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
