Key Terms Flashcards

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1
Q

Active Management

A

The use of a human element to actively manage a fund’s portfolio.

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2
Q

Arbitrage

A

The simultaneous buying and selling of two economically equivalent equivalent but differentially price portfolios so as to make but differently priced portfolios so as to make a risk-free profit.

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3
Q

Bear Market

A

A market condition in which te prices of securities are falling.

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4
Q

Benchmark

A

A standard or model portfolio against which the structure and performance of a security, mutual fund or investment manager can be measured.

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5
Q

Bond

A

A form of loan to a corporate or government entity.

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6
Q

Bull market

A

A financial market of a group of securities in which prices are rising or are expected to rise.

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7
Q

Coupon

A

The interest payment on a bond

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8
Q

Credit Risk

A

The risk that the counterparty to an agreement will be unable or unwilling to make payments required under the agreement.

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9
Q

Debenture

A

A type of debt instrument that is not secured by physical assets or collateral.

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10
Q

Depreciation

A

An accounting convention whereby firms write down the value of their assets over time

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11
Q

Discounted income model

A

A model for valuing investment which determines a present value for the investments by discounting the expected future income from the assets.

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12
Q

Efficient frontier

A

The line joining all efficient portfolios in the risk-return space

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13
Q

Efficient portfolio

A

A portfolio for which it is not possible to increase the expected return without accepting more risk.

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14
Q

Financial Gearing

A

A term used to describe the relationship between the Companys debt and equity shareholders funds.

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15
Q

A highly geared company

A

one where there is a high proportion of debt to equity

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16
Q

Market risk

A

The risk relating to changes in the value of a portfolio due to movements in the market value of the assets held.

17
Q

Operational risk

A

The risk of loss due to fraud or mismanagement within an organisation.

18
Q

Short sell in an asset

A

Having a negative economic exposure to the asset

19
Q

Systematic risk

A

Risk inherent to the entire market or the component of risk in an individual investment which cannot be eliminated by diversification.

20
Q

Unsecured loan stoc

A

A form of long-term corporate debt which is not secured on any specific assets of the borrower.

21
Q

Valuation rate of interest

A

The rate at which future liabilities and assets are discounted to the valuation date.

22
Q

Zero-coupon bond

A

A bond where the sole return is the payment of the nominal value on maturity.