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Glossary

Alpha
A measure of an investment's excess return compared to the return of a benchmark index.
Arbitrage
The simultaneous purchase and sale of an asset to profit from a difference in price.
Asset
Anything of value owned by an individual or corporation, such as stocks, bonds, or real estate.
Asset Allocation
The strategy of dividing a portfolio among different asset categories, such as stocks, bonds, and cash.
Accretion
The gradual increase in the value of an asset over time, often through compounding interest or the reduction of a discount.
Amortization
The process of gradually paying off a debt over time through regular payments.
Acquisition
The process of one company purchasing another to expand its operations or market reach.
Annualized Return
The geometric average amount of money earned by an investment each year over a given time period.
Arrears
Payments that are overdue and need to be made, often referring to interest or dividends.
Ask Price
The price at which a seller is willing to sell an asset or security.
Asset-Backed Security (ABS)
A financial security backed by a loan, lease, or receivables against assets other than real estate.
Beta
A measure of a stock’s volatility relative to the overall market.
Bond
A fixed income instrument representing a loan made by an investor to a borrower, typically corporate or governmental.
Buyout
The acquisition of a company or a controlling interest of a company’s shares.
Blue Chip
Shares of a well-established and financially sound company with a reliable record of profit.
Benchmark
A standard or index used as a reference for evaluating the performance of a portfolio or investment.
Bid Price
The price at which a buyer is willing to purchase an asset or security.
Bull Market
A market condition where prices are rising or are expected to rise, typically by 20% or more.
Bear Market
A market condition where prices are falling or are expected to fall, typically by 20% or more.
Book Value
The net value of a company's assets found on its balance sheet; calculated as total assets minus intangible assets and liabilities.
Basis Point
A unit of measure used in finance to describe percentage changes in interest rates, bond yields, or other financial percentages; one basis point is 0.01%.
Broker
An individual or firm that acts as an intermediary between buyers and sellers, usually for a commission.
Break-even Point
The point at which total revenue equals total costs, resulting in no net gain or loss.
Capital
Financial assets or resources that companies use to fund their operations and growth.
Capital Expenditure (CapEx)
Funds used by a company to acquire, upgrade, or maintain physical assets such as property or equipment.
Cash Flow
The net amount of cash being transferred in and out of a business, especially as it relates to operations, investing, and financing.
Collateral
An asset pledged by a borrower to secure a loan, which the lender can seize if the borrower defaults.
Convertible Bond
A bond that can be converted into a predetermined number of shares in the issuing company.
Cost of Capital
The cost for a company to raise funds through debt or equity, often used as a discount rate in valuations.
Coupon Rate
The annual interest rate paid on a bond, expressed as a percentage of the face value.
Covenant
A stipulation in a loan agreement that requires the borrower to fulfill certain conditions or restricts certain actions.
Credit Rating
An assessment of the creditworthiness of a borrower, typically assigned by a credit rating agency.
Credit Risk
The risk of loss due to a borrower's failure to make payments as promised.
Current Ratio
A liquidity ratio that measures a company’s ability to pay short-term obligations; calculated as current assets divided by current liabilities.
CAGR
Compound Annual Growth Rate; the rate of return required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested.
Debt
Money borrowed by one party from another, typically with an obligation to repay with interest.
Discounted Cash Flow (DCF)
A valuation method used to estimate the value of an investment based on its future cash flows.
Dividend
A portion of a company’s earnings distributed to shareholders, typically in the form of cash or additional shares.
Due Diligence
A comprehensive appraisal of a business, typically conducted before a financial transaction, to assess its assets, liabilities, and potential risks.
Derivatives
Financial instruments whose value is derived from the value of an underlying asset, such as futures, options, or swaps.
Debenture
A type of debt instrument that is not backed by physical collateral but by the general creditworthiness of the issuer.
Debt-to-Equity Ratio
A measure of a company's financial leverage, calculated by dividing total liabilities by shareholders' equity.
Depreciation
The process of allocating the cost of a tangible asset over its useful life, often used to reduce taxable income.
Default
The failure to meet the legal obligations of a loan, such as missing interest or principal payments.
Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
Discount Rate
The interest rate used to discount future cash flows in a DCF analysis, often representing the opportunity cost of capital.
Diversification
An investment strategy that spreads assets across different industries, sectors, or asset classes to reduce risk.
Equity
The value of ownership interest in a company, represented by shares in the company.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's operating performance.
EPS
Earnings Per Share; a company's profit divided by the outstanding shares of its common stock.
Exchange-Traded Fund (ETF)
A type of investment fund and exchange-traded product that holds assets like stocks, commodities, or bonds and trades on an exchange.
Enterprise Value (EV)
A measure of a company's total value, often used as a comprehensive alternative to market capitalization.
Efficient Market Hypothesis (EMH)
The theory that asset prices reflect all available information, implying that stocks always trade at their fair value.
Equity Financing
The process of raising capital through the sale of shares.
Expense Ratio
A measure of the cost to operate a mutual fund or ETF, expressed as a percentage of assets under management.
Ex-Dividend Date
The date on which a stock begins trading without the value of its next dividend payment.
Eurobond
A bond issued in a currency other than the currency of the country or market in which it is issued.
Earnings Yield
The ratio of earnings per share to the current market price per share, used as an alternative to the P/E ratio.
Emerging Markets
Nations with social or business activity in the process of rapid growth and industrialization, often offering high growth potential but with higher risk.
Fixed Income
A type of investment that provides regular, fixed payments, such as bonds.
Free Cash Flow (FCF)
Cash generated by a company after accounting for capital expenditures, which is available for distribution to shareholders.
Futures
Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
Fundamental Analysis
A method of evaluating a security by analyzing financial data, economic factors, and industry trends to estimate its intrinsic value.
Forex (Foreign Exchange)
The global marketplace for trading national currencies against one another.
Face Value
The nominal value of a bond or stock as stated by the issuer, also known as par value.
Fiscal Year
A 12-month period used by companies for accounting purposes, which may not coincide with the calendar year.
Forward Rate
The agreed-upon price for a future transaction, often used in currency or interest rate contracts.
Fund Manager
A professional responsible for implementing a fund's investment strategy and managing its portfolio trading activities.
Fintech
A blend of finance and technology, referring to companies that use technology to improve financial services.
Financial Leverage
The use of debt to increase the potential return of an investment, often adding to risk.
Floating Rate
An interest rate on a loan or bond that fluctuates over time with the market or index rate.
Gross Margin
The difference between revenue and the cost of goods sold, expressed as a percentage of revenue, indicating the profitability of a company’s core activities.
GDP
Gross Domestic Product; the total market value of all goods and services produced within a country during a specific period.
Guarantee
A commitment by one party (the guarantor) to cover the debt or financial obligation of another party in case of default.
Growth Stock
A stock from a company expected to grow at an above-average rate compared to other companies in the market.
Green Bond
A type of bond issued to fund projects that have positive environmental or climate benefits.
Government Bond
A debt security issued by a government, generally considered a low-risk investment.
Globalization
The process of increased interconnectedness and interdependence of global markets, businesses, and economies.
Gross Profit
The profit a company makes after deducting the costs associated with producing and selling its products or services.
Gearing Ratio
A financial ratio that compares a company's borrowed funds (debt) to its equity, indicating the level of financial risk.
Greeks
A set of risk measures used to assess the sensitivity of options and other derivatives to various factors, such as Delta, Gamma, Theta, Vega, and Rho.
Global Markets
The international financial markets where securities, currencies, commodities, and other assets are traded.
Hedge
An investment strategy used to offset potential losses in one position by taking an opposite position in a related asset.
Hedge Fund
A pooled investment fund that employs various strategies to earn active return for its investors, often using leverage, derivatives, and short-selling.
High-Yield Bond
A bond with a higher risk of default but offering a higher return, typically issued by companies with lower credit ratings.
Holding Period
The length of time an asset is held before being sold or liquidated.
Hurdle Rate
The minimum rate of return on an investment that a manager or company expects to achieve before starting a project or investment.
Hybrid Security
A financial instrument that combines characteristics of both debt and equity, such as convertible bonds or preferred stock.
High-Frequency Trading (HFT)
A type of algorithmic trading that uses powerful computers to transact a large number of orders at extremely high speeds.
Hedging
The practice of making an investment to reduce the risk of adverse price movements in an asset.
Holder of Record
A person or entity that is legally recognized as owning shares in a company on a particular date, often for purposes of dividends or voting.
Headline Risk
The risk that news events, whether related to a company, sector, or economy, may affect its stock price or financial performance.
Inflation
The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.
Interest Rate
The percentage at which interest is charged or paid on an amount of money, typically expressed annually.
Initial Public Offering (IPO)
The first sale of a company's shares to the public, allowing it to raise capital from public investors.
Insider Trading
The illegal practice of trading stocks or other securities based on confidential, non-public information about a company.
Investment Grade
A rating assigned to bonds that indicates a low risk of default, typically issued by companies with a strong credit rating.
Inflation-Linked Bond
A type of bond in which the principal and/or interest payments are adjusted for inflation, offering protection against rising prices.
Index Fund
A type of mutual fund or exchange-traded fund that seeks to replicate the performance of a specific index, such as the S&P 500.
Intrinsic Value
The perceived or calculated true value of an asset, based on an objective analysis of its fundamental factors.
Income Statement
A financial statement that shows a company’s revenues and expenses over a specific period, used to assess profitability.
Investment Portfolio
A collection of financial assets such as stocks, bonds, commodities, and real estate, held by an individual or institution.
Implied Volatility
The estimated volatility of an asset's price based on the market price of options on that asset, used in option pricing models.
Interest Coverage Ratio
A ratio used to determine how easily a company can pay interest on its outstanding debt, calculated by dividing EBIT by interest expenses.
J Curve
A graphical representation of a curve that shows the initial negative return followed by an improvement, often used to describe the impact of an investment or policy over time.
Junk Bond
A high-yield bond with a lower credit rating, which offers higher returns to compensate for the higher risk of default.
Joint Venture
A business arrangement where two or more parties agree to pool their resources for a specific task, often creating a new business entity.
Judgmental Risk
The type of risk based on subjective analysis or decisions, often when evaluating uncertain outcomes in investments or projects.
Just-in-Time (JIT)
An inventory management system where goods are produced or delivered only as needed to minimize waste and reduce holding costs.
Jobber
A term used for a market maker or trader who buys and sells securities for their own account in order to provide liquidity in the market.
Japanese Candlestick
A type of chart used in technical analysis that displays the open, high, low, and close prices of a security for a specific period.
KPI (Key Performance Indicator)
A measurable value that demonstrates how effectively a company is achieving key business objectives.
Kangaroo Bond
A bond issued by a non-Australian issuer in the Australian market, denominated in Australian dollars.
Kurtosis
A statistical measure used to describe the distribution of returns, indicating the presence of extreme outcomes or outliers in a dataset.
K-1 (Schedule K-1)
A tax document used to report income, deductions, and credits from partnerships, S corporations, and other pass-through entities to individual partners or shareholders.
Kicker
A provision in a bond, convertible security, or other financial instrument that allows the holder to receive additional benefits or bonuses, often linked to performance.
Leverage
The use of borrowed funds to increase the potential return on an investment, which also increases risk.
Liquidity
The ease with which an asset can be bought or sold in the market without affecting its price.
LBO (Leveraged Buyout)
A financial transaction in which a company is acquired using a significant amount of borrowed funds to meet the cost of acquisition.
Long Position
An investment position where an investor buys a security in the expectation that its price will rise.
LIBOR (London Interbank Offered Rate)
An interest rate benchmark used to set the rates on various financial products, reflecting the rate at which banks lend to each other.
LTM (Last Twelve Months)
A financial metric that includes data from the past 12 months, often used to assess a company's performance.
Loss Leader
A product sold at a loss to attract customers with the aim of generating additional profit from other goods or services.
Leverage Ratio
A financial ratio that measures the level of debt a company has relative to its equity or assets, often used to assess financial risk.
Liquidity Risk
The risk that an asset cannot be sold quickly enough in the market to prevent or minimize a loss.
Loan-to-Value Ratio (LTV)
A financial ratio used by lenders to assess the risk of a loan, calculated by dividing the loan amount by the appraised value of the asset.
Limited Partnership
A business structure where one or more partners have limited liability, while others may have unlimited liability.
Letter of Credit
A document issued by a bank guaranteeing payment to a seller on behalf of a buyer, ensuring the seller gets paid if the buyer defaults.
M&A (Mergers and Acquisitions)
A general term used to describe the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, and tender offers.
Market Capitalization
The total value of a company's outstanding shares of stock, calculated by multiplying the share price by the total number of shares.
Money Market
A sector of the financial market in which short-term borrowing and lending of funds takes place, typically involving high liquidity and low-risk instruments.
Margin
The difference between the cost of an investment and the amount borrowed to finance it; also refers to the required equity or collateral for trading.
Mutual Fund
A pooled investment fund that collects money from many investors to purchase securities such as stocks, bonds, or other assets.
Margin Call
A demand from a broker to an investor to deposit additional funds or securities to cover potential losses in a margin account.
Monetary Policy
The process by which a government or central bank controls the supply of money, often through interest rates and other tools to influence economic activity.
Mark-to-Market
An accounting method used to value assets and liabilities at their current market price rather than their book value.
Money Laundering
The illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear legitimate.
Market Maker
A firm or individual that buys and sells a security, maintaining an inventory to provide liquidity and facilitate trading in the market.
Municipal Bond
A debt security issued by a local government or its agencies, often offering tax-free income to investors.
Maturity Date
The date on which the principal amount of a debt instrument, such as a bond, is due to be repaid.
Net Asset Value (NAV)
The total value of a mutual fund's or exchange-traded fund's (ETF) assets, minus its liabilities, often used to determine the price of one share in the fund.
NDA (Non-Disclosure Agreement)
A legally binding contract that ensures one party will not disclose certain confidential information to others.
Narrow Market
A market characterized by low trading volume or few participants, which may result in less liquidity and higher volatility.
Non-Performing Asset (NPA)
An asset, typically a loan, that is in default or close to being in default, meaning the borrower is unable to make timely payments.
Negative Yield
A situation in which the return on an investment is negative, often due to falling interest rates or inflation surpassing the yield.
Nominal Value
The face value of a bond or stock, as opposed to its market value or book value.
Note
A debt instrument or bond with a maturity date of less than 10 years, often used by companies or governments to raise short-term capital.
Naked Option
An options position in which the seller does not hold the underlying asset, leaving them exposed to potentially unlimited losses.
Net Income
A company's total earnings, calculated by subtracting expenses, taxes, and costs from total revenue, often referred to as the 'bottom line.'
Non-Compete Clause
A contractual agreement that restricts one party from engaging in business activities that compete with another party's business.
Notional Amount
The total value of a derivative contract, such as a futures or swap contract, used to calculate payments, but not the actual amount exchanged.
NAV per Share
The per-share value of a mutual fund or ETF, calculated by dividing the fund's net asset value by the number of shares outstanding.
Option
A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price before a specified expiration date.
Open Market Operations (OMO)
The buying and selling of government securities in the open market by a central bank to regulate the money supply and interest rates.
Out-of-the-Money
A situation in which an option has no intrinsic value, meaning the strike price is not favorable compared to the market price of the underlying asset.
Over-the-Counter (OTC)
A method of trading financial instruments directly between two parties, rather than through an exchange, often for derivatives or bonds.
Operating Income
A company's profit derived from its core business operations, excluding any non-operating income or expenses such as taxes or interest.
Overvalued
A term used to describe an asset or stock whose current market price is higher than its intrinsic or perceived value.
Option Premium
The price paid for an options contract, which reflects the time value, volatility, and intrinsic value of the option.
Order Book
A real-time list of buy and sell orders for a specific security, often used to gauge market demand and supply.
Outperformance
When an asset, such as a stock or fund, performs better than a benchmark or comparison index over a specific period.
On-the-Run Securities
The most recently issued U.S. Treasury securities, which are generally more liquid and are used as benchmarks in the market.
Obligor
An entity that is legally obligated to repay a debt or perform a contractual obligation, such as the issuer of a bond.
Off-Balance-Sheet (OBS)
Assets or liabilities not listed on a company's balance sheet, often used to keep certain risks or investments out of the public view.
Private Equity
Investment in private companies or buyouts of public companies that result in their delisting from stock exchanges, often to restructure or improve operations.
Public Offering
The sale of securities by a company to the public, typically through an IPO (Initial Public Offering), allowing it to raise capital.
Portfolio
A collection of investments, such as stocks, bonds, and other financial assets, owned by an individual or institution.
P/E Ratio (Price-to-Earnings Ratio)
A valuation ratio calculated by dividing the market price per share by the earnings per share, used to assess the relative value of a company's stock.
Put Option
A financial contract that gives the holder the right, but not the obligation, to sell an underlying asset at a predetermined price before a specified expiration date.
Private Placement
The sale of securities to a select group of investors, rather than through a public offering, often used by smaller companies to raise capital.
Payout Ratio
The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage of earnings.
Primary Market
The market where new securities are issued and sold to investors, as opposed to the secondary market where existing securities are traded.
Performance Fee
A fee paid to a fund manager or investment firm based on the fund's investment performance, typically a percentage of profits earned over a benchmark.
Primary Dealer
A firm or financial institution that is authorized to trade directly with a central bank and often participates in government bond auctions.
Price Discovery
The process by which the price of an asset is determined through the interactions of buyers and sellers in the market.
Prospectus
A legal document issued by a company offering securities, which provides detailed information about the investment, including risks and financials.
Prime Rate
The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for other lending rates.
Quantitative Easing (QE)
A non-traditional monetary policy used by central banks to stimulate the economy by purchasing government securities or other assets to increase the money supply.
Quality Spread
The difference in yield between bonds of different credit ratings, such as the spread between investment-grade and junk bonds.
Quasi-Governmental Agency
A government-sponsored entity that operates in the private sector but is backed by government support, such as Fannie Mae or Freddie Mac.
Quantitative Analysis
The use of mathematical models and statistical techniques to analyze financial markets, assess investment opportunities, and make trading decisions.
Quick Ratio
A financial metric used to measure a company’s ability to meet its short-term obligations using its most liquid assets, also known as the acid-test ratio.
Qualified Institutional Buyer (QIB)
An institutional investor that meets specific criteria under U.S. securities laws and is eligible to purchase securities in private placements.
Qualified Dividend
A dividend paid by a U.S. corporation or a qualified foreign corporation that is eligible for favorable tax treatment.
Quota
A limit or cap on the amount of a particular asset, commodity, or investment that can be imported, exported, or sold within a particular period.
Return on Investment (ROI)
A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit by the initial investment cost.
Risk
The possibility of losing some or all of an investment, or the chance that an investment's actual return will differ from its expected return.
Reverse Stock Split
A corporate action in which a company reduces the number of its outstanding shares while increasing the share price proportionally, without affecting the overall value for shareholders.
Reinvestment Risk
The risk that cash flows from an investment will be reinvested at a lower rate than the original investment’s return.
Repo (Repurchase Agreement)
A short-term borrowing agreement in which one party sells securities to another party with the agreement to repurchase them at a later date at a slightly higher price.
Risk-Adjusted Return
A measure used to evaluate the return of an investment by adjusting for its risk, often using metrics like the Sharpe ratio or the Sortino ratio.
Retained Earnings
The portion of a company's profits that is kept or retained in the business, rather than being paid out as dividends to shareholders.
Robo-Advisor
An automated platform that provides financial planning and investment management services using algorithms and artificial intelligence.
Redemption
The repayment or buyback of a bond or mutual fund share, either at maturity or before, usually at the investor’s request.
Risk Premium
The extra return an investor expects to receive from an investment that is considered riskier than a risk-free asset, such as a government bond.
Recession
A period of significant decline in economic activity, typically defined as two consecutive quarters of negative GDP growth.
Rights Offering
A method used by companies to raise capital by offering existing shareholders the right to purchase additional shares at a discounted price.
Return on Equity (ROE)
A financial ratio that measures a company’s ability to generate profit from its shareholders' equity, calculated by dividing net income by shareholder equity.
Short Selling
The practice of selling securities that the seller does not own, typically by borrowing them, with the intention of buying them back at a lower price.
Structured Product
A pre-packaged investment strategy based on derivatives, typically offering customized risk and return profiles to investors.
Swap
A derivative contract in which two parties agree to exchange cash flows or financial instruments over a specific period, often used to hedge risks or speculate.
Spread
The difference between the buying and selling price of a security, or the difference in yields between two financial instruments, such as bonds or interest rates.
Syndicated Loan
A loan provided by a group of lenders (syndicate) to a single borrower, often used by large companies or governments to raise significant capital.
S&P 500
An index of 500 large publicly traded companies in the U.S., used as a benchmark for the overall performance of the U.S. stock market.
Secured Debt
A loan or bond that is backed by collateral to reduce the risk for lenders, who can seize the collateral if the borrower defaults.
Stock Split
A corporate action in which a company issues additional shares to shareholders, increasing the number of outstanding shares while maintaining the overall value.
Spread Trading
A strategy involving the simultaneous purchase and sale of two related financial instruments to profit from changes in their price difference or spread.
Subordinated Debt
Debt that ranks below other debts in terms of claims on assets in the event of liquidation, usually offering higher yields due to the increased risk.
Securitization
The process of converting an illiquid asset, such as a loan or mortgage, into a tradable security by pooling it with other similar assets and issuing bonds backed by the pool.
Swing Trading
A trading strategy that attempts to capture gains in a stock or other asset over a period of a few days to several weeks, based on short-term price movements.
Systematic Risk
The risk inherent to the entire market or market segment, which cannot be eliminated through diversification, often influenced by factors like economic conditions or political events.
Trading Volume
The total number of shares or contracts traded for a particular security or market during a given period.
Treasury Bonds
Long-term debt securities issued by the U.S. government with maturities of 10 years or more, considered low-risk investments.
Tangible Assets
Physical assets such as real estate, machinery, or inventory, which can be valued and used to secure loans.
Technical Analysis
A method of evaluating securities by analyzing statistical trends from trading activity, such as price movement and volume, rather than fundamental factors.
Tax Shield
A reduction in taxable income achieved through allowable deductions such as interest payments or depreciation, which lowers a company's tax liability.
Treasury Bills (T-Bills)
Short-term debt securities issued by the U.S. government with maturities of one year or less, usually sold at a discount to face value.
Term Structure of Interest Rates
The relationship between interest rates (or bond yields) and different maturities of debt securities, often represented by a yield curve.
Total Return
The overall return on an investment, including both capital gains and income (such as dividends or interest), expressed as a percentage of the initial investment.
Takeover
The acquisition of one company by another, either through a purchase of shares or assets, often resulting in a change of control.
Trailing Stop
A stop-loss order that moves with the market price to lock in profits, where the stop price is adjusted as the price of the asset moves in favor of the investor.
Total Debt-to-Equity Ratio
A financial ratio that compares a company's total debt to its shareholders' equity, used to assess the company’s financial leverage and risk.
Tactical Asset Allocation
A strategy that actively adjusts the allocation of assets in a portfolio to capitalize on market opportunities and changes in economic conditions.
Underwriting
The process in which an underwriter evaluates and assumes the risk of a financial transaction, such as issuing new securities or providing loans.
Unsecured Debt
Debt that is not backed by collateral, meaning the lender has no claim to specific assets if the borrower defaults.
Use of Proceeds
A description in a prospectus or offering document detailing how a company intends to use the capital raised from an offering, such as for expansion or debt repayment.
Upfront Fee
A fee paid at the beginning of a transaction, such as in a loan agreement or underwriting process, before the transaction is completed.
Unit Investment Trust (UIT)
A type of investment fund that holds a fixed portfolio of securities and offers shares to investors, with the intention of holding the investments until maturity.
Unrealized Gain
A gain on an investment that has occurred, but the investment has not yet been sold, so the gain is not yet realized or taxable.
Usury
The illegal practice of charging an interest rate on a loan that exceeds the maximum rate allowed by law.
Uniform Securities Act
A model state law in the U.S. that provides a uniform set of standards for securities regulation across states, aimed at protecting investors.
Underlying Asset
The financial asset or instrument (e.g., stock, bond, commodity) that is the subject of a derivative contract, such as options or futures.
Utilization Rate
The percentage of a company’s available credit that is being used, often measured to assess financial health or risk.
Upward Repricing
The act of increasing the price of a security or asset, often done in response to rising market demand or changes in interest rates.
Volatility
A measure of the variation in the price of a financial instrument over time, indicating the level of risk or uncertainty in the market.
Value at Risk (VaR)
A risk management tool used to estimate the potential loss in value of a portfolio over a specified time period, given a certain confidence level.
Venture Capital
A type of private equity investment focused on funding early-stage, high-growth companies with significant potential for capital appreciation.
VIX (Volatility Index)
A popular measure of market volatility, derived from the implied volatility of options on the S&P 500 index, often referred to as the 'fear index'.
Voting Rights
The rights granted to shareholders of a company, allowing them to vote on certain corporate decisions, such as electing the board of directors.
Vertical Integration
A strategy where a company expands its operations into different stages of production, often by acquiring suppliers or distributors to control more of its value chain.
Venture Debt
A form of debt financing provided to early-stage, high-growth companies, typically in the form of loans or convertible debt, that may include warrants or options.
Volatility Index (VIX)
A measure of market expectations for volatility, calculated from the prices of S&P 500 index options, used as a gauge for market sentiment.
Value Investing
An investment strategy that involves buying undervalued stocks or assets, based on fundamental analysis, with the expectation that the market will eventually recognize their true value.
Venture Capitalist (VC)
An investor who provides capital to early-stage, high-potential companies in exchange for equity or ownership stake, often with a focus on rapid growth and high returns.
Valuation
The process of determining the current worth of an asset or company, often using methods such as discounted cash flow (DCF), market comparables, or precedent transactions.
Volatility Smile
A pattern in which implied volatility is higher for options that are deep in-the-money or out-of-the-money compared to at-the-money options, often seen in options markets.
Wholly Owned Subsidiary
A company whose entire stock is owned by another company, allowing the parent company full control over the subsidiary’s operations.
Warrant
A financial instrument that gives the holder the right, but not the obligation, to buy a security, usually stock, at a specific price before a specified expiration date.
Working Capital
A measure of a company's short-term financial health, calculated by subtracting current liabilities from current assets, indicating the available funds for day-to-day operations.
Weighted Average Cost of Capital (WACC)
A calculation used to determine a company's cost of capital, weighted by the proportion of debt and equity in the capital structure.
Withholding Tax
A tax deducted at source from income or dividends, paid to the government by the payer rather than the recipient.
Write-Off
The formal recognition that an asset no longer has value or is uncollectible, such as in the case of bad debt or inventory that cannot be sold.
WACC (Weighted Average Cost of Capital)
The average rate of return a company is expected to pay to finance its assets, calculated based on the weighted average of its equity and debt costs.
Window Dressing
The practice of making a portfolio appear more attractive by selling underperforming securities and buying high-performing ones at the end of a reporting period.
White Knight
A company or individual that acquires a target company in distress, often to prevent a hostile takeover by another party.
Working Capital Ratio
A liquidity ratio that measures a company's ability to cover its short-term obligations, calculated by dividing current assets by current liabilities.
X-IRR (Extended Internal Rate of Return)
A financial metric used to measure the annualized rate of return on a series of cash flows occurring at irregular intervals, often used in private equity or venture capital investments.
Xenocurrency
A currency that is used or traded outside its home country, often in international markets, such as the U.S. dollar or euro being used in countries other than their home regions.
X-Value
A reference to an unknown or variable value in a financial model, often used in the context of optimization or financial analysis.
Yield
The income generated from an investment, typically expressed as a percentage of the investment’s cost or current market value, including interest or dividends.
Yield Curve
A graph that shows the relationship between interest rates and the maturity dates of debt securities, typically government bonds, and is used to gauge the economic outlook.
YTM (Yield to Maturity)
The total return an investor can expect to earn if a bond is held until it matures, considering both interest payments and any capital gain or loss.
Yields to Call
The yield on a callable bond if it is redeemed by the issuer before its maturity date, which could occur if interest rates fall.
Year-End Adjustments
Changes made to a company's financials or accounting records at the end of the year, such as adjusting for depreciation, accruals, or estimates to reflect the true financial position.
Yellow Bond
A type of bond issued by an entity for environmental or green purposes, typically used to finance projects related to sustainability or climate change.
Zero-Coupon Bond
A debt security that does not pay periodic interest but is issued at a deep discount to its face value, with the full value paid at maturity.
Z-Score
A financial metric used to predict the likelihood of a company going bankrupt, based on several financial ratios and statistical analysis.
Zero-Base Budgeting
A budgeting method in which all expenses must be justified for each new period, starting from a 'zero base,' rather than adjusting previous budgets.
Zombie Company
A company that continues to operate but is financially insolvent or struggling, often relying on debt refinancing or government support to survive.
Zero Beta Portfolio
A portfolio of assets that has no correlation with the overall market, meaning its returns are independent of market movements.

Glossary

Alpha
A measure of an investment's excess return compared to the return of a benchmark index.
Arbitrage
The simultaneous purchase and sale of an asset to profit from a difference in price.
Asset
Anything of value owned by an individual or corporation, such as stocks, bonds, or real estate.
Asset Allocation
The strategy of dividing a portfolio among different asset categories, such as stocks, bonds, and cash.
Accretion
The gradual increase in the value of an asset over time, often through compounding interest or the reduction of a discount.
Amortization
The process of gradually paying off a debt over time through regular payments.
Acquisition
The process of one company purchasing another to expand its operations or market reach.
Annualized Return
The geometric average amount of money earned by an investment each year over a given time period.
Arrears
Payments that are overdue and need to be made, often referring to interest or dividends.
Ask Price
The price at which a seller is willing to sell an asset or security.
Asset-Backed Security (ABS)
A financial security backed by a loan, lease, or receivables against assets other than real estate.
Beta
A measure of a stock’s volatility relative to the overall market.
Bond
A fixed income instrument representing a loan made by an investor to a borrower, typically corporate or governmental.
Buyout
The acquisition of a company or a controlling interest of a company’s shares.
Blue Chip
Shares of a well-established and financially sound company with a reliable record of profit.
Benchmark
A standard or index used as a reference for evaluating the performance of a portfolio or investment.
Bid Price
The price at which a buyer is willing to purchase an asset or security.
Bull Market
A market condition where prices are rising or are expected to rise, typically by 20% or more.
Bear Market
A market condition where prices are falling or are expected to fall, typically by 20% or more.
Book Value
The net value of a company's assets found on its balance sheet; calculated as total assets minus intangible assets and liabilities.
Basis Point
A unit of measure used in finance to describe percentage changes in interest rates, bond yields, or other financial percentages; one basis point is 0.01%.
Broker
An individual or firm that acts as an intermediary between buyers and sellers, usually for a commission.
Break-even Point
The point at which total revenue equals total costs, resulting in no net gain or loss.
Capital
Financial assets or resources that companies use to fund their operations and growth.
Capital Expenditure (CapEx)
Funds used by a company to acquire, upgrade, or maintain physical assets such as property or equipment.
Cash Flow
The net amount of cash being transferred in and out of a business, especially as it relates to operations, investing, and financing.
Collateral
An asset pledged by a borrower to secure a loan, which the lender can seize if the borrower defaults.
Convertible Bond
A bond that can be converted into a predetermined number of shares in the issuing company.
Cost of Capital
The cost for a company to raise funds through debt or equity, often used as a discount rate in valuations.
Coupon Rate
The annual interest rate paid on a bond, expressed as a percentage of the face value.
Covenant
A stipulation in a loan agreement that requires the borrower to fulfill certain conditions or restricts certain actions.
Credit Rating
An assessment of the creditworthiness of a borrower, typically assigned by a credit rating agency.
Credit Risk
The risk of loss due to a borrower's failure to make payments as promised.
Current Ratio
A liquidity ratio that measures a company’s ability to pay short-term obligations; calculated as current assets divided by current liabilities.
CAGR
Compound Annual Growth Rate; the rate of return required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested.
Debt
Money borrowed by one party from another, typically with an obligation to repay with interest.
Discounted Cash Flow (DCF)
A valuation method used to estimate the value of an investment based on its future cash flows.
Dividend
A portion of a company’s earnings distributed to shareholders, typically in the form of cash or additional shares.
Due Diligence
A comprehensive appraisal of a business, typically conducted before a financial transaction, to assess its assets, liabilities, and potential risks.
Derivatives
Financial instruments whose value is derived from the value of an underlying asset, such as futures, options, or swaps.
Debenture
A type of debt instrument that is not backed by physical collateral but by the general creditworthiness of the issuer.
Debt-to-Equity Ratio
A measure of a company's financial leverage, calculated by dividing total liabilities by shareholders' equity.
Depreciation
The process of allocating the cost of a tangible asset over its useful life, often used to reduce taxable income.
Default
The failure to meet the legal obligations of a loan, such as missing interest or principal payments.
Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
Discount Rate
The interest rate used to discount future cash flows in a DCF analysis, often representing the opportunity cost of capital.
Diversification
An investment strategy that spreads assets across different industries, sectors, or asset classes to reduce risk.
Equity
The value of ownership interest in a company, represented by shares in the company.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's operating performance.
EPS
Earnings Per Share; a company's profit divided by the outstanding shares of its common stock.
Exchange-Traded Fund (ETF)
A type of investment fund and exchange-traded product that holds assets like stocks, commodities, or bonds and trades on an exchange.
Enterprise Value (EV)
A measure of a company's total value, often used as a comprehensive alternative to market capitalization.
Efficient Market Hypothesis (EMH)
The theory that asset prices reflect all available information, implying that stocks always trade at their fair value.
Equity Financing
The process of raising capital through the sale of shares.
Expense Ratio
A measure of the cost to operate a mutual fund or ETF, expressed as a percentage of assets under management.
Ex-Dividend Date
The date on which a stock begins trading without the value of its next dividend payment.
Eurobond
A bond issued in a currency other than the currency of the country or market in which it is issued.
Earnings Yield
The ratio of earnings per share to the current market price per share, used as an alternative to the P/E ratio.
Emerging Markets
Nations with social or business activity in the process of rapid growth and industrialization, often offering high growth potential but with higher risk.
Fixed Income
A type of investment that provides regular, fixed payments, such as bonds.
Free Cash Flow (FCF)
Cash generated by a company after accounting for capital expenditures, which is available for distribution to shareholders.
Futures
Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
Fundamental Analysis
A method of evaluating a security by analyzing financial data, economic factors, and industry trends to estimate its intrinsic value.
Forex (Foreign Exchange)
The global marketplace for trading national currencies against one another.
Face Value
The nominal value of a bond or stock as stated by the issuer, also known as par value.
Fiscal Year
A 12-month period used by companies for accounting purposes, which may not coincide with the calendar year.
Forward Rate
The agreed-upon price for a future transaction, often used in currency or interest rate contracts.
Fund Manager
A professional responsible for implementing a fund's investment strategy and managing its portfolio trading activities.
Fintech
A blend of finance and technology, referring to companies that use technology to improve financial services.
Financial Leverage
The use of debt to increase the potential return of an investment, often adding to risk.
Floating Rate
An interest rate on a loan or bond that fluctuates over time with the market or index rate.
Gross Margin
The difference between revenue and the cost of goods sold, expressed as a percentage of revenue, indicating the profitability of a company’s core activities.
GDP
Gross Domestic Product; the total market value of all goods and services produced within a country during a specific period.
Guarantee
A commitment by one party (the guarantor) to cover the debt or financial obligation of another party in case of default.
Growth Stock
A stock from a company expected to grow at an above-average rate compared to other companies in the market.
Green Bond
A type of bond issued to fund projects that have positive environmental or climate benefits.
Government Bond
A debt security issued by a government, generally considered a low-risk investment.
Globalization
The process of increased interconnectedness and interdependence of global markets, businesses, and economies.
Gross Profit
The profit a company makes after deducting the costs associated with producing and selling its products or services.
Gearing Ratio
A financial ratio that compares a company's borrowed funds (debt) to its equity, indicating the level of financial risk.
Greeks
A set of risk measures used to assess the sensitivity of options and other derivatives to various factors, such as Delta, Gamma, Theta, Vega, and Rho.
Global Markets
The international financial markets where securities, currencies, commodities, and other assets are traded.
Hedge
An investment strategy used to offset potential losses in one position by taking an opposite position in a related asset.
Hedge Fund
A pooled investment fund that employs various strategies to earn active return for its investors, often using leverage, derivatives, and short-selling.
High-Yield Bond
A bond with a higher risk of default but offering a higher return, typically issued by companies with lower credit ratings.
Holding Period
The length of time an asset is held before being sold or liquidated.
Hurdle Rate
The minimum rate of return on an investment that a manager or company expects to achieve before starting a project or investment.
Hybrid Security
A financial instrument that combines characteristics of both debt and equity, such as convertible bonds or preferred stock.
High-Frequency Trading (HFT)
A type of algorithmic trading that uses powerful computers to transact a large number of orders at extremely high speeds.
Hedging
The practice of making an investment to reduce the risk of adverse price movements in an asset.
Holder of Record
A person or entity that is legally recognized as owning shares in a company on a particular date, often for purposes of dividends or voting.
Headline Risk
The risk that news events, whether related to a company, sector, or economy, may affect its stock price or financial performance.
Inflation
The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.
Interest Rate
The percentage at which interest is charged or paid on an amount of money, typically expressed annually.
Initial Public Offering (IPO)
The first sale of a company's shares to the public, allowing it to raise capital from public investors.
Insider Trading
The illegal practice of trading stocks or other securities based on confidential, non-public information about a company.
Investment Grade
A rating assigned to bonds that indicates a low risk of default, typically issued by companies with a strong credit rating.
Inflation-Linked Bond
A type of bond in which the principal and/or interest payments are adjusted for inflation, offering protection against rising prices.
Index Fund
A type of mutual fund or exchange-traded fund that seeks to replicate the performance of a specific index, such as the S&P 500.
Intrinsic Value
The perceived or calculated true value of an asset, based on an objective analysis of its fundamental factors.
Income Statement
A financial statement that shows a company’s revenues and expenses over a specific period, used to assess profitability.
Investment Portfolio
A collection of financial assets such as stocks, bonds, commodities, and real estate, held by an individual or institution.
Implied Volatility
The estimated volatility of an asset's price based on the market price of options on that asset, used in option pricing models.
Interest Coverage Ratio
A ratio used to determine how easily a company can pay interest on its outstanding debt, calculated by dividing EBIT by interest expenses.
J Curve
A graphical representation of a curve that shows the initial negative return followed by an improvement, often used to describe the impact of an investment or policy over time.
Junk Bond
A high-yield bond with a lower credit rating, which offers higher returns to compensate for the higher risk of default.
Joint Venture
A business arrangement where two or more parties agree to pool their resources for a specific task, often creating a new business entity.
Judgmental Risk
The type of risk based on subjective analysis or decisions, often when evaluating uncertain outcomes in investments or projects.
Just-in-Time (JIT)
An inventory management system where goods are produced or delivered only as needed to minimize waste and reduce holding costs.
Jobber
A term used for a market maker or trader who buys and sells securities for their own account in order to provide liquidity in the market.
Japanese Candlestick
A type of chart used in technical analysis that displays the open, high, low, and close prices of a security for a specific period.
KPI (Key Performance Indicator)
A measurable value that demonstrates how effectively a company is achieving key business objectives.
Kangaroo Bond
A bond issued by a non-Australian issuer in the Australian market, denominated in Australian dollars.
Kurtosis
A statistical measure used to describe the distribution of returns, indicating the presence of extreme outcomes or outliers in a dataset.
K-1 (Schedule K-1)
A tax document used to report income, deductions, and credits from partnerships, S corporations, and other pass-through entities to individual partners or shareholders.
Kicker
A provision in a bond, convertible security, or other financial instrument that allows the holder to receive additional benefits or bonuses, often linked to performance.
Leverage
The use of borrowed funds to increase the potential return on an investment, which also increases risk.
Liquidity
The ease with which an asset can be bought or sold in the market without affecting its price.
LBO (Leveraged Buyout)
A financial transaction in which a company is acquired using a significant amount of borrowed funds to meet the cost of acquisition.
Long Position
An investment position where an investor buys a security in the expectation that its price will rise.
LIBOR (London Interbank Offered Rate)
An interest rate benchmark used to set the rates on various financial products, reflecting the rate at which banks lend to each other.
LTM (Last Twelve Months)
A financial metric that includes data from the past 12 months, often used to assess a company's performance.
Loss Leader
A product sold at a loss to attract customers with the aim of generating additional profit from other goods or services.
Leverage Ratio
A financial ratio that measures the level of debt a company has relative to its equity or assets, often used to assess financial risk.
Liquidity Risk
The risk that an asset cannot be sold quickly enough in the market to prevent or minimize a loss.
Loan-to-Value Ratio (LTV)
A financial ratio used by lenders to assess the risk of a loan, calculated by dividing the loan amount by the appraised value of the asset.
Limited Partnership
A business structure where one or more partners have limited liability, while others may have unlimited liability.
Letter of Credit
A document issued by a bank guaranteeing payment to a seller on behalf of a buyer, ensuring the seller gets paid if the buyer defaults.
M&A (Mergers and Acquisitions)
A general term used to describe the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, and tender offers.
Market Capitalization
The total value of a company's outstanding shares of stock, calculated by multiplying the share price by the total number of shares.
Money Market
A sector of the financial market in which short-term borrowing and lending of funds takes place, typically involving high liquidity and low-risk instruments.
Margin
The difference between the cost of an investment and the amount borrowed to finance it; also refers to the required equity or collateral for trading.
Mutual Fund
A pooled investment fund that collects money from many investors to purchase securities such as stocks, bonds, or other assets.
Margin Call
A demand from a broker to an investor to deposit additional funds or securities to cover potential losses in a margin account.
Monetary Policy
The process by which a government or central bank controls the supply of money, often through interest rates and other tools to influence economic activity.
Mark-to-Market
An accounting method used to value assets and liabilities at their current market price rather than their book value.
Money Laundering
The illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear legitimate.
Market Maker
A firm or individual that buys and sells a security, maintaining an inventory to provide liquidity and facilitate trading in the market.
Municipal Bond
A debt security issued by a local government or its agencies, often offering tax-free income to investors.
Maturity Date
The date on which the principal amount of a debt instrument, such as a bond, is due to be repaid.
Net Asset Value (NAV)
The total value of a mutual fund's or exchange-traded fund's (ETF) assets, minus its liabilities, often used to determine the price of one share in the fund.
NDA (Non-Disclosure Agreement)
A legally binding contract that ensures one party will not disclose certain confidential information to others.
Narrow Market
A market characterized by low trading volume or few participants, which may result in less liquidity and higher volatility.
Non-Performing Asset (NPA)
An asset, typically a loan, that is in default or close to being in default, meaning the borrower is unable to make timely payments.
Negative Yield
A situation in which the return on an investment is negative, often due to falling interest rates or inflation surpassing the yield.
Nominal Value
The face value of a bond or stock, as opposed to its market value or book value.
Note
A debt instrument or bond with a maturity date of less than 10 years, often used by companies or governments to raise short-term capital.
Naked Option
An options position in which the seller does not hold the underlying asset, leaving them exposed to potentially unlimited losses.
Net Income
A company's total earnings, calculated by subtracting expenses, taxes, and costs from total revenue, often referred to as the 'bottom line.'
Non-Compete Clause
A contractual agreement that restricts one party from engaging in business activities that compete with another party's business.
Notional Amount
The total value of a derivative contract, such as a futures or swap contract, used to calculate payments, but not the actual amount exchanged.
NAV per Share
The per-share value of a mutual fund or ETF, calculated by dividing the fund's net asset value by the number of shares outstanding.
Option
A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price before a specified expiration date.
Open Market Operations (OMO)
The buying and selling of government securities in the open market by a central bank to regulate the money supply and interest rates.
Out-of-the-Money
A situation in which an option has no intrinsic value, meaning the strike price is not favorable compared to the market price of the underlying asset.
Over-the-Counter (OTC)
A method of trading financial instruments directly between two parties, rather than through an exchange, often for derivatives or bonds.
Operating Income
A company's profit derived from its core business operations, excluding any non-operating income or expenses such as taxes or interest.
Overvalued
A term used to describe an asset or stock whose current market price is higher than its intrinsic or perceived value.
Option Premium
The price paid for an options contract, which reflects the time value, volatility, and intrinsic value of the option.
Order Book
A real-time list of buy and sell orders for a specific security, often used to gauge market demand and supply.
Outperformance
When an asset, such as a stock or fund, performs better than a benchmark or comparison index over a specific period.
On-the-Run Securities
The most recently issued U.S. Treasury securities, which are generally more liquid and are used as benchmarks in the market.
Obligor
An entity that is legally obligated to repay a debt or perform a contractual obligation, such as the issuer of a bond.
Off-Balance-Sheet (OBS)
Assets or liabilities not listed on a company's balance sheet, often used to keep certain risks or investments out of the public view.
Private Equity
Investment in private companies or buyouts of public companies that result in their delisting from stock exchanges, often to restructure or improve operations.
Public Offering
The sale of securities by a company to the public, typically through an IPO (Initial Public Offering), allowing it to raise capital.
Portfolio
A collection of investments, such as stocks, bonds, and other financial assets, owned by an individual or institution.
P/E Ratio (Price-to-Earnings Ratio)
A valuation ratio calculated by dividing the market price per share by the earnings per share, used to assess the relative value of a company's stock.
Put Option
A financial contract that gives the holder the right, but not the obligation, to sell an underlying asset at a predetermined price before a specified expiration date.
Private Placement
The sale of securities to a select group of investors, rather than through a public offering, often used by smaller companies to raise capital.
Payout Ratio
The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage of earnings.
Primary Market
The market where new securities are issued and sold to investors, as opposed to the secondary market where existing securities are traded.
Performance Fee
A fee paid to a fund manager or investment firm based on the fund's investment performance, typically a percentage of profits earned over a benchmark.
Primary Dealer
A firm or financial institution that is authorized to trade directly with a central bank and often participates in government bond auctions.
Price Discovery
The process by which the price of an asset is determined through the interactions of buyers and sellers in the market.
Prospectus
A legal document issued by a company offering securities, which provides detailed information about the investment, including risks and financials.
Prime Rate
The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for other lending rates.
Quantitative Easing (QE)
A non-traditional monetary policy used by central banks to stimulate the economy by purchasing government securities or other assets to increase the money supply.
Quality Spread
The difference in yield between bonds of different credit ratings, such as the spread between investment-grade and junk bonds.
Quasi-Governmental Agency
A government-sponsored entity that operates in the private sector but is backed by government support, such as Fannie Mae or Freddie Mac.
Quantitative Analysis
The use of mathematical models and statistical techniques to analyze financial markets, assess investment opportunities, and make trading decisions.
Quick Ratio
A financial metric used to measure a company’s ability to meet its short-term obligations using its most liquid assets, also known as the acid-test ratio.
Qualified Institutional Buyer (QIB)
An institutional investor that meets specific criteria under U.S. securities laws and is eligible to purchase securities in private placements.
Qualified Dividend
A dividend paid by a U.S. corporation or a qualified foreign corporation that is eligible for favorable tax treatment.
Quota
A limit or cap on the amount of a particular asset, commodity, or investment that can be imported, exported, or sold within a particular period.
Return on Investment (ROI)
A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit by the initial investment cost.
Risk
The possibility of losing some or all of an investment, or the chance that an investment's actual return will differ from its expected return.
Reverse Stock Split
A corporate action in which a company reduces the number of its outstanding shares while increasing the share price proportionally, without affecting the overall value for shareholders.
Reinvestment Risk
The risk that cash flows from an investment will be reinvested at a lower rate than the original investment’s return.
Repo (Repurchase Agreement)
A short-term borrowing agreement in which one party sells securities to another party with the agreement to repurchase them at a later date at a slightly higher price.
Risk-Adjusted Return
A measure used to evaluate the return of an investment by adjusting for its risk, often using metrics like the Sharpe ratio or the Sortino ratio.
Retained Earnings
The portion of a company's profits that is kept or retained in the business, rather than being paid out as dividends to shareholders.
Robo-Advisor
An automated platform that provides financial planning and investment management services using algorithms and artificial intelligence.
Redemption
The repayment or buyback of a bond or mutual fund share, either at maturity or before, usually at the investor’s request.
Risk Premium
The extra return an investor expects to receive from an investment that is considered riskier than a risk-free asset, such as a government bond.
Recession
A period of significant decline in economic activity, typically defined as two consecutive quarters of negative GDP growth.
Rights Offering
A method used by companies to raise capital by offering existing shareholders the right to purchase additional shares at a discounted price.
Return on Equity (ROE)
A financial ratio that measures a company’s ability to generate profit from its shareholders' equity, calculated by dividing net income by shareholder equity.
Short Selling
The practice of selling securities that the seller does not own, typically by borrowing them, with the intention of buying them back at a lower price.
Structured Product
A pre-packaged investment strategy based on derivatives, typically offering customized risk and return profiles to investors.
Swap
A derivative contract in which two parties agree to exchange cash flows or financial instruments over a specific period, often used to hedge risks or speculate.
Spread
The difference between the buying and selling price of a security, or the difference in yields between two financial instruments, such as bonds or interest rates.
Syndicated Loan
A loan provided by a group of lenders (syndicate) to a single borrower, often used by large companies or governments to raise significant capital.
S&P 500
An index of 500 large publicly traded companies in the U.S., used as a benchmark for the overall performance of the U.S. stock market.
Secured Debt
A loan or bond that is backed by collateral to reduce the risk for lenders, who can seize the collateral if the borrower defaults.
Stock Split
A corporate action in which a company issues additional shares to shareholders, increasing the number of outstanding shares while maintaining the overall value.
Spread Trading
A strategy involving the simultaneous purchase and sale of two related financial instruments to profit from changes in their price difference or spread.
Subordinated Debt
Debt that ranks below other debts in terms of claims on assets in the event of liquidation, usually offering higher yields due to the increased risk.
Securitization
The process of converting an illiquid asset, such as a loan or mortgage, into a tradable security by pooling it with other similar assets and issuing bonds backed by the pool.
Swing Trading
A trading strategy that attempts to capture gains in a stock or other asset over a period of a few days to several weeks, based on short-term price movements.
Systematic Risk
The risk inherent to the entire market or market segment, which cannot be eliminated through diversification, often influenced by factors like economic conditions or political events.
Trading Volume
The total number of shares or contracts traded for a particular security or market during a given period.
Treasury Bonds
Long-term debt securities issued by the U.S. government with maturities of 10 years or more, considered low-risk investments.
Tangible Assets
Physical assets such as real estate, machinery, or inventory, which can be valued and used to secure loans.
Technical Analysis
A method of evaluating securities by analyzing statistical trends from trading activity, such as price movement and volume, rather than fundamental factors.
Tax Shield
A reduction in taxable income achieved through allowable deductions such as interest payments or depreciation, which lowers a company's tax liability.
Treasury Bills (T-Bills)
Short-term debt securities issued by the U.S. government with maturities of one year or less, usually sold at a discount to face value.
Term Structure of Interest Rates
The relationship between interest rates (or bond yields) and different maturities of debt securities, often represented by a yield curve.
Total Return
The overall return on an investment, including both capital gains and income (such as dividends or interest), expressed as a percentage of the initial investment.
Takeover
The acquisition of one company by another, either through a purchase of shares or assets, often resulting in a change of control.
Trailing Stop
A stop-loss order that moves with the market price to lock in profits, where the stop price is adjusted as the price of the asset moves in favor of the investor.
Total Debt-to-Equity Ratio
A financial ratio that compares a company's total debt to its shareholders' equity, used to assess the company’s financial leverage and risk.
Tactical Asset Allocation
A strategy that actively adjusts the allocation of assets in a portfolio to capitalize on market opportunities and changes in economic conditions.
Underwriting
The process in which an underwriter evaluates and assumes the risk of a financial transaction, such as issuing new securities or providing loans.
Unsecured Debt
Debt that is not backed by collateral, meaning the lender has no claim to specific assets if the borrower defaults.
Use of Proceeds
A description in a prospectus or offering document detailing how a company intends to use the capital raised from an offering, such as for expansion or debt repayment.
Upfront Fee
A fee paid at the beginning of a transaction, such as in a loan agreement or underwriting process, before the transaction is completed.
Unit Investment Trust (UIT)
A type of investment fund that holds a fixed portfolio of securities and offers shares to investors, with the intention of holding the investments until maturity.
Unrealized Gain
A gain on an investment that has occurred, but the investment has not yet been sold, so the gain is not yet realized or taxable.
Usury
The illegal practice of charging an interest rate on a loan that exceeds the maximum rate allowed by law.
Uniform Securities Act
A model state law in the U.S. that provides a uniform set of standards for securities regulation across states, aimed at protecting investors.
Underlying Asset
The financial asset or instrument (e.g., stock, bond, commodity) that is the subject of a derivative contract, such as options or futures.
Utilization Rate
The percentage of a company’s available credit that is being used, often measured to assess financial health or risk.
Upward Repricing
The act of increasing the price of a security or asset, often done in response to rising market demand or changes in interest rates.
Volatility
A measure of the variation in the price of a financial instrument over time, indicating the level of risk or uncertainty in the market.
Value at Risk (VaR)
A risk management tool used to estimate the potential loss in value of a portfolio over a specified time period, given a certain confidence level.
Venture Capital
A type of private equity investment focused on funding early-stage, high-growth companies with significant potential for capital appreciation.
VIX (Volatility Index)
A popular measure of market volatility, derived from the implied volatility of options on the S&P 500 index, often referred to as the 'fear index'.
Voting Rights
The rights granted to shareholders of a company, allowing them to vote on certain corporate decisions, such as electing the board of directors.
Vertical Integration
A strategy where a company expands its operations into different stages of production, often by acquiring suppliers or distributors to control more of its value chain.
Venture Debt
A form of debt financing provided to early-stage, high-growth companies, typically in the form of loans or convertible debt, that may include warrants or options.
Volatility Index (VIX)
A measure of market expectations for volatility, calculated from the prices of S&P 500 index options, used as a gauge for market sentiment.
Value Investing
An investment strategy that involves buying undervalued stocks or assets, based on fundamental analysis, with the expectation that the market will eventually recognize their true value.
Venture Capitalist (VC)
An investor who provides capital to early-stage, high-potential companies in exchange for equity or ownership stake, often with a focus on rapid growth and high returns.
Valuation
The process of determining the current worth of an asset or company, often using methods such as discounted cash flow (DCF), market comparables, or precedent transactions.
Volatility Smile
A pattern in which implied volatility is higher for options that are deep in-the-money or out-of-the-money compared to at-the-money options, often seen in options markets.
Wholly Owned Subsidiary
A company whose entire stock is owned by another company, allowing the parent company full control over the subsidiary’s operations.
Warrant
A financial instrument that gives the holder the right, but not the obligation, to buy a security, usually stock, at a specific price before a specified expiration date.
Working Capital
A measure of a company's short-term financial health, calculated by subtracting current liabilities from current assets, indicating the available funds for day-to-day operations.
Weighted Average Cost of Capital (WACC)
A calculation used to determine a company's cost of capital, weighted by the proportion of debt and equity in the capital structure.
Withholding Tax
A tax deducted at source from income or dividends, paid to the government by the payer rather than the recipient.
Write-Off
The formal recognition that an asset no longer has value or is uncollectible, such as in the case of bad debt or inventory that cannot be sold.
WACC (Weighted Average Cost of Capital)
The average rate of return a company is expected to pay to finance its assets, calculated based on the weighted average of its equity and debt costs.
Window Dressing
The practice of making a portfolio appear more attractive by selling underperforming securities and buying high-performing ones at the end of a reporting period.
White Knight
A company or individual that acquires a target company in distress, often to prevent a hostile takeover by another party.
Working Capital Ratio
A liquidity ratio that measures a company's ability to cover its short-term obligations, calculated by dividing current assets by current liabilities.
X-IRR (Extended Internal Rate of Return)
A financial metric used to measure the annualized rate of return on a series of cash flows occurring at irregular intervals, often used in private equity or venture capital investments.
Xenocurrency
A currency that is used or traded outside its home country, often in international markets, such as the U.S. dollar or euro being used in countries other than their home regions.
X-Value
A reference to an unknown or variable value in a financial model, often used in the context of optimization or financial analysis.
Yield
The income generated from an investment, typically expressed as a percentage of the investment’s cost or current market value, including interest or dividends.
Yield Curve
A graph that shows the relationship between interest rates and the maturity dates of debt securities, typically government bonds, and is used to gauge the economic outlook.
YTM (Yield to Maturity)
The total return an investor can expect to earn if a bond is held until it matures, considering both interest payments and any capital gain or loss.
Yields to Call
The yield on a callable bond if it is redeemed by the issuer before its maturity date, which could occur if interest rates fall.
Year-End Adjustments
Changes made to a company's financials or accounting records at the end of the year, such as adjusting for depreciation, accruals, or estimates to reflect the true financial position.
Yellow Bond
A type of bond issued by an entity for environmental or green purposes, typically used to finance projects related to sustainability or climate change.
Zero-Coupon Bond
A debt security that does not pay periodic interest but is issued at a deep discount to its face value, with the full value paid at maturity.
Z-Score
A financial metric used to predict the likelihood of a company going bankrupt, based on several financial ratios and statistical analysis.
Zero-Base Budgeting
A budgeting method in which all expenses must be justified for each new period, starting from a 'zero base,' rather than adjusting previous budgets.
Zombie Company
A company that continues to operate but is financially insolvent or struggling, often relying on debt refinancing or government support to survive.
Zero Beta Portfolio
A portfolio of assets that has no correlation with the overall market, meaning its returns are independent of market movements.