Glossary of Terms 7 Flashcards
Scrip Issue
A scrip issue (sometimes called a capitalisation or bonus issue) is a further issue of new shares to existing equity shareholders. They receive free a number of shares in proportion to their holdings.
Settlement
The payment of an account. Completing a stock transaction by delivering the required stock certificates and/or funds. Closing out a brokerage account.
Share Buy-backs
Repurchase, by a company, of its own shares in the market. Usually a tax-efficient means of returning capital to shareholders.
Share Split
In a share split existing shares are split into two shares of half the original nominal value. No new money is raised and no reserves are capitalised.
Shareholder Value
The present value of all expected current and future cashflows available to shareholders.
Short-selling
Selling, in the market, shares that have been borrowed from another investor.
Sovereign Debt
Fixed income stock issued by a national government (in order to finance expenditure not covered by taxation). The loans outstanding of individual countries, usually negotiated by their respective governments.
Specific Risk
The risk of holding a share which is unique to the industry or company and can be eliminated by having a suitably diversified portfolio of shares of differing types of companies. This is sometimes also referred to as alpha, unsystematic or residual risk.
Split-capital Investment Trust
An investment trust where the ordinary share capital consists of income shares and capital shares. Holders of income shares receive all or most of the distributed income while holders of capital shares receive little or no income but receive the residual value of the assets after income shares have been redeemed at a fixed value when the trust is wound up.
Spot Interest Rate
The n-year spot interest rate is the geometrical average of the interest rates that are expected to apply over the next n years. It is the redemption yield on an n year ZCB (See ZCB Yield Curve).
Spot rates are also referred to as zero rates.
Spread
The difference between a market maker’s bid and offer prices. Often referred to as bid-offer spread.
Strip
A bond strip is a tradable security consisting of one of the payments constituting a coupon paying bond. In effect it is a ZCB.
Sub-sovereigns
Fixed income stock issued by government agencies, supranationals and government guaranteed organisations.
Systematic Risk
The risk of the individual share relative to the overall market which cannot be eliminated by diversification. It is measured by the beta factor. A share with a beta greater than 1 is said to be aggressive, i.e. the price of the share is expected to do better than the market when prices rise. Conversely, a share with beta less than 1 is a defensive stock, i.e. its price will be expected to fall by less than the market when prices fall.
