method
Method of managing inventory
| that minimizes in-process inventory stocks.
336
Registered bonds
Bonds for which ownership is recorded by
| either name or serial number.
337
Foreign portfolio investment
Shorter-term investment by individuals, firms, and institutional investors (e.g., pension funds) in foreign financial instruments such as foreign stocks and foreign government bonds.
338
Capital asset pricing model
(CAPM) An equation describing the expected return on any asset (or portfolio) as a linear function of its beta relative to the market portfolio.
339
Risk Tolerance
The amount of risk an investor is willing and able to bear to achieve an investment goal
340
Frequency distribution
A tabular display of data summarized into a relatively small number of intervals.
341
Exercise price
The fixed price at which an option holder can buy or sell the underlying. Also called strike price, striking price, or strike.
342
What is ACCOUNTING PROFIT?
Income as reported on the income statement, in accordance with prevailing accounting standards, before the provisions for income tax expense.
Also called INCOME BEFORE TAXES or PRETAX INCOME.
343
Tariffs
Taxes that a government levies on imported goods.
344
Direct write-off method
An approach to recognizing credit
losses on customer receivables in which the company waits until such time as a customer has defaulted and only then recognizes the loss.
345
Peformance fee
Fee paid to the general partner from the limited partners based on realized net profits
346
G-spread
The yield spread in basis points over an actual or
| interpolated government bond.
347
Bottom-up analysis
An investment selection approach that focuses on company-specific circumstances rather than emphasizing economic cycles or industry analysis.
348
Tax loss carry forward
A taxable loss in the current period that may be used to reduce future taxable income.
349
What is commitment offering other name?
Underwritten offering.
350
Sales-type leases
Under US GAAP, a type of finance lease, from a lessor perspective, where the present value of the lease payments (lease receivable) exceeds the carrying value of the leased asset. The revenues earned by the lessor both a selling profit at inception and financing (interest) revenues.
351
Surety bond
Form of external credit enhancement whereby
a rated and regulated insurance company guarantees to reimburse bondholders for any losses incurred up to a maximum amount if the issuer defaults.
352
Relative dispersion
The amount of dispersion relative to a
| reference value or benchmark.
353
Position
The quantity of an asset that an entity owns or owes.
354
Contractionary fiscal policy
A fiscal policy that has the objective to make the real economy contract.
355
Operational risk
The risk that arises from inadequate or failed people, systems, and internal policies, procedures, and processes, as well as from external events that are beyond the control of the organization but that affect its operations.
356
Net book value
The remaining (undepreciated) balance of an asset’s purchase cost. For liabilities, the face value of a bond minus any unamortized discount, or plus any unamortized premium.
357
Store of value
The quality of tending to preserve value.
358
Base rates
The reference rate on which a bank bases lending rates to all other customers.
359
Transactions money balances
Money balances that are held to finance transactions.
360
Elasticity of demand
A measure of the sensitivity of quan- tity demanded to a change in a product’s own price: %∆QD/%∆P.
361
Taxable temporary differences
Temporary differences that result in a taxable amount in a future period when deter- mining the taxable profit as the balance sheet item is recovered or settled.
362
Trust receipt arrangement
The use of inventory as collateral
for a loan. The inventory is segregated and held in trust, and the proceeds of any sale must be remitted to the lender immediately.
363
Change in polarity principle
A tenet of technical analysis that once a support level is breached, it becomes a resis- tance level. The same holds true for resistance levels; once breached, they become support levels.
364
Voluntarily unemployed
A person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy.
365
Load fund
A mutual fund in which, in addition to the annual fee, a percentage fee is charged to invest in the fund and/ or for redemptions from the fund.
366
Non-cumulative preference shares
Preference shares for which dividends that are not paid in the current or subse- quent periods are forfeited permanently (instead of being accrued and paid at a later date).
367
Non-recourse loan
Loan in which the lender does not have a shortfall claim against the borrower, so the lender can look only to the property to recover the outstanding mortgage balance.
368
Tax base
The amount at which an asset or liability is valued for tax purposes.
369
Funds of hedge funds
Funds that hold a portfolio of hedge funds, more commonly shortened to funds of funds.
370
Short selling
A transaction in which borrowed securities are sold with the intention to repurchase them at a lower price
at a later date and return them to the lender.
371
Debt-to-equity ratio
A solvency ratio calculated as total debt
| divided by total shareholders’ equity.
372
Company analysis
Analysis of an individual company.
373
Cash flow from operations
The net amount of cash provided from operating activities.
374
Operating cycle
A measure of the time needed to convert raw materials into cash from a sale; it consists of the number of days of inventory and the number of days of receivables.
375
Covered bond
Debt obligation secured by a segregated pool of assets called the cover pool. The issuer must maintain the value of the cover pool. In the event of default, bondholders have recourse against both the issuer and the cover pool.
376
Equity swap
A swap transaction in which at least one cash flow is tied to the return to an equity portfolio position, often an equity index.
377
t-Test
A hypothesis test using a statistic (t-statistic) that follows a t-distribution.
378
Capital market securities
Securities with maturities at issuance longer than one year.
379
Government equivalent yield
A yield that restates a yield- to-maturity based on 30/360 day-count to one based on actual/actual.
380
Bilateral loan
A loan from a single lender to a single borrower.
381
Non-sovereign government bonds
A bond issued by a gov- ernment below the national level, such as a province, region, state, or city.
382
Risk averse
The assumption that an investor will choose the least risky alternative.
383
Operating lease
An agreement allowing a lessee to use some asset for a period of time; essentially a rental.
384
Blockchain
A type of digital ledger in which information is
recorded sequentially and then linked together and secured
using cryptographic methods.
385
Top-down analysis
An investment selection approach that begins with consideration of macroeconomic conditions and then evaluates markets and industries based upon such conditions.
386
Financial risk
The risk that environmental, social, or gover- nance risk factors will result in significant costs or other losses to a company and its shareholders; the risk arising from a company’s obligation to meet required payments
under its financing agreements.
387
Price priority
The principle that the highest priced buy orders and the lowest priced sell orders execute first.
388
Unit labor cost
The average labor cost to produce one unit
| of output.
389
No-load fund
A mutual fund in which there is no fee for investing in the fund or for redeeming fund shares, although there is an annual fee based on a percentage of the fund’s net asset value.
390
Policy rate
An interest rate that a central bank sets and announces publicly; normally the rate at which it is willing to lend money to the commercial banks.
391
Line chart
In technical analysis, a plot of price data, typically closing prices, with a line connecting the points.
392
Distributed ledger
A type of database that may be shared among entities in a network
393
Principle of no arbitrage
See arbitrage-free pricing.
394
Embedded option
Contingency provisions that provide the issuer or the bondholders the right, but not the obligation, to take action. These options are not part of the security and cannot be traded separately.
395
Required rate of return
See market discount rate.
396
Herding
Clustered trading that may or may not be based on information.
397
Cash markets
See spot markets.
398
Average total cost
Total cost divided by quantity produced.
399
Debt incurrence test
A financial covenant made in conjunc- tion with existing debt that restricts a company’s ability to incur additional debt at the same seniority based on one
or more financial tests or conditions.
400
Standard deviation
The positive square root of the variance; a measure of dispersion in the same units as the original data.
401
Head and shoulders pattern
In technical analysis, a rever-
sal pattern that is formed in three parts: a left shoulder, head, and right shoulder; used to predict a change from an uptrend to a downtrend.
402
Kondratieff wave
A 54-year long economic cycle postulated by Nikolai Kondratieff.
403
Trade protection
Government policies that impose restric-
| tions on trade, such as tariffs and quotas.
404
Paasche index
An index formula using the current composition of a basket of products
405
What is the other name for Zero-coupon bonds?
Pure Discount Bonds
406
Average fixed cost
Total fixed cost divided by quantity produced.
407
Principal
The amount of funds originally invested in a project or instrument; the face value to be paid at maturity.
408
Hidden order
An order that is exposed not to the public but only to the brokers or exchanges that receive it.
409
Nominal risk-free interest rate
The sum of the real risk-free interest rate and the inflation premium.
410
Electronic communications networks
See alternative trading systems.
411
Yield to maturity
Annual return that an investor earns on a
bond if the investor purchases the bond today and holds it until maturity. It is the discount rate that equates the pres- ent value of the bond’s expected cash flows until maturity with the bond’s price. Also called yield-to-redemption or redemption yield.
412
Balanced
With respect to a government budget, one in which spending and revenues (taxes) are equal.
413
Elliott wave theory
A technical analysis theory that claims that the market follows regular, repeated waves or cycles.
414
What is ACCRUED EXPENSES ?
Liabilities related to expenses that have been incurred but not yet paid as of the end of an accounting period -> example of an accrued expense is rent that has been incurred but not yet paid, resulting in a liability "rent payable."
Also called ACCRUED LIABILITIES
415
Notching
Ratings adjustment methodology where specific issues from the same borrower may be assigned different credit ratings.
416
Degree of operating leverage
(DOL) The ratio of the percentage change in operating income to the percentage change in units sold; the sensitivity of operating income to changes in units sold.
417
Normal goods
Goods that are consumed in greater quantities as income increases.
418
Seasoned offering
An offering in which an issuer sells addi- tional units of a previously issued security.
419
Free float
The number of shares that are readily and freely tradable in the secondary market.
420
Arbitrageurs
Traders who engage in arbitrage
421
Diluted shares
The number of shares that would be outstanding if all potentially dilutive claims on common shares (e.g., convertible debt, convertible preferred stock, and employee stock options) were exercised.
422
Leverage
In the context of corporate finance, leverage refers to the use of fixed costs within a company’s cost structure. Fixed costs that are operating costs (such as depreciation or rent) create operating leverage. Fixed costs that are financial costs (such as interest expense) create financial leverage.
423
Pari passu
On an equal footing
424
Forward contract
An agreement between two parties in which one party, the buyer, agrees to buy from the other party, the seller, an underlying asset at a later date for a price established at the start of the contract.
425
Liabilities
Present obligations of an enterprise arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors’ claims on the resources of a company.
426
Coupon rate
The interest rate promised in a contract; this is the rate used to calculate the periodic interest payments.
427
Prime brokers
Brokers that provide services that commonly include custody, administration, lending, short borrowing, and trading.
428
Time-weighted rate of return
The compound rate of growth of one unit of currency invested in a portfolio during a stated measurement period; a measure of investment per- formance that is not sensitive to the timing and amount
of withdrawals or additions to the portfolio.
429
Sales risk
Uncertainty with respect to the quantity of goods and services that a company is able to sell and the price it is able to achieve; the risk related to the uncertainty of revenues.
430
Firm commitment offering
See underwritten offering
431
What is ACID-TEST RATIO?
A stringent measure of liquidity that indicates a company's ability to satisfy current liabilities with its most liquid assets.
(or called quick ratio, also check for formula)
calculated as:
Cash + Short Term marketable investments + receivables) / current liabilities
432
Complete markets
Informally, markets in which the variety
of distinct securities traded is so broad that any desired
payoff in a future state-of-the-world is achievable.
433
Current liabilities
Short-term obligations, such as accounts payable, wages payable, or accrued liabilities, that are expected to be settled in the near future, typically one year or less.
434
Promissory note
A written promise to pay a certain amount of money on demand.
435
Back-testing
With reference to portfolio strategies, the appli- cation of a strategy’s portfolio selection rules to historical data to assess what would have been the strategy’s historical performance.
436
Payback period
The number of years required to recover the original investment in a project. The payback is based on cash flows
437
Duration gap
A bond’s Macaulay duration minus the investment horizon.
438
Effective duration
The sensitivity of a bond’s price to a change in a benchmark yield curve.
439
Gamma
A numerical measure of how sensitive an option’s delta (the sensitivity of the derivative’s price) is to a change in the value of the underlying.
440
Big Data
The vast amount of data being generated by industry, governments, individuals, and electronic devices that arises from both traditional and non-traditional data sources.
441
Priced risk
Risk for which investors demand compensation
for bearing (e.g. equity risk, company-specific factors,
macroeconomic factors).
442
Cost of debt
The cost of debt financing to a company, such as
| when it issues a bond or takes out a bank loan.
443
Foreign currency reserves
Holding by the central bank of
| non-domestic currency deposits and non-domestic bonds.
444
Sample excess kurtosis
A sample measure of the degree of
a distribution’s kurtosis in excess of the normal distribu-
tion’s kurtosis
445
Weighted average cost of capital
A weighted average of the aftertax required rates of return on a company’s common stock, preferred stock, and long-term debt, where the weights are the fraction of each source of financing in the company’s target capital structure.
446
Cryptocurrency
An electronic medium of exchange that lacks
| physical form.
447
Trade credit
A spontaneous form of credit in which a pur-
| chaser of the goods or service is financing its purchase by delaying the date on which payment is made.
448
Non-cyclical
A company whose performance is largely inde- pendent of the business cycle
449
Prepaid expense
A normal operating expense that has been
| paid in advance of when it is due.
450
Central bank funds market
The market in which deposit- taking banks that have an excess reserve with their national central bank can loan money to banks that need funds for maturities ranging from overnight to one year. Called the
Federal or Fed funds market in the United States
451
First-degree price discrimination
Where a monopolist is able
to charge each customer the highest price the customer
is willing to pay.
452
Vertical analysis
Common-size analysis using only one report- ing period or one base financial statement; for example, an income statement in which all items are stated as per- centages of sales.
453
Code of ethics
An established guide that communicates an organization’s values and overall expectations regarding member behavior. A code of ethics serves as a general guide for how community members should act.
454
Depository institutions
Commercial banks, savings and loan banks, credit unions, and similar institutions that raise funds from depositors and other investors and lend it to borrowers.
455
Financial flexibility
The ability to react and adapt to financial adversity and opportunities.
456
Convexity adjustment
For a bond, one half of the annual or approximate convexity statistic multiplied by the change in the yield-to-maturity squared.
457
Continuous time
Time thought of as advancing in extremely
| small increments.
458
Principal–agent relationship
A relationship in which a principal hires an agent to perform a particular task or service;
also known as an agency relationship.
459
Forward commitments
Class of derivatives that provides the ability to lock in a price to transact in the future at a previously agreed-upon price
460
Deferred income
A liability account for money that has been collected for goods or services that have not yet been delivered; payment received in advance of providing a good or service.
461
Eurobonds
Type of bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated.
462
Forward curve
A series of forward rates, each having the same timeframe.
463
Revaluation model
Under IFRS, the process of valuing long- lived assets at fair value, rather than at cost less accumu- lated depreciation. Any resulting profit or loss is either reported on the income statement and/or through equity
under revaluation surplus.
464
Conditional probability
The probability of an event given (conditioned on) another event.
465
Is payable date and payment date the same thing ? (Yes or no )
Yes - the day that the company actually mails out (or electronically transfers) a dividend payment.
466
What is ACTIVE INVESTMENT?
An approach to investing in which the investor seeks to outperform a given benchmark
467
Perfectly elastic
When the quantity demanded or supplied of a given good is infinitely sensitive to a change in the value of a specified variable (e.g., price)
468
One-tailed hypothesis test
A test in which the null hypothesis is rejected only if the evidence indicates that the population parameter is greater than (smaller than) θ0. The alternative hypothesis also has one side.
469
Ex-dividend date
The first date that a share trades without (i.e., “ex”) the dividend.
470
Operating cash flow
The net amount of cash provided from operating activities.
471
Fibonacci sequence
A sequence of numbers starting with 0 and 1, and then each subsequent number in the sequence is the sum of the two preceding numbers. In Elliott Wave Theory, it is believed that market waves follow patterns that are the ratios of the numbers in the Fibonacci sequence.
472
Platykurtic
Describes a distribution that has relatively less weight in the tails than the normal distribution.
473
Bond equivalent yield
A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity. Bond equivalent yield allows for the restatement and com- parison of securities with different compounding periods.
474
National income
The income received by all factors of produc- tion used in the generation of final output. National income equals gross domestic product (or, in some countries, gross national product) minus the capital consumption allowance and a statistical discrepancy.
475
Non-renewable resources
Finite resources that are depleted once they are consumed, such as oil and coal.
476
Quantile
A value at or below which a stated fraction of the data lies. Also called fractile.
477
Broker–dealer
A financial intermediary (often a company)
that may function as a principal (dealer) or as an agent
(broker) depending on the type of trade.
478
Per unit contribution margin
The amount that each unit sold contributes to covering fixed costs - that is, the difference between he price per unit and the variable cost per unit.
479
Permissionless networks
Networks that are fully open to any user on a DLT network.
480
Risk factor/risk premium investing
An ESG investment style
that focuses on the inclusion of ESG information in the analysis of systematic risks as, for example, in smart beta and factor investment strategies (similar to size, value, momentum, and growth strategies).
481
Contract rate
See mortgage rate.
482
Quantity equation of exchange
An expression that over a given period, the amount of money used to purchase all goods and services in an economy, M × V, is equal to monetary value of this output, P × Y.
483
Point of sale (POS)
Systems that capture transaction data at the physical location in which the sale is made.
484
Project sequencing
To defer the decision to invest in a future project until the outcome of some or all of a current project is known. Projects are sequenced through time, so that investing in a project creates the option to invest in future projects.
485
Quintiles
Quantiles that divide a distribution into five equal parts.
486
Cash collateral account
Form of external credit enhance- ment whereby the issuer immediately borrows the credit- enhancement amount and then invests that amount, usually in highly rated short-term commercial paper.
487
Standardizing
A transformation that involves subtracting the
| mean and dividing the result by the standard deviation.
488
Historical equity risk premium approach
An estimate of a country’s equity risk premium that is based upon the his- torical averages of the risk-free rate and the rate of return on the market portfolio.
489
Diffusion index
Reflects the proportion of the index’s components that are moving in a pattern consistent with the overall index.
490
Expenses
Outflows of economic resources or increases in liabilities that result in decreases in equity (other than decreases because of distributions to owners); reductions in net assets associated with the creation of revenues.
491
Display size
The size of an order displayed to public view.
492
Leptokurtic
Describes a distribution that has fatter tails than a normal distribution.
493
Financial account
A component of the balance of payments account that records investment flows.
494
Unearned revenue
A liability account for money that has been collected for goods or services that have not yet been delivered; payment received in advance of providing a good or service. Also called deferred revenue or deferred income
495
Settlement price
The official price, designated by the clearing- house, from which daily gains and losses will be determined and marked to market.
496
Primary capital markets (primary markets)
The market where securities are first sold and the issuers receive the proceeds.
497
What is:
| Aggregate supply curve
The level of domestic output that companies will produce at each price level.
(google: graph supply curve - long and short run)
498
Lessee
The party obtaining the use of an asset through a lease.
499
Replication
The creation of an asset or portfolio from another asset, portfolio, and/or derivative
500
Weak-form efficient market hypothesis
The belief that secu- rity prices fully reflect all past market data, which refers to all historical price and volume trading information.
501
Risk-neutral pricing
Sometimes said of derivatives pricing, uses the fact that arbitrage opportunities guarantee that a risk-free portfolio consisting of the underlying and the derivative must earn the risk-free rate.
502
Special purpose entity
A non-operating entity created to carry out a specified purpose, such as leasing assets or securitizing receivables; can be a corporation, partnership, trust, limited liability, or partnership formed to facilitate a specific type of business activity. Also called special purpose vehicle or variable interest entity.
503
Key rate duration
A method of measuring the interest rate sensitivities of a fixed-income instrument or portfolio to
shifts in key points along the yield curve.
504
Treynor ratio
A measure of risk-adjusted performance that relates a portfolio’s excess returns to the portfolio’s beta.
505
Earnings surprise
The portion of a company’s earnings that
| is unanticipated by investors and, according to the efficient market hypothesis, merits a price adjustment.
506
Credit default swap (CDS)
A type of credit derivative in which one party, the credit protection buyer who is seeking credit protection against a third party, makes a series of regularly scheduled payments to the other party, the credit protection seller. The seller makes no payments until a credit event occurs.
507
Bollinger Bands
A price-based technical analysis indicator consisting of a moving average plus a higher line repre- senting the moving average plus a set number of standard deviations from average price (for the same number of periods as used to calculate the moving average) and a lower line that is a moving average minus the same number
of standard deviations.
508
Syndicated loans
Loans from group of lenders to a single borrower
509
Trade surplus (deficit)
When the value of exports is greater
| (less) than the value of imports.
510
Fiscal policy
The use of taxes and government spending to
| affect the level of aggregate expenditures.
511
Common market
Level of economic integration that incor-
porates all aspects of the customs union and extends it by allowing free movement of factors of production among members.
512
Quasi-government bonds
A bond issued by an entity that is either owned or sponsored by a national government. Also called agency bond.
513
Target capital structure
A company’s chosen proportions of debt and equity.
514
Distressed investing
Investing in securities of companies
in financial difficulty. Private equity funds that specialize in distressed investing typically buy the debt of mature companies in financial difficulty.
515
Liquidity trap
A condition in which the demand for money
becomes infinitely elastic (horizontal demand curve) so that injections of money into the economy will not lower interest rates or affect real activity.
516
Preference shares
type of equity interest which ranks above
common shares with respect to the payment of dividends and the distribution of the company’s net assets upon liquidation. They have characteristics of both debt and equity securities. Also called preferred stock.
517
Probability
A number between 0 and 1 describing the chance that a stated event will occur.
518
Return on assets (ROA)
A profitability ratio calculated as net income divided by average total assets; indicates a compa- ny’s net profit generated per dollar invested in total assets.
519
Fintech
Technological innovation in the design and delivery
| of financial services and products in the financial industry.
520
Statistic
A quantity computed from or used to describe a sample of data.
521
Losses
Asset outflows not directly related to the ordinary activities of the business.
522
Futures contract
A variation of a forward contract that has essentially the same basic definition but with some addi- tional features, such as a clearinghouse guarantee against credit losses, a daily settlement of gains and losses, and an
organized electronic or floor trading facility.
523
Perfectly inelastic
When the quantity demanded or supplied of a given good is completely insensitive to a change in the value of a specified variable (e.g., price)
524
Double top
In technical analysis, a reversal pattern that is formed when an uptrend reverses twice at roughly the same high price level; used to predict a change from an uptrend to a downtrend.
525
Population variance
A measure of dispersion relating to a population, calculated as the mean of the squared devia- tions around the population mean.
526
Non-current liabilities
Obligations that broadly represent a probable sacrifice of economic benefits in periods generally greater than one year in the future.
527
Expected inflation
The level of inflation that economic agents expect in the future.
528
Dispersion
The variability around the central tendency.
529
Spot rates
A sequence of market discount rates that cor-
respond to the cash flow dates; yields-to-maturity on
zero-coupon bonds maturing at the date of each cash flow.
530
Assignment of accounts receivable
The use of accounts
| receivable as collateral for a loan.
531
Demand shock
A typically unexpected disturbance to demand, such as an unexpected interruption in trade or transportation.
532
Quantitative easing
An expansionary monetary policy based on aggressive open market purchase operations.
533
Long
The buyer of a derivative contract. Also refers to the position of owning a derivative.
534
CBOE Volatility Index
A measure of near-term market volatility as conveyed by S&P 500 stock index option prices.
535
Gilts
Bonds issued by the UK government.
536
Revolving credit agreements
The strongest form of short- term bank borrowing facilities; they are in effect for multi- ple years (e.g., 3–5 years) and may have optional medium- term loan features.
537
Net tax rate
The tax rate net of transfer payments.
538
Risk exposure
The state of being exposed or vulnerable to a risk. The extent to which an organization is sensitive to underlying risks.
539
Behavioral finance
A field of finance that examines the psychological variables that affect and often distort the investment decision making of investors, analysts, and portfolio managers.
540
Depository receipt
A security that trades like an ordinary share on a local exchange and represents an economic interest in a foreign company.
541
Two-week repo rate
The interest rate on a two-week repur- chase agreement; may be used as a policy rate by a central bank.
542
Common-size analysis
The restatement of financial statement items using a common denominator or reference item that allows one to identify trends and major differences; an example is an income statement in which all items are expressed as a percent of revenue.
543
Flags
A technical analysis continuation pattern formed by
| parallel trendlines, typically over a short period.
544
Stakeholders
Individuals or groups of individuals who may be affected either directly or indirectly by a decision and thus have an interest, or stake, in the decision.
545
Price to cash flow
A valuation ratio calculated as price per
| share divided by cash flow per share.
546
Credit scoring model
A statistical model used to classify borrowers according to creditworthiness.
547
What is the other name of underlying?
Spot market
548
Diluted EPS
The EPS that would result if all dilutive securities were converted into common shares.
549
Personal disposable income
Equal to personal income less personal taxes.
550
Ethics
The study of moral principles or of making good choices. Ethics encompasses a set of moral principles and rules of conduct that provide guidance for our behavior.
551
Population standard deviation
A measure of dispersion
relating to a population in the same unit of measurement as the observations, calculated as the positive square root of the population variance.
552
Deep learning
Machine learning using neural networks with many hidden layers
553
Green finance
A type of finance that addresses environmental concerns while achieving economic growth.
554
Free cash flow to equity (FCFE)
The cash flow available to a company’s common shareholders after all operating expenses, interest, and principal payments have been made, and necessary investments in working and fixed capital have been made.
555
What is the definition of: A PRIORI PROBABILITY?
A probability based on logical analysis rather than on observation or personal judgement
556
Net revenue
Revenue after adjustments (e.g., for estimated returns or for amounts unlikely to be collected).
557
Beta
A measure of the sensitivity of a given investment or portfolio to movements in the overall market.
558
Passive investment
A buy and hold approach in which an investor does not make portfolio changes based on short-term expectations of changing market or security performance
559
Simple random sample
A subset of a larger population cre- ated in such a way that each element of the population
has an equal probability of being selected to the subset.
560
Complements
Goods that tend to be used together; techni-
cally, two goods whose cross-price elasticity of demand
is negative.
561
Yield duration
The sensitivity of the bond price with respect
| to the bond’s own yield-to-maturity.
562
Fundamental weighting
An index weighting method in which the weight assigned to each constituent security is based on its underlying company’s size. It attempts to address the disadvantages of market-capitalization weighting by using measures that are independent of the constituent security’s price.
563
Permanent differences
Differences between tax and financial reporting of revenue (expenses) that will not be reversed at some future date. These result in a difference between the company’s effective tax rate and statutory tax rate and do not result in a deferred tax item.
564
Prepayment penalty mortgages
Mortgages that stipulate a monetary penalty if a borrower prepays within a certain time period after the mortgage is originated.
565
Fixed-for-floating interest rate swap
An interest rate swap in which one party pays a fixed rate and the other pays a floating rate, with both sets of payments in the same
currency. Also called plain vanilla swap or vanilla swap.
566
Reserve requirement
The requirement for banks to hold
| reserves in proportion to the size of deposits.
567
Quasi-fixed cost
A cost that stays the same over a range of production but can change to another constant level when production moves outside of that range.
568
Underwritten offering
A type of securities issue mechanism in which the investment bank guarantees the sale of the securities at an offering price that is negotiated with the issuer. Also known as firm commitment offering.
569
Standard normal distribution
The normal density with mean
| (μ) equal to 0 and standard deviation (σ) equal to 1.
570
Nonparametric test
A test that is not concerned with a parameter, or that makes minimal assumptions about the population from which a sample comes.
571
Boom
An expansionary phase characterized by economic growth “testing the limits” of the economy.
572
Semiannual bond basis yield
An annual rate having a periodicity of two, also known as a semiannual bond equivalent yield
573
Hurdle rate
The rate of return that must be met for a project
| to be accepted.
574
Buyback
A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits, share repurchases use corporate cash.
575
Domestic content provisions
Stipulate that some percentage of the value added or components used in production should be of domestic origin.
576
Linker
See inflation-linked bond.
577
Expansion
The period of a business cycle after its lowest point and before its highest point.
578
Earnings per share
The amount of income earned during a
| period per share of common stock.
579
Divergence
In technical analysis, a term that describes the case when an indicator moves differently from the security
being analyzed.
580
Controlling shareholders
A particular shareholder or block
| of shareholders holding a percentage of shares that gives them significant voting power.
581
Share repurchase
A transaction in which a company buys back its own shares. Unlike stock dividends and stock splits, share repurchases use corporate cash.
582
Global registered share
A common share that is traded on
different stock exchanges around the world in different
currencies.
583
Cost of capital
The rate of return that suppliers of capital require as compensation for their contribution of capital.
584
Economic indicator
A variable that provides information on
| the state of the overall economy.
585
Zero-coupon bonds
Bonds that do not pay interest during
the bond’s life. It is issued at a discount to par value and
redeemed at par. Also called pure discount bonds.
586
Giffen goods
Goods that are consumed more as the price of the good rises because it is a very inferior good whose income effect overwhelms its substitution effect when
price changes.
587
Required margin
The yield spread over, or under, the ref- erence rate such that an FRN is priced at par value on a rate reset date.
588
Vote by proxy
A mechanism that allows a designated party— such as another shareholder, a shareholder representative, or management—to vote on the shareholder’s behalf.
589
Liquidity ratios
Financial ratios measuring the company’s
| ability to meet its short-term obligations.
590
Net realisable value
Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
591
Two-tailed hypothesis test
A test in which the null hypoth- esis is rejected in favor of the alternative hypothesis if the evidence indicates that the population parameter is either smaller or larger than a hypothesized value.
592
Opportunity cost
The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.
593
Flat price
The full price of a bond minus the accrued interest; also called the quotes or clean price
594
Current assets
Assets that are expected to be consumed or converted into cash in the near future, typically one year or less. Also called liquid assets.
595
What does ARR mean?
Average accounting Rate of return
596
Trimmed mean
A mean computed after excluding a stated small percentage of the lowest and highest observations.
597
Return on equity (ROE)
A profitability ratio calculated as net income divided by average shareholders’ equity.
598
First mortgage debt
Debt secured by a pledge of a specific
| property.
599
Probability function
A function that specifies the probability that the random variable takes on a specific value.
600
Stagflation
When a high inflation rate is combined with a high level of unemployment and a slowdown of the economy.
601
Producer price index
Reflects the price changes experienced by domestic producers in a country.
602
Proxy contest
Corporate takeover mechanism in which shareholders are persuaded to vote for a group seeking a controlling position on a company’s board of directors.
603
Financial leverage ratio
A measure of financial leverage calcu- lated as average total assets divided by average total equity.
604
Good-on-open
An execution instruction specifying that an order can only be filled at the opening of trading.
605
Growth cyclical
A term sometimes used to describe companies that are growing rapidly on a long-term basis but that still experience above-average fluctuation in their revenues and profits over the course of a business cycle.
606
Crossing networks
Trading systems that match buyers and sellers who are willing to trade at prices obtained from other markets.
607
Death cross
A technical analysis term that describes a situation where a short-term moving average crosses from above a longer-term moving average to below it; this movement is considered bearish.
608
Commodity swap
A swap in which the underlying is a com- modity such as oil, gold, or an agricultural product.
609
What is QUASI-GOVERNMENT BOND other name?
Agency Bond
610
Up transition probability
The probability that an asset’s
| value moves up.
611
Debentures
Type of bond that can be secured or unsecured.
612
Holder-of-record date
The date that a shareholder listed on the corporation’s books will be deemed to have owner- ship of the shares for purposes of receiving an upcoming dividend.
613
Day’s sales outstanding
Estimate of the average number of
| days it takes to collect on credit accounts.
614
Liquidity risk
The risk that a financial instrument cannot be
| purchased or sold without a significant concession in price due to the size of the market.
615
Gross margin
Sales minus the cost of sales (i.e., the cost of goods sold for a manufacturing company).
616
Ordinary annuity
An annuity with a first cash flow that is paid one period from the present.
617
Continuous random variable
A random variable for which the range of possible outcomes is the real line (all real num- bers between −∞ and +∞ or some subset of the real line).
618
Nonsystematic risk
Unique risk that is local or limited to a particular asset or industry that need not affect assets outside of that asset class.
619
Sovereign bond
A bond issued by a national government.
620
Reserve funds
See reserve accounts.
621
Component cost of capital
The rate of return required by suppliers of capital for an individual source of a company’s funding, such as debt or equity.
622
Sampling plan
The set of rules used to select a sample.
623
Gross domestic product
The market value of all final goods and services produced within the economy in a given period of time (output definition) or, equivalently, the aggregate income earned by all households, all companies, and the government within the economy in a given period of time (income definition).
624
Random variable
A quantity whose future outcomes are
| uncertain.
625
Fisher effect
The thesis that the real rate of interest in an economy is stable over time so that changes in nominal interest rates are the result of changes in expected inflation.
626
Non-agency RMBS
In the United States, securities issued by private entities that are not guaranteed by a federal agency or a GSE.
627
Best offer
The lowest offer (ask price) in the market.
628
Broker
1) An agent who executes orders to buy or sell secu- rities on behalf of a client in exchange for a commission.
2) See futures commission merchants.
629
Double coincidence of wants
A prerequisite to barter trades, in particular that both economic agents in the transaction want what the other is selling.
630
Net profit margin
An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses. Also called profit margin or return on sales.
631
What is ACCELERATED METHODS?
Depreciation methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset's useful life.
632
Text analytics
The use of computer programs to analyze and derive meaning from typically large, unstructured text- or
voice-based datasets.
633
Current yield
The sum of the coupon payments received over the year divided by the flat price; also called the income or interest yield or running yield.
634
Effective convexity
A curve convexity statistic that measures the secondary effect of a change in a benchmark yield curve on a bond’s price.
635
Loan-to-value ratio
The ratio of a property’s purchase price to the amount of its mortgage.
636
Pennants
A technical analysis continuation patterns formed by trendlines that converge to form a triangle, typically over a short period
637
Extension risk
The risk that when interest rates rise, fewer prepayments will occur because homeowners are reluctant to give up the benefits of a contractual interest rate that now looks low. As a result, the security becomes longer in maturity than anticipated at the time of purchase.
638
Alternative trading systems
Trading venues that function like exchanges but that do not exercise regulatory authority over their subscribers except with respect to the conduct of the subscribers’ trading in their trading systems. Also called electronic communications networks or multilateral trading facilities.
639
Commercial paper
A short-term, negotiable, unsecured prom-
| issory note that represents a debt obligation of the issuer.
640
Power of a test
The probability of correctly rejecting the
| null—that is, rejecting the null hypothesis when it is false.
641
Economic stabilization
Reduction of the magnitude of economic fluctuations.
642
Fisher index
The geometric mean of the Laspeyres index.
643
Comparable company
A company that has similar business
risk; usually in the same industry and preferably with a
single line of business.
644
Stakeholder management
The identification, prioritization, and understanding of the interests of stakeholder groups, and managing the company’s relationships with these groups.
645
Self-investment limits
With respect to investment limitations
applying to pension plans, restrictions on the percentage of assets that can be invested in securities issued by the pension plan sponsor.
646
Excess kurtosis
Degree of kurtosis (fatness of tails) in excess of the kurtosis of the normal distribution.
647
Semilogarithmic
Describes a scale constructed so that equal intervals on the vertical scale represent equal rates of change, and equal intervals on the horizontal scale repre- sent equal amounts of change.
648
Cross-sectional data
Observations over individual units at a point in time, as opposed to time-series data.
649
New classical macroeconomics
An approach to macroeco- nomics that seeks the macroeconomic conclusions of individuals maximizing utility on the basis of rational
expectations and companies maximizing profits.
650
Required yield spread
The difference between the yield-to-
maturity on a new bond and the benchmark rate; additional compensation required by investors for the difference in risk and tax status of a bond relative to a government bond. Sometimes called the spread over the benchmark.
651
Fixed charge coverage
```
A solvency ratio measuring the num- ber of times interest and lease payments are covered by operating income, calculated as (EBIT + lease payments)
divided by (interest payments + lease payments).
```
652
Forward rate agreements
a forrward contract calling for one party to make a fixed interest payment and the other to make an interest payment at a rate to be determined at the contract expiration.
653
Non-financial risks
Risks that arise from sources other than changes in the external financial markets, such as changes in accounting rules, legal environment, or tax rates.
654
Joint probability
The probability of the joint occurrence of stated events.
655
Pass-through rate
The coupon rate of a mortgage pass-through security
656
Carry
The net of the costs and benefits of holding, storing, or “carrying” an asset.
657
Operational independence
A bank’s ability to execute mon- etary policy and set interest rates in the way it thought
would best meet the inflation target.
658
Technology
The process a company uses to transform inputs into outputs.
659
What is:
| Aging schedule
A breakdown of accounts into categories of days outstanding.
| google: a company account table of the receivables in order of invoice due dates
660
Autarkic price
The price of a good or service in an autarkic
| economy.
661
Random number
An observation drawn from a uniform distribution.
662
Limited partners
Partners with limited liability. Limited part- nerships in hedge and private equity funds are typically restricted to investors who are expected to understand and to be able to assume the risks associated with the investments.
663
Terminal value
The expected value of a share at the end of the investment horizon—in effect, the expected selling price.
664
Sampling distribution
The distribution of all distinct possible values that a statistic can assume when computed from samples of the same size randomly drawn from the same
population.
665
Headline inflation
The inflation rate calculated based on the price index that includes all goods and services in an economy.
666
Capital stock
The accumulated amount of buildings, machin- ery, and equipment used to produce goods and services.
667
Owners’ equity
The excess of assets over liabilities; the resid- ual interest of shareholders in the assets of an entity after deducting the entity’s liabilities. Also called shareholders’ equity or shareholders’ funds.
668
Number of days of inventory
An activity ratio equal to the
number of days in a period divided by the inventory ratio for the period; an indication of the number of days a com- pany ties up funds in inventory.
669
Global minimum-variance portfolio
The portfolio on the minimum-variance frontier with the smallest variance of return.
670
Strategic analysis
Analysis of the competitive environment with an emphasis on the implications of the environment for corporate strategy.
671
Underlying
An asset that trades in a market in which buyers and sellers meet, decide on a price, and the seller then delivers the asset to the buyer and receives payment. The underlying is the asset or other derivative on which a par- ticular derivative is based. The market for the underlying is also referred to as the spot market.
672
Supply shock
A typically unexpected disturbance to supply.
673
Semiannual bond equivalent yield
See semiannual bond basis yield
674
Tax expense
An aggregate of an entity’s income tax payable (or recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabilities. It is essentially the income tax payable or recoverable if these had been determined based on accounting profit rather than taxable income.
675
Primary dealers
Financial institutions that are authorized
to deal in new issues of sovereign bonds and that serve primarily as trading counterparties of the office responsible for issuing sovereign bonds.
676
Lessor
The owner of an asset that grants the right to use the
| asset to another party.
677
Comparative advantage
A country’s ability to produce a
| good or service at a lower relative cost, or opportunity cost, than its trading partner.
678
Total factor productivity
A scale factor that reflects the por- tion of growth that is not accounted for by explicit factor inputs (e.g. capital and labor).
679
Depository bank
A bank that raises funds from depositors and other investors and lends it to borrowers.
680
Weighted average maturity
Weighting the remaining num- ber of months to maturity for each mortgage loan in the pool by the amount of the outstanding mortgage balance.
681
Lagging economic indicators
Turning points that take place later than those of the overall economy; they are believed to have value in identifying the economy’s past condition.
682
Deflation
Negative inflation.
683
Straight voting
A shareholder voting process in which shareholders receive one vote for each share owned.
684
Risk premium
An extra return expected by investors for bearing some specified risk.
685
Veblen goods
Goods that increase in desirability with increasing price
686
Operating profit margin
A profitability ratio calculated as
operating income (i.e., income before interest and taxes)
divided by revenue. Also called operating margin.
687
Cash flow additivity principle
The principle that dollar amounts indexed at the same point in time are additive.
688
Contracts for differences
See non-deliverable forwards.
689
Payable date
The day that the company actually mails out ( or electronically transfers) a dividend payment
690
Shortfall risk
The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
691
Depreciation
The process of systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets are expected to provide economic benefits.
692
Convergence
The tendency for differences in output per capita across countries to diminish over time; in technical analysis, a term that describes the case when an indicator moves in the same manner as the security being analyzed.
693
Book value
The net amount shown for an asset or liability on the balance sheet; book value may also refer to the company’s excess of total assets over total liabilities. Also called carrying value.
694
Call
An option that gives the holder the right to buy an under- lying asset from another party at a fixed price over a specific period of time.
695
What is:
| Aggregate supply
The quantity of goods and services producers are willing to supply at any given level of price.
(google: total available goods / services to a particular market from a producer)
696
Breakeven point
The number of units produced and sold at which the company’s net income is zero (Revenues = Total cost); in the case of perfect competition, the quantity at which price, average revenue, and marginal revenue equal average total cost.
697
Unit normal distribution
The normal density with mean (μ)
| equal to 0 and standard deviation (σ) equal to 1.
698
Discount rates
In general, the interest rate used to calculate a present value. In the money market, however, discount rate is a specific type of quoted rate.
699
Out of the money
Options that, if exercised, would require the payment of more money than the value received and therefore would not be currently exercised.
700
Quoted margin
The specified yield spread over the reference rate, used to compensate an investor for the difference in the credit risk of the issuer and that implied by the reference rate.
701
What is the other name for Book Value ?
Carrying value
702
Hypothesis testing
With reference to statistical inference, the subdivision dealing with the testing of hypotheses about
one or more populations.
703
Binomial random variable
The number of successes in n
Bernoulli trials for which the probability of success is
constant for all trials and the trials are independent.
704
Cash prices
See spot prices.
705
Total return index
An index that reflects the price appreciation or percentage change in price of the constituent securities plus any income received since inception.
706
Scenario analysis
Analysis that shows the changes in key
financial quantities that result from given (economic) events, such as the loss of customers, the loss of a sup- ply source, or a catastrophic event; a risk management technique involving examination of the performance of a portfolio under specified situations. Closely related to stress testing.
707
Profit
The return that owners of a company receive for the use of their capital and the assumption of financial risk when making their investments.
708
Effective annual rate
The amount by which a unit of currency will grow in a year with interest on interest included.
709
Direct format
With reference to the cash flow statement, a format for the presentation of the statement in which cash flow from operating activities is shown as operating cash receipts less operating cash disbursements. Also called direct method.
710
Target balance
A minimum level of cash to be held avail- able—estimated in advance and adjusted for known funds transfers, seasonality, or other factors.
711
Equal weighting
An index weighting method in which an equal weight is assigned to each constituent security at inception.
712
Leveraged buyout
A transaction whereby the target company’s management team converts the target to a privately held company by using heavy borrowing to finance the purchase of the target company’s outstanding shares.q
713
Peer group
A group of companies engaged in similar business activities whose economics and valuation are influenced by closely related factors
714
Structural subordination
Arises in a holding company struc- ture when the debt of operating subsidiaries is serviced by the cash flow and assets of the subsidiaries before funds can be passed to the holding company to service debt at the parent level.
715
Collaterals
Assets or financial guarantees underlying a debt
| obligation that are above and beyond the issuer’s promise to pay.
716
Repo rate
The interest rate on a repurchase agreement.
717
Tactical asset allocation
The decision to deliberately deviate from the strategic asset allocation in an attempt to add value based on forecasts of the near-term relative perfor- mance of asset classes.
718
Node
Each value on a binomial tree from which successive moves or outcomes branch.
719
What is ABSOLUTE FREQUENCY?
The number of (time a value of) observations in a given interval (is counted) "for grouped data"
720
Relative price
The price of a specific good or service in comparison with those of other goods and services.
721
Turn-of-the-year effect
Calendar anomaly that stock mar- ket returns in January are significantly higher compared to the rest of the months of the year, with most of the abnormal returns reported during the first five trading days in January.
722
Default risk
The probability that a borrower defaults or fails to meet its obligation to make full and timely payments of principal and interest, according to the terms of the debt security. Also called default probability.
723
Unlimited funds
An unlimited funds environment assumes
that the company can raise the funds it wants for all prof-
itable projects simply by paying the required rate of return.
724
Strategic asset allocation
The set of exposures to IPS- permissible asset classes that is expected to achieve the client’s long-term objectives given the client’s investment constraints.
725
Terminal stock value
The expected value of a share at the end of the investment horizon—in effect, the expected selling price. Also called terminal value.
726
Smart beta
Involves the use of simple, transparent, rules-based strategies as a basis for investment decisions.
727
Neutral rate of interest
The rate of interest that neither spurs
| on nor slows down the underlying economy.
728
Securitized assets
Assets that are typically used to create
| asset-backed bonds; for example, when a bank securitizes a pool of loans, the loans are said to be securitized.
729
Smart contract
A computer program that is designed to self- execute on the basis of pre-specified terms and conditions agreed to by parties to a contract.
730
Ethical principles
Beliefs regarding what is good, acceptable, or obligatory behavior and what is bad, unacceptable, or forbidden behavior.
731
Risk
Exposure to uncertainty. The chance of a loss or adverse outcome as a result of an action, inaction, or external event.
732
Secondary bond markets
Markets in which existing bonds are traded among investors.
733
Law of diminishing returns
The smallest output that a firm can produce such that its long run average costs are minimized.
734
Elastic
Said of a good or service when the magnitude of elas- ticity is greater than one.
735
Lockup period
The minimum holding period before investors are allowed to make withdrawals or redeem shares from a fund.
736
Dutch Book theorem
A result in probability theory stating that inconsistent probabilities create profit opportunities.
737
What is QUASI-GOVERNMENT BOND?
A bond issued by an entity that is either owned or sponsored by a national government
738
Cash flow from operating activities
The net amount of cash provided from operating activities.
739
Weighted average life
A measure that gives investors an indication of how long they can expect to hold the MBS before it is paid off; the convention-based average time to receipt of all principal repayments. Also called average life.
740
Quote-driven market
A market in which dealers acting as principals facilitate trading.
741
Good-on-close
An execution instruction specifying that an order can only be filled at the close of trading. Also called market on close.
742
Renewable resources
Resources that can be replenished,
| such as a forest.
743
What is AMERICAN DEPOSITORY SHARE?
The underlying shares on which American depository receipts are based. They trade in the issuing company's domestic market
(google: a certificate issued by an american bank representing a share of a foreign stock the bank holds in trust but that is traded on an american stock exchange)
744
What is ANTICIPATION STOCK?
Excess inventory that is held in anticipation of increased demand, often because of seasonal patterns of demand
745
Semi-strong-form efficient market
A market in which security prices reflect all publicly known and available information.
746
Convenience yield
A non-monetary advantage of holding an asset.
747
Futures price
The agreed-upon price of a futures contract.
748
Shareholder activism
Strategies used by shareholders to attempt to compel a company to act in a desired manner.
749
Frequency polygon
A graph of a frequency distribution obtained by drawing straight lines joining successive points representing the class frequencies.
750
Order
A specification of what instrument to trade, how much to trade, and whether to buy or sell.
751
Average life
See weighted average life.
752
Open economy
An economy that trades with other countries.
753
Net operating cycle
An estimate of the average time that elapses between paying suppliers for materials and col- lecting cash from the subsequent sale of goods produced
754
Elasticity of supply
A measure of the sensitivity of quantity supplied to a change in price: %∆QS/%∆P.
755
Enterprise risk management
An overall assessment of a company’s risk position. A centralized approach to risk management sometimes called firmwide risk management.
756
Conversion ratio
For a convertible bond, the number of
| common shares that each bond can be converted into.
757
LIFO reserve
The difference between the reported LIFO inven- tory carrying amount and the inventory amount that would have been reported if the FIFO method had been used (in other words, the FIFO inventory value less the LIFO inventory value).
758
Spread risk
Bond price risk arising from changes in the yield
spread on credit-risky bonds; reflects changes in the mar- ket’s assessment and/or pricing of credit migration (or downgrade) risk and market liquidity risk.
759
Secondary market
The market where securities are traded among investors.
760
Cost of carry
See carry.
761
Alternative data
Non-traditional data types generated by the use of electronic devices, social media, satellite and sensor networks, and company exhaust.
762
High-frequency trading
A form of algorithmic trading that makes use of vast quantities of data to execute trades on ultra-high-speed networks in fractions of a second.
763
Say on pay
A process whereby shareholders may vote on executive remuneration (compensation) matters.
764
Recession
A period during which real GDP decreases (i.e.,negative growth) for at least two successive quarters, or a period of significant decline in total output, income, employment, and sales usually lasting from six months to a year.
765
Days in receivables
Estimate of the average number of days
| it takes to collect on credit accounts.
766
Depression
See contraction.
767
Fiduciary call
A combination of a European call and a risk-free bond that matures on the option expiration day and has a face value equal to the exercise price of the call.
768
Fixed rate perpetual preferred stock
Nonconvertible, non- callable preferred stock that has a fixed dividend rate and no maturity date
769
What is ANNUITY DUE?
An annuity having a first cash flow that is paid immediately
770
Warehouse receipt arrangement
The use of inventory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e., a warehouse company) that supervises the inventory.
771
Capacity
The ability of the borrower to make its debt pay- ments on time.
772
ESG integration
The integration of qualitative and quanti- tative environmental, social, and governance factors into traditional security and industry analysis; also known as ESG incorporation.
773
Transfer payments
Welfare payments made through the social security system that exist to provide a basic minimum level of income for low-income households.
774
Swap contract
An agreement between two parties to exchange a series of future cash flows.
775
What is AGGREGATE DEMAND CURVE?
Inverse relationship between the price level and the real output
776
Taxable income
The portion of an entity’s income that is sub-
| ject to income taxes under the tax laws of its jurisdiction.
777
Bridge financing
Interim financing that provides funds until permanent financing can be arranged.
778
Systematic sampling
A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approx- imately random.
779
Quick ratio
A stringent measure of liquidity that indicates a company’s ability to satisfy current liabilities with its most liquid assets, calculated as (cash + short-term marketable investments + receivables) divided by current liabilities.
780
Price index
Represents the average prices of a basket of goods and services.
781
Ricardian equivalence
An economic theory that implies that it makes no difference whether a government finances a deficit by increasing taxes or issuing debt.
782
Running yield
See current yield.
783
Supranational bonds
A bond issued by a supranational agency
| such as the World Bank.
784
Held-to-maturity
Debt (fixed-income) securities that a com- pany intends to hold to maturity; these are presented at their original cost, updated for any amortisation of dis- counts or premiums.
785
What is the other name for Carrying value?
Book value
786
Cost structure
The mix of a company’s variable costs and
| fixed costs.
787
Price to earnings ratio
(P/E ratio or P/E) The ratio of share
| price to earnings per share.
788
Semivariance
The average squared deviation below the mean.
789
Deep learning nets
Machine learning using neural networks with many hidden layers.
790
Scatter plot
A two-dimensional plot of pairs of observations on two data series.
791
Normal distribution
A continuous, symmetric probability distribution that is completely described by its mean and its variance.
792
Open market operations
The purchase or sale of bonds by the national central bank to implement monetary policy. The bonds traded are usually sovereign bonds issued by the national government.
793
Common shares
A type of security that represent an owner- ship interest in a company.
794
Full integration
An ESG investment style that focuses on the explicit inclusion of ESG factors into the traditional financial analysis of individual stocks for the purpose of valuation (e.g., as inputs into cash flow forecasts and/or cost-of-capital estimates).
795
Option premium
The amount of money a buyer pays and
| seller receives to engage in an option transaction.
796
Public offering
An offering of securities in which any member of the public may buy the securities. Also called public offers
797
Paired observations
Observations that are dependent on each other
798
Thematic investment
An ESG investing style that focuses
on investing in themes or assets specifically relating to ESG factors, such as clean energy, green technology, or sustainable agriculture.
799
Simple interest
The interest earned each period on the orig-
| inal investment; interest calculated on the principal only.
800
Discriminatory pricing rule
A pricing rule used in continuous markets in which the limit price of the order or quote that first arrived determines the trade price.
801
Precautionary money balances
Money held to provide a buffer against unforeseen events that might require money.
802
Portfolio planning
The process of creating a plan for building a portfolio that is expected to satisfy a client’s investment objectives.
803
Venture capital
Investments that provide “seed” or startup
capital, early-stage financing, or later-stage financing (including mezzanine-stage financing) to companies that are in early development stages and require additional capital for expansion or preparation for an initial public offering.
804
Diffuse prior
The assumption of equal prior probabilities.
805
Positive screening
An ESG investment style that focuses on the inclusion of certain sectors, companies, or practices in a fund or portfolio on the basis of specific minimum
ESG criteria.
806
Book building
Investment bankers’ process of compiling a “book” or list of indications of interest to buy part of an offering.
807
Diminishing balance method
An accelerated depreciation method, i.e., one that allocates a relatively large propor- tion of the cost of an asset to the early years of the asset’s useful life.
808
Collateral manager
Buys and sells debt obligations for and from the CDO’s portfolio of assets (i.e., the collateral) to generate sufficient cash flows to meet the obligations to
the CDO bondholders.
809
Cumulative distribution function
A function giving the probability that a random variable is less than or equal to a specified value.
810
Shareholders’ equity
Assets less liabilities; the residual inter-
| est in the assets after subtracting the liabilities.
811
Long position
A position in an asset or contract in which one owns the asset or has an exercisable right under the contract.
812
Cannibalization
Cannibalization occurs when an investment takes customers and sales away from another part of the company.
813
Derivative pricing rule
A pricing rule used by crossing net-
| works in which a price is taken (derived) from the price that is current in the asset’s primary market.
814
Relative frequency
With reference to an interval of grouped
| data, the number of observations in the interval divided by the total number of observations in the sample.
815
Unanticipated (unexpected) inflation
The component of
| inflation that is a surprise.
816
Quoted interest rate
A quoted interest rate that does not account for compounding within the year. Also called stated annual interest rate.
817
Perpetual bonds
Bonds with no stated maturity date.
818
Sample selection bias
Bias introduced by systematically
excluding some members of the population according to a particular attribute—for example, the bias introduced when data availability leads to certain observations being excluded from the analysis.
819
Best effort offering
An offering of a security using an invest-
ment bank in which the investment bank, as agent for the issuer, promises to use its best efforts to sell the offering but does not guarantee that a specific amount will be sold.
820
Random number generator
An algorithm that produces uniformly distributed random numbers between 0 and 1.
821
Number of days of receivables
Estimate of the average num- ber of days it takes to collect on credit accounts.
822
What is ARBITRAGE ?
1) The simultaneous purchase of an undervalued asset or portfolio, in order to obtain a diskless profit on the price differential.
Taking advantage of a market inefficiency in a risk-free manner.
2) the condition in a financial market in which equivalent asset or combinations of assets sell for two different prices, creating an opportunity to profit at no risk with no commitment of money.
In a well-functioning financial market, few arbitrage opportunities are possible
3) a risk-free operation that earns an expected positive net profit but requires no net investment of money.
Google: the simultaneous buying and selling, currency, or commodities in different market or in derivatives forms in order to take advantage of differing prices for the same asset.
823
Participating preference shares
Preference shares that entitle shareholders to receive the standard preferred dividend plus the opportunity to receive an additional dividend if the company’s profits exceed a pre-specified level.
824
Simple random sampling
The procedure of drawing a sample
| to satisfy the definition of a simple random sample.
825
Certificate of deposit
An instrument that represents a spec- ified amount of funds on deposit with a bank for a speci- fied maturity and interest rate. CDs are issued in various
denominations and can be negotiable or non-negotiable.
826
Retracement
In technical analysis, a reversal in the movement of a security’s price such that it is counter to the prevailing
longerterm price trend.
827
Term structure of credit spreads
The relationship between
the spreads over the “risk-free” (or benchmark) rates and
times-to-maturity.
828
Degrees of freedom (df)
The number of independent obser- vations used.
829
Nonconventional cash flow
In a nonconventional cash flow
pattern, the initial outflow is not followed by inflows only, but the cash flows can flip from positive (inflows) to nega- tive (outflows) again (or even change signs several times).
830
Other comprehensive income
Items of comprehensive income that are not reported on the income statement; comprehensive income minus net income.
831
Fixed costs
Costs that remain at the same level regardless of
| a company’s level of production and sales.
832
Point estimate
A single numerical estimate of an unknown quantity, such as a population parameter.
833
What is AMORTIZING LOAN ?
Loan with a payment schedule that calls for periodic payments of interest and repayments of principal
834
Warrant
Attached option that gives its holder the right to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.
835
Redemption yield
See yield to maturity
836
Weighted mean
An average in which each observation is weighted by an index of its relative importance.
837
Dividend discount model
(DDM) A present value model that
| estimates the intrinsic value of an equity share based on the present value of its expected future dividends.
838
Settlement date
Date when the buyer makes cash payment and the seller delivers the security.
839
Repurchase date
The date when the party who sold the security at the inception of a repurchase agreement buys the security back from the cash lending counterparty.
840
Sample kurtosis
A sample measure of the degree of a distri-
| bution’s peakedness.
841
Principal business activity
The business activity from which a
| company derives a majority of its revenues and/or earnings.
842
Spurious correlation
A correlation that misleadingly points toward associations between variables.
843
Total fixed cost
The summation of all expenses that do not change as the level of production varies.
844
Call market
A market in which trades occur only at a particular time and place (i.e., when the market is called).
845
Fair value
The amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction; the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
846
Harmonic mean
A type of weighted mean computed by averaging the reciprocals of the observations, then taking
the reciprocal of that average.
847
Variance
The expected value (the probability-weighted
average) of squared deviations from a random variable’s
expected value.
848
Price relative
A ratio of an ending price over a beginning price; it is equal to 1 plus the holding period return on the asset.
849
Credit tranching
A structure used to redistribute the credit risk associated with the collateral; a set of bond classes created to allow investors a choice in the amount of credit risk that they prefer to bear.
850
Yield to redemption
see yield to maturity
851
Sector
A group of related industries.
852
Notional principal
An imputed principal amount.
853
Derivatives
A financial instrument whose value depends on the value of some underlying asset or factor (e.g., a stock price, an interest rate, or exchange rate).
854
Artihmetric mean
The sum of the observations divided (/) by the number of observations
855
Other name for underwritten offering is ?
Commitment offering
856
Total variable cost
The summation of all variable expenses.
857
Cash conversion cycle
A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to days of inventory on hand + days of sales outstanding – number of days of payables. Also called net operating cycle.
858
Specific identification method
An inventory accounting method that identifies which specific inventory items were sold and which remained in inventory to be carried over to later periods.
859
Broad money
Encompasses narrow money plus the entire range of liquid assets that can be used to make purchases.
860
What is the other name for ALTERNATIVE TRADING SYSTEM?
Electronic communications networks or multilateral trading facilities
861
Daily settlement
See mark to market and marking to market.
862
Drag on liquidity
When receipts lag, creating pressure from the decreased available funds.
863
Revenue
The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; the inflows of economic resources to a company over a stated period.
864
Block brokers
```
A broker (agent) that provides brokerage ser-
vices for large-size trades.
```
865
Sustainable rate of economic growth
The rate of increase in the economy’s productive capacity or potential GDP.
866
Spread
In general, the difference in yield between different fixed income securities. Often used to refer to the differ-
ence between the yield-to-maturity and the benchmark.
867
Keynesians
Economists who believe that fiscal policy can
have powerful effects on aggregate demand, output, and employment when there is substantial spare capacity in an economy.
868
Stock dividend
A type of dividend in which a company distrib- utes additional shares of its common stock to shareholders instead of cash.
869
Lender of last resort
An entity willing to lend money when no other entity is ready to do so.
870
Early repayment option
See prepayment option.
871
Lower bound
The lowest possible value of an option.
872
What is ELECTRONIC COMMUNICATIONS NETWORKS
see Alternative trading system
873
Letter of credit
Form of external credit enhancement whereby
a financial institution provides the issuer with a credit line to reimburse any cash flow shortfalls from the assets backing the issue.
874
Open-end fund
A mutual fund that accepts new investment money and issues additional shares at a value equal to the net asset value of the fund at the time of investment.
875
Allocationally efficient
A characteristic of a market, a financial system, or an economy that promotes the allocation of resources to their highest value uses.
876
Price value of a basis point
A version of money duration, it is
| an estimate of the change in the full price of a bond given a 1 basis point change in the yield-to-maturity.
877
Unconditional probability
The probability of an event not
| conditioned on another event.
878
Street convention
Yield measure that neglects weekends and holidays; the internal rate of return on cash flows assuming payments are made on the scheduled dates, even when the scheduled date falls on a weekend or holiday.
879
Serial maturity structure
Structure for a bond issue in which
the maturity dates are spread out during the bond’s life; a stated number of bonds mature and are paid off each year before final maturity.
880
Stackelberg model
A prominent model of strategic decision making in which firms are assumed to make their decisions sequentially.
881
Capital allocation line
(CAL) A graph line that describes the combinations of expected return and standard deviation of return available to an investor from combining the optimal portfolio of risky assets with the risk-free asset
882
Sustainable investing
The practice of identifying companies that can efficiently manage their financial, environmen- tal, and human capital resources to generate attractive long-term profitability; often synonymous with responsible investing.
883
Price to book value
A valuation ratio calculated as price per
| share divided by book value per share.
884
Discouraged worker
A person who has stopped looking for
| a job or has given up seeking employment.
885
Estimator
An estimation formula; the formula used to com- pute the sample mean and other sample statistics are examples of estimators.
886
Robo-adviser
A machine-based analytical tool or service that provides technology-driven investment solutions through
online platforms.
887
Leading economic indicators
Turning points that usually precede those of the overall economy; they are believed to have value for predicting the economy’s future state, usually near-term.
888
Haircut
See repo margin.
889
Defensive companies
Companies with sales and profits that have little sensitivity to the business cycle or state of the economy.
890
Conventional cash flow
A conventional cash flow pattern is
| one with an initial outflow followed by a series of inflows.
891
Spearman rank correlation coefficient
A measure of cor- relation applied to ranked data.
892
Permissioned networks
Networks that are fully open only to select participants on a DLT network
893
Enterprise value
A measure of a company’s total market value from which the value of cash and short-term investments have been subtracted.
894
Sampling
The process of obtaining a sample.
895
What is ADD-ON RATES?
Bank certificates of deposit, repos, and indexes such as LIBOR & EURIBOR are quoted on an add-basis (bond equivalent yield basis)
896
Performance evaluation
The measurement and assessment of the outcome of investment management decision
897
Face value
The amount of cash payable by a company to the bondholders when the bonds mature; the promised payment at maturity separate from any coupon payment.
898
Trade diversion
When regional integration results in lower- cost imports from non-member countries being replaced with higher-cost imports from members
899
General partner
The partner that runs the business and ultimately bears unlimited liability for the business’s debts
and obligations.
900
Committed capital
The amount that the limited partners have agreed to provide to the private equity fund.
901
Proxy voting
A process that enables shareholders who are unable to attend a meeting to authorize another individual to vote on their behalf
902
Balance of trade deficit
When the domestic economy is spending more on foreign goods and services than foreign economies are spending on domestic goods and services.
903
Systematic risk
Risk that affects the entire market or econ- omy; it cannot be avoided and is inherent in the overall market. Systematic risk is also known as non-diversifiable or market risk.
904
Household
A person or a group of people living in the same
| residence, taken as a basic unit in economic analysis.
905
Constituent securities
With respect to an index, the individual securities within an index.
906
Reverse repurchase agreement
A repurchase agree- ment viewed from the perspective of the cash lending counterparty.
907
Redemptions
Withdrawals of funds by investors, as allowed by the notice period and other terms in the partnership agreement
908
Profit and loss (P&L) statement
A financial statement that provides information about a company’s profitability over a stated period of time. Also called the income statement.
909
Unit elastic
An elasticity with a magnitude of negative one.
| Also called unitary elastic.
910
Giro system
An electronic payment system used widely in
| Europe and Japan.
911
Statistically significant
A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient, frequently understood to mean a result indicating that the corresponding population regres- sion coefficient is different from 0.
912
Public offer
See public offering
913
Benchmark issue
The latest sovereign bond issue for a given maturity. It serves as a benchmark against which to com- pare bonds that have the same features but that are issued by another type of issuer.
914
Backup lines of credit
A type of credit enhancement provided by a bank to an issuer of commercial paper to ensure that the issuer will have access to sufficient liquidity to repay maturing commercial paper if issuing new paper is not a viable option.
915
Bond indenture
The governing legal credit agreement, typ- ically incorporated by reference in the prospectus. Also called trust deed.
916
Disbursement float
The amount of time between check issu- ance and a check’s clearing back against the company’s account.
917
Sustainable growth rate
The rate of dividend (and earnings) growth that can be sustained over time for a given level of return on equity, keeping the capital structure constant and without issuing additional common stock.
918
Total comprehensive income
The change in equity during a
period resulting from transaction and other events, other than those changes resulting from transactions with owners in their capacity as owners.
919
Days of inventory on hand
An activity ratio equal to the
| number of days in the period divided by inventory turnover over the period.
920
Private investment in public equity
PIPE) An investment in the equity of a publicly traded firm that is made at a discount to the market value of the firm’s shares.
921
Variation margin
Additional margin that must be deposited in
an amount sufficient to bring the balance up to the initial
margin requirement.
922
What is ANTI-DILUTIVE ?
With ref. to a transaction or a security, one that would increased earnings per shares (EPS) or result in EPS higher than the company's basic EPS - anti-dilutive securities are not included in the calculation of dilutes EPS.
923
Expected value
The probability-weighted average of the pos- sible outcomes of a random variable.
924
Statutory voting
A common method of voting where each share represents one vote.
925
Speculative demand for money
The demand to hold specu- lative money balances based on the potential opportunities or risks that are inherent in other financial instruments. Also called portfolio demand for money.
926
Outcome
A possible value of a random variable
927
Pure discount bonds
See zero-coupon bonds
928
Capital consumption allowance
A measure of the wear and tear (depreciation) of the capital stock that occurs in the production of goods and services
929
Fed funds rate
The US interbank lending rate on overnight borrowings of reserves.
930
Statement of financial position
The financial statement that presents an entity’s current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as of a particular point in time (the date of the balance sheet).
931
Step-up coupon bond
Bond for which the coupon, which may be fixed or floating, increases by specified margins at specified dates.
932
Central banks
The dominant bank in a country, usually with
| official or semi-official governmental status.
933
What is ACCOUNTING COSTS?
Monetary value of economic resources used in performing an activity. These can be explicit, out-of-pocket, current payments, or an allocation of historical payments (depreciation) for resources. They do not include implicit opportunity costs.
934
Natural language processing
Computer programs developed to analyze and interpret human language.
935
Contingent convertible bonds
Bonds that automatically convert into equity if a specific event or circumstance occurs, such as the issuer’s equity capital falling below the minimum requirement set by the regulators. Also called CoCos.
936
Statement of changes in equity
(statement of owners’ equity)
A financial statement that reconciles the beginning-of- period and end-of-period balance sheet values of share- holders’ equity; provides information about all factors affecting shareholders’ equity. Also called statement of owners’ equity.
937
Yield
The actual return on a debt security if it is held to
| maturity.
938
Spread over the benchmark
See required yield spread.
939
Repo margin
The difference between the market value of the security used as collateral and the value of the loan. Also called haircut.
940
Screening
The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
941
Credit spread option
An option on the yield spread on a bond.
942
Collateralized debt obligation
Generic term used to describe a security backed by a diversified pool of one or more debt
obligations.
943
Capital budgeting
The process that companies use for deci- sion making on capital projects—those projects with a life of one year or more.
944
Histogram
A bar chart of data that have been grouped into a frequency distribution.
945
Sponsored
A type of depository receipt in which the foreign company whose shares are held by the depository has a
direct involvement in the issuance of the receipts.
946
Sensitivity analysis
Analysis that shows the range of possible
| outcomes as specific assumptions are changed.
947
Personal consumption expenditures
All domestic personal consumption; the basis for a price index for such consumption called the PCE price index.
948
Exclusionary screening
An ESG implementation approach that excludes certain sectors or companies that deviate from an investor’s accepted standards. Also called negative screening or norms-based screening.
949
Survivorship bias
The bias resulting from a test design that fails to account for companies that have gone bankrupt, merged, or are otherwise no longer reported in a database.
950
Repurchase price
The price at which the party who sold the security at the inception of the repurchase agreement buys the security back from the cash lending counterparty.
951
Price to sales
A valuation ratio calculated as price per share
| divided by sales per share.
952
Debt-to-capital ratio
A solvency ratio calculated as total debt divided by total debt plus total shareholders’ equity
953
Posterior probability
An updated probability that reflects or
| comes after new information.
954
Price stability
In economics, refers to an inflation rate that is
| low on average and not subject to wide fluctuation.
955
Credit enhancements
Provisions that may be used to reduce the credit risk of a bond issue.
956
Assets
Resources controlled by an enterprise as a result of past events and from which future economic benefits to
the enterprise are expected to flow.
957
Variable cost
Costs that fluctuate with the level of produc-
| tion and sales.
958
Behind the market
Said of prices specified in orders that are worse than the best current price; e.g., for a limit buy order, a limit price below the best bid.
959
Put-call parity
An équation expressing the equivalence (parity) of a portfolio of a call and a bond with a portfolio of a put and the underlying, which leads to the relationship between put and call prices.
960
Limit order book
The book or list of limit orders to buy and sell that pertains to a security.
961
Price multiple
A ratio that compares the share price with some sort of monetary flow or value to allow evaluation of the relative worth of a company’s stock.
962
What is ACCOUNTS RECEIVABLE TURNOVER?
Ratio of sales on credit to the average balance in accounts receivable
963
Continuously compounded return
The natural logarithm of 1 plus the holding period return, or equivalently, the natural logarithm of the ending price over the beginning price.
964
Gains
Asset inflows not directly related to the ordinary activities of the business.
965
What is AGENCY RMBS?
In the USA, securities backed by residential mortgages loans and guaranteed by a federal agency or guarantee by either of the two GSEs (Fannie Mae OR Freddie Mac)
(google: backed by government tax agencies)
966
Simple yield
The sum of the coupon payments plus the straight-line amortized share of the gain or loss divided by the flat price.
967
Oligopoly
Market structure with a relatively small number of firms supplying the market.
968
Negative screening
An ESG investment style that focuses on the exclusion of certain sectors, companies, or practices in a fund or portfolio on the basis of specific ESG criteria
969
Global depository receipt
A depository receipt that is issued
outside of the company’s home country and outside of the
United States.
970
Diversification ratio
The ratio of the standard deviation of
an equally weighted portfolio to the standard deviation of
a randomly selected security.
971
Contraction
The period of a business cycle after the peak and
| before the trough; often called a recession or, if exceptionally severe, called a depression.
972
Collateralized mortgage obligation
A security created through the securitization of a pool of mortgage-related products (mortgage pass-through securities or pools of loans).
973
Rho
The sensitivity of the option price to the risk-free rate.
974
What is ACTIVE RETURN?
The return on a portfolio - (minus) the return on the portfolio's benchmark
975
Currency swap
A swap in which each party makes interest payments to the other in different currencies.
976
Triple tops
In technical analysis, a reversal pattern that is formed when the price forms three peaks at roughly the same price level; used to predict a change from an uptrend to a downtrend.
977
Partial duration
See key rate duration
978
Currencies
Monies issued by national monetary authorities.
979
Ask size
The max quantity of an asset that pertains (google: applicable) to a specific ask price from a trader.
Ex: If the ask for a share issue is 30$ for a size of 1,000 shares, the trader is offering to sell a 30$ up to 1,000 shares.
980
Sales
Generally, a synonym for revenue; “sales” is generally understood to refer to the sale of goods, whereas “revenue” is understood to include the sale of goods or services.
981
Compounding
The process of accumulating interest on interest.
982
Quotas
Government policies that restrict the quantity of a good that can be imported into a country, generally for a specified period of time.
983
Robust
The quality of being relatively unaffected by a violation of assumptions.
984
What is ACQUISITION METHOD?
A method of accounting for a business combination where the acquirer is required to measure each identifiable asset and liability at fair value.
This method was the result of a joint project of the IASB and FASB aiming at convergence in standards for the accounting of business combinations.
( google: when an acquirer buys another company and uses GAAP, it must record the event -> that event is called acquisition method)
985
Parameter
A descriptive measure computed from or used to describe a population of data, conventionally represented by greek letters
986
Bid–offer spread
The difference between the prices at which dealers will buy from a customer (bid) and sell to a cus- tomer (offer or ask). It is often used as an indicator of liquidity.
987
Best bid
The highest bid in the market.
988
Unemployed
People who are actively seeking employment but are currently without a job
989
Stock-out losses
Profits lost from not having sufficient inven- tory on hand to satisfy demand.
990
Reverse repo
A repurchase agreement viewed from the per- spective of the cash lending counterparty.
991
Export subsidy
Paid by the government to the firm when it exports a unit of a good that is being subsidized.
992
LIFO layer liquidation
With respect to the application of the LIFO inventory method, the liquidation of old, relatively low-priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old, low-priced inventory. Also called LIFO liquidation.
993
Clearinghouse
An entity associated with a futures market that acts as middleman between the contracting parties and guarantees to each party the performance of the other.
994
Closed economy
An economy that does not trade with other
| countries; an autarkic economy.
995
Clearing
The process by which the exchange verifies the
execution of a transaction and records the participants’
identities.
996
Direct financing leases
Under US GAAP, a type of finance lease, from a lessor perspective, where the present value of the lease payments (lease receivable) equals the carrying value of the leased asset. No selling profit is recognized at lease inception. The revenues earned by the lessor are financing in nature.
997
Par value
the amount of principal on a bond
998
Non-participating preference shares
Preference shares that do not entitle shareholders to share in the profits of the company. Instead, shareholders are only entitled to receive a fixed dividend payment and the par value of the shares in the event of liquidation.
999
Sample statistic
A quantity computed from or used to describe a sample.
1000
Forward market
For future delivery, beyond the usual settle- ment time period in the cash market.
1001
Rebalancing policy
```
The set of rules that guide the process of
restoring a portfolio’s asset class weights to those specified in the strategic asset allocation.
```
1002
Say’s law
Named for French economist J.B. Say: All that is pro- duced will be sold because supply creates its own demand.
1003
Discounted cash flow models
Valuation models that estimate
| the intrinsic value of a security as the present value of the future benefits expected to be received from the security.
1004
Liquidation
To sell the assets of a company, division, or subsidiary piecemeal, typically because of bankruptcy; the form of bankruptcy that allows for the orderly satisfaction of creditors’ claims after which the company ceases to exist.
1005
What is AMORTIZED COST?
The historical cost (initially recognized costs) of an asset, adjusted for amortization and impairment
1006
Operating efficiency ratios
Ratios that measure how effi- ciently a company performs day-to-day tasks, such as the collection of receivables and management of inventory.
1007
Profession
An occupational group that has specific educa- tion, expert knowledge, and a framework of practice and behavior that underpins community trust, respect, and recognition.
1008
Sample standard deviation
The positive square root of the sample variance.
1009
Balance sheet
The financial statement that presents an entity’s current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as of a particular point in time (the date of the balance sheet). Also called statement of financial position or statement of financial condition.
1010
Bonus issue of shares
A type of dividend in which a com- pany distributes additional shares of its common stock to shareholders instead of cash.
1011
Time-series data
Observations of a variable over time.
1012
True yield
The internal rate of return on cash flows using the actual calendar including weekends and bank holidays
1013
Seniority ranking
Priority of payment of various debt
| obligations.
1014
Note rate
See mortgage rate.
1015
Good-till-cancelled order
An order specifying that it is valid until the entity placing the order has cancelled it (or, com- monly, until some specified amount of time such as 60 days has elapsed, whichever comes sooner).
1016
Second-degree price discrimination
When the monopolist charges different per-unit prices using the quantity pur- chased as an indicator of how highly the customer values the product.
1017
Contractionary
Tending to cause the real economy to contract
1018
Own price
The price of a good or service itself (as opposed to the price of something else).
1019
Capital markets
Financial markets that trade securities of
| longer duration, such as bonds and equities.
1020
Transactions motive
In the context of inventory management, the need for inventory as part of the routine production– sales cycle.
1021
Lead underwriter
The lead investment bank in a syndicate of investment banks and broker–dealers involved in a securities underwriting.
1022
Bearer bonds
Bonds for which ownership is not recorded; only the clearing system knows who the bond owner is.
1023
Goodwill
An intangible asset that represents the excess of the purchase price of an acquired company over the value of the net assets acquired.
1024
Equity
Assets less liabilities; the residual interest in the assets after subtracting the liabilities.
1025
Order-driven markets
A market (generally an auction market) that uses rules to arrange trades based on the orders that traders submit; in their pure form, such markets do not make use of dealers.
1026
Duration
A measure of the approximate sensitivity of a secu- rity to a change in interest rates (i.e., a measure of interest rate risk).
1027
Standing limit orders
A limit order at a price below market and which therefore is waiting to trade.
1028
Trade creation
When regional integration results in the
| replacement of higher cost domestic production by lower cost imports from other members.
1029
Electronic funds transfer (EFT)
The use of computer networks to conduct financial transactions electronically.
1030
Trading securities
Under US GAAP, a category of debt securi-
| ties held by a company with the intent to trade them. Also called held-for-trading securities.
1031
Sampling error
The difference between the observed value
| of a statistic and the quantity it is intended to estimate.
1032
Fundamental value
The underlying or true value of an asset based on an analysis of its qualitative and quantitative characteristics. Also called intrinsic value.
1033
What is AGGREGATE OUTPUT?
The value of all the goods and services produced in a specified period of time
1034
Human capital
The accumulated knowledge and skill that workers acquire from education, training, or life experience and the corresponding present value of future earnings to
be generated by said skilled individual.
1035
Relative strength index
A technical analysis momentum
| oscillator that compares a security’s gains with its losses over a set period.
1036
Dividend
A distribution paid to shareholders based on the number of shares owned.
1037
Current government spending
With respect to government expenditures, spending on goods and services that are provided on a regular, recurring basis including health, education, and defense.
1038
Change of control put
A covenant giving bondholders the right to require the issuer to buy back their debt, often at par or at some small premium to par value, in the event that the borrower is acquired.
1039
Voluntary export restraint
A trade barrier under which the exporting country agrees to limit its exports of the good to its trading partners to a specific number of units.
1040
Sharpe ratio
The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard
deviation of return.
1041
Security characteristic line
A plot of the excess return of a
| security on the excess return of the market.
1042
Limitations on liens
Meant to put limits on how much secured debt an issuer can have.
1043
Time-period bias
The possibility that when we use a time- series sample, our statistical conclusion may be sensitive to the starting and ending dates of the sample.
1044
Limit order
Instructions to a broker or exchange to obtain the best price immediately available when filling an order, but in no event accept a price higher than a specified (limit) price when buying or accept a price lower than a specified (limit) price when selling.
1045
Parallel shift
A parallel yield curve shift implies that all rates change by the same amount in the same direction.
1046
Weighted average coupon rate
Weighting the mortgage rate of each mortgage loan in the pool by the percentage of the mortgage outstanding relative to the outstanding amount of all the mortgages in the pool.
1047
Asset beta
The unlevered beta; reflects the business risk of
| the assets; the asset’s systematic risk.
1048
Staggered boards
Election process whereby directors are typically divided into multiple classes that are elected sep- arately in consecutive years—that is, one class every year.
1049
Risk-neutral probabilities
Weights that are used to compute a binomial option price. They are the probabilities that would apply if a risk-neutral investor valued an option.
1050
Wholesale price index
Reflects the price changes experienced by domestic producers in a country.
1051
Cumulative voting
A voting process whereby each shareholders can accumulate and vote all his /her shares for a single candidate in an election, as opposed to having to allocate their voting rights evenly among all candidates
1052
Guarantee certificate
A type of structured financial instru- ment that provides investors capital protection. It combines a zero-coupon bond and a call option on some underlying asset.
1053
Employed
The number of people with a job.
1054
Cash flow yield
The internal rate of return on a series of cash flows.
1055
Diseconomies of scale
Increase in cost per unit resulting
| from increased production.
1056
Preferred stock
See preference shares.
1057
Rent
Payment for the use of property.
1058
Secondary precedence rules
Rules that determine how to rank orders placed at the same time.
1059
Operating breakeven
The number of units produced and sold at which the company’s operating profit is zero (revenues = operating costs).
1060
Third-degree price discrimination
When the monopolist segregates customers into groups based on demographic or other characteristics and offers different pricing to each group.
1061
Putable bonds
Bonds that give the bondholder the right to sell the bond back to the issuer at a predetermined price on a specified dates.
1062
Real risk-free interest rate
The single-period interest rate for a completely risk-free security if no inflation were expected.
1063
Objective probabilities
Probabilities that generally do not vary from person to person; includes a priori and objective probabilities.
1064
Benchmark rate
Typically the yield-to-maturity on a gov- ernment bond having the same, or close to the same, time-to-maturity.
1065
Total invested capital
The sum of market value of common equity, book value of preferred equity, and face value of debt.
1066
Automatic stabilizer
A countercyclical factor that automat- ically comes into play as an economy slows and unem- ployment rises.
1067
Risk shifting
Actions to change the distribution of risk outcomes
1068
Natural rate of unemployment
Effective unemployment rate, below which pressure emerges in labor markets.
1069
Contingency provision
Clause in a legal document that allows for some action if a specific event or circumstance occurs.
1070
Bullet bond
Bond in which the principal repayment is made
| entirely at maturity.
1071
What is AGENCY BONDS?
See Quasi-Government Bond
1072
Portfolio company
In private equity, the company in which the private equity fund is investing.
1073
One-sided hypothesis test
A test in which the null hypothesis
is rejected only if the evidence indicates that the population parameter is greater than (smaller than) θ0. The alternative hypothesis also has one side.
1074
Solvency
With respect to financial statement analysis, the ability of a company to fulfill its long-term obligations.
1075
Available-for-sale
Under US GAAP, debt securities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general, available-for-sale debt secu- rities are reported at fair value on the balance sheet, with unrealized gains included as a component of other com- prehensive income.
1076
Subordination
Form of internal credit enhancement that relies on creating more than one bond tranche and ordering the claim priorities for ownership or interest in an asset between the tranches. The ordering of the claim priorities is called a senior/subordinated structure, where the tranches of highest seniority are called senior followed by subor- dinated or junior tranches. Also called credit tranching.
1077
Default risk premium
An extra return that compensates investors for the possibility that the borrower will fail to make a promised payment at the contracted time and in the contracted amount.
1078
Life-cycle stage
The stage of the life cycle: embryonic, growth, shakeout, mature, declining.
1079
Present value models
Valuation models that estimate the intrinsic value of a security as the present value of the future benefits expected to be received from the security. Also called discounted cash flow models.
1080
Vega
A measure of the sensitivity of an options price to changes in the underlying's volatility
1081
Cost averaging
The periodic investment of a fixed amount of money
1082
Permutation
An ordered listing.
1083
Equity risk premium
The expected return on equities minus the risk-free rate; the premium that investors demand for investing in equities.
1084
Declaration date
The day that the corporation issues a state-
| ment declaring a specific dividend.
1085
Financing activities
Activities related to obtaining or repaying
capital to be used in the business (e.g., equity and long-
term debt).
1086
Geometric mean
A measure of central tendency computed by
| taking the nth root of the product of n non-negative values.
1087
What is AMORTIZATION ?
The process of allocating the cost of intangibles long-ter, assets having a finite useful life to accounting periods, the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.
Google: the action or process of gradually writing off the initial cost of an asset
1088
Recognition lag
The lag in government response to an eco- nomic problem resulting from the delay in confirming a change in the state of the economy.
1089
Arms index
A flow of funds indicator applied to a broad stocks market index to measure the relative extent to which money is moving into or out of rising and declining stocks
1090
Engagement/active ownership
An ESG investment style that
uses shareholder power to influence corporate behavior through direct corporate engagement (i.e., communicating with senior management and/or boards of companies), filing or co-filing shareholder proposals, and proxy voting that is directed by ESG guidelines.
1091
Downgrade risk
The risk that a bond issuer’s creditworthiness deteriorates, or migrates lower, leading investors to believe the risk of default is higher. Also called credit migration risk.
1092
Clearing instructions
Instructions that indicate how to arrange the final settlement (“clearing”) of a trade.
1093
Non-sovereign bonds
A bond issued by a government below the national level, such as a province, region, state, or city.
1094
Production function
Provides the quantitative link between the levels of output that the economy can produce and the inputs used in the production process.
1095
Asian call option
A european-style option with a value at maturity and the average stock price during the life of the option, or 00$, whichever is greater
1096
What is ADDITION RULE FOR PROBABILITIES?
A principle stating that the probability that A or B occurs (both occur) equals the probability that A occurs, plus the probability that B occurs, minus the probability that both A and B occur.
1097
Hostile takeover
An attempt by one entity to acquire a com- pany without the consent of the company’s management.
1098
Discounted payback period
the number of years it takes for the cumulative discounted cash flows from a project to equal the original investment.
1099
Collateralized loan obligations
A structured asset-backed
| security that is collateralized by a pool of loans.
1100
Overbought
A market condition in which market sentiment is thought to be unsustainably bullish.
1101
Stop-loss order
See stop order.
1102
Foreign direct investment
Direct investment by a firm in one country (the source country) in productive assets in
a foreign country (the host country).
1103
Coincident economic indicators
Turning points that are usu- ally close to those of the overall economy; they are believed to have value for identifying the economy’s present state.
1104
Working capital management
The management of a compa- ny’s short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers).
1105
What is ANNUEL PERCENTAGE RATE ?
The cost of borrowing expressed as a yearly rate
1106
Autarky
A state in which a country does not trade with other
| countries.
1107
Perfect competition
A market structure in which the individual firm has virtually no impact on market price, because it is assumed to be a very small seller among a very large number of firms selling essentially identical products
1108
Capital restrictions
Controls placed on foreigners’ ability to own domestic assets and/or domestic residents’ ability to own foreign assets.
1109
n Factorial
For a positive integer n, the product of the first n positive integers; 0 factorial equals 1 by definition. n factorial is written as n!.
1110
Prepayment risk
The uncertainty that the timing of the actual cash flows will be different from the scheduled cash flows as set forth in the loan agreement due to the borrowers’ ability to alter payments, usually to take advantage of interest rate movements.
1111
Target semi-deviation
The positive square root of target a target value
1112
Store of wealth
Goods that depend on the fact that they
| do not perish physically over time, and on the belief that others would always value the good.
1113
Unemployment rate
The ratio of unemployment to labor force
1114
Kurtosis
The statistical measure that indicates the combined weight of the tails of a distribution relative to the rest of the distribution.
1115
Drawdown
A percentage peak-to-trough reduction in net asset value
1116
Corporate governance
The system of internal controls and
| procedures by which individual companies are managed.
1117
Tender offer
Corporate takeover mechanism which involves shareholders selling their interests directly to the group seeking to gain control.
1118
Personal income
A broad measure of household income
that includes all income received by households, whether earned or unearned; measures the ability of consumers to make purchases.
1119
Bernoulli trial
An experiment that can produce one of two outcomes.
1120
Gold standard
With respect to a currency, if a currency is on
the gold standard a given amount can be converted into a
prespecified amount of gold.
1121
Cournot assumption
Assumption in which each firm deter- mines its profit-maximizing production level assuming that the other firms’ output will not change.
1122
Yield-to-worst
The lowest of the sequence of yields-to-call
| and the yield-to-maturity.
1123
Socially responsible investing
An investment approach that
excludes investments in companies or industries that devi- ate from an organization’s beliefs and sometimes includes investments with favorable environmental or social profiles
1124
Dividend payout ratio
The ratio of cash dividends paid to
| earnings for a period.
1125
Trust deed
The governing legal credit agreement, typically incorporated by reference in the prospectus. Also called
bond indenture.
1126
Option-adjusted yield
The required market discount rate whereby the price is adjusted for the value of the embed- ded option.
1127
Short
The seller of an asset or derivate contract. also refers to the position of being short an asset or derivate contract
1128
Horizon yield
The internal rate of return between the total return (the sum of reinvested coupon payments and the sale price or redemption amount) and the purchase price of the bond.
1129
Premium
In the case of bonds, premium refers to the amount
| by which a bond is priced above its face (par) value. In the case of an option, the amount paid for the option contract.
1130
Spot prices
The price of an asset for immediately delivery.
1131
Venture capital fund
A hedge fund that seeks to buy, optimize, and ultimately sell portfolio companies to generate profits. See private equity fund.
1132
Resistance
In technical analysis, a price range in which selling activity is sufficient to stop the rise in the price of a security.
1133
Quantity theory of money
Asserts that total spending (in money terms) is proportional to the quantity of money.
1134
Security market line
(SML) the graph of the capital asset pricing model
1135
Weighted average cost method
An inventory accounting method that averages the total cost of available inventory items over the total units available for sale.
1136
Recourse loan
Loan in which the lender has a claim against the borrower for any shortfall between the outstanding mortgage balance and the proceeds received from the sale of the property.
1137
Long-lived assets
Assets that are expected to provide eco- nomic benefits over a future period of time, typically greater than one year. Also called long-term assets.
1138
Demand function
A relationship that expresses the quantity demanded of a good or service as a function of own-price and possibly other variables.
1139
Time value decay
Said of an option when, at expiration,
| no time value remains and the option is worth only its exercise value.
1140
Core inflation
The inflation rate calculated based on a price index of goods and services except food and energy.
1141
CVaR
Conditional VaR, a tail loss measure. The weighted average of all loss outcomes in the statistical distribution that exceed the VaR loss
1142
Cash-settled forwards
See non-deliverable forwards.
1143
Return-generating model
A model that can provide an esti-
mate of the expected return of a security given certain parameters and estimates of the values of the independent variables in the model.
1144
Cyclical companies
Companies with sales and profits that regularly expand and contract with the business cycle or state of economy.
1145
Prospectus
The document that describes the terms of a new bond issue and helps investors perform their analysis on the issue
1146
Traditional investment markets
Markets for traditional investments, which include all publicly traded debts and equities and shares in pooled investment vehicles that hold publicly traded debts and/or equities.
1147
par curve
a sequence of yields-to maturity such that each bond is priced at par value. The bonds are assumed to have the same currency, credit risk, liquidity, tax status, and annual yields stated for the same periodicity.
1148
Economic union
Incorporates all aspects of a common market and in addition requires common economic institutions and coordination of economic policies among members.
1149
Rebalancing
Adjusting the weights of the constituent securities in an index.
1150
Cumulative relative frequency
For data grouped into inter- vals, the fraction of total observations that are less than the value of the upper limit of a stated interval.
1151
Benchmark
A comparison portfolio; a point of reference or comparison.
1152
Credit analysis
The evaluation of credit risk; the evaluation
| of the creditworthiness of a borrower or counterparty.
1153
Operating activities
Activities that are part of the day-to-day business functioning of an entity, such as selling inventory and providing services.
1154
Degree of confidence
The probability that a confidence inter-
| val includes the unknown population parameter.
1155
Order precedence hierarchy
With respect to the execution of orders to trade, a set of rules that determines which orders execute before other orders.
1156
Defensive interval ratio
A liquidity ratio that estimates the number of days that an entity could meet cash needs from liquid assets; calculated as (cash + short-term mar- ketable investments + receivables) divided by daily cash expenditures.
1157
Historical simulation
Another term for the historical method of estimating VaR. This term is somewhat misleading in that the method involves not a simulation of the past but rather what actually happened in the past, sometimes adjusted to reflect the fact that a different portfolio may have existed in the past than is planned for the future.
1158
Call option
An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time.
1159
Collateralized bond obligations
A structured asset-backed security that is collateralized by a pool of bonds.
1160
Cumulative preference shares
Preference shares for which any dividends that are not paid accrue and must be paid in full before dividends on common shares can be paid.
1161
Classified balance sheet
A balance sheet organized so as to group together the various assets and liabilities into
subcategories (e.g., current and noncurrent).
1162
Credit derivatives
A contract in which one party has the right to claim a payment from another party in the event that a specific credit event occurs over the life of the contract.
1163
Correlation
A number between −1 and +1 that measures the comovement (linear association) between two random
variables.
1164
Shelf registration
Type of public offering that allows the
| issuer to file a single, all-encompassing offering circular that covers a series of bond issues.
1165
Substitutes
Said of two goods or services such that if the price of one increases the demand for the other tends to increase, holding all other things equal (e.g., butter and margarine).
1166
Shareholder engagement
The process whereby companies
| engage with their shareholders.
1167
Time value
The difference between the market price of the option and its intrinsic value.
1168
Survey approach
An estimate of the equity risk premium that is based upon estimates provided by a panel of finance experts.
1169
Semideviation
The positive square root of semivariance
| sometimes called semistandard deviation
1170
Put
An option that gives the holder the right to sell an underlying asset to another party at a fixed price over a specific period of time
1171
Situational influences
External factors, such as environmental
| or cultural elements, that shape our behavior.
1172
Dealing securities
Securities held by banks or other financial intermediaries for trading purposes.
1173
Protective put
An option strategy in which a long position in an asset is combined with a long position in a put
1174
Deferred revenue
A liability account for money that has been collected for goods or services that have not yet been delivered; payment received in advance of providing a good or service.
1175
FX swap
The combination of a spot and a forward FX
| transaction.
1176
Sovereign
A bond issued by a national government.
1177
Discrete random variable
A random variable that can take
| on at most a countable number of possible values.
1178
Callable bond
A bond containing an embedded call option that gives the issuer the right to buy the bond back from the investor at specified prices on pre-determined dates.
1179
Cyclical
See cyclical companies.
1180
Average product
Measures the productivity of inputs on
average and is calculated by dividing total product by the total number of units for a given input that is used to generate that output.
1181
Sovereign yield spread
An estimate of the country spread
(country equity premium) for a developing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the difference between a government bond yield in the country being analyzed, denominated in the currency of the developed country, and the Treasury bond yield on a similar maturity bond in the developed country.
1182
Principal amount
Amount that an issuer agrees to repay the
| debt holders on the maturity date.
1183
Separately managed account
(SMA) An investment port- folio managed exclusively for the benefit of an individual
or institution.
1184
What is AMERICAN STYLE?
Type of option contract that can be exercised at any time up to the option's expiration date
1185
Buy-side firm
An investment management company or other investor that uses the services of brokers or dealers (i.e., the client of the sell side firms).
1186
Vertical demand schedule
Implies that some fixed quantity is demanded, regardless of price.
1187
Statistical inference
Making forecasts, estimates, or judg- ments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.
1188
Gross profit margin
The ratio of gross profit to revenues.
1189
Data science
An interdisciplinary field that brings computer science, statistics, and other disciplines together to analyze
and produce insights from Big Data.
1190
Safety-first rules
Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.
1191
Official policy rate
An interest rate that a central bank sets
| and announces publicly; normally the rate at which it is willing to lend money to the commercial banks.
1192
What is ABSOLUTE DISPERSION?
The amount of variability present without comparison to any reference point or benchmark.
1193
Prepayment option
Contractual provision that entitles the
borrower to prepay all or part of the outstanding mortgage principal prior to the scheduled due date when the prin- cipal must be repaid. Also called early repayment option
1194
Private equity securities
Securities that are not listed on public exchanges and have no active secondary market. They are issued primarily to institutional investors via non-public offerings, such as private placements.
1195
Quota rents
Profits that foreign producers can earn by raising the price of their goods higher than they would without a quota.
1196
What is AGENCY BOND other name?
Quasi-government bond
1197
Correlation coefficient
A number between −1 and +1 that
measures the consistency or tendency for two investments to act in a similar way. It is used to determine the effect on portfolio risk when two assets are combined.
1198
Perpetuity
A perpetual annuity, or a set of never-ending level
| sequential cash flows, with the first cash flow occurring one period from now. A bond that does not mature.
1199
Future value (FV)
The amount to which a payment or series
| of payments will grow by a stated future date.
1200
Type I error
The error of rejecting a true null hypothesis.
1201
Term structure
See maturity structure.
1202
Risk budgeting
The establishment of objectives for individuals, groups, or divisions of an organization that takes into account the allocation of an acceptable level of risk.
1203
Special purpose vehicle
See special purpose entity.
1204
Credit-linked note (CLN)
Fixed-income security in which the holder of the security has the right to withhold payment of the full amount due at maturity if a credit event occurs.
1205
Option-adjusted spread
OAS = Z-spread – Option value (in basis points per year).
1206
Balance of payments
A double-entry bookkeeping system that summarizes a country’s economic transactions with the rest of the world for a particular period of time, typically a calendar quarter or year
1207
Speculative money balances
Monies held in anticipation that other assets will decline in value.
1208
Captive finance subsidiary
A wholly-owned subsidiary of a company that is established to provide financing of the sales of the parent company.
1209
Hedge funds
Private investment vehicles that typically use leverage, derivatives, and long and short investment strategies.
1210
Range
The difference between the maximum and minimum
| values in a dataset.
1211
Required yield
See market discount rate.
1212
Potential GDP
The level of real GDP that can be produced
at full employment; measures the productive capacity of
the economy.
1213
Likelihood
The probability of an observation, given a partic- ular set of conditions.
1214
Data snooping
See data mining.
1215
Non-deliverable forwards
Cash-settled forward contracts, used predominately with respect to foreign exchange for- wards. Also called contracts for differences.
1216
Net income
The difference between revenue and expenses; what remains after subtracting all expenses (including depreciation, interest, and taxes) from revenue.
1217
Payment date
The day that the company actually mails out (or electronically transfers) a dividend payment
1218
Expected loss
Defat probability times loss severity given default
1219
Development capital
Minority equity investments in more
mature companies that are seeking capital to expand or restructure operations, enter new markets, or finance major acquisitions.
1220
Linear scale
A scale in which equal distances correspond to equal absolute amounts. Also called arithmetic scale.
1221
Fiscal multiplier
The ratio of a change in national income to
| a change in government spending.
1222
Call protection
The time during which the issuer of the bond is not allowed to exercise the call option.
1223
Simulation
Computer-generated sensitivity or scenario anal- ysis that is based on probability models for the factors that drive outcomes.
1224
Comprehensive income
The change in equity of a busi-
ness enterprise during a period from nonowner sources; includes all changes in equity during a period except those resulting from investments by owners and distributions to owners; comprehensive income equals net income plus other comprehensive income.
1225
Capital rationing
A capital rationing environment assumes
| that the company has a fixed amount of funds to invest.
1226
Syndicated offering
A bond issue that is underwritten by a group of investment banks
1227
Price elasticity of demand
Measures the percentage change in the quantity demanded, given a percentage change in the price of a given product.
1228
Price takers
Producers that must accept whatever price the
| market dictates.
1229
What is ACTIVE STRATEGY?
In ref. to short-term cash management: an investment strategy characterized by monitoring and attempting to capitalize on market conditions to optimized the risk and return relationship of short-term investments.
1230
Horizontal analysis
Common-size analysis that involves com- paring a specific financial statement with that statement in prior or future time periods; also, cross-sectional analysis of one company with another.
1231
Demand-pull
Type of inflation in which increasing demand raises prices generally, which then are reflected in a busi- ness’s costs as workers demand wage hikes to catch up with the rising cost of living.
1232
Locked limit
A condition in the futures markets in which a transaction cannot take place because the price would be beyond the limits.
1233
Cash market securities
Money market securities settled on a “same day” or “cash settlement” basis.
1234
Paired comparisons test
A statistical test for differences based on paired observations drawn from samples that are dependent on each other
1235
Collateral trust bonds
Bonds secured by securities such as
| common shares, other bonds, or other financial assets.
1236
Productivity
The amount of output produced by workers in a given period of time—for example, output per hour worked; measures the efficiency of labor.
1237
Trade payables
Amounts that a business owes to its vendors for goods and services that were purchased from them but
which have not yet been paid.
1238
Restricted payments
A bond covenant meant to protect
| creditors by limiting how much cash can be paid out to shareholders over time.
1239
Ask
The price at which a dealer or trader is willing to sell an asset, typically qualified by a maximum quantity (ask size)
*check offer
1240
ESG
An acronym that encompasses environmental, social and governance.
1241
Tokenization
The process of representing ownership rights to physical assets on a blockchain or distributed ledger.
1242
Historical cost
In reference to assets, the amount paid to purchase an asset, including any costs of acquisition and/ or preparation; with reference to liabilities, the amount of proceeds received in exchange in issuing the liability.
1243
Character
The quality of a debt issuer’s management.
1244
Curve duration
The sensitivity of the bond price (or the market value of a financial asset or liability) with respect to a benchmark yield curve
1245
Working capital
The difference between current assets and current liabilities.
1246
Brokered market
A market in which brokers arrange trades
| among their clients.
1247
Contingent claims
Derivatives in which the payoffs occur if
| a specific event occurs; generally referred to as options.
1248
Deferred tax liabilities
A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminate the liability over the course of future operations when income tax payable exceeds tax expense.
1249
Credit-linked coupon bond
Bond for which the coupon changes when the bond’s credit rating changes.
1250
Profitability index
PI) For a simple project, the PI is the present value of a project’s future cash flows divided by the initial investment.
1251
Risk management
The process of identifying the level of risk an organization wants, measuring the level of risk the orga- nization currently has, taking actions that bring the actual level of risk to the desired level of risk, and monitoring the new actual level of risk so that it continues to be aligned with the desired level of risk.
1252
Clawback
A requirement that the general partner return any funds distributed as incentive fees until the limited partners have received back their initial investment and a
percentage of the total profit.
1253
Notice period
The length of time (typically 30–90 days) in
| advance that investors may be required to notify a fund of their intent to redeem some or all of their investment.
1254
Cryptography
An algorithmic process to encrypt data, mak-
| ing the data unusable if received by unauthorized parties.
1255
Statement of operations
A financial statement that provides information about a company’s profitability over a stated period of time.
1256
Credit risk
The risk of loss caused by a counterparty’s or debtor’s failure to make a promised payment. Also called default risk.
1257
Dealers
A financial intermediary that acts as a principal in trades.
1258
Sample variance
A sample measure of the degree of dis- persion of a distribution, calculated by dividing the sum of the squared deviations from the sample mean by the sample size minus 1.
1259
Limit down
A limit move in the futures market in which the price at which a transaction would be made is at or below the lower limit.
1260
Supervised learning
A machine learning approach that makes use of labeled training data.
1261
Covariance matrix
A matrix or square array whose entries are
| covariances; also known as a variance–covariance matrix.
1262
Direct taxes
Taxes levied directly on income, wealth, and
| corporate profits.
1263
Special dividend
A dividend paid by a company that does not pay dividends on a regular schedule, or a dividend that supplements regular cash dividends with an extra payment.
1264
Price return
Measures only the price appreciation or percent- age change in price of the securities in an index or portfolio.
1265
Volatility
As used in option pricing, the standard deviation of the continuously compounded returns on the under- lying asset.
1266
World price
The price prevailing in the world market.
1267
Primary market
The market where securities are first sold and the issuers receive the proceeds.
1268
Two-fund separation theorem
The theory that all investors regardless of taste, risk preferences, and initial wealth will hold a combination of two portfolios or funds: a risk-free asset and an optimal portfolio of risky assets.
1269
Foreign exchange gains (or losses)
Gains (or losses) that
occur when the exchange rate changes between the inves- tor’s currency and the currency that foreign securities are denominated in.
1270
Ordinary shares
Equity shares that are subordinate to all other types of equity (e.g., preferred equity). Also called common stock or common shares.
1271
Current cost
With reference to assets, the amount of cash or
cash equivalents that would have to be paid to buy the same or an equivalent asset today; with reference to liabilities, the undiscounted amount of cash or cash equivalents that would be required to settle the obligation today.
1272
Offer
The price at which a dealer or trader is willing to sell an asset, typically qualified by a maximum quantity (ask size).
1273
Contribution margin
The amount available for fixed costs and
profit after paying variable costs; revenue minus variable
costs.
1274
Asset swap
Converts the periodic fixed coupon of a specific
| bond to a Libor plus or minus a spread.
1275
What is ACCRUED INTEREST?
Interest earned but not yet paid
1276
Homogeneity of expectations
The assumption that all inves- tors have the same economic expectations and thus have the same expectations of prices, cash flows, and other investment characteristics.
1277
Capital account
A component of the balance of payments account that measures transfers of capital.
1278
Tenor
The time-to-maturity for a bond or derivative contract.
| Also called term to maturity.
1279
Floating-rate notes
A note on which interest payments are
not fixed, but instead vary from period to period depending
on the current level of a reference interest rate.
1280
Conditional variances
The variance of one variable, given the outcome of another.
1281
New Keynesians
A group of dynamic general equilibrium
| models that assume slow-to-adjust prices and wages.
1282
Oversold
A market condition in which market sentiment is thought to be unsustainably bearish.
1283
Short-run average total cost
The curve describing average
| total cost when some costs are considered fixed.
1284
Own-price elasticity of demand
The percentage change in quantity demanded for a percentage change in good’s own price, holding all other things constant.
1285
Joint probability function
A function giving the probability of joint occurrences of values of stated random variables.
1286
Benchmark spread
The yield spread over a specific bench- mark, usually measured in basis points.
1287
Nominal GDP
The value of goods and services measured at current prices.
1288
Population mean
The arithmetic mean value of a population; the arithmetic mean of all the observations or values in
the population.
1289
Sell-side firm
A broker/dealer that sells securities and provides independent investment research and recommendations to their clients (i.e., buy-side firms).
1290
Conversion price
For a convertible bond, the price per share
| at which the bond can be converted into shares.
1291
Quartiles
Quantiles that divide a distribution into four equal parts.
1292
Single-step format
With respect to the format of the income statement, a format that does not subtotal for gross profit ( revenue - cost of good sold)
1293
Reversal patterns
A type of pattern used in technical analysis to predict the end of a trend and a change in direction of the security’s price.
1294
Skewed
Not symmetrical.
1295
All-or-nothing (AON) orders
An order that includes the instruction to trade only if the trade fills the entire quantity (size) specified.
( google SEC: order to buy or sell a stock that must be executed in its entirety, or not executed at all. AON orders that cannot be executed immediately remain active until they are executed or cancelled.)
1296
Best-in-class
An ESG implementation approach that seeks to identify the most favorable companies in an industry based on ESG considerations.
1297
Spot markets
Markets in which assets are traded for immediate delivery.
1298
Experience curve
A curve that shows the direct cost per unit of good or service produced or delivered as a typically declining function of cumulative output.
1299
Stress testing
A specific type of scenario analysis that esti- mates losses in rare and extremely unfavorable combina- tions of events or scenarios.
1300
Validity instructions
Instructions which indicate when the
| order may be filled.
1301
Pull on liquidity
When disbursements are paid too quickly or trade credit availability is limited, requiring companies to expend funds before they receive funds from sales that could cover the liability
1302
Principal value
Amount that an issuer agrees to repay the
| debt holders on the maturity date.
1303
What is the other name for Pure Discount bonds?
Zero-coupon bonds
1304
Coefficient of variation
(CV) The ratio of a set of observa- tions’ standard deviation to the observations’ mean value.
1305
Forward price
The fixed price or rate at which the transaction scheduled to occur at the expiration of a forward contract will take place. This price is agreed on at the initiation date of the contract.
1306
Reverse stock split
A reduction in the number of shares outstanding with a corresponding increase in share price, but no change to the company’s underlying fundamentals.
1307
Option-adjusted price
The value of the embedded option plus the flat price of the bond.
1308
Nominal scale
A measurement scale that categorizes data but does not rank them.
1309
Overfitting
An undesirable result from fitting a model so
| closely to a dataset that it does not perform well on new data.
1310
Nash equilibrium
When two or more participants in a non- coop-erative game have no incentive to deviate from their respective equilibrium strategies given their opponent’s strategies.
1311
Foreclosure
Allows the lender to take possession of a mort- gaged property if the borrower defaults and then sell it to
recover funds.
1312
Value investors
With reference to equity investors, investors who are focused on paying a relatively low shares price in relation to earnings or assets per share
1313
Average variable cost
Total variable cost divided by quantity
| produced.
1314
Profitability ratios
Ratios that measure a company’s ability to generate profitable sales from its resources (assets).
1315
Law of one price
The condition in a financial market in which two equivalent financial instruments or combinations of financial instruments can sell for only one price. Equivalent to the principle that no arbitrage opportunities are possible.
1316
What is ABSOLUTE ADVANTAGE?
A country's ability to produce a good or service at a lower absolute cost than its trading partner (aka: other countries)
1317
Total probability rule for expected value
A rule explain- ing the expected value of a random variable in terms of expected values of the random variable conditional on mutually exclusive and exhaustive scenarios.
1318
Spot curve
A sequence of yields-to-maturity on zero-coupon bonds. Sometimes called zero or strip curve because coupon
payments are “stripped” off of the bonds.
1319
Price limits
Limits imposed by a futures exchange on the price change that can occur from one day to the next.
1320
Refinancing rate
A type of central bank policy rate.
1321
Down transition probability
The probability that an asset’s value moves down in a model of asset price dynamics.
1322
Fractile
A value at or below which a stated fraction of the data lies
1323
Float
In the context of customer receipts, the amount of money
that is in transit between payments made by customers and
the funds that are usable by the company.
1324
Periodicity
The assumed number of periods in the year, typically matches the frequency of coupon payemts
1325
Reorganization
Agreements made by a company in bank-
ruptcy under which a company’s capital structure is altered and/or alternative arrangements are made for debt repay- ment; US Chapter 11 bankruptcy. The company emerges from bankruptcy as a going concern.
1326
Pure-play method
A method for estimating the beta for a company or project, it requires using a comparable company’s beta and adjusting it for financial leverage differences.
1327
Conventional bond
See plain vanilla bond.
1328
Term structure of yield volatility
The relationship between the
| volatility of bond yields-to-maturity and times-to-maturity.
1329
Labor productivity
The quantity of goods and services (real GDP) that a worker can produce in one hour of work.
1330
Credit migration risk
The risk that a bond issuer’s creditwor- thiness deteriorates, or migrates lower, leading investors to believe the risk of default is higher. Also called down- grade risk.
1331
What is ACTION LAG?
Delay from policy deacons to implementation
1332
Portfolio demand for money
The demand to hold specula- tive money balances based on the potential opportunities or risks that are inherent in other financial instruments.
1333
Hedge portfolio
A hypothetical combination of the derivative and its underlying that eliminates risk.
1334
Balloon payment
Large payment required at maturity to retire a bond’s outstanding principal amount.
1335
Skewness
A quantitative measure of skew (lack of symmetry); a synonym of skew.
1336
Total return
Measures the price appreciation, or percentage change in price of the securities in an index or portfolio, plus any income received over the period.
1337
Net exports
The difference between the value of a country’s exports and the value of its imports (i.e., value of exports minus imports).
1338
Sector indexes
Indexes that represent and track different economic sectors—such as consumer goods, energy, finance, health care, and technology—on either a national, regional, or global basis.
1339
Direct debit program
An arrangement whereby a customer authorizes a debit to a demand account; typically used by companies to collect routine payments for services.
1340
Present value (PV
The present discounted value of future cash flows: For assets, the present discounted value of the future net cash inflows that the asset is expected to generate; for liabilities, the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities.
1341
Exercise
The process of using an option to buy or sell the underlying.
1342
Underemployed
A person who has a job but has the qualifi- cations to work a significantly higher-paying job.
1343
Consumer surplus
The difference between the value that a consumer places on units purchased and the amount of money that was required to pay for them.
1344
Basket of listed depository receipts
An exchange-traded fund (ETF) that represents a portfolio of depository receipts.
1345
Divisor
A number (denominator) used to determine the value of a price return index. It is initially chosen at the incep- tion of an index and subsequently adjusted by the index provider, as necessary, to avoid changes in the index value that are unrelated to changes in the prices of its constit- uent securities.
1346
Capital market expectations
An investor’s expectations concerning the risk and return prospects of asset classes.
1347
Cross-price elasticity of demand
The percentage change in quantity demanded for a given percentage change in the price of another good; the responsiveness of the demand for Product A that is associated with the change in price of Product B.
1348
Two-sided hypothesis test
A test in which the null hypoth- esis is rejected in favor of the alternative hypothesis if the evidence indicates that the population parameter is either smaller or larger than a hypothesized value.
1349
Tree diagram
A diagram with branches emanating from nodes representing either mutually exclusive chance events or mutually exclusive decisions.
1350
Holding period return
The return that an investor earns during a specified holding period; a synonym for total return.
1351
Defined benefit pension plans
Plans in which the company promises to pay a certain annual amount (defined benefit) to the employee after retirement. The company bears the investment risk of the plan assets.
1352
panel data
observations through time on a signal characteristic of multiple observational units
1353
Winsorized mean
A mean computed after assigning a stated percent of the lowest values equal to one specified low value, and a stated percent of the highest values equal to one specified high value.
1354
Debt-to-assets ratio
A solvency ratio calculated as total debt divided by total assets.
1355
ESG investing
The consideration of environmental, social, and governance factors in the investment process.
1356
Free cash flow to the firm (FCFF)
The cash flow available to the company’s suppliers of capital after all operating expenses have been paid and necessary investments in working capital and fixed capital have been made.
1357
Structured financial instruments
Financial instruments that share the common attribute of repackaging risks. Structured financial instruments include asset-backed securities, collateralized debt obligations, and other struc- tured financial instruments such as capital protected, yield enhancement, participation and leveraged instruments.
