[xebec]

This thread is a glossary of financial terms. If there's anything that I've missed please reply to the thread. No chat in the thread please.

[xebec]

Active Management - A traditional investment technique whereby fund managers actively manage assets by building and repositioning portfolios to take advantage of market opportunities.
Amortization - The planned writing-down of the value of an intangible asset (e.g. goodwill) over a period of time.
Analyst - A research specialist who analyses the performance and prospects of companies, markets or economies or a junior corporate financier.
Angels - Slang for individual lenders providing venture capital.
Arbitrage - A method of trading which exploits securities which are mispriced in relation to each other.
Arranger - An intermediary who arranges, for a fee, a transaction between two end-users without directly participating in the transaction.
Asset Allocation - Top-down investment strategy, which specifies the proportions of funds to be ascribed to various asset classes and/or geographical areas.
Asset backed security - A security, supported by almost any kind of asset, which has a predictable payment stream

[xebec]

Back Office - The function within an investment bank, which ensures smooth settlement, payment and reporting of transactions.
Backed In Sale/Purchase - A sale or a purchase, at a premium or discount respectively, facilitated by unforeseen events. 'Back Up The Truck' - (US) Expression used to prepare the floor for a large buyer.
Backwardation - When the future price is below the underlying spot price.
Balance Sheet - A summary of a company's assets and liabilities.
Banking Finance - Arrangement of direct finance for companies, often for acquisitions or financial restructures.
Bar - Slang for one million of a specified currency.
Barrier Option - An option, to sell or buy, which ceases to exist, or only comes into existence, if the underlying asset trades at, or through, a predetermined price; common in FX markets.
Bazaar - A thinly regulated financial market.
Bear - An investor who suggests that the market or an individual stock will decline. A bear market is one in which prices are falling, over an extended period. See also Bull.
Bearer Share - A share for which no register of ownership is kept.
Benchmark - The price or performance of a financial instrument, used as a reference to compare the performances of similar instruments.
Bid - The price someone will pay.
Block Trade - The sale or purchase of a very large number of shares in a single transaction (the most common unit is 10,000 shares).
Blue Chip - The most highly regarded stocks or companies; derived from the color of the highest value poker chip.
Bond - A certificate of debt issued by a company, government or supranational body, which is traded at a price according to its yield and the issuer's credit rating.
Boning - (US) Inflating the price of an asset beyond its worth.
Bookrunner - The bank which takes overall control of structuring, pricing and inviting other underwriters into a debt or equity issue.
Brokerage - A firm or institution, which introduces the two parties in a transaction to each other and/or arranges the transaction for a commission fee.
Bull - An investor who suggests that the market will rise.
Buyout - Buying control of a company (often by its own management).

[xebec]

Cable - The dollar to sterling foreign exchange rate.
Callable - A security which the seller can redeem before its stated maturity at a given price or date.
Call option - A financial instrument that derives its value from the price of another financial instrument, called the underlying. It affords the buyer the right, but not the obligation, to buy the underlying instrument for a pre-defined price, on an agreed date sometime in the future. The model most associated with the valuation of these financial instruments (called derivatives) is the Black-Scholes model.
Cap, floor and collar - Terms that set upper and lower limits on the price of an asset; most commonly applied to floating-rate interest payments.
Capital - In economics, this defines premises, machinery and equipment (a factor of production, together with land & labor). In finance, it is used as a generic term for a company's debt and equity.
Capital market - The market from which companies raise capital by selling medium and long- term financial instruments including bonds, notes, swaps and equities.
Capital structure - A company's financial framework, including long-term debt, preferred stock and net worth.
144A certificates - Trades governed by the SEC's Rule 144A, which permits large institutions to trade among themselves in privately-placed securities, which would otherwise have a two-year holding period requirement.
Chartism/Chartist - The study of charts/ those who study charts to predict the movement of the market. Coined the phrase, 'let the trend be your friend'.
Chinese Wall - An information barrier designed to prevent communication between those involved in making investment decisions and those who may have access to insider or undisclosed information.
Collateral - Assets (property or securities) pledged by a borrower to secure payment of a loan or bond issue in the event of default.
Contango - A future above the spot price.
Convertible - A debt instrument which gives the holder the option to convert it to shares in the issuer company. See Exchangeable.
Coupon - The nominal amount of interest expressed as a percentage of the principal value, payable to the holder of a Fixed Income security by the borrower; or a certificate attached to a bearer security showing interest due on a specified date. In the US domestic market: a Treasury note or bond.
Counterparty - The other individual, or institution, party to an agreement or contract.
Credit Rating - Evaluation by a rating agency of an issue's investment quality, or of a company's overall ability to repay its debts.
Cross Rate - An exchange rate where the US dollar is not the base currency; or an exchange rate where the national currency is not part of the transaction.
Currency Option - A transaction giving the purchaser the right (not obligation) to buy or sell one currency against another at a specified price during a specified period.
Currency Swap - A contract that commits two parties to exchange, over an agreed period, streams of interest payments denominated in different currencies and, at the end of the period, the principal amounts.
Custody - The holding of securities in safekeeping for a client, often across borders, to maximize investment returns, tax efficiency, security or liquidity.

[xebec]

Dawn Raid - A raid which takes place very quickly, usually just as the market opens. See also Raider.
Dead Cat Bounce - A small rise in a bear market.
Dealer - A person, or institution, acting as a principal in buying and selling securities.
Debenture - In the UK, a bond, often backed by specified assets or revenues of the borrower. In the US, an unsecured debt.
Debt Capital markets - The market on which debt instruments are traded; the division of an investment bank that helps clients buy and sell them.
Debt Instrument - A means for companies, governments etc. to raise funds by issuing a contractual obligation to make payments of interest and to redeem a stated principal amount on a stated future date.
Delta - The first order derivative of the options theoretical value with respect to a change in the price of the underlying asset.
Depreciation - Loss of value over time, usually of fixed assets, e.g. machinery.
Derivative - A security which derives its value from the current or future performance of an underlying asset, commodity, index, currency etc. Often used to hedge exposure and to balance risks across a portfolio.
Dividend - The proportion of a company's earnings distributed in cash to shareholders.
Dog - The market term describing poorly received issue. It is often said of these issues that 'once a dog, always a dog'.

[xebec]

ECP - (Euro Commercial Paper) Discounted Eurodollar issues of commercial paper - notes or drafts, usually of less than three months maturity, the proceeds of which are typically used for current transactions.
Emerging Economies/Markets - Countries with developing economies, often experiencing rapid growth and offering lucrative investment opportunities, but also characterized by instability and high risk.
EMTN - (Euro Medium Term Note) Debt instruments with maturities ranging from one to five years, listed on the London and Luxembourg stock exchanges and usually registered with the US Securities and Exchange Commission.
Equity - Securities issued as shares in a company.
Equity Capital Markets - The markets on which primary equity issues (e.g. IPOs) are traded; the division of an investment bank which helps clients structure, buy and sell primary equity.
Equity-Linked Security - A security whose value is dependent on the price of the underlying stocks, including warrants and options.
Eurobond - Securitized debt publicly issued in bearer form outside the home market of the currency of denomination.
Exchange-Traded Derivatives - Options and futures that are traded on an organized exchange in standard denominations.
Exchangeable - A debt instrument that gives the holder the option to convert it to shares in a company that is not the issuing company.
Exotic Currency - A currency, other than the most-frequently traded currencies, often of an emerging economy.
Exotic Option - A non-standard option or one with a twist. See also Vanilla.

[xebec]

Fixed Income/Fixed Interest - A security or instrument on which interest is calculated as a constant specified percentage of the principal amount and paid at the end of a specified period until maturity; also used to describe bonds and interest rate products.
Flotation - An Initial Public Offering (IPO) or the selling of new shares in a company on a stock market (a primary market activity).
Foreign Exchange (FX) - The trading of currencies, to allow companies to trade goods across borders and to maximize returns on interest rate investments internationally.
Forward - A contract to buy/sell an asset, at a price agreed today, at a future point in time. Distinct from futures in that they are not traded on an exchange.
FRA (Forward Rate Agreement) - Agreement that, in the future, a set interest rate will apply to a certain principal amount for a fixed period.
Front Office - The client-facing functions within an investment bank, including Trading and Sales teams.
Fund - Cash or assets invested according to specified criteria, often by fund management specialists on behalf of clients.
Fundamental Analysis - Market analysis based on supply and demand factors such as raw materials, consumer trends, money supply, as well as a company's balance sheet and income statements.
Futures Contract - A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.

[xebec]

The Garage - (US) An area on the floor of the New York Stock Exchange.
To Garage - Meaning to transfer assets/liabilities to somewhere.
Gilt Market - The market in UK Treasury ('gilt edged') securities; the original certificates offered by the Treasury were gilt edged.
Glamour Stock - Stocks that hold a high profile in the press.
Go-Go Fund - A unit trust or investment fund which is regarded as high-risk but which is expected to produce a greater than average increase in value return.
Golden Parachute - Financial benefits earned by senior executives in the event of a takeover.
Goodwill - An intangible asset representing the difference between the purchase price of a company and its book value.


Hedge - To balance risk by offsetting exposure incurred in one instrument or position (e.g. a bond) with an equal but opposite position in an equivalent instrument (e.g. bond futures).
High-Yield Security - A bond, sometimes known as a junk bond, usually issued by a company with a credit rating below investment grade, and offering investors high returns in return for above-average risk.
Hot Money - Money that moves across country borders in response to interest rate changes.

[xebec]

Institutional Investor - An institution whose purpose is to invest its assets or those held in trust for others (e.g. pension funds, insurance companies).
Interest Rate - The proportion of a sum of money that is paid over a specified period of time in payment for its loan.
Interest Rate Product - A debt instrument.
Interest Rate Swap - An agreement between two parties to exchange their interest rate exposures from floating to fixed-rate, or vice versa.
In The Box - (US) Slang for a receipt for a security held by a dealer that confirms that delivery has been made.
In The Tank - Slang for rapidly dropping prices.
Investment Bank - A firm, acting as underwriter or agent, that serves as an intermediary between an issuer of securities and investing institutions, and which advises corporate, institutional and sovereign clients on their acquisitions, disposals, capital raising, structuring and risk management.
Investment Banking - The processes by which companies raise capital, especially to fund growth, acquisitions etc; the division of an investment bank which advises on acquisitions, mergers, bid defenses, restructures and disposals.
Investment Trust - A company whose sole business consists of buying, selling and holding shares and whose investors share the profits of the company managing the trust.
IPO/Initial Public Offering - The first offering on a public stock exchange of all, or part, of a company's equity.

[xebec]

JGB - Japanese Government Bond.
Junk bond - Bonds rated below investment grade.

Killer Bees - Those who aid a company in fending off a hostile takeover.

[xebec]

Lead Manager - The lead underwriter of a new debt or equity issue, responsible for selling it to investors but not pricing and inviting other underwriters into the deal (the bookrunner's responsibility).
Lemon - (UK) Slang term for a bad deal.
Leveraged Buy-Out (LBO) - Obtaining control of a company through debt financing.
Leveraged Finance - Finance that takes advantage of the ratio between a company's debt and equity, often associated with relatively high risk and return. The department of an investment bank that provides advice on these opportunities.
LIBOR (London Interbank Offered Rate) - The rate at which prime banks offer to make Eurocurrency deposits with other prime banks for a given maturity which can range from overnight to 5 years, in London.
LIFFE - London International Financial Futures and Options Exchange.
Liquidity - The volume of turnover in a market, or the extent to which money can be moved between investments or cashed in.
Listed - A security or contract (stock, bond, or option) that trades on a regulated exchange such as the New York Stock Exchange.
Locals - Local individuals on the floor of the exchange who trade their own accounts.
Long Position - A long position is one which profits when the value of the underlying asset goes up.
Lookback Option - The right, at the end of a specified period, to exercise an option at the highest spot rate it has achieved over that period.
LSE - London Stock Exchange.

[xebec]

Macroeconomic - Pertaining to whole economies and inter-relationships between them
Management Buyout (MBO) - The purchase of a company by its existing management, usually with the assistance of financial backers - often providing loans secured on the assets of the company.
Market - A two-way price consisting of a bid and an offer.
Market Capitalization - A company's share price multiplied by the number of shares issued in the market, which therefore equates to the value of the company.
Merger - The integration of two or more companies, possibly following an acquisition, involving an exchange of shares.
Mergers and Acquisitions (M&A) - See Merger; the division of an investment bank that advises on and helps clients execute mergers and acquisitions.
Mezzanine Finance - A financial instrument that pays lenders of a company an above-average yield, but also allows them to convert their loans into the company's equity by means of warrants; often used in leveraged buyouts.
Modern Portfolio Theory - Assumes that markets are efficient (the price of instruments incorporates all publicly-known information about them); proposes that a diversified portfolio of risky assets will be less risky than the sum of the individual assets
Money Market - The wholesale securities market, especially in short-term, highly liquid, high- quality assets.
Moody's (Moody's Investors Service) - A US credit rating agency, which applies globally- recognized ratings to bonds and the institutions and companies that issue them.
Mortgage-Backed Security - A bond whose value is based on an interest in a pool of mortgages.
Multi-Tranche - A single security that comprises two or more components with different terms, e.g. dates of maturity, or different regions in which components are issued.
MinFin - Russian Treasury bill, denominated in US dollars and issued on behalf of the Russian Ministry of Finance.
Mutual Fund - A managed portfolio of equities and a limited range of other instruments, open to public subscription, whose investors are credited with units according to the amount of their investment; also known as a unit trust. See also Investment Trust.

[xebec]

Noise - Fluctuations in price and volume that confuse any judgment on which way the market is going.
Note - A promise to pay rather than an order to pay; in the US, a fixed-rate debt instrument with a maturity of less than 10 years; any floating-rate debt instrument, other than a floating-rate certificate of deposit.


OAT - Obligation Assimilable du Tresor, a French Treasury bond issue with initial maturities of from seven to 30 years.
Offer - The price at which someone will sell.
Option - An instrument giving the holder the right (not obligation) to buy or sell an underlying asset within a given period, at a specified price.
Ordinary Share - A regular share in a company, giving the holder the right to vote on company decisions and receive a dividend.
Over-The-Counter (OTC) - Non-official markets created by dealers trading separately from established exchanges.

[xebec]

Pari Passu - (Latin) Translates as 'with equal progress', and describes the position of a new issue of shares as equal to existing shares for the purposes of dividend payments.
PERL(E)S (Principal Exchange-Rate-Linked Securities) - Securities whose interest and redemption are paid in the base currency (often US dollar), or the currency in which the relevant operating results are reported, but are based on the exchange rate between the base currency and another currency.
Pit - The area of the trading floor, normally circular with tiered steps, used for open outcry trading.
Player - Slang for a trader heavily involved with a certain stock or market.
Plum - (UK) Slang term for successful investment or a good stock.
Portfolio - The totality of securities owned by an investor or dealer are said to constitute their portfolio.
Portfolio Trade - A trade involving a number of different securities, often motivated by an investor's desire to rebalance a portfolio; also known as a basket trade.
Preference share - A class of equity that ranks ahead of common shares in respect of dividends and the distribution of assets should the company be dissolved or wound up; in the US, preferred stock
Primary Market - The market in which new security issues are initially sold or distributed.
Private Banking - The provision of banking and investment services to high net worth individual clients.
Private Placement - An issue offered to a single or a few investors (usually no more than 20) as opposed to being publicly offered.
Privatization - The sale of government-owned shares in nationalized industries or other commercial enterprises on a public stock exchange.
Project Finance - Advice on, and provision of, financing for infrastructural and public works projects, often in emerging markets.
Pump & Dump - Financial fraud that typically involves artificially inflating the price of a stock or other security through untrue or exaggerated promotion (creating artificial demand), in order to sell stock, previously purchased cheaply, at the inflated price. When the promotion stops or flaws in the promotion are exposed, the artificial demand is removed, causing a collapse in the price of the investment, leaving many investors out of pocket.
Put Option - Similar to the call option, but affording the buyer the opportunity to sell the underlying instrument for a pre-defined price, on an agreed date, sometime in the future.
Puttable - A security which the buyer can sell back to the seller at a given price and/or time.

[xebec]

Quanto Option - One in which the return is converted to another currency, e.g. an option on US interest rates payable in Japanese yen.
Quid - One million pounds sterling.


Raider - Investor, generally hostile, aiming to buy a controlling interest in a company's stock and install new management.
Refinancing - Paying off an existing loan with another loan or equity issue, usually to benefit from improved terms.
Registered Share - A share, the ownership of which is recorded by a registrar in the name of the holder or his nominee. See also Bearer.
Repo (Repurchase agreement) - A method of maximizing returns on a portfolio by borrowing against a security held by the borrower for an agreed interest rate and time period.
Research - The division of an investment bank that prepares reports and other information about equities, interest rates or foreign exchange rates for clients.
Restructuring - Rearranging the finance of a company, often by changing the balance of debt and equity on the balance sheet.
Return On Equity (ROE) - A measure of profitability; the income from continuing operations (after payment of preferred dividends) divided by average common equity for the specified period.
Return On Investment (ROI) - A measure of profitability; the profit from your investment divided by the investment itself.
Risk Management - The active management of the level of financial risk incurred by an investor; often involving the use of hedging and derivatives to balance exposure to different risks and returns across a portfolio.
RMP (Risk Management Products) - The most commonly used client term for a derivative.
Rocket Scientist - An expert designer of financial products.