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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
Q

Distributed Ledger Technology

A

The replacement of one centralised ledger of transactions with a decentralised network of computers (nodes) all holding copies of exactly the same ledger

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26
Q

Dividend

A

Distribution of profits by a company

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27
Q

Dividend Yield

A

Most recent dividend expressed as a percentage of current share price

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28
Q

Dow Jones Industrial Average Index (DJIA)

A

Major share index in the USA, based on the prices of 30 major company shares

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29
Q

Effective Annual Rate

A

The annualised compound rate of interest applied to a cash deposit or loan. Also known as the annual equivalent rate (AER)

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30
Q

Equity

A

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

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31
Q

ESG

A

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

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32
Q

Exchange

A

Marketplace for trading investments

33
Q

Exchange rate

A

Rate at which one currency can be exchanged for another

34
Q

Face Value / Par Value / Nominal Value

A

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
Q

Foreign Exchange Market

A

A market for the trading of foreign currencies

36
Q

FTSE 100

A

Main UK share index of 100 leading shares

37
Q

Fund

A

Collective investment scheme where money in combined and invested in a portfolio of shares with a common investment purpose

38
Q

Find Manager

A

A firm that invests money on behalf of customers

39
Q

Index

A

A statistical measure of the changes in a selection of stocks representing a portion of the overall market

40
Q

Inflation

A

An increase in the general level of prices

41
Q

Initial Public Offering (IPO)

A

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
Q

Interest

A

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
Q

Investment Bank

A

A business that specialises in raising debt and equity for companies

44
Q

Leverage

A

A measure of the extent to which a company finances itself from debt, relative to equity

45
Q

Listing

A

Companies whose securities are listed on the LSE and available to be traded

46
Q

Loan

A

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
Q

London Stock Exchange (LSE)

A

Main UK market for securities

48
Q

Market

A

All exchanges are markets - electronic or physical meeting places where assets are bought or sold

49
Q

Market Price

A

Price of a share as quoted on the exchange

50
Q

Maturity

A

Date when the capital on a bond is repaid

51
Q

Merger

A

The combining of two or more companies into one new entity

52
Q

Mortgage

A

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
Q

Nasdaq

A

National Association of Securities Dealers Automated Quotations. US market specialising in the share of technology companies

54
Q

National Debt

A

A government’s total outstanding borrowing resulting from financing successive budget deficits, mainly through the issue of government backed securities

55
Q

Nikkei 225

A

Main Japanese share index, composed of shares in the largest 225 companies listed on the Japanese stock exchange

56
Q

Nominal Value

A

The amount of a bond that will be repaid on maturity. Also known as face or par value

57
Q

Overdraft

A

A form of borrowing from a bank where the lending bank can demand repayment at any time

58
Q

Over-the-Counter (OTC)

A

Transactions that are undertaken away from an exchange

59
Q

Pawnbroker

A

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
Q

Payday Loan

A

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
Q

Pension Fund

A

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
Q

Personal Loan

A

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
Q

Personal Pension Scheme

A

A retirement saving scheme set up by an individual, rather than set up by the individuals employer

64
Q

Portfolio

A

A selection of imvestments

65
Q

Premium

A

The regular payment made to an insurance company for insurance against a range of risks

66
Q

Redemption Date

A

The date at which a bond issuer has to repay the face value of the bond

67
Q

Reinsurance

A

The term for insurance taken out by an insurer on a policy that it has underwritten

68
Q

Responsible Investment

A

The inclusion of ethical criteria when making investment choices

69
Q

Retail Bank

A

Organisation that provides banking facilities to individuals and small/medium businesses

70
Q

Return

A

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
Q

Secured

A

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
Q

Security

A

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
Q

Shareholders

A

Those who own the shares of the company. Essentially, they are the owners of the company

74
Q

Start-up

A

A business or company in its early stages. Typically start-ups are businesses that are not yet generating any profits

75
Q

State Pension Scheme

A

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
Q

Syndicate

A

Insurance companies joining together to write insurance

77
Q

Trade

A

The purchase and sale of a security. Traces in shares are often agreed on exchanges

78
Q

Treasury

A

Government department ultimately responsible for the regulation of the financial services sector

79
Q

Unsecured

A

A loan provided to a borrower where the lender takes no security

CISI - Fundamentals of Financial Services (9 decks)

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