What's new at Moneyterms

Technical insolvency

Default admin account — Wed, 17 Jun 2009 11:29:07 +0100

If a company (or person) is technically insolvent that merely means that it has a negative net asset value; its liabilities are greater than its debts.

Long term debt/equity

Default admin account — Mon, 25 May 2009 21:54:13 +0100

The long term debt to equity ratio is simply similar to gearing, except that short term debt is excluded from the calculation.

Information ratio

Default admin account — Fri, 22 May 2009 11:55:40 +0100

The information ratio is the more general form of the Sharpe ratio (formula and detailed description). It is used as a risk adjusted measure of the relative performance of a portfolio.

Style drift

Default admin account — Thu, 21 May 2009 16:35:20 +0100

Style drift is an (gradually increasing) inconsistency between the stated strategy that a portfolio or fund should follow (e.g., as specified by its mandate) and the actual investments made.

Why style drift occurs

Debt service ratio

Default admin account — Tue, 19 May 2009 12:17:29 +0100

A debt service ratio may be:

The ratio of cash available to pay debt, to debt payments, for a company or a project; the debt service cover ratio.

Loan life cover ratio (LLCR)

Default admin account — Fri, 15 May 2009 06:54:55 +0100

The loan life cover ratio (LLCR) is often used by banks, both for corporate loans and for project finance.

Debt service cover ratio (DSCR)

Default admin account — Thu, 14 May 2009 09:59:49 +0100

The debt service cover ratio (DSCR) is a measure of cash inflows available to pay debt compared to the repayments that are due. It is also sometimes refered to as annual debt service cover ratio (ADSCR).

Regulatory arbitrage

Default admin account — Wed, 13 May 2009 12:35:32 +0100

Regulatory arbitrage (often abbreviated to regarb) is financial engineering that uses differences between economic substance and regulatory position to evade unwelcome regulation.

Greenmail

Default admin account — Tue, 12 May 2009 09:19:05 +0100

Greenmail is the use of the threat of a hostile takeover to coerce a company into buying off a shareholder at a premium.

The use of greenmail is fairly straightforward: the buying of a stake that is large enough to be a takeover threat, without triggering any

FTSE small cap indices

Default admin account — Fri, 01 May 2009 07:49:15 +0100

The FTSE Small Cap index consists of companies that are in the FTSE All-share index, but are too small to qualify for the FTSE 350.

FTSE also publishes an index of companies that are too small to qualify for the FTSE All-share i

Look ahead bias

Default admin account — Thu, 30 Apr 2009 12:27:35 +0100

The term look-ahead bias may mean:

multi-period sampling bias,
the inclusion of data that was not available at the time when back-testing, or,
look-head benchmark bias.

Multi-period sampling bias

Default admin account — Thu, 30 Apr 2009 10:26:50 +0100

Multi-period sampling bias arises when the imposition of a minimum history requirement on time-series data excludes some data. For example, when looking at the returns generated by funds, investments that have been in existence for less than a minimum period may be excluded.

Self-selection bias

Default admin account — Tue, 28 Apr 2009 11:14:14 +0100

Selection bias is the distortion of statistics by the way in which a sample is selected.

Backfill bias

Default admin account — Tue, 28 Apr 2009 08:14:49 +0100

Backfill bias, also called instant history bias, is closely related to survivorship bias and self-selection bias, and similarly distorts indices.

Index futures

Default admin account — Mon, 27 Apr 2009 10:18:10 +0100

Index futures are a contract for difference on the level of an index.

Portable alpha

Default admin account — Sun, 26 Apr 2009 13:41:13 +0100

Portable alpha is the transfer of alpha from one portfolio to another.

Basis risk

Default admin account — Fri, 24 Apr 2009 19:19:02 +0100

Basis risk is the risk that the change in price of a hedge may not match the change in price of the asset it hedges. It may occur because of how a hedge is constructed, or because of the terms of the derivative contracts.

Capital reduction

Default admin account — Tue, 17 Mar 2009 11:34:10 +0000

A reduction of capital is a capital re-organisation that has the effect of allowing the return to shareholders of capital would otherwise not be dist

Share premium account

Default admin account — Wed, 11 Mar 2009 10:19:19 +0000

The share premium account balances the difference between the par value of a company's shares and the amount that the company actually received for newly issued shares.

Suppose a company issues a 100 shares of £1 each, but is paid £3 per share.

Printing money/Quantitative easing

Default admin account — Wed, 11 Mar 2009 06:24:50 +0000

Quantitative easing is a euphemism for printing money through a central bank's open market operations.