I, J, K, L Flashcards
Incentive fee
A fee paid to the manager of a fund based
on the fund’s performance. Most hedge
funds and a small number of mutual funds
have incentive fees.
Indenture
A formal document that outlines the
features of a debt security, the obligations of
the issuer, and the rights of the investor
under the contract
Independent variable
A variable assumed to influence another
variable
Index ratio
For Government of Canada real-return
bonds, the ratio of the current consumer
price index (CPI) to the base CPI. The
index ratio is used to calculate the inflation
compensation. See also Consumer price
index, Inflation compensation, and
Real-return bond.
Indexing
A passive investment strategy, supported by
the efficient market hypothesis, designed to
track the performance of a specific market
index. See also Efficient market
hypothesis and Passive investment
strategy.
Industrial capacity utilization rate
A measure (calculated independently in
both Canada and the U.S.) of the intensity
with which industries use their production
capacity, expressed as the percentage of
actual to potential output.
Industrial Product Price Index
IPPI
An indicator of the rate of change for goods
and services sold by Canadian producers.
Industry momentum
The tendency of an industry or sector to
continue to outperform other industries or
sectors. See also Momentum ranking.
Industry momentum ranking
A ranking of industry performance over the
past several periods. The ranking indicates
the consistency of an industry’s
performance relative to others and the
broad market. See also Industry momentum
Inflation compensation
An adjustment to a real-return bond’s
principal representing the cumulative level
of inflation from the bond’s issue date. For
Government of Canada real-return bonds,
the inflation compensation equals the
bond’s principal multiplied by the index
ratio, minus the bond’s principal. See also
Index ratio and Real-return bond.
Infrastructure
Refers to such projects as roads, ports,
airports and water works.
Institute of Supply Management
(ISM) Manufacturing Index
A monthly national survey of American
purchasing and supply executives from over
400 industrial companies.
Interest
Money charged by a lender to a borrower
for the use of his or her money.
Interest rate risk
The portion of a debt security’s total risk
that is related to fluctuations in the general
level of interest rates, as represented by the
yields on federal government bonds. See
also Systematic risk.
Interest rate volatility theory
A theory used to explain the behaviour of
spreads on bonds with embedded options.
According to the theory, yield spreads on
callable bonds widen during times of
greater interest rate volatility, and narrow
during times of lower volatility. Yield
spreads on putable bonds react in the
opposite manner. See also Yield spread.
Interlist
The act of listing securities on more than
one exchange. Many Canadian companies
interlist their common shares on both the
Toronto and New York Stock Exchanges.
Inter-market spread strategy
A debt securities strategy that attempts to
capitalize on the difference in yield spreads
and expected changes in yield spreads
between different sectors of the bond
market. See also Intra-market spread
strategy.
Internal rate of return
An interest rate that equates the price or
value of a security or portfolio of securities
to the present value of the security or
portfolio’s future cash flows.
Interviewing
The process of gathering information about
a client’s investment objectives, personal
circumstances, and “frame of reference.”
This is accomplished by guiding the
discussion or probing
Intra-market spread strategy
A debt securities strategy that involves
swapping bonds that are largely similar. The
investor may have identified mispriced
securities, or may see relative value
differences between two bonds from two
different issuers in the same business sector.
Also known as a substitution swap. See also
Inter-market spread strategy
Inverted yield curve
A downward or negatively-sloped yield
curve characterized by short-term interest
rates that are greater than longer-term rates.
See also Flat yield curve, Normal yield
curve, and Yield curve.
Investment constraints
Factors that limit in some way the securities
that may be included in a client’s portfolio,
expressed as the client’s time horizon,
liquidity requirements, tax situation, legal
and regulatory requirements, and any other
unique circumstances.
Investment grade bond
A debt security with a credit rating of BBB
(low) (or equivalent) and higher. See also
Credit rating and High-yield bond.
Investment management process
An integrated and continual process
designed to meet specific goals and
objectives within a set of constraints.
