Key Terms Flashcards
Active Management
The use of a human element to actively manage a fund’s portfolio.
Arbitrage
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.
Bear Market
A market condition in which te prices of securities are falling.
Benchmark
A standard or model portfolio against which the structure and performance of a security, mutual fund or investment manager can be measured.
Bond
A form of loan to a corporate or government entity.
Bull market
A financial market of a group of securities in which prices are rising or are expected to rise.
Coupon
The interest payment on a bond
Credit Risk
The risk that the counterparty to an agreement will be unable or unwilling to make payments required under the agreement.
Debenture
A type of debt instrument that is not secured by physical assets or collateral.
Depreciation
An accounting convention whereby firms write down the value of their assets over time
Discounted income model
A model for valuing investment which determines a present value for the investments by discounting the expected future income from the assets.
Efficient frontier
The line joining all efficient portfolios in the risk-return space
Efficient portfolio
A portfolio for which it is not possible to increase the expected return without accepting more risk.
Financial Gearing
A term used to describe the relationship between the Companys debt and equity shareholders funds.
A highly geared company
one where there is a high proportion of debt to equity
Market risk
The risk relating to changes in the value of a portfolio due to movements in the market value of the assets held.
Operational risk
The risk of loss due to fraud or mismanagement within an organisation.
Short sell in an asset
Having a negative economic exposure to the asset
Systematic risk
Risk inherent to the entire market or the component of risk in an individual investment which cannot be eliminated by diversification.
Unsecured loan stoc
A form of long-term corporate debt which is not secured on any specific assets of the borrower.
Valuation rate of interest
The rate at which future liabilities and assets are discounted to the valuation date.
Zero-coupon bond
A bond where the sole return is the payment of the nominal value on maturity.
