Moneyterms: I-O

Iceberg order: A large order that is divided into smaller ones, or only partially disclosed, in order to avoid the market reaction to the existence of a large buyer or seller.…
IFRS: International Financial Reporting Standards are accounting standards set by the International Accounting Standards Board.…
Immediate or cancel: Immediate or cancel orders must be immediately executed or cancelled; partial filling is allowed.…
Impairment: The cost shown in the profit and loss account as the result of a fall in the value of an asset.…
Implied volatility: The level of volatility which the market implicitly expects given the current market price of a security.…
Income effect: The component of the increase in sales of a good with lower prices attributable to consumers being better off as a result of the lower price.…
Income elasticity: The rate of change of demand for a good with change in consumers incomes.…
Income investing: Investing to generate income rather than capital growth.…
Income statement: A financial statement that shows the profit or loss a company has made over a period of time.…
Incumbent telco: A former monopoly that still has a dominant market share. For example, the incumbent telco in Britain is BT, the former British Telecom.…
Index: An index tracks the movement in the value of a market, sector or a region.…
Index futures: A contract for difference on the value of an index; a derivative that offers geared access to movements in the market.…
Index tracker: A collective investment vehicle that is designed to replicate the performance of a particular index.…
Indirect beneficial interest: An financial interest, usually in the context of disclosure, that beneficially owned by a connected person.…
Indirect cost: Any cost that is not a direct cost.…
Inferior good: A good that is consumed less as incomes rise.…
Inflation: The rate at which prices rise. There are many measures used for different purposes.…
Information ratio: A risk a risk-adjusted time-invariant measure of the out-performance of a portfolio.…
Insider ring: A group of people who collaborate to profit from insider trading.…
Insider trading: Making investment decisions using information that should be confidential. It is a criminal offence in most countries.…
In-situ value: The value, at current market prices, of the reserves a mining company owns.…
Insolvent: Unable to pay debts, or having liabilities greater than assets.…
Institutional broking: Stock (and other) broking services supplied, usually together with research, to fund managers and other financial institutions.…
Intangible assets: Assets that do not have a definite form. They include goodwill, patents, trademarks and capitalised development costs.…
Intellectual property: Patents, copyrights and trademarks.…
Inter-dealer broker: Intermediaries who act for brokers and market makers) who wish to buy or sell substantial quantities without revealing their identities.…
Interest cover: Profit before interest and tax, divided by interest payable.…
Interest margin: Interest income minus interest expenses as a percentage of average interest earning assets.…
Interest rate: Although interest rates may appear to be straightforward, they may be quoted and calculated in a number of different ways.…
Interest rate parity: Differences in different currencies' interest rates should equal the difference between the spot the forward exchange rates.…
Interest rate risk: This is the financial risk to which a portfolio or institution is exposed to if interest rates change.…
Interest spread: (interest income ÷ interest earning assets) - (interest expense ÷ interest bearing liabilities).…
In the money: A term used to indicate than an to indicate that the intrinsic value of an option is positive.…
Intra-market arbitrage: Simultaneous transactions in the same security to profit from a price disparity between markets.…
Intrinsic value: The amount of money an option would make by exercising it immediately; the price difference between the strike price and the price of the underlying.…
Inventory: Current assets held for sale, or for processing and subsequent re-sale.…
Investment megatrend: A sustained fundamental shift: a major secular trend.…
Investment strategy: An approach to investing, a methodology used to pick investments, or a choice of investments.…
Investment style: An approach to investing, a methodology used to pick investments, or a choice of investments.…
Investment trust: Companies whose sole business is to manage the investments it owns. A somewhat misleading term used for historical reasons.…
Investor activism: Action by shareholders to intervene in the running of a company.…
Investor relations: The things a company does to keep investors informed.…
Invoice discounting: Invoice discounting is a means of raising money using invoiced debtors as security, It differs factoring in that the borrower retains control of dealing with customers and collecting payments.…
IOC order: Immediate or cancel orders must be immediately executed or cancelled; partial filling is allowed.…
IPO: The sale of shares to the public as a precursor to the shares trading on an exchange for the first time.…
IRR: The discount rate at which the net present value is zero.…
ISIN: A unique identity number for securities allocated through an international mechanism; very useful for international clearing and settlement systems.…
Islamic banking: Essentially a specific type of ethical investing. Its major distinguishing feature is the ban on interest.…
J-curve: A dip followed by slower, but sustained growth in the longer term, as allegedly happens when a currency depreciates.…
Jensen's alpha: The alpha of a security or fund is its out-performance over the risk adjusted return, with risk measured by beta.…
Joint venture: A business jointly controlled by two or more parties.…
Junk bond: A bond with a credit rating below investment grades. Many funds do not invest in junk bonds.…
KPI (Key performance indicators): Indicators of the performance of a telecoms business in terms of customers and revenue generation.…
Labour intensive: A business in which the main cost is that of labour and it is high compared to sales.…
Laffer curve: The relationship between tax rates and tax revenues. Commonly associated with controversy about the point at which further increases in rates will cause a fall in revenues.…
Law of one price: Two portfolios that will produce exactly the same cash flows in the future must have the same value now.…
Leveraged buy-out (LBO): An acquisition which is largely funded by debt; popular with private equity firms that often make large acquisitions with comparatively limited resources.…
LFL: An abbreviation of like-for-like. LFL numbers strip out the effect of shop openings and closures on retailers' sales or profits.…
Libor: The interest rate at which banks borrow funds from other banks in the London interbank market. Widely used as the reference rate.…
Life-cycle investing: A strategy of varying asset allocation to match an investor's age and stage of life, usually shifting to lower risk assets over time.…
LIFO: A method of valuing stocks (inventory) by assuming that the most recent purchases are used first.…
Like-for-like: LFL numbers strip out the effect of shop openings and closures on retailers sales or profits.…
Limited liability: The limitation of liability for a corporation's debt to the corporation itself, shielding its owners (e.g. shareholders).…
Limited recourse debt: The lender of a non-recourse loan is only entitled to repayment from specific assets and cash flows and a limited amount beyond that.…
Limit order: An order to purchase securities within a price limit.…
Liquidation: The "winding up" of a company, so that it ceases to exist. Companies being liquidated may be insolvent, or merely ceasing operations.…
Liquidity: How tradeable a security is. A security that is constantly trading in large quantities it is can be bought or sold easily, quickly and with less likelihood of influencing the price.…
Liquidity premium: The extra return that compensates investors for investing in an illiquid security.…
Listed company: A company is "listed" if its securities trade on financial exchanges.…
Lloyd's of London: London's unique insurance market.…
Load factor: The ratio of average load to peak load to capacity.…
Loan life cover ratio: The ratio of the NPV of cash available to pay a loan over its life to the amount outstanding.…
Local loop: The connection from a telephone exchange to a subscriber’s premises; enormously expensive for new entrants to replicate.…
Local loop unbundling: A regulators requirement that incumbent telecoms companies allow other operators to use their local loops at wholesale rates.…
London Stock Exchange: The world's third largest and Europe's biggest stock exchange.…
Long position: An investor who has a holding of a particular security has a long position in it.…
Long term debt:equity ratio: A simple measure of both capital strucuture and financial strength.…
Long term liabilities: Long term liabilities are those that are due to be paid in more than an year.…
Long Term PE: A PE ratio calculated using average earnings over several years…
Look-ahead bias: Any of several types of bias caused by changes over time or the inclusion of data not available in a period being modelled.…
Loss ratio: Claims paid as a percentage of premium income, similar to the claims ratio.…
LPG (Liquefied Petroleum Gas): Extracted from natural gas or from the refinery processes. Most LPG is used for fuel, but it is also used as a refrigerant and an aerosol propellant.…
M0 (monetary base): Bank notes and coins in circulation plus banks deposits with the central bank.…
M1: A measure of money supply: bank notes and coins plus sight deposits.…
M2: A narrow measure of money supply that includes retail bank deposits. In the UK equivalent to the retail element of M4.…
M3: A broad measure of money supply.…
M4: The UK's main broad measure of money supply.…
M & A: Mergers and acquisition: a lucrative line of advisory work for investment banks.…
Macroeconomic derivatives: Derivatives based on.…
Majority shareholder: A shareholder of group of connected shareholders who can cast the majority of votes at a general meeting of a company.…
Management buy-in: The purchase of a business by new owner-managers, usually with private equity backing.…
Mandatory offer: An offer to buy the remaining shares, required by the City Code of a shareholder or concert party that has bought a 30% or greater stake.…
Marginal cost: The increase in total costs as a result of producing one extra unit of output.…
Marginal revenue: The increase in revenue from selling one extra unit.…
Margins: Profit divided by sales. One of several measures that differ in the definition of profit used.…
Margin trading: Investing in securities with borrowed money, using the securities themselves as security; greatly increasing both risk and potential profit.…
Market arbitrage: Simultaneous transactions in the same security to profit from a price disparity between markets.…
Market capitalisation: Market capitalisation, often abbreviated to market cap, is the total value of a company’s shares.…
Market capitalisation/sales: market cap ÷ sales.…
Market maker: A dealer who receives privileges in share dealing in return for providing liquidity, usually by always quoting firm bid and offer prices.…
Market neutral: A market neutral portfolio is one that is fully hedged against the impact of market movements.…
Market order: an order to buy or sell a quantity of securities at the current market price.…
Market PE: The PE ratio of an entire market. Total market cap ÷total net profits.…
Market penetration: The proportion (as a percentage) of a potential market who actually buy a product or service.…
Market portfolio: A portfolio that contains all appropraiate investments pro-rata to market cap.…
Mark to market: Using the current market price as a book value.…
Mark to model: Estimating book value using a financial model.…
Mark to model: The use of book values based on financial models.…
Matched bargain: Trading systems in which investors’ offers to buy and sell securities are directly matched with each other rather than through market makers.…
Mathematical finance: The application of sophisticated maths to finance.…
MBI: Management buy-in, the purchase of a business by new owner-managers, usually with private equity backing.…
MBO: The acquisition of a business by (a consortium including) its existing management.…
Mboe (Millions of barrels of oil equivalent): A single number combining the volumes of oil and gas production.…
MBS: Mortgage backed securities: an asset backed security backed by cash flows from mortgage lending.…
MCEV (Market Consistent Embedded Value): An embedded value calculation designed to make inter-company comparisons more consistent.…
Mean reversion: The tendency of a number that changes over time to return to the long term average after anomalous periods.…
Mechanical investing: An investment strategy that follows fixed rules rather than using human judgement to make (or even approve) buy and sell decisions.…
Mechanical royalties: Royalties paid to a music publisher, composer or songwriter by a person making a recording.…
Media convergence: The technology driven unification of different media channels, for example the delivery of audio and video over the Internet.…
Media Fragmentation: The breaking up of the large audiences previously enjoyed by media channels as a result of technology increasing the choice available.…
Median: The number from a series such that exactly half the numbers are less than it and half greater.…
Megatrend: A sustained fundamental shift: a major secular trend.…
Merger: The combination of two or more companies, under circumstances that make it hard to identify which is really buying (in economic rather than legal terms).…
Merger arbitrage: Trading that aims to exploit market inefficiencies that occur during takeover bids.…
Mergers and acquisitions (M & A): A lucrative investment banking function, advising companies involved in takeovers and mergers.…
Mezzanine finance: A form of finance which has characteristics which place it between debt and equity.…
Mid-cap: A company with a medium market capitalisation. Companies in the FTSE 250 index is considered mid-cap.…
Middle office: Work related to monitoring, and providing the information to manage, the work of the front office.…
Mid-price: The average of the bid and offer prices.…
Millions of barrels of oil equivalent a day: A measure of the combined volume of oil and natural gas produced.…
Mineral Reserves: The economically mineable part of the measured and indicated mineral resources.…
Mineral Resources: A mineral resource is a concentration of material, not necessarily one that is economically viable to mine.…
Minimum volatility index: An index that gives a higher weighting to low volatility shares, and those with low covariances with others in the index.…
Minority interests: Deduction made in a company's consolidated accounts for amounts attributable to minority shareholders in group companies.…
Minority shareholder: A shareholder, other than the majority shareholder, in a company that is controlled by a majority shareholder or group of connected shareholders.…
MIRR: MIRR is a variant of IRR which has several advantages including a single answer and a more sensible reinvestment assumption.…
Mode: The most frequently occurring number in a set of numbers.…
Model risk: The risk that a model may produce incorrect results.…
Modified duration: Modified duration is a measure of the sensitivity of a bond price to interest rates.…
Modified internal rate of return: MIRR is a variant of IRR which has some advantages. MIRR gives a single answer compared with the IRR which may give multiple answers.…
Modigliani-Miller theory: An alternative name for capital structure irrelevance: the theory that a company's capital structure does not affect its total value.…
Momentum Investing: A simple investment strategy that assumes price will continue any strong current trends.…
Money market fund: A fund that invests in short term debt instruments.…
Money multiplier: The multiple of the increase in the monetary base by which the money supply increases.…
Money supply: The amount of money in an economy: physical cash and various types of bank and non-bank deposits depending on the exact definition.…
Monoline insurer: An insurer that has a single line of business that, in a financial markets context, is insuring bond repayments.…
Monopoly: A market in which there is only one supplier of a product or service.…
Monopsony: A market in which there are multiple suppliers but only one buyer.…
Monte-Carlo simulation: A useful technique for financial modelling that uses random inputs to model uncertainty.…
Moral hazard: Refers to the likelihood of a person or organisation willing to take on more risk as they are covered by insurance.…
Mortgage backed securities: An asset backed security backed by cash flows from mortgage lending.…
Moving average: The average of a value over the previous x days.…
MSCI (Morgan Stanley Capital International): An index publisher best known for its emerging market indices.…
Multi-manager fund: Usually used as a synonym for fund of funds. The use of the term is driven by marketing.…
Multi-period sampling bias: The bias introduced into index calculations bu the exlusion of constituents with short histories.…
Mutual funds: A common type of collective investment vehicle, similar to an UK unit trust of OEIC.…
MVNO: A company that provides mobile phone telecoms without owning its own network by buying capacity in bulk and reselling it retail.…
Naked PE: A long term , sector relative PE ratio, with a further adjustment for company size.…
Nash equilibrium: In game theory, a situation in which no player has an incentive to change their strategy.…
Natural gas: A gaseous mixture of hydrocarbon compounds; usually found together with oil but the proportion of oil to gas varies from field to field.…
Natural monopoly: A monopoly that arises from the nature of the industry, rather than being imposed by law or resulting from anti-competitive practices.…
NAV: The total value of a company’s assets less the total value of its liabilities, divided by the number of shares in issue.…
Negative basis trade: A negative basis trade exploits an arbitrage opportunity created by a difference between the price of a bond and the price of a credit default swap that hedges it…
Negative carry: The difference between the cost of financing and investment, and the income from it, when a loss.…
Negative equity: Negative equity occurs when the value of an asset is less than the amount of a debt secured on it. it is common in factoring, project finance and US residential mortgages.…
Net premium written: Premium written after deduction of reinsurance costs.…
Net present value: The current value of a stream of future cash flows, negative or positive.…
Net publisher's share: A music publisher's share of royalties it collects.…
Net realisable value: Net realisable value can be used used to calculate the value of assets when cost of purchase cannot be used…
Network effects: Effects which cause the value of a product to its consumers to increase if it is more widely used.…
New business margin: A profit measure used by insurers: a type of profit margin.…
New issue: The sale of new securities by an issuer to investors.…
Nominal interest rates: The actual interest rate without any adjustments. Usually the interest payment ÷ principal.…
Nominee: A holder of securities on behalf on investors; often subsidiaries of stockbrokers.…
Non-interest income: For banks, Non-interest income ÷ operating income.…
Non-performing assets (NPA): Loans that are not being repaid or serviced through interest payments on time.…
Non-recourse debt: The lender of a non-recourse loan is only entitled to repayment from specific assets and cash flows.…
Non-voting shares: Shares that participate in profits but cannot vote at company meetings.…
NOPAT: Net Operating Profit After Tax. The profit made for all providers of capital, both shareholders and debt holders.…
Normal distribution: Also called the Gaussian distribution, is the commonest of the many probability distributions.…
Normal market size: The Minimum size of transactions up to which market maker quotes must be good for.…
Notes to accounts: More detailed disclose and explanations of the numbers in the financial statements.…
NPV: The current value of a stream of future cash flows, negative or positive.…
OEIC: Open Ended Investment Company: a type of collective investment fund that is incorporated but open ended.…
Ofcom: The UK regulator of the broadcasting and telecommunications industries.…
Off balance sheet financing: Debt financing that is not shown on the face of the balance sheet.…
Offer price: The lowest price at which a seller is willing to sell a particular security. This is therefore the price at which the security can be bought.…
Official List: The list of all securities whose trading on UK financial exchanges has been approved by the UK Listing Authority.…
Ofgem: The UK regulator of the gas and electricity industries.…
Ofwat: The UK regulator of the water industry.…
OIBDA: Operating income before depreciation and amortisation. A profit measure that excludes the distorting effects of interest, and the accounting treatment of depreciation and amortisation. It is very similar to EBITDA.…
Oil reserves: The amount of oil or gas that has been discovered and that can be extracted profitably, classified by the probability of successful extraction.…
Oligopoly: Where an oligopoly exists, a few large suppliers dominate the market resulting in a high degree of market concentration.…
Oligopsony: Oligopsony exists when a few large buyers dominate a market.…
OPEC basket price: A basket of seven crude oil prices, to which OPEC has tied its production activity.…
Open market operations: A central bank's buying and selling of government securities, generally done to control money supply and interest rates.…
Open offer: Entitles shareholders to buy shares in proportion to existing entitlements, but this right is not transferable.…
Open outcry: The traditional method of trading by writing offers on a board and shouting out offers to other dealers.…
Operating cash flow: This is the amount of actual cash made by a company’s business.…
Operating cash flow ratio: Operating cash flow ÷ current liabilities; a measure a company's ability to pay its short term liabilities.…
Operating lease: A lease on terms under which the lessor retains the risks and rewards of ownership. Any lease that is not a finance lease.…
Operating margin: Operating profit divided by sales, as a percentage.…
Operating profit: Profit generated by a company’s operations before interest payments, tax or non operating income.…
Operational gearing: Operational gearing is the effect of fixed costs on the relationship between sales and operating profits.…
Option: The right to buy or sell an asset at a pre-arranged price.…
Option value: The difference between the intrinsic value of an option and its actual value is called the option value.…
Option writer: A person who creates an option by selling an option to a buyer.…
Order book: The list of active trades that have not executed for a security.…
Order driven trading system: A trading system that matches orders directly against each other, unlike a quote driven system.…
Ordinary shares: The most common form of equity. Shares with equal entitlements to share in profits and to vote.…
Ore grade: A measurement of the metal content in ore.…
Organic growth: Growth (including negative growth) that comes from a company’s existing businesses as opposed to acquisitions.…
Orphan Drugs: A designation that gives pharmaceutical companies additional incentives to develop particular drugs, usually for rare diseases.…
OTC drug: A drug which does not require a prescription to be sold; generally less profitable than prescription drugs.…
Out of the money: An option is out of the money if it has negative intrinsic value.…
Outsourcing: The contracting out of work that was previously done within an organisation to an external provider.…
Outstanding claims reserve: The total amount of claims made but not paid but expected to be paid.…
Overhead cost ratio: Overhead costs ÷ sales; the proportion of sales that is spent on overheads.…
Overnight rate: The rate at which money is lent, to be returned the next day, by one bank to another.…
Over-the-counter drug: A drug which does not require a prescription to be sold; generally less profitable than prescription drugs.…
Overtrading: Over expansion (of sales) relative to available resources.…