G-3 Flashcards
Back-testing
With reference to portfolio strategies, the application of a portfolio strategies’ selection rules to historical data to assess what would have been the strategy’s historical performance
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
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
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
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 part of a particular point in time (the date of the balance sheet);
Also called statement of financial position or statement of financial condition
Balance sheet ratios
Financial ratios involving balance sheet items only
Balanced
With respect to a government budget, one in which spending and revenues (taxes) are equal
Balloon payment
Large payment required at maturity to retire a bond’s outstanding principal amount
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
Barter economy
An economy where economic agents as house-holds, corporations, and governments “pay” for goods and services with another good or service
Base rates
The reference rate on which a bank bases lending rates to all other customers
Basis point
Used in stating yield spreads, one basis point equals one-hundredth of a percentage point, or 0.01%
Basket of listed depository receipts
An exchange-traded fund (ETF) that represents a portfolio of depository receipts
Bearer bonds
Bonds for which ownership is not recorded; only the clearing system knows who the bond owner is
Behavioral finance
A field of finance that examines the psychological variables that affect and often distort the investment decision of investors, analysts, and portfolio managers
Behind the market
Said of prices specified in orders that are worse than the best current price; i.e. for a limit buy order, a limit price below the best bid
Benchmark
A comparison portfolio; a point of reference or comparison
Benchmark issue
The latest sovereign bond issue for a given maturity. It serves as a benchmark against which to compare bonds that have the same features but that are issued by another type of issuer
Benchmark rate
Typically the yield-to-maturity on a government bond having the same, or close to the same, time-to-maturity
Benchmark spread
The yield spread over a specific benchmark, usually measured in basis points
Bernoulli random variable
A random variable having outcomes 0 and 1
Bernoulli trial
An experiment that can produce one of two outcomes
Best bid
The highest bid in the market
Best effort offering
An offering of a security using an investment 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 used
Best-in-class
An ESG implementation approach that seeks to identify the most favorable companies in an industry based on ESG considerations
Best offer
The lowest offer (ask price) in the market
Beta
A measure of the sensitivity of a given investment or portfolio to movements in the overall market
Bid
The price at which a dealer or trader is willing to buy an asset, typically qualified by a maximum quantity
Bid-ask spread
The difference between the prices at which dealers will buy from a customer (bid) and sell to a customer (offer or ask). It is often used as an indicator of liquidity.
Bid-offer spread
see bid-ask spread
Bid size
The maximum quantity of an asset that pertains to a specific bid price from a trader
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
Bilateral loan
A loan from a single lender to a single borrower
Binomial model
A model for pricing options in which the underlying price can move to only one of two possible new prices
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
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 )
Bitcoin
A cryptocurrency using blockchain technology that was created in 2009
Block brokers
A broker (agent) that provides brokerage services for large-size trades
Blockchain
A type of digital ledger in which information is recorded sequentially and then linked together and secured using cryptographic methods.
Blue chip
Widely held large markets capitalization companies that are considered financially sound and are leaders in their respective industry or local stock market
Bollinger Bands
A price-based technical analysis indicator consisting of a moving average plus a higher line representing 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
Bond
Contractual agreement between the issuer and the bondholders
