Fibre optic cable that has been laid but is not currently used....more on Dark fibre
Data revenues
The revenue generated from carrying data rather than voice telecommunications traffic. Data revenues are likely to have different margins and growth prospects from voice....more on Data revenues
Dawn raid
The purchase of a large shareholding in a target company in a very short time, prior to the announcement of a takeover bid....more on Dawn raid
Day trading
Actively trading securities during the trading day but closing all positions by the end of the day. Very risky, potentially very profitable....more on Day trading
Days convention
An assumption made to simplify the calculation of accrued interest by rounding the number of days in a year or month....more on Days convention
DCF valuation
The calculation of the present value of a stream of future cash flows taking into account both risk and the time expected to elapse before the cash is received....more on DCF valuation
Dead cat bounce
A recovery in the price of a security that does not indicate any sustained recovery or a significant re-rating, but rather a slight recovery from very low levels....more on dead cat bounce
Deal comps
The use of comparisons of the valuations at which deals, such as takeovers, have occurred, in valuing a company...more on deal comps
An agreement 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 debt covenants
A defensive business is one whose profits are not particularly sensitive to economic conditions....more on defensive
Defensive patent
A patent that is registered with the intention of providing a defence against other patent holders, rather than being enforced against others....more on defensive patents
Deferred income
Income received during an accounting period for goods and services not yet supplied....more on deferred income
Deferred shares
Shares that have lesser rights than ordinary shares in receiving dividends or repayments of capital....more on deferred shares
Deferred tax
A balance sheet line to record accrue between the periods in which events occur and the periods in which they are taxable....more on deferred tax
Deflation
Negative inflation. Most likely in particular industries or during recessions....more on deflation
Delivery vs payment
Making payment for securities only on delivery, to minimise the risk to which securities market participants are exposed....more on delivery vs payment
Delta
The delta of a derivative is the rate of change in the price of a derivative with the price of the underlying....more on Delta
Delta hedging
The delta of a derivative can be used to hedge a holding of the derivative with a position in the underlying security or vice-versa....more on Delta hedging
Dematerialised securities
Securities that can be held without ownership of paper certificates: ownership is recorded in a depositary...more on Dematerialised securities
Demerger
Spinning off business into a completely separate company. Usually done by distributing shares in the new company to existing company....more on Demerger
Depletion
The allocation of cost to the profit and loss account, spread out over several years according the the measured usage of the asset in each year....more on depletion
The allocation of the cost of an asset to the profit and lost account by allocating part of the cost to each year of its estimated useful life....more on Depreciation
Depression
A depression is a severe sustained recession. There is no clear dividing line between a recession and a depression....more on Depression
Derivatives
A security, the value of which depends on the value of another security. Used to either hedge risks or for speculative investments....more on Derivatives
Diluted EPS
An EPS number that takes account of shares to be issued in the future, as well as those currently issued....more on Diluted EPS
Dealing in a companies securities by directors. Subject to special disclosure rules....more on Directors dealing
Dirty price
The dirty price of a bond is the actual amount paid to buy a bond. Unlike the clean price it is not adjusted for accrued interest....more on Dirty price
Disclosure
The revealing of information to investors. The extent of disclosure in important to investors....more on Disclosure
Discount broking
A low cost stock broking service that does not include any advice or portfolio management but simply buying and selling securities...more on Discount broking
Discount rate
The rate used to calculate the present value of future cash flows in a discounted cash flow calculation...more on discount rate
Discount window
A collateralised lending facility run by a central bank, lending to banks in order to ensure their short term liquidity...more on discount window
Discounted cash flow
The calculation of the present value of a stream of future cash flows, taking into account both risk and the time expected to elapse before the cash is received....more on Discounted cash flow
Discretionary broking
A stock broking service where the broker manages a portfolio and the client need have no involvement in buying and selling securities....more on Discretionary broking
The removal of intermediaries from a process, supply chain or market. The commonest financial example is the issue of bonds to replace bank borrowing....more on Disintermediation
Disruptive technology
A new technology, that radically transforms markets, creates wholly new markets or destroys existing markets for other technologies....more on Disruptive technology
Risk that is specific to a particular security or sector so its impact on a diversified portfolio is limited....more on Diversifiable risk
Diversification
The reduction of risk achieved by buying a portfolio of securities whose returns are not correlated....more on Diversification
Dividend cover
How many times over an year's dividend could have been paid out of the year's profits....more on Dividend cover
Dividend discount model
A financial model that values shares at the discounted value of future dividend payments. This is theoretically the most correct way of valuing shares....more on Dividend discount model
In the oil and gas industries; refining and distribution as opposed to upstream exploration and production....more on Downstream
DPS
Dividend per share; total dividend ÷number of shares in issue....more on DPS
DRIP
A dividend reinvestment plan allows shareholders to cheaply re-invest dividends in buying more shares....more on DRIP
Drug pipeline
The drugs a pharmaceutical company is developing testing. This includes completely new drugs, variants of old drugs and new applications of old drugs....more on Drug pipeline
Dry natural gas
The remainder of natural gas after the removal of both liquefiable hydrocarbons and most of the non-hydrocarbon gases....more on Dry natural gas
Dual listing
A way in which a group can have equal listings on two markets, by using a separate holding company for each market....more on dual listing
Due diligence
The checks that are carried out before a major transaction: by bidders before a takeover offer, by underwriters before an IPO....more on Due diligence
Dumb money effect
The tendency of investments popular with private investors to under-perform...more on Dumb money effect
Duopoly
A market dominated by two suppliers to the extent that they jointly control prices....more on Duopoly
Duration
The duration is a measure of the average time it takes a bondholder to get their money (both principal and interest)....more on Duration
Dutch disease
The damaging effects of inflows money into a country as a result of exports of natural resources, and similar sources....more on Dutch disease
DVP
Making payment for securities only on delivery, to minimise the risk to which securities market participants are exposed....more on DVP
Dynamic hedge
A hedge that needs to be adjusted as the price (and sometimes other characteristics) of the portfolio or security it is hedging changes....more on dynamic hedging
A portfolio that provides the best expected returns for a given level of risk, or, equivalently, the lowest risk possible for a given level of expected returns....more on Efficient portfolio
EGM
A meeting of shareholders other than the AGM...more on EGM
Electronic point of sale
Systems that handle both cash and card transactions. They also often connect to networks making sales information instantly available....more on Electronic point of sale
An option that is part of another security. It does not trade by itself, but it does affect the value of the security of which forms a part....more on Embedded option
Embedded value
This is an estimate of the economic worth of a life insurance business. In essence, it is the present value of distributable earnings which is made up of two components....more on Embedded Value
The value of a company's business rather than the company; the answer the the question "how much would it cost to buy full ownership free of debt?"....more on Enterprise value
EPIC code
A memorable code used to identify UK listed securities. Now called TIDMs....more on EPIC code
EPOS
Systems that handle both cash and card transactions. They also often connect to networks making sales information instantly available....more on EPOS
EPS
Earnings per share. Net profit divided by the number of shares in issue....more on EPS
Equity
The stake a businesses owners have in it; assets minus liabilities....more on Equity
Equity cure
The injection of equity finance to cover a shortfall that would otherwise breach a debt covenant....more on equity cure
Equity risk premium
The difference between the expected rate of return of the stock market and the risk free rate of return; the amount of extra return investors demand for taking the extra risk of equity investment....more on Equity risk premium
ERP
The integration of diverse business systems; usually a reference to the software used to achieve this...more on ERP
ETF
An investment fund, units of which can be bought and sold on a stock exchange. Often used by tracker funds....more on ETF
Ethical drug
A drug that may only be sold by a pharmacist when authorised by a written prescription from a medical practitioner....more on Ethical drug
Ethical investing
Investing restricted according to ethical criteria. Ethical investors may use specialist research or invest in ethical funds to ensure their ethical standards are adhered to....more on Ethical investing
Eurobonds
Bonds issued in a currency other than the issuer’s home currency. Usually outside the issuer’s home country as bearer bonds....more on Eurobonds
Eurocurrency
Bank deposits in a country other than the issuer of the currency...more on Eurocurrency
An option that can be exercised only at a pre-determined price on the expiry date....more on European option
EV
The value of a company's business rather than the company; the answer the the question "how much would it cost to buy full ownership free of debt?"....more on EV
EV/EBIT
Enterprise value divided by earnings before interest and tax...more on EV/EBIT
EV/EBITA
Enterprise value divided by earnings before interest, tax and amortisation...more on EV/EBITA
EV/EBITDA
Enterprise value divided by earnings before interest tax depreciation and amortisation....more on EV/EBITDA
The excess of actual returns over the minimum required by the suppliers of capital. Useful as a tool for evaluating management performance than for rather than for valuation....more on EVA (Economic value added)
Ex-dividend
A share goes ex-dividend when buyers will no-longer receive a dividend that is to be paid....more on Ex-dividend
Execution only
A low cost stock broking service that does not include any advice or portfolio management but simply buying and selling securities....more on Execution only
Ex-rights
A share is said to be trading ex-rights when buyers will no longer have rights under a pending rights issue....more on Ex-rights
Exceptional items
Unusual costs or revenues whose exclusion from profits better shows underlying performance...more on Exceptional items
Excess return
The amount by which the return on an investment is greater than the risk free rate of return....more on Excess return
Exchange market size
The Minimum size of transactions up to which market maker quotes must be good for....more on exchange market size
Exchange rate risk
The risk that the value of an investment will be affected by changes in currency exchange rates....more on Exchange rate risk
Exchange rate transaction effects
The accounting loss or gain resulting from the change in exchange rates between the recording and settlement of a transaction....more on Exchange rate transaction effects
An investment fund, units of which can be bought and sold on a stock exchange. Often used by tracker funds....more on Exchange traded fund
Execution risk
The risk that a company's plans, usually at a time of change, will go awry, and the financial risk that entails....more on Execution risk
Exercise price
The price at which a derivative gives the right (or obligation) to buy or sell the underlying security. Also known as the strike price....more on Exercise price
Exotic options
Types of option more complex than the simple and common European, American and Asian varieties....more on Exotic options
Expected return
The average of all possible returns an investment will produce, weighted by probability....more on Expected return
Expense ratio
For a general insurer, operating expenses as a percentage of premium income. It is an efficiency measure....more on Expense ratio
The nominal value of a security, shown on the face of a certificate....more on face value
Factoring
Factoring is a form of financing uses invoiced debtors as a security against which to raise money and outsources the management and collection of this debt....more on factoring
Fair value
The value of an asset or liability in an arms length transaction between unrelated willing and knowledgeable parties. A concept used in many accounting standards including the IFRSs....more on fair value
Fast market
A combination of heavy trading and volatile prices in a security or market....more on fast markets
Fat tails
A fat tailed probability distribution is one in which extreme events are more probable....more on fat tails
FCF
How much money a company could pay shareholders out of profits without expanding, but without running down its existing operations either....more on FCF
FIFO
A method of valuing stocks (inventory) for accounting purposes. Stocks issued are assumed to be the oldest available....more on FIFO
Fill or kill
Fill or kill orders must either immediatly be completely executed, or cancelled....more on FOK orders
Finance lease
A lease that is a way of raising money to buy the asset leased, rather than a true rental....more on finance lease
Financial 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 Financial covenants
A mathematical construct that can range from a simple formula (such as PE) to complex computer programs that may take days to run....more on Financial model
First mover advantage
The competitive advantage that the first company to launch a new type of product should have over those that start later....more on First mover advantage
Fisher hypothesis
The Fisher hypothesis, suggests that, in the long run, inflation and nominal interest rates move together, implying that real interest rates are stable in the long term....more on Fisher hypothesis
Fisher separation
The theorem that investment decisions by firms need not be linked to consumption decisions by individual investors....more on Fisher separation
Fixed asset
Fixed assets are assets that have a remaining life over an year....more on Fixed asset
Fixed asset turnover
A measure of how effectively fixed assets are used to generate sales: sales ÷fixed assets. ....more on Fixed asset turnover
An interest rate that is set in advance and does not change depending on external factors....more on Fixed interest
Fixed odds betting terminals
Electronic gambling machines which accept fixed odds bets on the outcome of a simulated game up to a pre-set maximum....more on Fixed odds betting terminals
Flat yield
The flat yield of a bond is simply the coupon rate divided by the current price....more on Flat yield
Floating interest rates
Interest rates that change over time in line with market rates (or a bank's central rate)....more on Floating interest rates
FOK order
Fill or kill orders must either immediatly be completely executed, or cancelled....more on FOK orders
Footfall
The number of people visiting a shop or a chain of shops in a period of time....more on Footfall
The price of a futures contract being greater than the spot price of the underlying (usually a commodity). Also known as contango....more on Forwardation
Forwards
An agreement to buy or sell a given quantity of a commodity or a particular asset at a specified future date at a pre-agreed price....more on forwards
Founders' shares
Shares issued to the founders of a company that may have different characteristics from ordinary shares....more on founders' shares
(Available assets - required minimum margin of solvency) ÷ admissible assets....more on Free asset ratio
Free cash flow
How much money a company could pay shareholders out of profits without expanding, but without running down its existing operations either....more on Free cash flow
Free float
The proportion of a company's shares that are likely to be tradeable on the market: a measure of how many shares are reasonably liquid....more on Free float
FRSSE (financial reporting standard for smaller entities)
A simplified UK accounting standard for small organisations....more on FRSSE
FRN
A debt instrument, issued for three years or longer and carrying a variable (floating) interest rate....more on FRN
Front office
Work connected with originating transactions and providing advice....more on Front office
Front running
Trading by a broker on their own account, ahead of processing a client's order that is likely to affect prices...more on Front running
FSA
The Financial Services Authority is the regulator of all financial services in the UK....more on FSA
FTK (Freight Tonne Kilometres)
FTK measures actual freight traffic. It is the equivalent of RPK for freight. One FTK is one metric tonne of revenue load carried one kilometre....more on FTK (Freight Tonne Kilometres)
FTSE
A publisher of indices, including the most widely used in the UK....more on FTSE
FTSE 100
An equity index whose constituents are the 100 largest UK listed companies....more on the FTSE 100
A collective investment vehicle that invests in other funds....more on Fund of funds
Fundamental analysis
The most common way in which investors value securities: using methods such as discounted cash flows and valuation ratios....more on Fundamental analysis
A security or commodity is fungible if it is perfectly interchangeable with any other of the same type, class and issuer....more on Fungible
Futures
A future is a contract to buy an underlying security or commodity at a fixed price at a future date....more on Futures
GAAP
A set of rules, accounting principles and standards that are used in a particular region or country. Mostly being converged with IFRSs....more on GAAP
Game Theory
A mathematical framework for analysing what choices rational individuals will make, when the pay-offs depend on the combination of all player's choices....more on Game Theory
Gamma
The rate of change of a derivative's delta with the price of the underlying. Approximately, the change in the delta from a one unit change in the price....more on Gamma
Gamma hedging
A hedge constructed using both the delta and gamma of a portfolio. A gamma hedge needs less frequent re-balancing than a delta hedge....more on Gamma hedging
Going concern
The assumption for the purposes of accounting or valuation, or the fact in the case of a sale, that a business will continue to operate....more on Going concern
The inflation measure that is used to adjust economic growth statistics....more on GDP deflater
GDR
A security issued in one country which bundles together a number of shares in a company in another country....more on GDR
Gearing
Measures the extent to which a company is funded by debt....more on Gearing
Generic drug
A drug that that is in effect a copy of an original proprietary version of a drug....more on Generic drug
Geometric mean
An average calculated by multiplying a series of numbers and taking the nth root where n is the number of numbers in the series....more on Geometric mean
Giffen good
Something that consumers will buy more of if the price rises....more on Giffen goods
Gilts
British government bonds. A very wide range of gilts are in issue at any given time....more on Gilts
Global depositary receipt
A security issued in one country which bundles together a number of shares in a company in another country....more on global depositary receipts
Golden share
A share with special voting rights, typically veto powers under certain cirumstances....more on golden shares
Goodwill
Goodwill arises when a company buys another business at a price greater than the book value....more on Goodwill
GOPPAR
Gross operating profit per available room. A measure of hotels' profit relative to capacity....more on GOPPAR
Buying an over-priced investment, especially during a bubble, expecting that it will be possible to sell at a profit to a “greater fool”....more on greater fools
Greeks
Measures of the rate of change (mathematically the derivative) of the price of a derivative security or portfolio with another quantity...more on greeks
Greenmail
The use of the threat of a hostile takeover to coerce managment into buying off a potential bidder...more on greenmail
Sales minus the cost of goods sold. A very simple but useful profit measure....more on Gross profit
Gross win
In a gambling business this is the amount the company has won (and its customers have lost) over a given period....more on Gross win
Growth investing
An investment style that emphasises future growth rather than the value of the existing profits and cash flows....more on Growth investing
H-share
The shares of a mainland Chinese company listed in Hong Kong...more on H-share
Haircut
The percentage deducted from the value of a security (usually debt) to determine the maximum amount against which it can be used as collateral...more on Haircut
Headline 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 headline EPS
A financial strategy that reduces the risks from one security or other investment by buying or selling others....more on Hedge
Hedge fund
Hedge funds use a range of generally high risk investment strategies including arbitrage and short selling , they are frequently highly geared....more on hedge funds
A model of the factors (such as quality) that affect prices, so price indices can be adjusted for changes in these factors....more on Hedonic pricing model
HICP
An inflation measure required by the EU, now identical to the UK's CPI....more on HICP