Moneyterms: D-H

Dark fibre
Fibre optic cable that has been laid but is not currently used.…
Dark pool
A trading venue in which large orders can be placed without making them visible to the market.…
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.…
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.…
Days convention
An assumption made to simplify the calculation of accrued interest by rounding the number of days in a year or month.…
Day trading
Actively trading securities during the trading day but closing all positions by the end of the day. Very risky, potentially very profitable.…
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.…
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.…
Deal comps
The use of comparisons of the valuations at which deals, such as takeovers, have occurred, in valuing a company.…
Debenture
A corporate debt security. Usage of the term varies.…
Debt covenant
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.…
Debt/equity ratio
A measure of the indebtedness of a company. Usually one of: long term debt ÷equity, total debt ÷equity or net debt ÷equity.…
Debtor days
(Trade debtors ÷ sales) × 365. The average time debtors take to pay.…
Debt service cover ratio
The ratio of cash flow to loan repayments and interest.…
Debt service ratio
One of a number of ratios of cash flow to debt repayments.…
De-equitisation
The subsitution of debt for equity.…
Defensive
A defensive business is one whose profits are not particularly sensitive to economic conditions.…
Defensive patent
A patent that is registered with the intention of providing a defence against other patent holders, rather than being enforced against others.…
Deferred income
Income received during an accounting period for goods and services not yet supplied.…
Deferred shares
Shares that have lesser rights than ordinary shares in receiving dividends or repayments of capital.…
Deferred tax
A balance sheet line to record accrue between the periods in which events occur and the periods in which they are taxable.…
Deflation
Negative inflation. Most likely in particular industries or during recessions.…
Delivery vs payment
Making payment for securities only on delivery, to minimise the risk to which securities market participants are exposed.…
Delta
The delta of a derivative is the rate of change in the price of a derivative with the price of the underlying.…
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.…
Dematerialised securities
Securities that can be held without ownership of paper certificates: ownership is recorded in a depositary.…
Demerger
Spinning off business into a completely separate company. Usually done by distributing shares in the new company to existing company.…
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.…
Depositary system (Central Depositary/CDS)
A system that records ownership in securities that are traded without using paper certificates for holdings.…
Deposit multiplier
The multiple of the increase in the monetary base by which the money supply increases.…
Depreciation
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.…
Depression
A depression is a severe sustained recession. There is no clear dividing line between a recession and a depression.…
Derivatives
A security, the value of which depends on the value of another security. Used to either hedge risks or for speculative investments.…
Diluted EPS
An EPS number that takes account of shares to be issued in the future, as well as those currently issued.…
Direct cost
A cost directly linked to the manufacture of a product.…
Directors dealing
Dealing in a companies securities by directors. Subject to special disclosure rules.…
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.…
Disclosure
The revealing of information to investors. The extent of disclosure in important to investors.…
Discount broking
A low cost stock broking service that does not include any advice or portfolio management but simply buying and selling securities.…
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.…
Discount rate
The rate used to calculate the present value of future cash flows in a discounted cash flow calculation.…
Discount window
A collateralised lending facility run by a central bank, lending to banks in order to ensure their short term liquidity.…
Discrete Time Financial Models
Financial models that treat time as changing in discrete jumps rather than continuously.…
Discretionary broking
A stock broking service where the broker manages a portfolio and the client need have no involvement in buying and selling securities.…
Diseconomies of scale
Costs that rise faster than an increase in output; negative economies of scale.…
Disintermediation
The removal of intermediaries from a process, supply chain or market. The commonest financial example is the issue of bonds to replace bank borrowing.…
Disruptive technology
A new technology, that radically transforms markets, creates wholly new markets or destroys existing markets for other technologies.…
Distributable reserves
The amount of equity that a company may pay out as dividends.…
Diversifiable risk
Risk that is specific to a particular security or sector so its impact on a diversified portfolio is limited.…
Diversification
The reduction of risk achieved by buying a portfolio of securities whose returns are not correlated.…
Dividend cover
How many times over an year's dividend could have been paid out of the year's profits.…
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.…
Dividend irrelevance
The theory that divided payments are irrelevant when valuing a company.…
Dividend per share
Dividends over an year for each share held; total dividend ÷number of shares in issue.…
Dividend policy
A company's usual practice when deciding how big a dividend payment to make.…
Dividend yield
Total dividends paid per share over the course of a year ÷ share price.…
Divisia money supply index
A weighted index measure of money supply.…
Dogs of the Dow
An investment strategy that picks the highest yield stocks in the Dow Jones Industrial Average.…
Dominance
A strategy dominates another if it is guaranteed to lead to a better results.…
Dominant trading strategy
A portfolio that costs the same as another one, but which is always guaranteed to out-perform the other.…
Double entry
A bookkeeping system which records each transaction as equal debits and credits.…
Double witching
A period of volatility caused by the expiry of two classes of derivatives on the same underlying.…
Dow Jones Averages
The most widely followed index of US markets.…
Downstream
In the oil and gas industries; refining and distribution as opposed to upstream exploration and production.…
DPS
Dividend per share; total dividend ÷number of shares in issue.…
DRIP
A dividend reinvestment plan allows shareholders to cheaply re-invest dividends in buying more shares.…
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.…
Dry natural gas
The remainder of natural gas after the removal of both liquefiable hydrocarbons and most of the non-hydrocarbon gases.…
Dual listing
A way in which a group can have equal listings on two markets, by using a separate holding company for each market.…
Due diligence
The checks that are carried out before a major transaction: by bidders before a takeover offer, by underwriters before an IPO.…
Dumb money effect
The tendency of investments popular with private investors to under-perform.…
Duopoly
A market dominated by two suppliers to the extent that they jointly control prices.…
Duration
The duration is a measure of the average time it takes a bondholder to get their money (both principal and interest).…
Dutch disease
The damaging effects of inflows money into a country as a result of exports of natural resources, and similar sources.…
DVP
Making payment for securities only on delivery, to minimise the risk to which securities market participants are exposed.…
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.…
Dynamic provisioning
The adjustment of bank's provisions for loans for the economic cycle.…
Earnings accretive
Acquisitions are said to be earnings accretive if they increase EPS.…
Earnings dilutive
Acquisitions are said to be earnings dilutive if they are expected to decrease the acquiring company's EPS.…
Earnings enhancing
Acquisitions are said to be earnings enhancing if they increase EPS.…
Earnings yield
EPS ÷ share price.…
EBIT
Earnings before Interest and Tax. A profit measure closely related to operating profit.…
EBITA
Earnings before Interest, Tax and Amortisation.…
EBITDA
Earnings before Interest, Tax, Depreciation and Amortisation.…
EBITDA margin
EBITDA as a percentage of sales.…
ECN
An electronic trading venue that is not an exchange.…
Econometrics
A branch of statistics that deals with the time series data common in economics and finance.…
Economies of scale
Anything that helps save costs if the scale of operations increases.…
EEV
A standardised calculation of embedded value and related numbers.…
Effective gearing
The ratio of the fractional change in the price of a derivative to the fractional change in the price of the underlying.…
Efficient frontier
A graph showing the best possible return against lowest possible risk.…
Efficient markets
A market in which securities prices reflect all available information.…
Efficient portfolio
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.…
EGM
A meeting of shareholders other than the AGM.…
Electronic point of sale
Systems that handle both cash and card transactions. They also often connect to networks making sales information instantly available.…
Embedded computer
A computer that is incorporated into another device.…
Embedded option
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.…
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.…
Emerging markets
Investment markets in developing economies.…
Enhanced indexing
A combination of index tracking with active investment.…
Enterprise resource planning
The integration of diverse business systems; usually a reference to the software used to achieve this.…
Enterprise 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?".…
EPIC code
A memorable code used to identify UK listed securities. Now called TIDMs.…
EPOS
Systems that handle both cash and card transactions. They also often connect to networks making sales information instantly available.…
EPS
Earnings per share. Net profit divided by the number of shares in issue.…
Equity
The stake a businesses owners have in it; assets minus liabilities.…
Equity cure
The injection of equity finance to cover a shortfall that would otherwise breach a debt covenant.…
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.…
ERP
The integration of diverse business systems; usually a reference to the software used to achieve this.…
ETF
An investment fund, units of which can be bought and sold on a stock exchange. Often used by tracker funds.…
Ethical drug
A drug that may only be sold by a pharmacist when authorised by a written prescription from a medical practitioner.…
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.…
Eurobonds
Bonds issued in a currency other than the issuer’s home currency. Usually outside the issuer’s home country as bearer bonds.…
Eurocurrency
Bank deposits in a country other than the issuer of the currency.…
Eurodollar
US dollar bank deposits outside the US.…
European embedded value
A standardised calculation of embedded value and related numbers.…
European option
An option that can be exercised only at a pre-determined price on the expiry date.…
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?".…
EVA (Economic value added)
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.…
EV/EBIT
Enterprise value divided by earnings before interest and tax.…
EV/EBITA
Enterprise value divided by earnings before interest, tax and amortisation.…
EV/EBITDA
Enterprise value divided by earnings before interest tax depreciation and amortisation.…
EV/sales
Enterprise value ÷ sales.…
Exceptional items
Unusual costs or revenues whose exclusion from profits better shows underlying performance.…
Excess return
The amount by which the return on an investment is greater than the risk free rate of return.…
Exchange market size
The Minimum size of transactions up to which market maker quotes must be good for.…
Exchange rate risk
The risk that the value of an investment will be affected by changes in currency exchange rates.…
Exchange rate transaction effects
The accounting loss or gain resulting from the change in exchange rates between the recording and settlement of a transaction.…
Exchange rate translation effects
The effects exchange rates has on reported profits due to the consolidation of accounts in different currencies.…
Exchange traded fund
An investment fund, units of which can be bought and sold on a stock exchange. Often used by tracker funds.…
Ex-dividend
A share goes ex-dividend when buyers will no-longer receive a dividend that is to be paid.…
Execution only
A low cost stock broking service that does not include any advice or portfolio management but simply buying and selling securities.…
Execution risk
The risk that a company's plans, usually at a time of change, will go awry, and the financial risk that entails.…
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.…
Exotic options
Types of option more complex than the simple and common European, American and Asian varieties.…
Expected return
The average of all possible returns an investment will produce, weighted by probability.…
Expense ratio
For a general insurer, operating expenses as a percentage of premium income. It is an efficiency measure.…
Ex-rights
A share is said to be trading ex-rights when buyers will no longer have rights under a pending rights issue.…
Extraordinary general meeting
A meeting of shareholders other than the AGM.…
Fabless semiconductor company
A company that designs and markets semiconductors, but does not manufacture them.…
Face value
The nominal value of a security, shown on the face of a certificate.…
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.…
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.…
Fast market
A combination of heavy trading and volatile prices in a security or market.…
Fat tails
A fat tailed probability distribution is one in which extreme events are more probable.…
FCA
The Financial Conduct Authority (FCA) is the UK's regulator of financial services businesses, the most important exception to its remit is that prudential regulation of banks is the responsibility of the Bank of England.…
FCF
How much money a company could pay shareholders out of profits without expanding, but without running down its existing operations either.…
FIFO
A method of valuing stocks (inventory) for accounting purposes. Stocks issued are assumed to be the oldest available.…
Fill or kill
Fill or kill orders must either immediatly be completely executed, or cancelled.…
Finance lease
A lease that is a way of raising money to buy the asset leased, rather than a true rental.…
Financial Conduct Authority
The Financial Conduct Authority (FCA) is the UK's regulator of financial services businesses, the most important exception to its remit is that prudential regulation of banks is the responsibility of the Bank of England.…
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.…
Financial economics
The theory of finance including securities valuation and capital structure.…
Financial gearing
A measure of the extent to which a company is funded by debt.…
Financial model
A mathematical construct that can range from a simple formula (such as PE) to complex computer programs that may take days to run.…
First mover advantage
The competitive advantage that the first company to launch a new type of product should have over those that start later.…
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.…
Fisher separation
The theorem that investment decisions by firms need not be linked to consumption decisions by individual investors.…
Fixed asset
Fixed assets are assets that have a remaining life over an year.…
Fixed asset turnover
A measure of how effectively fixed assets are used to generate sales: sales ÷fixed assets.…
Fixed costs
Costs that do not change with the level of sales.…
Fixed interest
An interest rate that is set in advance and does not change depending on external factors.…
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.…
Flat yield
The flat yield of a bond is simply the coupon rate divided by the current price.…
Floating interest rates
Interest rates that change over time in line with market rates (or a bank's central rate).…
FOK order
Fill or kill orders must either immediatly be completely executed, or cancelled.…
Footfall
The number of people visiting a shop or a chain of shops in a period of time.…
Forwardation
The price of a futures contract being greater than the spot price of the underlying (usually a commodity). Also known as contango.…
Forward integration
Increasing vertical integration by combining a core business with its buyers.…
Forward rate bias
The tendency of currency markets to over-estimate movements in currency.…
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.…
Founders' shares
Shares issued to the founders of a company that may have different characteristics from ordinary shares.…
FRC (Financial Reporting Council)
The regulator of financial reporting in the UK.…
Free asset ratio
(Available assets - required minimum margin of solvency) ÷ admissible assets.…
Free cash flow
How much money a company could pay shareholders out of profits without expanding, but without running down its existing operations either.…
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.…
FRN
A debt instrument, issued for three years or longer and carrying a variable (floating) interest rate.…
Front office
Work connected with originating transactions and providing advice.…
Front running
Trading by a broker on their own account, ahead of processing a client's order that is likely to affect prices.…
FRSSE (financial reporting standard for smaller entities)
A simplified UK accounting standard for small organisations.…
F-score (Piotroski's)
A measurement of the financial strength of companies, combining several other measures.…
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.…
FTSE
A publisher of indices, including the most widely used in the UK.…
FTSE 100
An equity index whose constituents are the 100 largest UK listed companies.…
FTSE 250
An index of mid-cap London listed shares.…
FTSE 350
An index tracking UK mid-cap and large company shares. Its constituents cover about 90% of UK market cap.…
FTSE Small cap index
An index, the constituents of which are companies in the FTSE all-share index that are too small for the FTSE 350.…
FTSE small cap indices
FSTE publishes three small cap indices.…
Fundamental analysis
The most common way in which investors value securities: using methods such as discounted cash flows and valuation ratios.…
Fundamentally weighted index
A market index that is weighted using measures such as accounting numbers.…
Fund mandate
The parameters within which a fund should invest.…
Fund of funds
A collective investment vehicle that invests in other funds.…
Fungible
A security or commodity is fungible if it is perfectly interchangeable with any other of the same type, class and issuer.…
Futures
A future is a contract to buy an underlying security or commodity at a fixed price at a future date.…
GAAP
A set of rules, accounting principles and standards that are used in a particular region or country. Mostly being converged with IFRSs.…
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.…
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.…
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.…
GDP deflater
The inflation measure that is used to adjust economic growth statistics.…
GDP (Gross Domestic Product)
The total value of all goods and services produced in an economy.…
GDR
A security issued in one country which bundles together a number of shares in a company in another country.…
Gearing
Measures the extent to which a company is funded by debt.…
Generic drug
A drug that that is in effect a copy of an original proprietary version of a 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.…
Giffen good
Something that consumers will buy more of if the price rises.…
Gilts
British government bonds. A very wide range of gilts are in issue at any given time.…
Global depositary receipt
A security issued in one country which bundles together a number of shares in a company in another country.…
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.…
Golden share
A share with special voting rights, typically veto powers under certain cirumstances.…
Goodwill
Goodwill arises when a company buys another business at a price greater than the book value.…
GOPPAR
Gross operating profit per available room. A measure of hotels' profit relative to capacity.…
Gordon growth model
A simplified dividend discount model: easy to apply but flawed and not suited to all companies.…
Government bonds
Bonds issued by a government in its own currency.…
Greater fool
Buying an over-priced investment, especially during a bubble, expecting that it will be possible to sell at a profit to a “greater fool”.…
Greeks
Measures of the rate of change (mathematically the derivative) of the price of a derivative security or portfolio with another quantity.…
Greenmail
The use of the threat of a hostile takeover to coerce managment into buying off a potential bidder.…
Gross margin
Gross profit divided by sales as a percentage.…
Gross operating profit per available room
A measure of hotels' profit relative to capacity.…
Gross premium written
Premium written before deduction of re-insurance expenses; a measure of sales.…
Gross profit
Sales minus the cost of goods sold. A very simple but useful profit measure.…
Gross win
In a gambling business this is the amount the company has won (and its customers have lost) over a given period.…
Growth investing
An investment style that emphasises future growth rather than the value of the existing profits and cash flows.…
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.…
Harmonised index of consumer prices
An inflation measure required by the EU,called the CPI in the UK.…
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.…
Hedge
A financial strategy that reduces the risks from one security or other investment by buying or selling others.…
Hedge fund
Hedge funds use a range of generally high risk investment strategies including arbitrage and short selling , they are frequently highly geared.…
Hedonic price index
A price index adjusted for changes in factors such as product quality.…
Hedonic pricing model
A model of the factors (such as quality) that affect prices, so price indices can be adjusted for changes in these factors.…
HICP
An inflation measure required by the EU, now identical to the UK's CPI.…
High frequency trading
The placing of orders at rates as high as thousands per second.…
Historical cost
An asset value based on the actual purchase cost, or the accounting principle that requires this.…
Historical PE
A PE ratio based on published accounts rather than forecast data.…
Horizontal integration
The widening of a business by widening its operations at the same point in the supply chain.…
Hostile takeover bid
A takeover bid that is opposed by the directors of the target company.…
H-share
The shares of a mainland Chinese company listed in Hong Kong.…
Hybrid security
A hybrid security or hybrid instrument is a security that has characteristics of both debt and equity.…
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