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Assets
Personal possessions of value, including cash, real estate and investments.
Automatic payment
An arrangement that authorises periodic withdrawals to be made from a checking or savings account to pay bills, usually regular monthly payments such as for rent or mortgages
Automatic transfer
An arrangement that moves money at certain specified times, often monthly, from an interest-bearing or savings account into a non-interest, usually checking, account for the payment of checks or other drafts.
Bank
An institution that acts as a financial intermediary by receiving money from depositors and lenders and also lending to borrowers. A bank must be chartered and meet certain criteria. Chartering is done by the Controller of the Currency for national banks, by the Federal Reserve System for state member banks, by the Federal Deposit Insurance Corporation (FDIC) for insured banks, and by state regulatory agencies. Also referred to as a commercial bank.
Broker premium
Sum paid to a mortgage broker as the "middleman" in the mortgage process between the lender and the borrower. Lenders offer brokers wholesale rates; brokers add a surcharge to cover the cost of underwriting to arrive at the rates charged to borrowers
Commercial bank
A financial institution that provides a broad range of services, from checking and savings accounts to business loans and credit cards.
Consumer credit
Loans for personal or household use as opposed to business or commercial lending. Loans are generally unsecured, not backed by collateral.
Deposit
Money given by a buyer when making a formal offer to bind the sale. Also called earnest money. It is also the term used for money placed in a bank or other financial institute.
Dividend
Distribution of earnings to shareholders. In credit unions, it's the money paid to members for deposits, similar to the interest banks pay to their customers for deposits
e-commerce
A system used to conduct business transactions of buying and selling goods and services over a computer network.
Feasible portfolio
A portfolio that an investor can construct, given the assets available.
Floating exchange rate system
Purchase or sale of the currencies of other nations by a central bank for the purpose of influencing foreign exchange rates or maintaining orderly foreign exchange markets. Also called foreign-exchange market intervention.
Gold standard
An international monetary system in which currencies are defined in terms of their gold content, and payment imbalances between countries are settled in gold. It was in effect from about 1870 to 1914
Gross interest
Interest earned before taxes are deducted.
Horizontal merger
A merger involving two or more firms in the same industry that are both at the same stage in the production cycle; that is, two or more competitors.
Horizontal price movement
Stock price movement within a narrow price range over an extended period of time which creates the appearance of a relatively straight line on a graph of the stock's price.
Intangible asset
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual property, patents, copyrights, and trademarks are examples of intangible assets
Interest rate
The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.
Joint account
An agreement between two or more firms to share risk and financing responsibility in purchasing or underwriting securities, or an account owned jointly by two or more persons at a bank or brokerage house.
Kickback
In the context of finance, refers to compensation of dealers by sales finance companies for discounting installment purchase paper. In the context of contracts, refers to secret payments made to ensure that the contract goes to a specific firm.
Leveraged buyout (LBO)
A transaction used to make a public corporation private that is financed through debt such as bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment-grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specialises in such investments.
Market interest rate
Rates of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in the money market.
Market portfolio
A portfolio consisting of all assets available to investors, with each asset held in proportion to its market value relative to the total market value of all assets.
Nominal exchange rate
The actual foreign exchange quotation in contrast to the real exchange rate, which has been adjusted for changes in purchasing power
Optimal portfolio
An efficient portfolio most preferred by an investor because its risk/reward characteristics approximate the investor's utility function. A portfolio that maximisesan investor's preferences with respect to return and risk.
Portfolio diversification
Investing in different asset classes and in securities of many issuers in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security, industry, (or country).
Quantitative analysis
An assessment of specific measurable securities or investment factors, such as cost of capital, value of assets and projections of sales, costs, earnings, and profits. Combined with more subjective or qualitative considerations (such as management effectiveness), quantitative analysis can enhance investment decisions and portfolios.
Rate of interest
The rate, as a proportion of the principal, at which interest is computed.
Real estate
A piece of land and whatever physical property is on it.
Real rate of return
The percentage return on some investments that has been adjusted for inflation.
Redemption fee
A fee some mutual funds charge when an investor sells shares within a specified short period of time
Savings bank
An institution that primarily accepts consumer savings deposits and to make home mortgage loans.
Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.
Second mortgage lending
Loans secured by real estate previously pledged in a first mortgage.
Secured bond
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture.
Shareholder
Person or entity that owns shares or equity in a corporation.
Taxable income
Gross income less a variety of deductions.
Total revenue
Total sales and other revenue for the period shown. Known as "turnover" in the U.K.
Transferable Stock Options
Options that provide by their terms that they may be transferred by the optionee, generally only to a family member or to a trust, limited partnership or other entity for the benefit of family members, or to a charity.
Underwriting
Acting as the underwriter in the issue of new securities for a firm.
Upside potential
The amount by which analysts or investors expect the price of a security may increase.
Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, so variable life policies are referred to as equity-linked policies.
Venture capital
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.
Withholding
Used in the context of securities, the illegal practice of a public offering participant keeping some shares in a private account or with a family member, employee, or dealer to profit from the higher market price of a hot issue.
Used in the context of taxes, the withholding by an employer of a certain amount of an employee's income in order to cover the employee's tax liability. Also used to refer to the withholding by corporations and financial institutions of a flat 10% of interest and dividend payments due to security holders.
Woody
Slang to describe a market moving strongly upward, as in, "This market has a woody."
Yield
The percentage return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.
Yield to maturity
The percentage rate of return paid on a bond, note, or other fixed income security if the investor buys and holds it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.
Zero-beta portfolio
A portfolio constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero.
Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments.
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