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.…
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