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CSI glossary > Vocab 4 > Flashcards

Vocab 4 Flashcards

1
Q

Interval funds

A

A type of mutual fund that has the flexibility to buy back its outstanding shares periodically. Also known as closed end discretionary funds.

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2
Q

Intrinsic value

A

That portion of a warrant or call option’s price that represents the amount by which the market price of a security exceeds the price at which the warrant or call option may be exercised (exercise price). Consider the theoretical value of a security (i.e. what a security should be worth or priced at in the market.)

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3
Q

Inventory turnover ratio

A

Cost of goods sold divided by inventory. The ratio may also be expressed as the number of days required to sell current inventory by dividing the ratio into 365.

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4
Q

Investment policy statement

A

The agreement between a portfolio manager and a client that provides the guidlines for the manager.

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5
Q

Investment dealers association (IDA) of Canada

A

The Canadian investment industry’s national trade association and self regulatory organization.The IDA seeks to foster efficient capital markets by encouraging participation in the savings and investment process, and by insuring the integrity of the marketplace.

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6
Q

Irrevocable beneficiary

A

A beneficiary whose entitlement under the segregated fund contract cannot be terminated or changed without his or her consent.

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7
Q

Issuer bid

A

An offer by an issuer to security holders to buy back any of its own shares or other securities converible onto shares.

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8
Q

Jitney

A

The execution and clearing of orders by one member of a stock exchange for the account of another member. Example: Broker A is a small firm whose business is not sufficient to maintain a trader on the floor of the exchange. Instead it gives its orders to broker B for execution and clearing and pays a reduced percentage of the normal commision.

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9
Q

Junior bond issue

A

A corporate bond issue, the collateral for which has been pledged as security for other more senior debt issues and is therefore subject to these prior claims.

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10
Q

Junior debt

A

One or more junior bond issues.

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11
Q

Keynesian economics

A

Economic policy developed by British economic John Maynard Keynes who proposed that active government intervention in the market was the only method of ensuring economic growth and prosperity.

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12
Q

Know your client (KYC)

A

The cardinal rule in making investment recommendations. All relevant information about a client must be known in order to ensure that the registrant’s recommendations are suitable.

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13
Q

Labour force

A

The sum of the population aged 15 and over who are either employed or unemployed.

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14
Q

Labour sponsored venture capital corporations (LSVCC)

A

LSVCCs are investment funds, sponsored by labour organizations, that have a specific mandate to invest in small to medium size businesses. To encourage this mandate, governments offer generous tax credits to investors in LSVCCs.

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15
Q

Lagging indicators

A

A selection of statistical data, that on average, indicate the highs and lows in the business cycle behind the economy as a whole. These relate to business expenditures for new plant and equipment, consumer’s instalment credit, short term business loans, the overall value of manufacturing and trade inventories.

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16
Q

Large value transfer system (LVTS)

A

A Canadian Payments Association electronic system for the transfer of large value payments between participating financial institutions.

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17
Q

LEAPS

A

Long Term Equity Anticipation Securities are long term (2-3 year) option contracts.

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18
Q

Leading indicators

A

A selection of statistical data that, on average, indicate highs and lows in the business cycle ahead of the economy as a whole. These relate to employment, capital investment, business starts and failures, profits, stock prices, inventory adjustments, housing starts and certain commodity prices.

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19
Q

Leverage

A

The effect of fixed charges (i.e.debt interest or preferred dividends, or both) on per-share earnings of common stock. Increases or decreases in income before fixed charged result in magnified percentage increases or decreases in earnings per common share. Leverage also refers to seeking magnified percentage returns on an investment by using borrowed funds, margin accounts or securities which require payments of only a fraction of the underlying security’s value (such as rights, warrants or oprions)

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20
Q

Life cycle

A

A model used in financial planning that tries to link age with investing. The underlying theory is that an individual’s asset mix will change, as they grow older. However the life cycle is not a substitute for the “know your client rule”

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21
Q

Limited liability

A

The word limited at the end of a Canadian company’s name implies that liability of the company’s is limited to the money they paid to buy the shares. By contrast, ownership by sole proprietor or partnership carries unlimited personal legal responsibility for debts incurred by the business.

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22
Q

Limit order

A

A clients order to buy or sell at a specific price or better. the order can be executed only at the price or a better one

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23
Q

Limited partnership

A

Limited partnership: a type of partnership whereby a limited partner cannot participate in the daily business activity and liability is limited to the partners investment.

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24
Q

Liquidity

A

Liquidity: 1.the ability of the market in a particular security to absorb a reasonable amount of buying or selling at a reasonable price change. 2. A Corporation’s current assets relative to its current liabilities; it’s cash position

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25
Q

Liquidity preference theory

A

Liquidity preference theory: A theory that tries to explain the shape of the yield curve.it postulates that investors want to invest for the short term because they are risk-averse.borrowers, however, want long-term money.in order to entice investors to invest long-term, borrowers must offer higher rates for longer-term money.this being the case, the yield curve should slope upwards reflecting the higher rates for longer borrowing.

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26
Q

Liquidity ratios

A

Liquidity ratios: financial ratios that are used to judge the company’s ability to meet its short-term commitments.see current ratio.

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27
Q

Liquidity risk

A

Liquidity risk: the risk that an investor will not be able to buy or sell a security quickly enough because buying or selling opportunities are limited.

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28
Q

Listed stock

A

the stock of a company which is traded on the stock exchange.

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29
Q

Listing agreement

A

stock exchange document published when a company’s shares are accepted for listing.it provides basic information on the company, it’s business, management, offsets, capitalization and financial status.

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30
Q

Load

A

the portion of the offering price of shares of most open-end investment companies [mutual funds] which covers sales commissions and all other costs of distribution.

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31
Q

London Interbank offered rate [LIBOR]

A

the rate of interest charge by large international banks dealing in your eurodollars to other large international Banks.

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32
Q

Long/short equity funds

A

a type of hedge fund that consists of equal – dollar value long and short positions within a region or industry sector.

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33
Q

Long – term Bond

A

a bond or debenture maturing in more than 10 years.

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34
Q

Macroeconomic policy

A

government policy that tries to influence the performance of the economy as a whole through monetary policy and fiscal policy.

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35
Q

Major trend

A

underline price trend prevailing in the market despite temporary declines or rallies.

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36
Q

Managed accounts

A

similar to a discretionary account but more long – term in nature.maybe solicited.

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37
Q

Managed futures funds

A

also known as commodity pools.managed futures funds apply a systematic approach to trading, using technical and statistical analysis of price and volume information to determine investment decisions.

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38
Q

Management expense ratio

A

the total expense of operating a mutual fund expressed as a percentage of the funds next asset value.it includes the management fee as well as other expenses charged directly to the fund such asadministrative, audit, legal fees etc., but excludes brokerage fees.published rates of return are calculated after the management expense ratio has been deducted.

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39
Q

Management fee

A

the fee that the manager of a mutual fund or segregated fund charges the fund for managing the portfolio and operating the fund.the fee is usually set as fixed percentage of the funds next asset value.

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40
Q

Managers discussion and analysis [MD& A]:

A

the discussion and analysis by the company’s own managers of the information contained in the annual information form.

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41
Q

Margin

A

the amount paid by a client when he uses credit to buy a security, the balance being alone by his broker against acceptable collateral.

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42
Q

Margin call

A

when an investor purchases an account on margin in the expectation that the share value will rise, or shorts for security on expectation that share price will decline, and share prices go against the investor, the brokerage firm will send out a margin call requiring that the investor add additional funds or marketable securities to the account to contact the brokers loan.

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43
Q

Market

A

the arrangement whereby products and services are bought and sold, either directly or through intermediaries.

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44
Q

Marketable bonds

A

bonds for which there is a ready market (I.E.client will buy them because the prices and features are attractive].

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45
Q

Market capitalization

A

the value of a company based on the market price of it’s issued and outstanding common shares.it is calculated by multiplying the number of outstanding shares by the current market price of a share.

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46
Q

Market correction

A

price reversal that typically occurs when a security has been overbought or oversold in the market.

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47
Q

Market maker

A

the trader employed by a securities firm who is authorized and required, by applicable self – regulatory organizations [SRO], to maintain a reasonable liquidity in securities markets by making firm bids for offers for one or more designated securities.

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48
Q

Market regulation services Inc. [RS]:

A

An SRO that acts as the independent regulation services provider for Canadian equity markets, including the Toronto Stock exchange, venture exchange, and Canadian trading and quotation system [CNQ].RS regulates trading on these marketplaces to ensure transactions areexecuted properly, fairly and in compliance with trading rules.

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49
Q

Market – out clause

A

a clause that allows the dealer to cancel the issue if market conditions changed to the point where the issue becomes un-saleable.

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50
Q

Market risk

A

the non controllable or systematic risk associated with equities.

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51
Q

Marketable

A

a security that is easily bought or sold.

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52
Q

Market timing

A

decisions on when to buy or sell securities based on economic factors, such as the strength of the economy and the direction of interest rates, or based on stock price movements and the volume of trading through the use of technical analysis.

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53
Q

Market segmentation theory

A

a theory on the structure of the yield curve.it is believed that large institutions shaped the yield curve.the banks preferred to borrow short-term wallet insurance industry, with a longer Horizon, prefers long-term money.the supply and demand of the large institutions shape the curve.

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54
Q

Marking to market

A

the process in the futures market in which the daily price changes are paid by the parties incurring losses to the parties earning profits.

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55
Q

Married put or a put hedge

A

the purchase of an underlying asset and the purchase of a put option on that underlying asset.

56
Q

Material change

A

A change in the affairs of a company that is expected to have a significant effect on the market value of its securities.

57
Q

Mature industry

A

an industry that experiences slower, more stable growth rates in earnings and sales than growth or emerging industries, for example.

58
Q

Maturity

A

the date on which a loan or bond or debenture comes due and is to be paid off.

59
Q

Maturity guarantee:

A

the minimum dollar value of the contract after the guarantee, Usually 10 years.this amount is also known as the annuity benefit.

60
Q

Maturity date

A

the date at which the contract expires, and the time at which any maturity guarantees are based.segregated fund contracts normally mature in 10 years, although companies are allowed to set longer periods.maturities of less than 10 years are permitted only for funds such as protected mutual funds, which are regulated as securities and are not segregated funds.

61
Q

Medium term Bond

A

A bond or debenture maturing in over three years but less than 10 years

62
Q

Member firm

A

stock brokerage firm or investment dealer which is a member of a stock exchange or the investment dealers Association of Canada.

63
Q

Microeconomic policy

A

economic policies which focus on the function of firms, workers, labor and production markets which are the main determinant of up countries prosperity overtime.

64
Q

Minority interest

A

1.the equity of the shareholders who do not hold controlling interest in a controlled company; 2.and consolidated financial statements [I] the item in the balance sheet of the parent company representing that portion of the assets of a consolidated subsidiary considered as accruing to the shares of the subsidiary not owned by the parent; and [I] the item the ducted in the earning statement of the parent and representing that portion of the subsidiaries earnings considered as accruing to the subsidiaries shares not owned by the parent.

65
Q

Monetarist

A

school of economics. Which states that the level of price as well as economic output is determined by an economy’s money supply.this school of thought believes that control of the money supply is more vital to economic prosperity in the level of government spending, for example.

66
Q

Monetary aggregates

A

an aggregate that measures the quantity of money held by a country’s households, firms and governments.it includes various forms of money or payment instruments grouped according to their degree of liquidity, such as M1, M2 or M3.

67
Q

monetary condition index

A

a measure of the degree of tightening or easing in monetary conditions in the economy based on interest and exchange rates relative to a given base period.

68
Q

Monetary policy

A

policy implemented by the federal government through the Bank of Canada to control credit and the money supply in the economy.

69
Q

Money market

A

that part of the capital market in which short-term financial obligations are bought and sold.these include treasury bills and other federal government securities maturing in three years or less and commercial paper, bankers acceptances, trust company guaranteed investment certificates and other instruments with a year or less left to maturity.longer-term securities, when their term shortens to the limit mentioned, are also traded in the money market.

70
Q

Money purchase plan [MPP

A

a type of registered pension plan; also called a defined contribution plan.in this type of plan, the annual payout is based on the contributions to the plan and the amounts those contributions have earned over the years preceding retirement.in other words, the benefits are not known but the contributions are.

71
Q

Mortgage:

A

a contract specifying that certain property is pledged as security for a loan.

72
Q

Mortgage backed securities

A

similar to bonds, the current $5000 units with five – year terms are backed by a share in a pool of home mortgages insured under the national housing act. units pay interest and a part of principal each month and, if homeowners prepay their mortgages, may pay out additional amounts of principle before normal maturity.they trade in the bond market at prices reflecting current interest rates.

73
Q

Mortgage bond

A

a bond issue secured by a mortgage on the issuers property.

74
Q

Multiple

A

a colloquial term for the price-earnings ratio of a company’s common shares.

75
Q

Mutual fund

A

an investment fund operated by a company that uses the proceeds from shares and units sold to investors to invest in stocks, bonds, derivatives and other financial securities.mutual funds offer investors the advantages of diversification and professional management and are sold on a load or no load basis.mutual fund shares/units are redeemable on demand at the funds current net I set value per share [NAVPS]

76
Q

Mutual fund dealers Association [MFDA]:

A

a recently established self regulatory organization that will monitor and regulate mutual fund dealers and sales people.

77
Q

Naked writer

A

a seller of an option contract who does not own an offsetting positions in the underlying security or a suitable alternative.the rules for establishing whether opposition is naked or uncovered are detailed in the CSI’s Canadian option course.

78
Q

National policies

A

the Canadian securities administrators have developed a number of policies that are applicable across Canada.these coordinated efforts by the CSA are an attempt to create a national securities regulatory framework. copies of policies are available from each provincial regulator

79
Q

National registration database [NRD]:

A

a web – based system that permits mutual fund salespersons and investment advisers to file applications for registration electronically.

80
Q

Natural unemployment rate

A

also called the full employment unemployment rate or the non-accelerating inflation rate of unemployment [NAIRU].at this level of unemployment, the economy is thought to be operating at close to its full potential or capacity.

81
Q

NASDAQ

A

an acronym for the national Association of securities dealers automated quotation system.NASDAQ is a computerized system that provides brokers and dealers with price quotations for securities traded OTC.

82
Q

Near banks

A

see country banks.

83
Q

Negative pledge provision

A

a protective provision written into the trust indenture of a companies debenture issue providing that no subsequent mortgage bond issue may be secured by all or part of the companies assets, unless at the same time the company’s the debentures are similarly secured.

84
Q

Negotiable

A

A certificate that is transferable by delivery and which, in the case of a registered certificate, has been duly endorsed and gauranteed.

85
Q

Negotiated offer

A

A term describing a particular type of financing in which the investment dealer negotiates with the corporation on the issuance of securities. The details would include the type of security to be issued, the price, coupon or dividend rate, special features and protective provisions.

86
Q

Net asset value

A

For a mutual fund, net asset value represents the market value of the fund’s share and is calculated as total assets of a corporation less its liabilities. Net asset value is typically calculated at the close of each trading day. Also referred to as the book value of a company’s different classes of securities.

87
Q

Net Change

A

The change in the price of a security from the closing price on one day to the closing price on the following trading day. In the case of a stock which is entitled to a dividend one day , but is trading ex-dividend the next, the dividend is not considered in computing the change. The same applies to stock splits. A stock selling at 100 the day before a two for one split and trading at 50 the next day at 50 would be considered unchanged.

88
Q

Net earnings

A

The part of a company’s profits remaining after all expenses and taxes have been paid and out of which dividends may be paid.

89
Q

Net Profit Margin

A

A profitability ratio that indicates how efficiently the company is managed after taking into account both expenses and taxes.

90
Q

New Account Application form

NAAF

A

A form that is filled out by the client and the AI at the opening of the account. It gives relevant information to make suitable investment recommendations. The NAAF must be completed and approved before any trades are put through on an account.

91
Q

New issue

A

An offering of stock or bonds sold by a company for the first time. Proceeds may be used to retire outstanding securities of the company, to purchase fixed assets or for additional working capital. New debt issues are also offered by government bodies.

92
Q

NEX

A

A new and seperate board of the TSX Venture Exchange that provides a trading forum for companies that have fallen below the venture exchange’s listing standards. Companies that hove low levels of busines activity or who do not carry on active business will trade on the NEX board, while companies that are actively carrying on business will remain with the main TSX venture exchange stock list.

93
Q

Nominal GDP

A

Gross domestic product based on prices prevailing in the same year not corrected for inflation. Also referred to as current dollar or chained dollar GDP

94
Q

Nominal Rate

A

The quoted or stated rate on an investment or a loan. This rate allows for comparissons but does not take into account the effects of inflation.

95
Q

No Par Value

n.p.v

A

Indicates a common stock has no stated face value

96
Q

Non-client and professional orders

A

A type of order for the account of partners, directors, officers, major share holders, IAs and employees of member firms that must be marked “PRO”, “N-C” or “Emp” in order to ensure that client ordes are given priority for the same securities.

97
Q

non-competitive tender

A

A method of distribution used in particular by the bank of Canada for government of canada bonds. Primary distributors are allowed to request bonds at the average price of the accepted competitive tenders. There is no guarantee as to the amount, if ant, received in response to this request.

98
Q

Non Cumulative

A

A ppreferred dividend that does not accrue or accumulate if unpaid.

99
Q

Non-trading employees

A

Employees of a securities firm who are not primarily engaged in slaes may occasionaly accept orders from the public. Such employees are designated as non-trading employees and may be exempt from registration by the administration.

100
Q

off-the-board

A

this term may refer to transactions over the counter in unlisted securities, or , in a specilal situation, to a transaction involving a block of listed shares which is not executed on a recognized stock exchange.

101
Q

offering memorandom

A

this document is prepared by the dealer involved in a new issue outlining some of the salient features of the new issue, but not the price or other issue specific details. it is used as a pre marketing tool in assesssing the market for the issueas well as for obtaining expressions of interest.

102
Q

Offering price

A

the price that an investor pays to purchase shares in a mutual fund. The offering price includes the charge or load that is levied when the purchase is made.

103
Q

Of record

A

On the company’s books or records. If, for example, a company announces that it will pay a dividend on january 15 to shareholders of record, every shareholder whose name appears on the company’s books on that date will be sent a dividend cheque from the company.

104
Q

Office of the superintendent of financial institutions

OSFI

A

The federal regulatory agency whose main resposibilities regarding insurance companies and segregated funds are to ensure the the companies issuing the funds are finacially solvent.

105
Q

Old age security

OAS

A

Agevernment pension plan payable at age 65 to all canadians citizens and legal residents

106
Q

Ombudsman for banking sevices and investments

OBSI

A

An independent organization that investigates customer complaints against finacial service providers.

107
Q

open market operations

A

method through which the bank of canada influences interest rates by trading securities with participants in the money market.

108
Q

opening transaction

A

an option transaction that is considered the initial or primary transaction. an opening transaction creates new rights for the buyer of an option , or new obligations for a seller. see also closing transaction.

109
Q

operating band

A

the bank of canda’s 50 basis point range for the overnight lending rate.

110
Q

operating cash flow ratio

A

a liquidity ratio that shows how well liabilities to be paid within one year are covered by the cash flow generated by the company’s operating activities.

111
Q

operating performance ratios

A

a type of ratio that illustrates how well management is making use of company resources.

112
Q

operating profit margin

A

a profitability ratio that is a stringint measure of a company’s ability to manage its resources effectively.

113
Q

option premium

A

the amount paid to enter onto an option contract, paid by the buyer tp the seller or writer of the contract.

114
Q

output gap

A

the difference between the actual level of output and the potential level of output when the economy is using all available resources of capital and labour.

115
Q

outstanding shares

A

the part of issued shares which remains outstanding in the hands of investors.

116
Q

out of the money

A

a call option is out of the money if the market price of the underlying security is below its strike price . a put option is out of the money if the market price of the underlying security is above the strike price.

117
Q

over allotment option

A

an activity used to stanbilize the after market price of a recently issued security. if the price increases above the offer price, dealers can cover their short position by exercising an over allotment option (also refered to as a green shoe option) by either increasing the demand in the case of covering a short position or increasing supply in the case of over allotment option exercise.

118
Q

over the counter

OTC

A

a market for securities made up for securities dealers who may or may not be members of a recognized stock exchange. Over the counter is mainly a market conducted over the telephone. Also called the unlisted , inter dealer or street market. nasdaq is an example of an over the counter market.

119
Q

overcontribution

A

an amount made in excess to the annual limit made to an rrsp. An over contribution in excess of 2000 is penelized at a rate of 1% per month.

120
Q

override

A

in an underwrighting, the additional payment the financial group receives over and above their original entitlement for their services as financial advisors and syndicate managers or leads.

121
Q

par value

A

the stated face value of a bond or stock (as assigned by the company;s charter) expressed as a dollar amount per share. par value of a common stock usually has little relationship to the current maket value and so no par value stock is now more common. par value of a preffered stock is significant as it indicates the dollar amount of assets each preferred share would be entitled to should the company be liquidated.

122
Q

pari passu

A

a legal term meaning that all securities within a series have equal rank or claim on earnings and assets. usually refers to equally ranking issues of a company;s preferred shares.

123
Q

participating feature

A

preferred shares which, in addition to their fixed rate of prior dividend, share with the common in further dividend distributions and in capital distributions above their par value in liquidation.

124
Q

participating organizations

A

firms who have access to the trading facilities within the canadian exchanges but who are not shareholders of the actual echange. also known as approved participants.

125
Q

partnership

A

a form of business organization that involves two or more peolple contributing to the business and legislated under the federal partnership act

126
Q

participation rate

A

the share of the working age population (15-65) that is in the labour market, either working or looking for work.

127
Q

past service pension adjusted

PSPA

A

an employer may increase a member’s pension by the granting of additional past service benefits to an employee in a defined benefit plan. plan members who incur a PSPA will have their RRSP contribution room reduced by the amount of this adjustment.

128
Q

payback period

A

the time that it takes for a convertible security to recoup its premium through its higher yield, compared with the dividend that is paid on the stock.

129
Q

Penny stocks

A

low priced speculative issues selling at less than 1$ a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment calibre issues.

130
Q

pension adjustment

PA

A

the amount of contributions made or the value of benefits accrued to a member of an employer sponsored retirement plan for a calender year. the PA enables the individual to determine the amount that may be contributed to an RRSP that would be in addition to contributions into a registered pension plan.

131
Q

performance bonds

A

what is often required upon entry into a futures contract giving the parties to a contract a higher level of assurance that the terms of the contract will eventually be honoured. The performance bond is often referred to as margin.

132
Q

perpetual bonds

A

a unique type of debt security that has no maturity date

133
Q

Phillips curve

A

a graph showing the relationship between inflation and unemployment. the theory states that unemployment can be reduced in the short run by increasing the price level (inflation) at a faster rate. Conversly, inflation can be lowered at the cost of possibly increased unemployment and slower economic growth.

134
Q

piggyback warrants

A

a second series of warrants aquired upon exercise of primary warrants sold as part of a unit.

135
Q
A

CSI glossary (5 decks)

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