- 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.…
Copyright Graeme Pietersz © 2005-2016