Alpha
Definition: A measure of an investment’s performance compared to a benchmark.
Example: The fund posted an alpha of 2.5%, beating the S&P 500.
Amortization
Definition: The process of gradually writing off the initial cost of an asset.
Example: The company amortized its intangible assets over 10 years.
Annual Report
Definition: A yearly record of a company’s financial performance.
Example: Investors reviewed the company’s annual report before buying shares.
Annuity
Definition: A financial product that pays out a fixed stream of payments.
Example: He bought an annuity to ensure lifetime income.
Appreciation
Definition: An increase in the value of an asset over time.
Example: The real estate property appreciated significantly over the last decade.
Arbitrage
Definition: The simultaneous purchase and sale of an asset to profit from a price difference.
Example: Traders used arbitrage to profit from currency discrepancies.
Asset Allocation
Definition: The process of dividing investments among different asset categories.
Example: A balanced asset allocation reduces overall risk.
Asset Class
Definition: A group of securities that exhibit similar characteristics.
Example: Stocks, bonds, and real estate are different asset classes.
Assets
Definition: Resources owned by an individual or entity that have economic value.
Example: The company reported total assets of $10 million.
Balance Sheet
Definition: A financial statement showing a company’s assets, liabilities, and equity.
Example: The balance sheet provided a snapshot of the firm's financial health.
Bear Market
Definition: A market condition where prices are falling or expected to fall.
Example: Investors became cautious during the bear market.
Beta
Definition: A measure of a stock’s volatility relative to the market.
Example: A beta of 1.2 indicates higher volatility than the market.
Blue Chip Stock
Definition: Shares of large, reputable companies with a history of performance.
Example: She invested in blue chip stocks for stability.
Bond
Definition: A fixed income investment representing a loan made by an investor to a borrower.
Example: Municipal bonds often offer tax-free income.
Book Value
Definition: The value of a company based on its financial statements.
Example: The stock was trading below its book value.
Broker
Definition: A person or firm that arranges transactions between a buyer and seller.
Example: He used a broker to buy shares of Tesla.
Bull Market
Definition: A market condition where prices are rising or expected to rise.
Example: The tech sector fueled the latest bull market.
Call Option
Definition: A financial contract giving the buyer the right to buy an asset at a set price.
Example: He exercised a call option to buy stock at a discount.
Capital Gain
Definition: The profit from the sale of an asset.
Example: She realized a capital gain after selling her shares.
Capital Loss
Definition: The loss from the sale of an asset for less than the purchase price.
Example: The investment resulted in a capital loss.
Capital Market
Definition: Markets for buying and selling equity and debt instruments.
Example: Companies raise capital through capital markets.
Cash Flow
Definition: The net amount of cash being transferred in and out of a business.
Example: Positive cash flow is vital for operations.
CD (Certificate of Deposit)
Definition: A savings certificate with a fixed maturity date and interest rate.
Example: He invested in a 12-month CD with a 4% return.
Common Stock
Definition: A security representing ownership in a corporation.
Example: Common stockholders can vote at shareholder meetings.
Compound Interest
Definition: Interest calculated on the initial principal and also on the accumulated interest.
Example: Compound interest accelerates growth over time.
Consumer Price Index (CPI)
Definition: Measures changes in the price level of a market basket of consumer goods.
Example: CPI rose 3% indicating inflation.
Credit Rating
Definition: An evaluation of the credit risk of a potential debtor.
Example: The company’s credit rating was upgraded to AAA.
Cryptocurrency
Definition: A digital or virtual currency secured by cryptography.
Example: Bitcoin is the most popular cryptocurrency.
Current Assets
Definition: Assets expected to be converted into cash within one year.
Example: Cash and inventory are current assets.
Current Liabilities
Definition: Obligations a company needs to pay within a year.
Example: Accounts payable are current liabilities.
Day Trading
Definition: The practice of buying and selling securities within the same trading day.
Example: He made a profit through day trading tech stocks.
Debt-to-Equity Ratio
Definition: A measure of a company’s financial leverage.
Example: A low debt-to-equity ratio suggests conservative financing.
Default
Definition: Failure to repay a loan or meet a financial obligation.
Example: The company defaulted on its bond payments.
Depreciation
Definition: A reduction in the value of an asset over time.
Example: The equipment was depreciated over five years.
Derivative
Definition: A financial security whose value depends on an underlying asset.
Example: Options and futures are common derivatives.
Diversification
Definition: Spreading investments to reduce risk.
Example: She diversified her portfolio across industries.
Dividend
Definition: A portion of a company’s earnings distributed to shareholders.
Example: The company issued a $0.50 dividend per share.
Dividend Yield
Definition: A financial ratio showing how much a company pays in dividends relative to its share price.
Example: A 3% dividend yield was attractive to investors.
Dow Jones Industrial Average
Definition: A stock market index that measures 30 large U.S. companies.
Example: The Dow rose 200 points today.
Earnings
Definition: A company’s profit after expenses and taxes.
Example: Quarterly earnings beat analyst expectations.
Earnings Per Share (EPS)
Definition: Net income divided by the number of outstanding shares.
Example: The company reported EPS of $2.10.
EBITDA
Definition: Earnings before interest, taxes, depreciation, and amortization.
Example: EBITDA helps assess profitability without financing effects.
Equity
Definition: Ownership interest in a company.
Example: Shareholders' equity increased with profits.
ETF (Exchange-Traded Fund)
Definition: A type of investment fund traded on stock exchanges.
Example: She invested in an S&P 500 ETF.
Federal Reserve
Definition: The central bank of the United States.
Example: The Fed raised interest rates by 0.25%.
Fiduciary
Definition: A person or entity required to act in another’s best interest.
Example: A fiduciary advisor must prioritize the client’s needs.
Financial Statement
Definition: A formal record of financial activities.
Example: The auditor reviewed the financial statement.
Fiscal Year
Definition: A 12-month period used for financial reporting.
Example: Their fiscal year ends in September.
Fixed Income
Definition: Investments that return a fixed interest or dividend.
Example: Bonds are common fixed income securities.
Forex
Definition: The global currency exchange market.
Example: She profited from trading in the forex market.
Forward Contract
Definition: A customized contract between two parties to buy or sell an asset at a specified future date for a price agreed upon today.
Example: Farmers use forward contracts to lock in prices for crops.
Futures Contract
Definition: A standardized legal agreement to buy or sell an asset at a predetermined price at a specified time in the future.
Example: Futures contracts are traded on exchanges.
GAAP
Definition: Generally Accepted Accounting Principles; standard framework of accounting rules.
Example: The company prepares its financial reports under GAAP.
GDP (Gross Domestic Product)
Definition: The total market value of all final goods and services produced in a country in a given period.
Example: GDP grew by 2% in the last quarter.
Growth Stock
Definition: A stock expected to grow at an above-average rate compared to other companies.
Example: Tech companies are often classified as growth stocks.
Hedge
Definition: An investment made to reduce the risk of adverse price movements in an asset.
Example: He hedged his portfolio with options.
High-Yield Bond
Definition: A bond that offers a higher interest rate due to its lower credit rating.
Example: High-yield bonds carry more risk.
Index Fund
Definition: A type of mutual fund designed to replicate the performance of a market index.
Example: She invests in an S&P 500 index fund.
Inflation
Definition: The rate at which the general level of prices for goods and services rises.
Example: Inflation erodes purchasing power.
Initial Public Offering (IPO)
Definition: The first time a company's stock is offered to the public.
Example: The IPO was oversubscribed.
Interest Rate
Definition: The proportion of a loan that is charged as interest to the borrower.
Example: Interest rates are influenced by central banks.
Intrinsic Value
Definition: The perceived or calculated value of an asset based on fundamentals.
Example: Investors seek stocks trading below intrinsic value.
Investment Grade
Definition: Bonds rated BBB or higher, considered low-risk.
Example: The fund only holds investment-grade securities.
IRA (Individual Retirement Account)
Definition: A retirement savings account with tax advantages.
Example: He opened a Roth IRA to save for retirement.
Junk Bond
Definition: A bond rated below investment grade, with high yield and high risk.
Example: Junk bonds offer higher returns but greater risk.
Key Performance Indicator (KPI)
Definition: A measurable value that indicates how effectively a company is achieving key business objectives.
Example: Revenue growth is a common KPI.
Large-Cap Stock
Definition: Shares of companies with large market capitalization.
Example: Large-cap stocks are considered stable.
Leverage
Definition: The use of borrowed money to increase the potential return of an investment.
Example: Leverage can amplify both gains and losses.
Liabilities
Definition: Legal financial debts or obligations owed by a company.
Example: The company reduced its liabilities last year.
Liquidity
Definition: The ease with which an asset can be converted into cash.
Example: Treasury bonds are highly liquid.
Load Fund
Definition: A mutual fund that charges a commission or sales charge.
Example: He preferred no-load funds to avoid extra fees.
Long Position
Definition: The buying of a security with the expectation that it will rise in value.
Example: She took a long position in Apple stock.
Market Capitalization
Definition: The total market value of a company's outstanding shares.
Example: The company joined the trillion-dollar market cap club.
Market Order
Definition: An order to buy or sell a stock immediately at the best available price.
Example: He placed a market order for 100 shares.
Market Risk
Definition: The risk of losses due to factors that affect the overall market.
Example: Diversification helps reduce market risk.
Money Market Fund
Definition: A mutual fund that invests in short-term, high-quality investments.
Example: Money market funds are considered safe.
Mutual Fund
Definition: An investment vehicle that pools money from investors to buy securities.
Example: She invested in a diversified mutual fund.
Nasdaq
Definition: A global electronic marketplace for buying and selling securities.
Example: Tech companies are often listed on the Nasdaq.
Net Asset Value (NAV)
Definition: The value per share of a mutual fund or ETF.
Example: NAV is calculated at the end of each trading day.
Net Income
Definition: A company’s total earnings or profit.
Example: Net income increased 12% year over year.
No-Load Fund
Definition: A mutual fund that does not charge a sales fee.
Example: He chose a no-load fund to maximize returns.
Options
Definition: Contracts that give the buyer the right to buy or sell an asset at a set price.
Example: He used options to hedge his position.
Over-the-Counter (OTC)
Definition: Trading done directly between two parties without a centralized exchange.
Example: OTC markets can have less transparency.
P/E Ratio
Definition: Price-to-Earnings Ratio; a valuation of a company’s current share price relative to its earnings.
Example: A high P/E ratio may indicate overvaluation.
Par Value
Definition: The face value of a bond or stock.
Example: The bond was issued at par value.
Passive Investing
Definition: An investment strategy that tracks a market index rather than trying to outperform it.
Example: Index funds are a form of passive investing.
Portfolio
Definition: A collection of financial investments held by an investor.
Example: Diversification across a portfolio helps manage risk.
Preferred Stock
Definition: A class of ownership with a fixed dividend, paid before common stockholders.
Example: Preferred shareholders receive dividends before common ones.
Premium
Definition: The amount by which a bond or stock sells above its face value.
Example: The bond traded at a premium.
Price Target
Definition: An analyst’s projection of a stock’s future price.
Example: The stock hit its price target in 3 months.
Principal
Definition: The original amount invested or loaned.
Example: He repaid the loan principal over 5 years.
Prospectus
Definition: A legal document issued to potential investors detailing an investment offering.
Example: She reviewed the fund’s prospectus before investing.
Rate of Return
Definition: The gain or loss of an investment over a specified period.
Example: His portfolio had a 10% annual rate of return.
Real Estate Investment Trust (REIT)
Definition: A company that owns, operates, or finances income-producing properties.
Example: REITs often pay high dividends.
Rebalancing
Definition: Adjusting a portfolio’s asset allocation back to its target.
Example: He rebalanced quarterly to maintain 60/40 allocation.
Return on Equity (ROE)
Definition: A measure of financial performance calculated by dividing net income by equity.
Example: ROE of 15% reflects efficient use of equity.
Revenue
Definition: Income generated from normal business operations.
Example: The company’s revenue grew 20% annually.
Risk Tolerance
Definition: An investor’s capacity and willingness to endure losses.
Example: She assessed her risk tolerance before investing.
Roth IRA
Definition: A retirement account with post-tax contributions and tax-free withdrawals.
Example: He used a Roth IRA for long-term tax-free growth.
Russell 2000
Definition: An index measuring the performance of 2,000 small-cap U.S. companies.
Example: The Russell 2000 rose 1.2% amid small-cap rallies.
S&P 500
Definition: A stock market index that tracks 500 large U.S. companies.
Example: The S&P 500 closed at an all-time high.
SEC (Securities and Exchange Commission)
Definition: A U.S. government agency that regulates the securities industry.
Example: The SEC launched an investigation into the company.
Securities
Definition: Financial instruments that represent some type of financial value.
Example: Stocks and bonds are examples of securities.
Sharpe Ratio
Definition: A measure for calculating risk-adjusted return.
Example: The mutual fund had a Sharpe Ratio of 1.5.
Short Selling
Definition: Selling a security that the seller does not own, hoping to buy it back at a lower price.
Example: He profited from short selling during the downturn.
Small-Cap Stock
Definition: Stocks with a small market capitalization, usually under $2 billion.
Example: Small-cap stocks can offer high growth potential.
Stock
Definition: A type of security that represents ownership in a corporation.
Example: She invested in both tech and energy stocks.
Stock Exchange
Definition: A marketplace where stocks are bought and sold.
Example: The NYSE is the largest stock exchange in the world.
Stop-Loss Order
Definition: An order placed to sell a security when it reaches a certain price.
Example: He used a stop-loss order to minimize potential losses.
Technical Analysis
Definition: A method of evaluating securities by analyzing statistics generated by market activity.
Example: Traders use technical analysis to time entries.
Time Horizon
Definition: The expected time period to hold an investment before taking the money out.
Example: Her retirement plan had a long time horizon.
Treasury Bond
Definition: A government debt security with a fixed interest rate and maturity over 10 years.
Example: Treasury bonds are considered low-risk.
Treasury Inflation-Protected Securities (TIPS)
Definition: Bonds that protect investors from inflation.
Example: TIPS offer lower returns but guard against inflation.
Turnover Ratio
Definition: The percentage of a fund’s holdings that have been replaced in a year.
Example: High turnover ratios can lead to higher taxes.
Unsecured Debt
Definition: Debt not backed by collateral.
Example: Credit card debt is a common example of unsecured debt.
Value Investing
Definition: An investment strategy of selecting stocks that appear to be trading for less than their intrinsic value.
Example: Warren Buffett is known for value investing.
Volatility
Definition: A statistical measure of the dispersion of returns.
Example: The cryptocurrency market is known for high volatility.
Volume
Definition: The number of shares traded in a security or market during a given period.
Example: Trading volume spiked during the earnings announcement.
Wealth Management
Definition: A service that combines financial and investment advice.
Example: He hired a firm for full-service wealth management.
Yield
Definition: The income return on an investment.
Example: The bond had a yield of 3.5%.
Zero-Coupon Bond
Definition: A bond that is issued at a discount and repaid at face value without periodic interest.
Example: Zero-coupon bonds are popular for long-term goals.
Active Management
Definition: A strategy where a manager makes decisions about how to allocate assets.
Example: The fund’s active management helped it outperform.
Asset-Backed Security
Definition: A financial security backed by a pool of assets.
Example: Asset-backed securities include credit card receivables.
Basis Point
Definition: One hundredth of a percentage point (0.01%).
Example: The Fed raised rates by 25 basis points.
Bid Price
Definition: The price a buyer is willing to pay for a security.
Example: The bid price was lower than the ask.
Black Swan Event
Definition: An unpredictable event with severe consequences.
Example: The pandemic was considered a black swan event.
Callable Bond
Definition: A bond that can be redeemed by the issuer before maturity.
Example: Callable bonds offer higher yields to compensate for risk.
Capital Expenditure (CapEx)
Definition: Funds used by a company to acquire or upgrade assets.
Example: CapEx increased as the firm expanded operations.
Capital Structure
Definition: How a firm finances its overall operations through debt and equity.
Example: The firm rebalanced its capital structure.
Cash Equivalents
Definition: Assets that are readily convertible to cash.
Example: Money market funds are considered cash equivalents.
Clearing House
Definition: A financial institution that facilitates the exchange of payments.
Example: The clearing house ensures transaction security.
Credit Default Swap (CDS)
Definition: A financial swap that transfers credit exposure between parties.
Example: CDS contracts rose during the debt crisis.
Current Ratio
Definition: A liquidity ratio that measures a company's ability to pay short-term obligations.
Example: The company had a current ratio of 2.1.
Custodian Bank
Definition: A financial institution that holds customers’ securities for safekeeping.
Example: The custodian bank managed large institutional funds.
Discount Rate
Definition: The interest rate used in discounted cash flow (DCF) analysis.
Example: A lower discount rate increases present value.
Emerging Market
Definition: An economy that is in the process of rapid growth and industrialization.
Example: Emerging markets offer high-risk, high-reward potential.
Equity Financing
Definition: Raising capital through the sale of shares.
Example: The startup used equity financing to raise $5 million.
Ex-Dividend Date
Definition: The cutoff date to receive the next dividend payment.
Example: He bought the stock before the ex-dividend date.
Exchange Rate
Definition: The value of one currency for the purpose of conversion to another.
Example: The exchange rate fluctuated due to inflation.
Float
Definition: The number of shares available for trading of a particular stock.
Example: The float was limited, causing higher volatility.
Fund of Funds
Definition: An investment strategy where a fund invests in other funds.
Example: Fund of funds diversify across multiple strategies.
Growth Fund
Definition: A mutual fund that invests in companies expected to grow faster than the market.
Example: Her IRA included a growth fund.
Holding Period
Definition: The time duration an investment is held by an investor.
Example: Long holding periods reduce capital gains tax.
Index
Definition: A statistical measure of changes in a representative group of individual data points.
Example: The Dow Jones is a widely followed index.
Inflation Risk
Definition: The danger that rising prices will erode purchasing power.
Example: Treasury bonds offer protection against inflation risk.
Intangible Asset
Definition: An asset that lacks physical substance, like a patent or trademark.
Example: The brand name was a key intangible asset.
Laddering
Definition: A strategy of purchasing bonds with different maturity dates.
Example: Laddering reduces interest rate risk.
Limit Order
Definition: An order to buy or sell a stock at a specific price or better.
Example: He placed a limit order at $100 per share.
Liquidity Ratio
Definition: A measurement of a company’s ability to cover its short-term obligations.
Example: The firm maintained a healthy liquidity ratio of 1.8.
Margin
Definition: Borrowed money used to purchase securities.
Example: He bought stock on margin to amplify returns.
Margin Call
Definition: A demand by a broker for an investor to deposit more funds to cover potential losses.
Example: A sharp drop triggered a margin call.
Market Correction
Definition: A decline of 10% or more in the price of a security or market index.
Example: The market saw a correction after rapid growth.
Market Maker
Definition: A firm or individual who actively quotes two-sided markets to provide liquidity.
Example: Market makers help stabilize trading.
Micro-Cap Stock
Definition: A stock with a market capitalization below $300 million.
Example: Micro-cap stocks are often thinly traded.
Money Supply
Definition: The total amount of monetary assets available in an economy.
Example: An increase in the money supply can trigger inflation.
Municipal Bond
Definition: A bond issued by a state, municipality, or county to finance public projects.
Example: Interest from municipal bonds is tax-free.
Net Present Value (NPV)
Definition: The value of a series of future cash flows discounted to the present.
Example: The NPV of the project was $150,000.
Operating Income
Definition: The profit earned from a firm’s core business operations.
Example: Operating income rose due to cost savings.
Opportunity Cost
Definition: The loss of potential gain from other alternatives when one is chosen.
Example: The opportunity cost of holding cash was high.
Outstanding Shares
Definition: The total shares of stock currently held by shareholders.
Example: The firm has 10 million outstanding shares.
Overbought
Definition: A condition where a security is considered overvalued.
Example: Technical indicators showed the stock was overbought.
Oversold
Definition: A condition where a security is considered undervalued.
Example: The analyst saw opportunity in the oversold shares.
PEG Ratio
Definition: The price/earnings to growth ratio, used to determine a stock’s value.
Example: A PEG ratio under 1.0 can indicate undervaluation.
Private Equity
Definition: Investment in companies not listed on public exchanges.
Example: Private equity firms often restructure underperforming companies.
Price Action
Definition: The movement of a security's price over time.
Example: Traders analyzed the price action to predict trends.
Price Book Ratio
Definition: Market price divided by book value per share.
Example: A low P/B ratio can mean undervaluation.
Quantitative Easing
Definition: A monetary policy where central banks buy securities to inject liquidity.
Example: The Fed used QE during the financial crisis.
Quick Ratio
Definition: A measure of a company’s ability to meet short-term liabilities with liquid assets.
Example: A quick ratio above 1.0 shows good liquidity.
Return on Assets (ROA)
Definition: Net income divided by total assets.
Example: A higher ROA suggests efficient asset use.
Risk Premium
Definition: The return in excess of the risk-free rate of return.
Example: Investors demand a higher risk premium for volatile stocks.
Robo-Advisor
Definition: An automated platform offering investment advice using algorithms.
Example: She opened an account with a robo-advisor.
S&P MidCap 400
Definition: An index that tracks mid-sized U.S. companies.
Example: Mid-cap stocks in the S&P 400 gained 1.5%.
Securities Act of 1933
Definition: Federal legislation for the registration of securities with the SEC.
Example: The IPO was filed under the Securities Act of 1933.
Securities Exchange Act of 1934
Definition: Established the SEC and regulates secondary trading.
Example: Insider trading is prosecuted under this act.
Short-Term Investment
Definition: Assets expected to be sold or converted into cash within a year.
Example: Short-term investments offer liquidity.
Spread
Definition: The difference between the bid and ask prices.
Example: Wider spreads suggest less liquidity.
Stagflation
Definition: A period of slow economic growth and high inflation.
Example: The 1970s are known for stagflation.
Standard Deviation
Definition: A measure of investment volatility.
Example: A lower standard deviation indicates more consistent returns.
Stop Order
Definition: An order to buy or sell a stock once it reaches a specified price.
Example: He placed a stop order to minimize losses.
Systematic Risk
Definition: The risk inherent to the entire market or market segment.
Example: Systematic risk cannot be diversified away.
Tax-Deferred
Definition: Taxes on earnings are postponed until withdrawal.
Example: 401(k) accounts offer tax-deferred growth.
Taxable Account
Definition: An investment account not offering tax advantages.
Example: Capital gains in taxable accounts are taxed annually.
Technical Indicator
Definition: A tool used to evaluate investments and trading patterns.
Example: RSI is a popular technical indicator.
Ticker Symbol
Definition: An abbreviation used to uniquely identify publicly traded shares.
Example: AAPL is Apple’s ticker symbol.
Time Value of Money
Definition: The concept that money available today is worth more than the same amount in the future.
Example: The time value of money is key in valuation.
Total Return
Definition: The gain or loss of an investment including income and capital appreciation.
Example: The fund’s total return was 12% last year.
Underwriter
Definition: An entity that administers the public issuance and distribution of securities.
Example: The investment bank served as underwriter for the IPO.
Unsystematic Risk
Definition: Company- or industry-specific risk that is diversifiable.
Example: Diversifying helps manage unsystematic risk.
Variable Cost
Definition: A cost that varies with the level of output.
Example: Raw materials are a typical variable cost.
Venture Capital
Definition: Funding given to startups and small businesses with growth potential.
Example: The app developer secured venture capital.
Volume Weighted Average Price (VWAP)
Definition: The average price of a security over a specific period, weighted by volume.
Example: Traders use VWAP as a benchmark.
Voluntary Disclosure
Definition: Information a firm chooses to share with investors beyond required filings.
Example: The company’s voluntary disclosure improved transparency.
Wash Sale
Definition: The sale of a security at a loss followed by a repurchase within 30 days.
Example: The IRS disallows losses on wash sales.
Yield Curve
Definition: A graph showing interest rates across different maturity dates.
Example: An inverted yield curve can signal recession.
Zombie Company
Definition: A firm that earns just enough to continue operating and service debt but not to grow.
Example: Low interest rates help zombie companies survive.
Account Reconciliation
Definition: The process of ensuring that two sets of records match.
Example: She performed account reconciliation at month-end.
Accrued Interest
Definition: Interest that has been earned but not yet received or paid.
Example: The bond’s accrued interest is calculated daily.
Actively Managed Fund
Definition: A fund where a manager makes investment decisions to outperform the market.
Example: He prefers actively managed funds for potential alpha.
After-Hours Trading
Definition: Trading that occurs outside regular trading hours.
Example: The stock rose 5% in after-hours trading.
Alternative Investment
Definition: An investment in asset classes other than stocks, bonds, or cash.
Example: Private equity is considered an alternative investment.
Annual Percentage Rate (APR)
Definition: The annual rate charged for borrowing or earned through an investment.
Example: The loan has an APR of 6.2%.
Ask Price
Definition: The lowest price a seller is willing to accept.
Example: The ask price was $102 per share.
Authorized Shares
Definition: The maximum number of shares a company is legally allowed to issue.
Example: Only a portion of authorized shares are outstanding.
Back-End Load
Definition: A fee paid when selling a mutual fund.
Example: The fund has a 2% back-end load.
Balance of Trade
Definition: The difference between a country’s exports and imports.
Example: A trade surplus results from a positive balance of trade.
Bankruptcy
Definition: A legal proceeding involving a person or business unable to repay debts.
Example: The company filed for Chapter 11 bankruptcy.
Bearish
Definition: Expecting a decline in prices.
Example: Investors turned bearish after weak earnings.
Benchmark
Definition: A standard against which performance is measured.
Example: The S&P 500 is used as a benchmark index.
Beta Coefficient
Definition: A measure of a stock's volatility in relation to the market.
Example: A beta of 1.3 implies higher market sensitivity.
Bond Ladder
Definition: A strategy of purchasing bonds with staggered maturities.
Example: A bond ladder reduces reinvestment risk.
Book Runner
Definition: The main underwriter of a new issue of securities.
Example: The book runner manages the allocation of shares.
Break-Even Point
Definition: The point at which total revenue equals total cost.
Example: The business reached its break-even point in 6 months.
Bullish
Definition: Expecting prices to rise.
Example: The analyst was bullish on the tech sector.
Callable Preferred Stock
Definition: Preferred stock that can be redeemed by the issuer before maturity.
Example: The company exercised its call option on the preferred stock.
Capital Lease
Definition: A lease classified as an asset and liability on the lessee’s balance sheet.
Example: Capital leases include ownership obligations.
Capitalization
Definition: The total value of a company’s outstanding shares.
Example: The firm’s market capitalization crossed $500 billion.
Chartist
Definition: An investor who uses charts and technical analysis to forecast prices.
Example: The chartist predicted a breakout.
Class A Shares
Definition: Shares with different rights than other classes, often favored by insiders.
Example: Class A shares have more voting power.
Collateral
Definition: An asset pledged by a borrower to secure a loan.
Example: The house served as collateral for the mortgage.
Commodities
Definition: Raw materials like oil, gold, and wheat traded on exchanges.
Example: Commodity prices surged due to supply issues.
Convertible Preferred Stock
Definition: Preferred stock that can be converted into common stock.
Example: Investors converted their preferred shares to participate in growth.
Coupon Rate
Definition: The annual interest rate paid on a bond.
Example: The bond’s coupon rate was 4.5%.
Covered Call
Definition: An options strategy where the investor sells call options against owned stock.
Example: He used covered calls to generate income.
Credit Spread
Definition: The difference in yield between securities with different credit qualities.
Example: Wider credit spreads indicate rising default risk.
Cross Rate
Definition: The exchange rate between two currencies, neither of which is the U.S. dollar.
Example: The EUR/JPY cross rate strengthened.
Custody
Definition: The safekeeping of securities by a custodian bank.
Example: The custodian provides custody services for mutual funds.
Debt Instrument
Definition: A paper or electronic obligation that enables the issuing party to raise funds.
Example: Treasury bills are debt instruments.
Defensive Stock
Definition: A stock that provides consistent dividends and stable earnings.
Example: Utilities are considered defensive stocks.
Depreciation Expense
Definition: The allocated portion of the cost of a fixed asset for a period.
Example: Depreciation expense lowered taxable income.
Derivatives Market
Definition: A financial market for derivatives like options and futures.
Example: The derivatives market helps manage risk.
Diluted Earnings Per Share
Definition: EPS calculated assuming all convertible securities are exercised.
Example: Diluted EPS accounts for future obligations.
Discretionary Income
Definition: Income remaining after deducting taxes and necessities.
Example: He invested his discretionary income in stocks.
Distribution Yield
Definition: Annual distribution expressed as a percentage of NAV.
Example: REITs usually have high distribution yields.
Double Bottom
Definition: A technical analysis pattern indicating potential reversal from a downtrend.
Example: The chart showed a bullish double bottom.
Duration
Definition: A measure of a bond’s sensitivity to interest rate changes.
Example: Longer duration bonds are more sensitive.
Earnings Guidance
Definition: A company’s projection of future earnings.
Example: The firm’s earnings guidance was above expectations.
Enterprise Value to EBITDA
Definition: A valuation metric comparing enterprise value to earnings before interest, taxes, depreciation, and amortization.
Example: A lower EV/EBITDA may indicate undervaluation.
Environmental, Social, and Governance (ESG)
Definition: Investment criteria focused on sustainable and ethical factors.
Example: ESG funds gained popularity with younger investors.
Exchange-Traded Note (ETN)
Definition: A debt security traded on exchanges, backed by a bank.
Example: ETNs can offer exposure to alternative assets.
Face Value
Definition: The nominal value of a bond, stock, or currency.
Example: The bond’s face value was $1,000.
Fee-Based Account
Definition: An investment account that charges a flat fee instead of commissions.
Example: Fee-based accounts can reduce conflicts of interest.
Fixed Asset
Definition: A long-term tangible asset used in operations.
Example: The factory is listed as a fixed asset.
Float Shares
Definition: Shares of a company available for trading by the public.
Example: The company has 20 million float shares.
Floating Rate Note
Definition: A bond with variable interest payments tied to a benchmark.
Example: The bank issued a floating rate note linked to LIBOR.
Foreign Exchange Reserves
Definition: Holdings of foreign currencies by a central bank.
Example: China has the largest foreign exchange reserves.
Form 10-K
Definition: A comprehensive annual report filed with the SEC.
Example: Investors studied the 10-K for insights.
Form 10-Q
Definition: A quarterly report filed with the SEC.
Example: The 10-Q revealed strong earnings growth.
Free Cash Flow Yield
Definition: Free cash flow divided by a company's market capitalization.
Example: High FCF yield can signal undervaluation.
Fundamental Analysis
Definition: Analyzing a company’s financials and economic indicators to assess value.
Example: Warren Buffett uses fundamental analysis.
Fungibility
Definition: The ability to interchange assets of the same type.
Example: Bitcoin is fungible; each unit is equivalent.
Gearing Ratio
Definition: A financial ratio that compares a company’s debt to equity.
Example: High gearing can indicate leverage risk.
Golden Parachute
Definition: A large financial compensation offered to executives if they are terminated.
Example: The CEO received a golden parachute after the merger.
Green Bond
Definition: A bond issued to fund environmentally friendly projects.
Example: The company issued green bonds to support solar energy.
Gross Profit
Definition: Revenue minus cost of goods sold.
Example: Gross profit increased due to lower production costs.
Growth at a Reasonable Price (GARP)
Definition: An investment strategy combining growth and value.
Example: She invested in GARP stocks.
Haircut
Definition: The reduction applied to the value of an asset for risk management.
Example: Repo agreements often involve a haircut on securities.
Hard Currency
Definition: A stable and widely accepted currency.
Example: The US dollar is considered a hard currency.
Headline Risk
Definition: The risk that news stories will affect an investment's price.
Example: Scandals create headline risk for listed companies.
Holding Company
Definition: A parent corporation that owns controlling interests in other companies.
Example: Berkshire Hathaway is a well-known holding company.
Hurdle Rate
Definition: The minimum acceptable rate of return on an investment.
Example: Projects with IRR below the hurdle rate are rejected.
Implied Volatility
Definition: The expected volatility of a security’s price embedded in options pricing.
Example: Traders monitor implied volatility for pricing options.
Indenture
Definition: A formal debt agreement between a bond issuer and bondholders.
Example: The bond indenture outlines covenants and terms.
Index Arbitrage
Definition: A trading strategy exploiting differences between index futures and their underlying assets.
Example: Hedge funds often engage in index arbitrage.
Inflation-Protected Bond
Definition: A bond that adjusts interest payments based on inflation.
Example: TIPS are popular inflation-protected securities.
Insolvency
Definition: A financial state where liabilities exceed assets.
Example: The company filed for bankruptcy due to insolvency.
Institutional Investor
Definition: An organization investing large sums, like pension funds and insurance companies.
Example: Institutional investors often influence market direction.
Intelligent Investor
Definition: A term popularized by Benjamin Graham promoting value investing.
Example: The Intelligent Investor is considered a classic finance book.
Interest Coverage Ratio
Definition: EBIT divided by interest expense.
Example: A higher ratio shows better debt servicing ability.
Investment Advisor
Definition: A person or firm that provides investment recommendations.
Example: Registered investment advisors must act as fiduciaries.
Investment Policy Statement (IPS)
Definition: A document outlining an investor's objectives and strategy.
Example: Advisors prepare an IPS for clients.
IPO Lock-Up Period
Definition: A window after an IPO during which insiders cannot sell shares.
Example: Stock dropped when the IPO lock-up period ended.
Joint Venture
Definition: A business arrangement where two or more parties collaborate for a specific goal.
Example: The two firms created a joint venture to enter the Asian market.
J-Curve
Definition: A trend showing initial loss followed by gains.
Example: Private equity funds often exhibit a J-curve.
K-1 Form
Definition: A tax document issued to partners in a partnership.
Example: He used the K-1 form to report investment income.
Key Rate Duration
Definition: A measure of bond price sensitivity to changes in specific maturity yields.
Example: Used for risk management in fixed income.
Know Your Customer (KYC)
Definition: A process that verifies client identities and assesses risk.
Example: Brokers are required to perform KYC checks.
LBO (Leveraged Buyout)
Definition: Acquisition using a significant amount of borrowed money.
Example: Private equity firms often use LBOs.
Lead Underwriter
Definition: The primary investment bank managing a security issuance.
Example: Goldman Sachs was the lead underwriter for the IPO.
Liquidity Trap
Definition: A situation where low interest rates fail to stimulate borrowing.
Example: Japan experienced a liquidity trap in the 1990s.
Living Will (Financial)
Definition: A plan that outlines how a bank would unwind during a collapse.
Example: Big banks must submit living wills to regulators.
Loan-to-Value Ratio (LTV)
Definition: Loan amount divided by appraised asset value.
Example: High LTV can increase default risk.
Locked-In
Definition: Unable to sell an investment without triggering taxes or penalties.
Example: He felt locked-in due to capital gains.
Macroeconomics
Definition: The study of the economy as a whole, including inflation, unemployment, and growth.
Example: Macroeconomics helps explain central bank policy.
Managed Account
Definition: An investment account managed by a professional advisor.
Example: High-net-worth individuals often use managed accounts.
Mandate
Definition: An instruction from an investor to an advisor or fund manager.
Example: The fund’s mandate includes only ESG-compliant companies.
Margin Account
Definition: An account that allows investors to borrow funds for trading.
Example: She opened a margin account to increase buying power.
Market Efficiency
Definition: The degree to which asset prices reflect all available information.
Example: In an efficient market, no strategy consistently outperforms.
Market Sentiment
Definition: The overall attitude of investors toward a market or asset.
Example: Bearish sentiment dragged prices lower.
Market Timing
Definition: Attempting to predict market direction to buy/sell at the right time.
Example: Most experts caution against market timing.
Mark-to-Market
Definition: Adjusting the value of assets to reflect current market prices.
Example: Futures accounts are settled daily using mark-to-market.
Maturity Date
Definition: The date a debt instrument is due to be repaid.
Example: The bond matures in 10 years.
Mean Reversion
Definition: The theory that asset prices eventually return to their long-term mean.
Example: He bought during a dip, expecting mean reversion.
Monte Carlo Simulation
Definition: A modeling technique using random sampling to estimate outcomes.
Example: Monte Carlo analysis forecasts retirement success rates.
Mortgage-Backed Security (MBS)
Definition: A type of asset-backed security secured by a collection of mortgages.
Example: The financial crisis was triggered in part by risky MBS.
Moving Average
Definition: A stock indicator that averages prices over a period to identify trends.
Example: The 50-day moving average crossed the 200-day.
Municipal Fund Security
Definition: A type of investment similar to a mutual fund offered by a municipal entity.
Example: 529 plans are considered municipal fund securities.
Mutual Fund Expense Ratio
Definition: The percentage of fund assets used for administrative and operational expenses.
Example: Lower expense ratios improve investor returns.
NAV Premium/Discount
Definition: The difference between a fund's market price and its net asset value.
Example: The ETF traded at a discount to NAV.
Negative Interest Rate
Definition: A situation where lenders pay interest to borrowers.
Example: Some European bonds have negative interest rates.
Net Interest Margin
Definition: The difference between interest income and interest paid out.
Example: Banks aim to maximize their net interest margin.
Net Operating Income (NOI)
Definition: Income from property after operating expenses, before taxes and financing.
Example: NOI is used to evaluate real estate performance.
Non-Cumulative Preferred Stock
Definition: Preferred stock that does not pay missed dividends in arrears.
Example: Investors in non-cumulative stock accept more risk.
Non-Deliverable Forward (NDF)
Definition: A cash-settled, short-term forward contract in a currency that is not freely convertible.
Example: NDFs are common in emerging markets.
Notional Value
Definition: The total value of a leveraged position's assets.
Example: The notional value of the swap exceeded $10 million.
OAS (Option-Adjusted Spread)
Definition: The yield spread that accounts for embedded options in bonds.
Example: OAS helps compare callable and non-callable bonds.
Open-End Fund
Definition: A fund that issues and redeems shares at NAV.
Example: Mutual funds are open-end funds.
Operating Cash Flow
Definition: Cash generated from a company's normal business operations.
Example: Healthy operating cash flow supports dividends.
Opportunity Zone
Definition: Designated areas where investments may receive tax advantages.
Example: They invested in an opportunity zone to defer capital gains.
Overnight Rate
Definition: The interest rate banks charge each other for overnight loans.
Example: The central bank controls the overnight rate.
Pari Passu
Definition: Equal footing; all parties treated equally.
Example: Creditors were ranked pari passu in the bankruptcy.
Participation Rate
Definition: The proportion of the labor force that is working or seeking work.
Example: A higher participation rate signals a strong job market.
Payment-In-Kind (PIK)
Definition: A financial instrument that pays interest in additional securities.
Example: PIK bonds help preserve cash flow.
Pension Fund
Definition: A pool of assets forming an income source for retirees.
Example: Teachers are covered under a public pension fund.
Performance Fee
Definition: A fee paid to a fund manager based on positive returns.
Example: The hedge fund charged a 20% performance fee.
Phantom Stock
Definition: A benefit giving the right to cash bonuses based on stock performance.
Example: Phantom stock aligns executives with shareholders.
Plowback Ratio
Definition: The portion of earnings retained for reinvestment.
Example: A high plowback ratio suggests growth focus.
Point-and-Figure Chart
Definition: A charting technique using price movements but not time.
Example: Traders used point-and-figure charts for breakouts.
Portfolio Turnover
Definition: A measure of how frequently assets are bought and sold.
Example: High turnover can result in tax inefficiency.
Position Sizing
Definition: Determining how much to invest in a particular trade.
Example: Proper position sizing helps manage risk.
Preferred Return
Definition: The minimum return investors must receive before profits are split.
Example: The preferred return was set at 8%.
Prepayment Risk
Definition: The risk that a bond is paid off early, reducing interest income.
Example: Mortgage securities are exposed to prepayment risk.
Price Channel
Definition: A range in which a stock’s price fluctuates over time.
Example: The stock remained in a sideways price channel.
Prime Brokerage
Definition: Services offered by banks to hedge funds and large investors.
Example: The hedge fund used a prime broker for leverage.
Principal Protected Note (PPN)
Definition: A structured product that guarantees return of principal.
Example: PPNs are used in conservative investing.
Private Placement
Definition: A securities offering not made through a public offering.
Example: Startups often raise capital via private placement.
Program Trading
Definition: Automated trading based on predetermined criteria.
Example: Program trading caused a surge in market volume.
Quant Fund
Definition: A fund that uses quantitative models to make trades.
Example: Quant funds rely on algorithms over human input.
R-Squared
Definition: A statistical measure of how closely a fund's performance correlates with a benchmark.
Example: An R-squared near 100 means close correlation.
Recession-Proof Stock
Definition: Stocks that tend to perform well during economic downturns.
Example: Consumer staples are often recession-proof.
Red Herring Prospectus
Definition: A preliminary registration statement for an IPO.
Example: The red herring outlines details before final pricing.
Registered Investment Advisor (RIA)
Definition: An individual or firm that advises clients and is registered with the SEC or state.
Example: RIAs must adhere to fiduciary standards.
Reinvestment Risk
Definition: The risk of reinvesting proceeds at lower interest rates.
Example: Callable bonds increase reinvestment risk.
Relative Strength Index (RSI)
Definition: A momentum oscillator used in technical analysis.
Example: An RSI above 70 indicates overbought conditions.
Repo (Repurchase Agreement)
Definition: A short-term borrowing agreement to sell and repurchase securities.
Example: Repos provide short-term liquidity.
Return on Capital Employed (ROCE)
Definition: Measures profitability and efficiency of capital use.
Example: High ROCE indicates effective capital management.
Revenue Bond
Definition: A municipal bond backed by revenues from a specific project.
Example: Revenue bonds fund toll roads and airports.
Rights Issue
Definition: An offer to existing shareholders to buy additional shares at a discount.
Example: The company raised capital via a rights issue.
Risk-Adjusted Return
Definition: Return measured relative to the risk taken.
Example: Investors compare risk-adjusted returns, not just returns.
Safe Harbor
Definition: A provision that reduces legal or regulatory liability.
Example: The company used a safe harbor for forward-looking statements.
Secondary Offering
Definition: An additional issuance of shares after the IPO.
Example: The company diluted shares in a secondary offering.
Sector Fund
Definition: A mutual fund or ETF focused on a specific industry sector.
Example: He invested in a healthcare sector fund.
Settlement Date
Definition: The date a trade is finalized.
Example: Equities settle on T+2.
Sharpening Ratio
Definition: Modified Sharpe Ratio adjusting for skewness and kurtosis.
Example: Used in hedge fund performance evaluation.
Short Float
Definition: The percentage of a company's shares currently sold short.
Example: High short float may lead to a squeeze.
Side Pocket
Definition: A mechanism used by hedge funds to separate illiquid investments.
Example: Side pockets protect remaining investors.
Smart Beta
Definition: A strategy combining passive and active investing rules.
Example: Smart beta ETFs follow custom factor indices.
Soft Dollar
Definition: An arrangement allowing managers to pay for services with client commissions.
Example: Soft dollars raise transparency concerns.
Split Ratio
Definition: The ratio at which a stock split is executed.
Example: A 2-for-1 split doubles the number of shares.
SPV (Special Purpose Vehicle)
Definition: A subsidiary created to isolate financial risk.
Example: SPVs were used during the financial crisis.
Stochastic Oscillator
Definition: A technical indicator comparing a security’s closing price to its price range.
Example: Used to identify overbought or oversold levels.
Tax-Loss Harvesting
Definition: Selling securities at a loss to offset capital gains tax.
Example: Advisors implement tax-loss harvesting in December.
Tracking Error
Definition: The deviation between a portfolio's return and its benchmark.
Example: Low tracking error indicates tight benchmark alignment.
Treasury Bill (T-Bill)
Definition: A short-term U.S. government debt obligation.
Example: T-bills mature in less than a year.
UCITS
Definition: A regulatory framework for investment funds in the European Union.
Example: UCITS funds are passportable across EU countries.
Unit Investment Trust (UIT)
Definition: An investment company offering a fixed portfolio.
Example: UITs provide defined maturity and stability.
VIX (Volatility Index)
Definition: A measure of market expectations for volatility.
Example: The VIX spiked during the market downturn.
Wash Trading
Definition: Illegal activity of buying and selling securities to mislead the market.
Example: Regulators penalize wash trading schemes.
Whisper Number
Definition: An unofficial earnings estimate circulated by analysts.
Example: The company beat the whisper number.
Yield to Maturity (YTM)
Definition: The total return anticipated on a bond if held until maturity.
Example: YTM helps compare bonds with different coupons.
Z-Score
Definition: A statistical measure of standard deviations from the mean.
Example: Z-score helps detect abnormal trading behavior.