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CISI - Fundamentals of Financial Services > Glossary of Terms > Flashcards

Glossary of Terms Flashcards

1
Q

Acquisition

A

A term used to describe the takeover or buying of a company by another.

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2
Q

Asset

A

Any item of economic of financial value owned by someone or a company

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3
Q

Bank of England

A

The UK’s central bank. Implements economic policy decided by the Treasury and determines interest rates

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4
Q

Bankruptcy

A

The situation where and individual, company or other organisation in unable to pay its debts

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5
Q

Bonds

A

Interest-bearing securities which entitle holders to annual interest and repayment at maturity. Commonly issued by both companies and government

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6
Q

Bitcoin

A

First created and most well-known cryptocurrency. First created in 2009

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7
Q

Blockchain

A

An example of a distributed ledger technology

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8
Q

Capital

A

Cash and assets used to generate income or make an investment

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9
Q

Capital Gain

A

An increase in the market value of a security (the value of the asset is greater than the price is was bought for)

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10
Q

Central Bank (4)

A

Central banks typically have responsibility for:

  1. setting a nation’s or a region’s short term interest rate
  2. controlling money supply
  3. acting as banker of the banks and lender of last resort to the banking system
  4. managing the national debt
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11
Q

Closing Price

A

The price of a security, such as a share or a bond at the end of the day

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12
Q

Collective Investment Scheme

A

A fund run by a professional manager that enables investors to pool their money. The manager selects the investments and the investors share in any increase (or decrease) in their value

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13
Q

Commission

A

Charges for acting as agent or broker

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14
Q

Coupon

A

The amount of interest paid on a bond

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15
Q

Credit Rating

A

An assessment of a bond issuer’s ability to pay the interest and repay the capital on the bonds. The best rating is triple A

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16
Q

Credit Risk

A

The likelihood of a borrower being unable to pay the interest or repay the debt

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17
Q

Currency

A

Any form of money that circulates in an economy as an accepted means of exchange for goods and services

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18
Q

Cryptocurrency

A

Virtual or electronic currencies which as their name suggests use encryption technology to control the amount of currency issued as well as to record ownership and payments

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19
Q

DAX

A

German shares index, comprising the largest companies (30 shares)

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20
Q

Dealer

A

An individual or firm acting in order to buy or sell a security for its own account and risk

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21
Q

Default

A

The situation where a borrower has failed to meet the requirements of their borrowing, for example by failing to pay their interest due

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22
Q

Deposit

A

A deposit is a sum of money held at a financial institution on behalf of an account holder for safekeeping

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23
Q

Derivative

A

A financial instrument whose price is based on the price of something else, typically another underlying asset. The other underlying asset could be a financial instrument, such as a bond or a share, or a commodity like oil, gold, silver, corn or wheat

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24
Q

Diversification

A

Investment strategy of spreading risk by investing in a range of investments

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25
Distributed Ledger Technology
The replacement of one centralised ledger of transactions with a decentralised network of computers (nodes) all holding copies of exactly the same ledger
26
Dividend
Distribution of profits by a company
27
Dividend Yield
Most recent dividend expressed as a percentage of current share price
28
Dow Jones Industrial Average Index (DJIA)
Major share index in the USA, based on the prices of 30 major company shares
29
Effective Annual Rate
The annualised compound rate of interest applied to a cash deposit or loan. Also known as the annual equivalent rate (AER)
30
Equity
Another name for shares or stock. It can also be used to refer to the amount by which the the value of a house exceeds any mortgage or borrowings secured on it
31
ESG
ESG stands for environmental, social and (corporate) governance. It involves considering whether a company is ‘doing the right thing’ in terms of the impact it has on the environment, the community in which it operates and the way it is governed
32
Exchange
Marketplace for trading investments
33
Exchange rate
Rate at which one currency can be exchanged for another
34
Face Value / Par Value / Nominal Value
This is the amount that needs to be repaid on a bond. It is also the amount that is used to calculate the coupon payment (face value x coupon percentage = coupon payment)
35
Foreign Exchange Market
A market for the trading of foreign currencies
36
FTSE 100
Main UK share index of 100 leading shares
37
Fund
Collective investment scheme where money in combined and invested in a portfolio of shares with a common investment purpose
38
Find Manager
A firm that invests money on behalf of customers
39
Index
A statistical measure of the changes in a selection of stocks representing a portion of the overall market
40
Inflation
An increase in the general level of prices
41
Initial Public Offering (IPO)
A new issue of ordinary shares, whether made by an offer for sale, an offer for subscription or a placing. Also known as a new issue
42
Interest
The price paid for borrowing money. Generally, interest is expressed as a percentage rate over a period of time, such as 5% per annum
43
Investment Bank
A business that specialises in raising debt and equity for companies
44
Leverage
A measure of the extent to which a company finances itself from debt, relative to equity
45
Listing
Companies whose securities are listed on the LSE and available to be traded
46
Loan
A form of debt where a borrower receives a certain amount of money from a lender. The borrower agrees to pay a contracted rate of interest to the lender and also agrees a date on which the loan will be repaid
47
London Stock Exchange (LSE)
Main UK market for securities
48
Market
All exchanges are markets - electronic or physical meeting places where assets are bought or sold
49
Market Price
Price of a share as quoted on the exchange
50
Maturity
Date when the capital on a bond is repaid
51
Merger
The combining of two or more companies into one new entity
52
Mortgage
A mortgage or more precisely a mortgage loan, is a long term loan used to finance the purchase of real estate (E.g. a house). Under the mortgagee agreement, the borrower agrees to make a series of payments back to the lender. The money lent by the bank (or building society) is secured agains the value of the property. If the payments are not made by the borrower, the lender can take back the property
53
Nasdaq
National Association of Securities Dealers Automated Quotations. US market specialising in the share of technology companies
54
National Debt
A government’s total outstanding borrowing resulting from financing successive budget deficits, mainly through the issue of government backed securities
55
Nikkei 225
Main Japanese share index, composed of shares in the largest 225 companies listed on the Japanese stock exchange
56
Nominal Value
The amount of a bond that will be repaid on maturity. Also known as face or par value
57
Overdraft
A form of borrowing from a bank where the lending bank can demand repayment at any time
58
Over-the-Counter (OTC)
Transactions that are undertaken away from an exchange
59
Pawnbroker
A business that provides loans to individuals. The pawnbroker takes an item of security (such as jewellery) in exchange for the loan. The loan needs to be repaid for the borrower to reclaim the item
60
Payday Loan
Very short-term loan that needs to be repaid on the borrower’s next payday, usually the end of the month. Such loans are often very expensive
61
Pension Fund
A fund set up by a company or government to invest the pension contributions of members and employees to be paid out at retirement age
62
Personal Loan
A loan taken out by an individual where the precise purpose for which the money will be used is not detailed in the loan agreement
63
Personal Pension Scheme
A retirement saving scheme set up by an individual, rather than set up by the individuals employer
64
Portfolio
A selection of imvestments
65
Premium
The regular payment made to an insurance company for insurance against a range of risks
66
Redemption Date
The date at which a bond issuer has to repay the face value of the bond
67
Reinsurance
The term for insurance taken out by an insurer on a policy that it has underwritten
68
Responsible Investment
The inclusion of ethical criteria when making investment choices
69
Retail Bank
Organisation that provides banking facilities to individuals and small/medium businesses
70
Return
A measure of the financial reward on an investment, such as dividends and capital growth on a share. Return is always linked to risk: to have the possibility of a bigger reward, a bigger risk will need to be taken
71
Secured
The situation where a lender (such as a bank or a pawnbroker) takes something of value. If the borrower fails to repay the debt, the lender is able to keeping and sell the item
72
Security
A bank has taken security for its loan when it holds something of value. The most obvious example is if a bank takes security in the form of property ownership on a mortgage
73
Shareholders
Those who own the shares of the company. Essentially, they are the owners of the company
74
Start-up
A business or company in its early stages. Typically start-ups are businesses that are not yet generating any profits
75
State Pension Scheme
A retirement scheme that is provided by the state. Such schemes are generally not particularly generous and need to be supplemented by other forms of income in retirement (such as personal pension schemes, or pension schemes provided by the employer)
76
Syndicate
Insurance companies joining together to write insurance
77
Trade
The purchase and sale of a security. Traces in shares are often agreed on exchanges
78
Treasury
Government department ultimately responsible for the regulation of the financial services sector
79
Unsecured
A loan provided to a borrower where the lender takes no security

CISI - Fundamentals of Financial Services (9 decks)

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