A demographic group defined by occupation that is commonly targeted by media and advertising companies....more on ABC1
Abnormal return
The excess of actual return over the level of return that would be expected given the riskiness of a portfolio....more on Abnormal return
Absolute return
An absolute return is the actual amount of money made by an investment ; the actual gain as a percentage of the amount invested....more on Absolute return
Acceptances
Agreements by the shareholders of a company subject to a bid to sell their shares to the bidder....more on Acceptances
Accepting house
A financial institution that accepts (guarantees) bills of exchange in return for a fee...more on Accepting house
Actuaries assess financial risk, calculate insurance premiums and value pension funds....more on Actuary
Ad driven media
The parts of the media that are dependent on advertising for their revenues, which therefore tend to be cyclical....more on Ad driven media
Adjusted EPS
EPS adjusted for non-cash or one-off items such as amortisation and exceptional costs to give a better indication of underlying trends...more on Adjusted EPS
Adjusted operating profit
Operating profit adjusted for non-cash or one-off items to give a better indication of underlying trends....more on Adjusted operating profit
Adjusted present value
An alternative to NPV. Cash flows are discounted using the cost of equity (instead of the WACC) and a separate adjustment is made for financing (i.e, the tax savings....more on Adjusted present value
Administrative receivership
The running of a company, or management of particular assets, is handed over to a receiver appointed by creditors in order to recover debts...more on Administrative receivership
ADR
A security issued in the US which bundles together a number of shares in a non-US company. ...more on ADR
Adverse opinion
An auditor's warning that a company's reported accounts do not show a true and fair view....more on Adverse opinion
Adverse selection
The tendency for those most at risk to be those most likely to buy insurance....more on Adverse selection
Stockbroking services that offer investors advice from a stockbroker but where trades are only made on the client's instructions....more on Advisory broking
AER
Annual effective rate; a number that can be used to compare different fixed interest investments taking into account the effects of compounding....more on AER
Agency cross
A trade that a broker matches directly between two of its clients, bypassing the market...more on Agency cross
Agency theory
The economic analysis of the conflicts of interest between owners and managers of assets....more on Agency theory
An option which can be exercised at the strike price at anytime before the expiry date....more on American option
Amortisation
Amortisation is the equivalent of depreciation for intangible assets....more on Amortisation
Angel investor
An individual investor who invests in a start-up that is unable to raise venture capital....more on Angel investor
Annual effective rate
A number that can be used to compare different fixed interest investments taking into account the effects of compounding....more on Annual effective rate
Annual premium equivalent
A measure that allows the calculation of new business numbers for an insurer that combines single premium and regular premium business....more on Annual premium equivalent
Annual report
The most important single regular release of information from the to investors...more on Annual report
Annuity
A regular income until the death purchased from a life insurance company for a lump sum....more on annuities
AON order
An all or nothing order is either executed in full or not at all....more on AON orders
Arbitrage pricing theory; a valuation method which is theoretically sound but which is difficult to apply in practice....more on APT
APV
Adjusted present value; an alternative to NPV. Cash flows are discounted using the cost of equity with a separate adjustment for financing....more on APV
Arbitrage
Making a gain through trading securities without committing or risking money....more on Arbitrage
The testing of a financial model by using it on past date and then comparing the 'predictions' to what actually happened....more on back-testing
Backfill bias
The distortion caused by the inclusion of historical of historical data of new index constituents....more on backfill bias
Backward integration
Increasing vertical integration by acquiring suppliers or otherwise increasing level of self supply....more on backward integration
Backwardation
Backwardation is the opposite of forwardation; it occurs when the price of the future is less than the spot price of underlying commodity....more on backwardation
The balance sheet shows what assets and liabilities the company has, and how the business is funded....more on Balance sheet
Bancassurance
The sale of insurance and banking products through the same channel, most commonly bank branches selling insurance....more on Bancassurance
Banking covenants
Agreements between a company and its creditors that it should that the company should operate within certain limits, typically on debt levels, asset sales or gearing....more on Banking covenants
Bankruptcy
A person who is insolvent (unable to pay their debts) can be declared bankrupt. This means their assets and income become, for a period, by a trustee who attempts to clear what debts they can....more on Bankruptcy
Barrel of oil
In the oil industry, a barrel is 42 US gallons, approximately equal to 159 litres....more on Barrel of oil
Barrier options
A type of exotic option whose value depends on the underlying passing (or not) a particular price point....more on Barrier options
Barriers to entry
Anything that makes it difficult for a new entrant to break into a market....more on Barriers to entry
A basis point is to one hundredth of a percentage point (i.e. 0.01%)....more on basis points
Basis risk
A basis risk is the risk that the value of a hedge may not move in perfect opposition to the position it hedges....more on basis risk
bboe
Billions of barrels of oil equivalent. A single number combining the volumes of oil and gas production....more on bboe
Bear
An investor who is pessimistic about the prospects for a market, a sector or a particular security....more on Bear
Bear raid
An attempt by traders to force the price down of a security by heavy forward selling. Such market manipulation is illegal in most countries....more on Bear raid
Bear squeeze
A price rise that causes bears to buy to cover their positions. The demand this creates causes further price rises....more on Bear squeeze
Bear trap
A short term dip in the price of a security that tempts bears into positions that make a loss when the price then rises again....more on Bear trap
Bearer securities
A security which gives the bearer of a paper certificate ownership, with no register of owners being maintained....more on Bearer securities
Behavioural finance
A branch of financial economics that models the behaviour of investors, rather than simply assuming that they are rational and risk averse....more on Behavioural finance
Benchmark
In an investment context most likely to mean a performance benchmark or a benchmark price....more on Benchmark
Benchmark index
The index or other measure against which the performance of a fund or portfolio is measured....more on Benchmark index
Benchmark price
Prices of commodities in a particular well specified, widely traded, form....more on Benchmark price
Beta is a measure of the correlation between the value of a security and the market. Beta is used to calculate discount rates for CAPM....more on Beta
Bid price
The highest price at which a buyer is willing to buy a particular security. The buyer may be a market maker or an ordinary investor....more on Bid price
Bid-offer spread
The difference between the prices at which shares can be bought and sold....more on Bid-offer spread
The most widely used method of option valuation. More complex models are sometimes necessary as it uses a number of simplifying assumptions....more on Black-Scholes
Black swan
An event that is highly improbable (and unforeseen and therefore omitted from models) that nonetheless occurs and has a significant impact.....more on Black swans
Blue chip
A large company. Blue chip shares are generally lower risk. FTSE 100 constituents are generally considered blue chips....more on blue chips
Boe
Barrels of oil equivalent is a single measure combining oil and natural gas production....more on Boe
Bonds
A bond is a security that pays interest. The majority of bonds have a fixed life at the end of which the principal is returned....more on Bonds
Bonus issue
The issue of new shares to existing shareholders at no charge in proportion to their existing shareholdings. It is basically a bookkeeping exercise....more on Bonus issue
The ratio of the orders taken in a period to the amount invoiced over the same period. Most commonly used in the semiconductor industry....more on Book to bill ratio
Bottom fishing
Any investment strategy that relies on buying extremely cheap; an extreme form of value investing....more on Bottom fishing
A small specialist financial institution such as a fund manager or broker....more on Boutique
Brand
The identifying name and other distinguishing characteristics attached to a business and its products or services....more on Brand
Brand dilution
Brand dilution is the weakening of a brand though its overuse: often from ill judged brand extension....more on Brand dilution
Brand extension
Brand extension is the widening of the range of products sold using a particular brand. If overdone it can risk diluting a brand....more on Brand extension
Break-even
The break-even point is the level of sales (revenues or volumes) needed to cover the fixed costs; the level of sales at which neither a profit or loss is made....more on Break-even
Brent crude
The accepted world benchmark crude oil which is used to price two thirds of the world's internationally traded crude oil supplies....more on Brent crude
Bubble
Security prices far above the levels which can be justified by any rational assessment of the real value of future cash flows. Bubbles inevitably burst....more on Bubble
Any strategy that holds securities for long periods, avoiding frequent trading....more on buy and hold
Buy-side analyst
An analyst who works for an institutional investor such as a fund management company, usually producing research for internal use rather than publication....more on buy-side analysts