Definitions Flashcards
Trend
A long-term pattern of movement in a particular direction.
European-style
Said of an option contract that can only be exercised on the option’s expiration date.
Triple bottoms
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.
Ratio scales
A measurement scale that has all the characteristics of interval measurement scales as well as a true zero
point as the origin.
Average revenue
Total revenue divided by quantity sold.
Universal owners
Long-term investors, such as pension funds,
that have significant assets invested in globally diversified
portfolios.
Free trade
When there are no government restrictions on a country’s ability to trade.
Plain vanilla bond
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.
Loss aversion
The tendency of people to dislike losses more than they like comparable gains.
Total cost
The summation of all costs, for which costs are classified as fixed or variable.
Asset utilization ratios
Ratios that measure how efficiently a
company performs day-to-day tasks, such as the collection
of receivables and management of inventory.
Reverse repurchase agreement
A repurchase agree- ment viewed from the perspective of the cash lending counterparty.
Effective interest rate
The borrowing rate or market rate that a company incurs at the time of issuance of a bond.
Grouping by nature
With reference to the presentation of expenses in an income statement, the grouping together of expenses by similar nature, e.g., all depreciation expenses.
Peak
The highest point of a business cycle
Prior probabilities
Probabilities reflecting beliefs prior to the
arrival of new information.
Overlay/portfolio tilt
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).
Nominal rate
A rate of interest based on the security’s face value.
Valuation allowance
A reserve created against deferred tax
assets, based on the likelihood of realizing the deferred
tax assets in future accounting periods.
Discount margin
See required margin.
Grouping by function
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.
Option
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.
Covariance
A measure of the co-movement (linear association)
between two random variables.
Deferred tax assets
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.
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.
Pseudo-random numbers
Numbers produced by random number generators
European option
An option that can only be exercised on its expiration date.
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
Pretax margin
A profitability ratio calculated as earnings before taxes divided by revenue.
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.
Small country
A country that is a price taker in the world
market for a product and cannot influence the world market price.
Look-ahead bias
A bias caused by using information that was unavailable on the test date.
Unsecured debt
Debt which gives the debtholder only a
general claim on an issuer’s assets and cash flow.
Fiat money
Money that is not convertible into any other commodity.
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.
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.
Convertible bond
Bond that gives the bondholder the right
to exchange the bond for a specified number of common shares in the issuing company.
Data mining
The practice of determining a model by extensive searching through a dataset for statistically significant patterns. Also called data snooping.
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.
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.
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.
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.
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.
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.
Technical analysis
A form of security analysis that uses price
and volume data, which is often displayed graphically, in decision making.
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.
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.
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.
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
Capital deepening investment
Increases the stock of capital relative to labor.
Solvency ratios
Ratios that measure a company’s ability to meet its long-term obligations.
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.
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.
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.
Probability density function
A function with non-negative values such that probability can be described by areas under the curve graphing the function.
Decreasing returns to scale
When a production process leads
to increases in output that are proportionately smaller than
the increase in inputs.
Dependent
With reference to events, the property that the probability of one event occurring depends on (is related to) the occurrence of another event.
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.
Quick assets
Assets that can be most readily converted to cash (e.g., cash, short-term marketable investments, receivables).
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).
Population
All members of a specified group.
What is AGGREGATE INCOME?
The value of all the payments earned by the suppliers of factors used in the production of goods and services
Security market index
A portfolio of securities representing
a given security market, market segment, or asset class.
Neural networks
Computer programs based on how our own
brains learn and process information.
Carrying amount
The amount at which an asset or liability is valued according to accounting principles.
Distributed ledger technology
Technology based on a distributed ledger.
Put-call-forward parity
The relationship amount puts, calls, and forward contracts
Option contract
see option
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.
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.
Ordinal scale
A measurement scale that sorts data into cat- egories that are ordered (ranked) with respect to some characteristic.
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.
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.
Event
Any outcome or specified set of outcomes of a random variable.
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.
Bond market vigilantes
Bond market participants who might reduce their demand for long-term bonds, thus pushing up their yields.
DuPont analysis
An approach to decomposing return on investment, e.g., return on equity, as the product of other financial ratios.
Counterparty risk
The risk that the other party to a contract will fail to honor the terms of the contract.
Capital expenditure
Expenditure on physical capital (fixed assets).
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.
Private equity fund
A hedge fund that seeks to buy, optimize, and ultimately sell portfolio companies to generate profits. See venture capital fund.
Stated annual interest rate
A quoted interest rate that does not account for compounding within the year. Also called
quoted interest rate.
Asset class
A group of assets that have similar characteristics,
attributes, and risk/return relationships.
Risk transfer
Actions to pass on a risk to another party, often, but not always, in the form of an insurance policy.
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.
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.
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.
Simulation trial
A complete pass through the steps of a simulation
Crowding out
The thesis that government borrowing may divert private sector investment from taking place.
Conversion value
For a convertible bond, the current share
price multiplied by the conversion ratio.
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.
Secured debt
Debt in which the debtholder has a direct claim—a pledge from the issuer—on certain assets and their associated cash flows.
Float factor
An estimate of the average number of days it takes deposited checks to clear; average daily float divided by average daily deposit.
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).
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.
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.
Strategic groups
Groups sharing distinct business models or catering to specific market segments in an industry.
Externality
An effect of a market transaction that is borne by parties other than those who transacted.
Non-accelerating inflation rate of unemployment
Effective unemployment rate, below which pressure emerges in labor markets.
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.
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.
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.
Artificial intelligence
Computer systems that exhibit cognitive and decision-making ability comparable (or superior) to that of humans
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.
Period costs
Costs (executives salaries - example) that can’t be directly matched with the timing of revenue and which are thus expensed immediatly
Auction
A type of bond issuing mechanism often used for
sovereign bonds that involve bidding.
Bid
The price at which a dealer or trader is willing to buy an asset, typically qualified by a maximum quantity.
Sample skewness
A sample measure of degree of asymmetry of a distribution.
Asset-based loan
A loan that is secured with company assets.
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.
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.
Direct method
See direct format.
Game theory
The set of tools decision makers use to incorpo-
rate responses by rival decision makers into their strategies.
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.
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.
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.
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
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.
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.
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.
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.
Extreme value theory
A branch of statistics that focuses primarily on extreme outcomes.
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
Performance bond
See margin bond
Support
In technical analysis, a price range in which buying
activity is sufficient to stop the decline in the price of a
security.
Neo-Keynesians
A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages.
Binomial model
A model for pricing options in which the underlying price can move to only one of two possible
new prices.
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
Bond
Contractual agreement between the issuer and the
bondholders.
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.
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.
Overcollateralization
Form of internal credit enhancement
that refers to the process of posting more collateral than needed to obtain or secure financing.
Call money rate
The interest rate that buyers pay for their margin loan.
Operating leverage
The use of fixed costs in operations.
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.
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.
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.
Diminishing marginal productivity
Describes a state in which each additional unit of input produces less output than previously.
Passive strategy
IN reference to short-term cash management, it is an investment strategy characterized by simple decision rules for making daily investments
Hypothesis
With reference to statistical inference, a statement
about one or more populations.
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
Securitization
A process that involves moving assets into a special legal entity, which then uses the assets as guarantees
to secure a bond issue.
Capital lease
See finance lease.
Execution instructions
Instructions that indicate how to fill an order.
Pairs arbitrage trade
A trade in two closely related stocks involving the short sale of one and the purchase of the other
Arbitrage-free pricing
The overall process of pricing derivatives by arbitrage and risk neutrality.
Also called the principle of no arbitrage
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.
Subordinated debt
A class of unsecured debt that ranks below a firm’s senior unsecured obligations.
Unsupervised learning
A machine learning approach that
does not make use of labeled training data.
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.
Competitive strategy
A company’s plans for responding to
the threats and opportunities presented by the external
environment.
Cost-push
Type of inflation in which rising costs, usually
wages, compel businesses to raise prices generally.
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.
Cartel
Participants in collusive agreements that are made openly and formally.
Sample mean
The sum of the sample observations, divided
by the sample size.
Expansionary
Tending to cause the real economy to grow.
Real GDP
The value of goods and services produced, measured at base year prices.
Tracking error
The standard deviation of the differences between a portfolio’s returns and its benchmark’s returns; a synonym of active risk.
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.
Balance sheet ratios
Financial ratios involving balance sheet items only.
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.
Real interest rate
Nominal interest rate minus the expected rate of inflation.
Estimate
The particular value calculated from sample obser- vations using an estimator.
Percentiles
Quantiles that divide a distribution into 100 equal parts
Primary bond markets
Markets in which issuers first sell
bonds to investors to raise capital.
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.
Combination
A listing in which the order of the listed items
does not matter.
Liquid market
Said of a market in which traders can buy or sell with low total transaction costs when they want to trade.
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.
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.
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.
Expansionary fiscal policy
Fiscal policy aimed at achieving
real economic growth.
Return on total capital
A profitability ratio calculated as EBIT divided by the sum of short- and long-term debt and equity.
Probability distribution
A distribution that specifies the probabilities of a random variable’s possible outcomes.
Economies of scale
Reduction in cost per unit resulting from increased production.
Bernoulli random variable
A random variable having the outcomes 0 and 1.
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.
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.
Grey market
The forward market for bonds about to be issued. Also called “when issued” market.
Type II error
The error of not rejecting a false null hypothesis.
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.
American depository receipt
A US dollar-denominated security that trades like a common share on US exchanges.
Organized exchange
A securities marketplace where buyers and seller can meet to arrange their trades.
Budget surplus/deficit
The difference between government
revenue and expenditure for a stated fixed period of time.
Secured bonds
Bonds secured by assets or financial guaran- tees pledged to ensure debt repayment in case of default.
Risk governance
The top-down process and guidance that directs risk management activities to align with and support the overall enterprise.
Empirical probability
The probability of an event estimated
as a relative frequency of occurrence.
Horizontal demand schedule
Implies that at a given price, the response in the quantity demanded is infinite.
Relative/best-in-class screening
An ESG investment style
that focuses on sectors, companies, or projects selected for ESG performance relative to industry peers.
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.
Settlement
The process that occurs after a trade is completed, the securities are passed to the buyer, and payment is received by the seller.
Longitudinal data
Observations on characteristic(s) of the same observational unit through time.
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.
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.
Bitcoin
A cryptocurrency using blockchain technology that
was created in 2009.
What is AMORTIZING BOND ?
Bond with a payment schedule that calls for periodic payments of interest and repayments of principal
Conditional expected value
The expected value of a stated event given that another event has occurred.
Time value of money
The principles governing equivalence
relationships between cash flows with different dates.
Support tranche
A class or tranche in a CMO that protects the PAC tranche from prepayment risk.
Long-run average total cost
The curve describing average total cost when no costs are considered fixed.
Asset-based valuation models
Valuation based on estimates
of the market value of a company’s assets.
Growth investors
With reference to equity investors, investors who seek to invest in high-earnings-growth companies.
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.
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.
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.
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.
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.
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.
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.
Convertible preference shares
A type of equity security that entitles shareholders to convert their shares into a specified number of common shares.
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.
Cross-sectional analysis
Analysis that involves comparisons across individuals in a group over a given time period or at a given point in time.
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).
Strong-form efficient market
A market in which security prices reflect all public and private information.
Equipment trust certificates
Bonds secured by specific types of equipment or physical assets.
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
Fill or kill
See immediate or cancel order.
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.
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.
What is the other term / name for Weighted average life?
Average Life
Trough
The lowest point of a business cycle.
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
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.
Gross profit
Sales minus the cost of sales (i.e., the cost of goods sold for a manufacturing company).
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.
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.
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).
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.
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.
Dark pools
Alternative trading systems that do not display the orders that their clients send to them.
Blue chip
Widely held large market capitalization companies
that are considered financially sound and are leaders in
their respective industry or local stock market.
Net present value
NPV) The present value of an investment’s cash inflows (benefits) minus the present value of its cash outflows (costs).
Loss severity
Portion of a bond’s value (including unpaid interest) an investor loses in the event of default.
Standards of conduct
Behaviors required by a group; estab- lished benchmarks that clarify or enhance a group’s code
of ethics.
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.”
Term maturity structure
Structure for a bond issue in which
the bond’s notional principal is paid off in a lump sum at maturity.
Common stock
See common shares.
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
Units-of-production method
A depreciation method that allocates the cost of a long-lived asset based on actual
usage during the period.
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.
Exchanges
Places where traders can meet to arrange their trades.
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.
Unexpected inflation
the component of inflation that is a surprise
Subjective probability
A probability drawing on personal or subjective judgment.
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.
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.
Normal profit
The level of accounting profit needed to just cover the implicit opportunity costs ignored in accounting costs.
Exhaustive
Covering or containing all possible outcomes.
Floaters
See floating-rate notes.
Fractional reserve banking
Banking in which reserves con- stitute a fraction of deposits.
Legal tender
Something that must be accepted when offered in exchange for goods and services.
Narrow money
The notes and coins in circulation in an econ- omy, plus other very highly liquid deposits.
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.
GDP deflator
A gauge of prices and inflation that measures the aggregate changes in prices across the overall economy.
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.
Level of significance
The probability of a Type I error in testing a hypothesis.
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.
Exercise value
The value obtained if an option is exercised based on current conditions. Also known as intrinsic value.
Transparency
Said of something (e.g., a market) in which information is fully disclosed to the public and/or regulators.
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.
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
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.
Automated Clearing House (ACH)
An electronic payment
network available to businesses, individuals, and finan- cial institutions in the United States, US Territories, and Canada.
Off-the-run
Seasoned government bonds are off-the-run securities; they are not the most recently issued or the most actively traded.
What is Asset allocation?
The process of determining how investment funds should be distributed among asset classes.
Economic loss
The amount by which accounting profit is less than normal profit.
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).
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.
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.
Non-current assets
Assets that are expected to benefit the company over an extended period of time (usually more than one year).
Operationally efficient
Said of a market, a financial system, or an economy that has relatively low transaction costs.
Stop order
An order in which a trader has specified a stop price condition. Also called stop-loss order.
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
Parametric test
Any test (or procedure) concerned with parameters or whose validity depends on assumptions concerning the population generating the SAMPLE
Delta
The sensitivity of the derivative price to a small change in the value of the underlying asset.
Continuous trading market
A market in which trades can be arranged and executed any time the market is open.
Descriptive statistics
The study of how data can be summa-
rized effectively.
Fundamental analysis
The examination of publicly available information and the formulation of forecasts to estimate the intrinsic value of assets.
Payments system
The system for the transfer of money
Second lien
A secured interest in the pledged assets that ranks below first lien debt in both collateral protection and priority of payment.
Full price
The price of a security with accrued interest; also called the invoice or dirty price.
On-the-run
The most recently issued and most actively traded sovereign securities.
Shutdown point
The point at which average revenue is equal
to the firm’s average variable cost.
Free-cash-flow-to-equity models
Valuation models based on discounting expected future free cash flow to equity.
Split coupon bond
See deferred coupon bond.
Univariate distribution
A distribution that specifies the prob-
abilities for a single random variable.
Efficient market
A market in which asset prices reflect new information quickly and rationally.
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.
Factor
A common or underlying element with which several variables are correlated.
Bid size
The maximum quantity of an asset that pertains to a specific bid price from a trader.
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).
Estimation
With reference to statistical inference, the sub- division dealing with estimating the value of a population parameter.
Triangle patterns
In technical analysis, a continuation chart pattern that forms as the range between high and low prices narrows, visually forming a triangle.
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.
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.
Exports
Goods and services that an economy sells to other countries.
Green bonds
A bond used in green finance whereby the proceeds are earmarked towards environmental-related products.
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.
Federal funds rate
The US interbank lending rate on overnight borrowings of reserves.
Current ratio
A liquidity ratio calculated as current assets divided by current liabilities.
What is ANNUITY?
A finite set of level sequential cash flows
Google : a fixed amount of money that is paid to someone each year.
Risk management framework
The infrastructure, process, and analytics needed to support effective risk management in an organization.
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.
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
Basis point
Used in stating yield spreads, one basis point equals one-hundredth of a percentage point, or 0.01%.
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.
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.
What is MULTILATERAL TRADING FACILITIES ?
see alternative trading system
Flotation cost
Fees charged to companies by investment bankers and other costs associated with raising new capital.
Wealth effect
An increase (decrease) in household wealth increases (decreases) consumer spending out of a given level of current income.
Contra account
An account that offsets another account.
Logarithmic scale
A scale in which equal distances represent equal proportional changes in the underlying quantity.
Dual-currency bonds
Bonds that make coupon payments in one currency and pay the par value at maturity in another currency.
VaR
See value at risk
What is the other name sport market is referred too?
Underlying
Sunk cost
A cost that has already been incurred.
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).
Risk aversion
The degree of an investor’s inability and unwillingness to take risk.
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.
Zero volatility spread (Z-spread)
Calculates a constant yield spread over a government (or interest rate swap) spot curve.
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.
Sample
A subset of a population.
Operating profit
A company’s profits on its usual business activities before deducting taxes. Also called operating income.
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).
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.
Barter economy
An economy where economic agents as house-holds, corporations, and governments “pay” for goods and services with another good or service.
Time tranching
The creation of classes or tranches in an ABS/MBS that possess different (expected) maturities.
Tracking risk
The standard deviation of the differences
between a portfolio’s returns and its benchmarks returns.
Also called tracking error.
Over-the-counter (OTC) markets
A decentralized market where buy and sell orders initiated from various locations
are matched through a communications network.
Laspeyres index
A price index created by holding the com- position of the consumption basket constant.
Current account
A component of the balance of payments account that measures the flow of goods and services.
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.
At the money
An option in which the underlying’s price
equals the exercise price.
Structural (or cyclically adjusted) budget deficit
The deficit that would exist if the economy was at full employment (or full potential output).
Just-in-time (JIT) method
Method of managing inventory
that minimizes in-process inventory stocks.
Registered bonds
Bonds for which ownership is recorded by
either name or serial number.
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.
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.
Risk Tolerance
The amount of risk an investor is willing and able to bear to achieve an investment goal
Frequency distribution
A tabular display of data summarized into a relatively small number of intervals.
Exercise price
The fixed price at which an option holder can buy or sell the underlying. Also called strike price, striking price, or strike.
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.
Tariffs
Taxes that a government levies on imported goods.
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.
Peformance fee
Fee paid to the general partner from the limited partners based on realized net profits
G-spread
The yield spread in basis points over an actual or
interpolated government bond.
Bottom-up analysis
An investment selection approach that focuses on company-specific circumstances rather than emphasizing economic cycles or industry analysis.
Tax loss carry forward
A taxable loss in the current period that may be used to reduce future taxable income.
What is commitment offering other name?
Underwritten offering.
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.
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.
Relative dispersion
The amount of dispersion relative to a
reference value or benchmark.
Position
The quantity of an asset that an entity owns or owes.
Contractionary fiscal policy
A fiscal policy that has the objective to make the real economy contract.
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.
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.
Store of value
The quality of tending to preserve value.
Base rates
The reference rate on which a bank bases lending rates to all other customers.
Transactions money balances
Money balances that are held to finance transactions.
Elasticity of demand
A measure of the sensitivity of quan- tity demanded to a change in a product’s own price: %∆QD/%∆P.
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.
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.
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.
Voluntarily unemployed
A person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy.
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.
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).
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.
Tax base
The amount at which an asset or liability is valued for tax purposes.
Funds of hedge funds
Funds that hold a portfolio of hedge funds, more commonly shortened to funds of funds.
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.
Debt-to-equity ratio
A solvency ratio calculated as total debt
divided by total shareholders’ equity.
Company analysis
Analysis of an individual company.
Cash flow from operations
The net amount of cash provided from operating activities.
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.
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.
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.
t-Test
A hypothesis test using a statistic (t-statistic) that follows a t-distribution.
Capital market securities
Securities with maturities at issuance longer than one year.
Government equivalent yield
A yield that restates a yield- to-maturity based on 30/360 day-count to one based on actual/actual.
Bilateral loan
A loan from a single lender to a single borrower.
Non-sovereign government bonds
A bond issued by a gov- ernment below the national level, such as a province, region, state, or city.
Risk averse
The assumption that an investor will choose the least risky alternative.
Operating lease
An agreement allowing a lessee to use some asset for a period of time; essentially a rental.
Blockchain
A type of digital ledger in which information is
recorded sequentially and then linked together and secured
using cryptographic methods.
Top-down analysis
An investment selection approach that begins with consideration of macroeconomic conditions and then evaluates markets and industries based upon such conditions.
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.
Price priority
The principle that the highest priced buy orders and the lowest priced sell orders execute first.
Unit labor cost
The average labor cost to produce one unit
of output.
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.
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.
Line chart
In technical analysis, a plot of price data, typically closing prices, with a line connecting the points.
Distributed ledger
A type of database that may be shared among entities in a network
Principle of no arbitrage
See arbitrage-free pricing.
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.
Required rate of return
See market discount rate.
Herding
Clustered trading that may or may not be based on information.
Cash markets
See spot markets.
Average total cost
Total cost divided by quantity produced.
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.
Standard deviation
The positive square root of the variance; a measure of dispersion in the same units as the original data.
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.
Kondratieff wave
A 54-year long economic cycle postulated by Nikolai Kondratieff.
Trade protection
Government policies that impose restric-
tions on trade, such as tariffs and quotas.
Paasche index
An index formula using the current composition of a basket of products
What is the other name for Zero-coupon bonds?
Pure Discount Bonds
Average fixed cost
Total fixed cost divided by quantity produced.
Principal
The amount of funds originally invested in a project or instrument; the face value to be paid at maturity.
Hidden order
An order that is exposed not to the public but only to the brokers or exchanges that receive it.
Nominal risk-free interest rate
The sum of the real risk-free interest rate and the inflation premium.
Electronic communications networks
See alternative trading systems.
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.
Balanced
With respect to a government budget, one in which spending and revenues (taxes) are equal.
Elliott wave theory
A technical analysis theory that claims that the market follows regular, repeated waves or cycles.
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
Notching
Ratings adjustment methodology where specific issues from the same borrower may be assigned different credit ratings.
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.
Normal goods
Goods that are consumed in greater quantities as income increases.
Seasoned offering
An offering in which an issuer sells addi- tional units of a previously issued security.
Free float
The number of shares that are readily and freely tradable in the secondary market.
Arbitrageurs
Traders who engage in arbitrage
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.
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.
Pari passu
On an equal footing
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.
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.
Coupon rate
The interest rate promised in a contract; this is the rate used to calculate the periodic interest payments.
Prime brokers
Brokers that provide services that commonly include custody, administration, lending, short borrowing, and trading.
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.
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.
Firm commitment offering
See underwritten offering
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
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.
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.
Promissory note
A written promise to pay a certain amount of money on demand.
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.
Payback period
The number of years required to recover the original investment in a project. The payback is based on cash flows
Duration gap
A bond’s Macaulay duration minus the investment horizon.
Effective duration
The sensitivity of a bond’s price to a change in a benchmark yield curve.
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.
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.
Priced risk
Risk for which investors demand compensation
for bearing (e.g. equity risk, company-specific factors,
macroeconomic factors).
Cost of debt
The cost of debt financing to a company, such as
when it issues a bond or takes out a bank loan.
Foreign currency reserves
Holding by the central bank of
non-domestic currency deposits and non-domestic bonds.
Sample excess kurtosis
A sample measure of the degree of
a distribution’s kurtosis in excess of the normal distribu-
tion’s kurtosis
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.
Cryptocurrency
An electronic medium of exchange that lacks
physical form.
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.
Non-cyclical
A company whose performance is largely inde- pendent of the business cycle
Prepaid expense
A normal operating expense that has been
paid in advance of when it is due.
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
First-degree price discrimination
Where a monopolist is able
to charge each customer the highest price the customer
is willing to pay.
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.
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.
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.
Financial flexibility
The ability to react and adapt to financial adversity and opportunities.
Convexity adjustment
For a bond, one half of the annual or approximate convexity statistic multiplied by the change in the yield-to-maturity squared.
Continuous time
Time thought of as advancing in extremely
small increments.
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.
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
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.
Eurobonds
Type of bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated.
Forward curve
A series of forward rates, each having the same timeframe.
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.
Conditional probability
The probability of an event given (conditioned on) another event.
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.
What is ACTIVE INVESTMENT?
An approach to investing in which the investor seeks to outperform a given benchmark
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)
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.
Ex-dividend date
The first date that a share trades without (i.e., “ex”) the dividend.
Operating cash flow
The net amount of cash provided from operating activities.
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.
Platykurtic
Describes a distribution that has relatively less weight in the tails than the normal distribution.
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.
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.
Non-renewable resources
Finite resources that are depleted once they are consumed, such as oil and coal.
Quantile
A value at or below which a stated fraction of the data lies. Also called fractile.
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.
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.
Permissionless networks
Networks that are fully open to any user on a DLT network.
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).
Contract rate
See mortgage rate.
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.
Point of sale (POS)
Systems that capture transaction data at the physical location in which the sale is made.
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.
Quintiles
Quantiles that divide a distribution into five equal parts.
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.
Standardizing
A transformation that involves subtracting the
mean and dividing the result by the standard deviation.
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.
Diffusion index
Reflects the proportion of the index’s components that are moving in a pattern consistent with the overall index.
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.
Display size
The size of an order displayed to public view.
Leptokurtic
Describes a distribution that has fatter tails than a normal distribution.
Financial account
A component of the balance of payments account that records investment flows.
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
Settlement price
The official price, designated by the clearing- house, from which daily gains and losses will be determined and marked to market.
Primary capital markets (primary markets)
The market where securities are first sold and the issuers receive the proceeds.
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)
Lessee
The party obtaining the use of an asset through a lease.
Replication
The creation of an asset or portfolio from another asset, portfolio, and/or derivative
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.
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.
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.
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.
Treynor ratio
A measure of risk-adjusted performance that relates a portfolio’s excess returns to the portfolio’s beta.
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.
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.
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.
Syndicated loans
Loans from group of lenders to a single borrower
Trade surplus (deficit)
When the value of exports is greater
(less) than the value of imports.
Fiscal policy
The use of taxes and government spending to
affect the level of aggregate expenditures.
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.
Quasi-government bonds
A bond issued by an entity that is either owned or sponsored by a national government. Also called agency bond.
Target capital structure
A company’s chosen proportions of debt and equity.
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.
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.
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.
Probability
A number between 0 and 1 describing the chance that a stated event will occur.
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.
Fintech
Technological innovation in the design and delivery
of financial services and products in the financial industry.
Statistic
A quantity computed from or used to describe a sample of data.
Losses
Asset outflows not directly related to the ordinary activities of the business.
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.
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)
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.
Population variance
A measure of dispersion relating to a population, calculated as the mean of the squared devia- tions around the population mean.
Non-current liabilities
Obligations that broadly represent a probable sacrifice of economic benefits in periods generally greater than one year in the future.
Expected inflation
The level of inflation that economic agents expect in the future.
Dispersion
The variability around the central tendency.
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.
Assignment of accounts receivable
The use of accounts
receivable as collateral for a loan.
Demand shock
A typically unexpected disturbance to demand, such as an unexpected interruption in trade or transportation.
Quantitative easing
An expansionary monetary policy based on aggressive open market purchase operations.
Long
The buyer of a derivative contract. Also refers to the position of owning a derivative.
CBOE Volatility Index
A measure of near-term market volatility as conveyed by S&P 500 stock index option prices.
Gilts
Bonds issued by the UK government.
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.
Net tax rate
The tax rate net of transfer payments.
Risk exposure
The state of being exposed or vulnerable to a risk. The extent to which an organization is sensitive to underlying risks.
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.
Depository receipt
A security that trades like an ordinary share on a local exchange and represents an economic interest in a foreign company.
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.
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.
