Accrued interest
interest that has accumulated on a security but has not yet been paid.
A
Actively managed funds
mutual funds where a manager selects securities to beat a benchmark.
Algorithmic trading
using programmed instructions to execute trades automatically.
American Depository Receipt (ADR)
a negotiable certificate representing ownership in a non US company’s shares.
AMFI / AMFI registration number (ARN)
Association of Mutual Funds in India; ARN identifies fund distributors.
Amortization
spreading payment of a loan or intangible asset cost over time.
Annual interest rate / annualized premium / annual report
annual percentage charged on loans; annualized insurance premium; yearly corporate report.
Anti money laundering (AML)
regulations to prevent funds obtained illegally from being disguised.
Arbitrage / arbitrage fund
exploiting price differences in different markets; funds that do this.
Arbitrators
impartial persons appointed to settle disputes.
Articles of association
document defining company regulations.
Ask price
lowest price a seller is willing to accept.
Asset allocation / valuation
distributing assets among categories; determining an asset’s value.
At par
security trading at its face value.
Auction
public sale in which items are sold to the highest bidder.
Audit / auditors
examination of financial statements and those who conduct it.
B
Bad debts
receivables unlikely to be collected.
Balanced funds / balanced scheme
mutual funds investing in a mix of equities and debt.
Balance of payments
record of a country’s transactions with the rest of the world.
Bank rate
rate at which a central bank lends to commercial banks.
Base metals
metals widely used in industry (copper, etc.).
Bearer stocks
shares whose ownership is evidenced by possession.
Bearish view / bullish view
expectation of falling or rising prices.
Beta
measure of a stock’s volatility relative to the market.
C
CAD (capital account deficit)
difference when investment outflows exceed inflows.
Call option
derivative giving the right to buy an asset at a set price.
Capital appreciation
rise in asset value.
Capital protection funds
schemes aiming to protect capital and deliver modest growth.
CDSL
Central Depository Services (India) Ltd., an Indian depository.
Certificates of deposit
short term deposits issued by banks.
Churning
excessive trading by a broker to generate commissions.
Circuit breaker
mechanism halting trading when price movements hit certain thresholds.
Collar / collateral
options strategy limiting upside and downside; asset pledged as security.
Combating Financing of Terrorism
policies targeting financing of terrorism.
Commodity trading
buying/selling commodities such as metals or agricultural products.
Compounded annual growth rate (CAGR)
annualised rate of return on an investment.
Consumer Price Index (CPI)
index measuring price changes of a basket of goods.
Contingent deferred sales charge (CDSC)
fee charged on mutual fund redemptions.
Contract notes / contra funds
documents confirming trades; mutual funds investing in out of favour sectors.
CIBIL (Credit Info Bureau)
Indian credit history provider.
Credit rating
assessment of creditworthiness.
Currency market / currency peg / currency trading
market where currencies are traded; fixed exchange rate; buying and selling currencies.
Current account / current account deficit
bank account used for frequent transactions; when a country’s imports exceed exports.
Custodian
entity holding securities on behalf of clients.
Cut off time
time by which orders must be received to be processed that day.
Cyclical stocks
shares whose performance fluctuates with economic cycles.
Call Money
Short-term borrowing and lending in the money market, typically one day.
Circuit Breaker
Regulatory mechanism to halt trading when prices move beyond a threshold.
Contango
Futures situation where forward price is higher than the spot price.
Cost of Carry
Net cost of holding a futures position (financing + storage – income).
Credit Rating
Assessment of a borrower’s creditworthiness.
D
Dawn raid
acquiring a large stake in a company at market opening.
Debentures / deep discount bonds
long term debt instruments; zero coupon bonds issued at a discount.
Debt fund
mutual fund investing mainly in fixed income securities.
Defensive stock / deficit / deflation
share that performs steadily in downturns; when spending exceeds revenue; general fall in price levels.
Delivery trading
buying shares for delivery to demat account.
Demand draft
prepaid instrument guaranteeing payment.
Demat account
electronic account to hold securities.
De merger
corporate restructuring splitting a company into separate units.
Department of Economic Affairs / depository / depository participants
Indian government department; organisation holding securities; intermediaries of a depository.
Depreciation
reduction in asset value over time.
Derivatives
instruments deriving value from underlying assets.
Diversification / diversified debt funds / diversified equity funds
spreading investments across assets or sectors.
Dividend / dividend distribution tax / dividend stripping
company’s distribution of profits; tax on dividends; exploiting timing of dividends for tax benefit.
Domestic institutional investor (DII)
Indian institutional investor.
Domestic trade deficit / due diligence
when imports exceed exports domestically; investigation of a company before a deal.
Dividend Yield
Annual dividend per share ÷ price per share, shown as %.
Dematerialisation (Demat)
Conversion of physical share certificates into electronic form.
E
Earnings before interest and tax (EBIT) / EBITD / EBITDA
measures of profitability excluding certain expenses.
Earnings per share (EPS)
portion of profit attributable to each share.
Economy
system of production and consumption.
Electronic Clearing Services (ECS)
electronic funds transfer used by banks.
ELSS (Equity Linked Savings Scheme)
tax saving mutual fund.
Employee stock option
company granted option to buy shares at a set price.
Entry load / exit load
charges when entering or exiting a mutual fund.
Equity capital / index / investment / market / mutual fund / share
capital raised by issuing shares; market indices; investment in shares; market for shares; mutual funds investing in equity; ownership units.
Escrow account
account held by a third party until conditions are met.
ETF (exchange traded fund)
fund trading on exchanges like a stock.
EUR / eurobond
euro currency; bond denominated in currency other than issuer’s home.
Ex dividend
stock trading without the right to an upcoming dividend.
Ex parte award
award granted when one party does not participate.
Exponential moving average (EMA)
moving average giving more weight to recent data.
Exports / exposure
goods sold abroad; proportion of capital invested.
Earnings Per Share (EPS)
Net profit attributable to equity shareholders ÷ number of shares.
EBITDA
Earnings before interest, tax, depreciation & amortisation; measure of profitability.
F
Face value
nominal value printed on a share or bond.
FDI (foreign direct investment)
investment from abroad establishing ownership/control.
Federal Reserve
US central banking system.
Feeder funds / FIAT currencies
funds investing in another fund; government issued currency not backed by commodities.
Fibonacci
ratio sequence used in technical analysis.
Financial analysis / planning
evaluating financial data; planning finances to meet goals.
Fiscal deficit / fiscal policy
when government spending exceeds revenue; use of taxation and spending to influence the economy.
Fit and proper person
ensures trustworthiness of business employees.
Fixed vs. flexible exchange rate
fixed rate pegged to another currency; flexible determined by market.
Folio
unique number identifying a mutual fund account.
Foreign currency convertible bond (FCCB) / FCNR account
bond convertible into equity; fixed deposit account for non residents.
Foreign exchange rate / foreign institutional investors (FIIs) / FIRC / FPIs
price of one currency in terms of another; institutional investors investing in foreign markets; Foreign Inward Remittance Certificate; foreign portfolio investors.
Forward contract / forward price
agreement to buy or sell at a future date; price agreed in the forward contract.
Fresh purchase / FRF / front running
buying newly issued securities; Financial Reporting Framework; illegal act of trading ahead of customer orders.
Fund / funded debt / fund manager / fund of funds / futures
pool of money; long term debt; person managing investments; fund investing in other funds; contracts obligating buy/sell at future date.
F&O (Futures & Options)
Derivative contracts traded on exchanges for hedging and speculation.
Face Value
Nominal value of a share or bond, distinct from its market price.
Forex Market
Global market for trading currencies.
G
Gamma / gamma hedging
option sensitivity measure; hedging using gamma.
Gap analysis / gap insurance / garbage fees
assessing differences between expectations and reality; insurance covering gap between car’s value and loan; extra fees in mortgage closings.
GBP / GDP / GDP price deflator
British pound; total value of goods and services produced; ratio of nominal to real GDP.
General business tax credit / general insurance
US tax credit for various business activities; insurance other than life insurance.
Gilt edged security
government or high grade bond.
Global indices / gold funds / government securities
indices tracking world markets; funds investing in gold; debt instruments issued by governments.
Graph theory
mathematical study of networks.
Gross national product (GNP) / gross registered tonnage (GRT)
total value of goods/services produced by nationals; measure of a ship’s size.
Group policy
insurance policy covering a group.
Growth funds/schemes
funds aiming for capital appreciation.
Guaranteed surrender value / guaranteed survival benefit
amount insurer guarantees on policy surrender; guaranteed payouts during the policy term.
H
Haircut
reduction applied to the value of collateral.
Half stock / Halloween strategy
half share; strategy of investing in November and selling in April.
Hard money loan / harmless warrants
loan secured by property; warrants not involving new debt.
Haurlan index / Hawala
indicator measuring market breadth; informal money transfer system.
Head and shoulders pattern / head fake trade / headline risk
chart pattern signalling reversal; false breakout; risk from negative headlines.
Heat maps
visual tools showing price movements.
Hedge funds / hedgers
pooled investment funds using sophisticated strategies; those hedging risk.
Hindu undivided family (HUF)
joint family recognized as a tax entity.
Hive off
selling part of a company.
Home equity / home loan / H shares
value of homeowner’s interest; mortgage loan; shares of Chinese companies listed in Hong Kong.
Human Development Index (HDI)
index measuring life expectancy, education and income.
Hybrid funds
funds investing in both equity and debt.
I
Income scheme / income stocks
mutual fund focusing on regular income; stocks paying high dividends.
Index / index funds / index of industrial production (IIP)
statistical measure of market performance; funds replicating an index; indicator measuring factory output.
Indian Depository Receipt (IDR)
instrument allowing investors to hold shares of foreign companies.
Individual financial advisor (IFA)
person offering financial advice.
Inflation / INR / insider trading / insolvency
general rise in prices; Indian rupee; illegal trading using non public information; inability to pay debts.
Institutional investors / insurance
entities pooling money to invest; protection against risk.
Interest rate / interest rate futures / interest rate swap
price of borrowing money; derivative based on interest rates; contract exchanging interest rate payments.
Interim dividend / intermediaries
dividend paid before year end; firms facilitating transactions.
International trade / interval fund / in the money
exchange of goods between countries; close ended fund allowing periodic repurchase; option with intrinsic value.
Intraday trading / intrinsic value / investment / investors / IOC / IPO
buying and selling within the same day; real worth of an asset; committing money with expectation of return; people who invest; immediate or cancel order; initial public offering.
J
Jobber
trader who buys and sells securities on own account.
Joint account / joint & survivor annuity / joint bond
account held by two or more; annuity paying until last survivor dies; bond with two issuers.
Joint float / joint liability / joint life payout
stabilizing multiple currencies through joint reserve; shared responsibility for debt; policy paying benefits to more than one life.
Joint stock company
company owned by shareholders.
JPY / junk bonds
Japanese yen; high yield, high risk corporate bonds.
K
Key Information Memorandum (KIM)
document summarising scheme information.
Kiwi bond
New Zealand government bond.
KRA (KYC Registration Agency)
repository for know your customer documents.
K ratio
measure used by investors to analyse risk adjusted returns.
KYC (Know Your Customer)
process of verifying identity.
L
Laggard / lagging indicator
stock or indicator that underperforms; indicator reflecting past events.
Laissez faire
policy of minimal government intervention.
Large cap
company with large market capitalisation.
LBP (Lebanese pound)
Lebanon’s currency.
Lead manager / lead reinsurer / leads and lags
main manager of an issue; reinsurer taking largest share; timing foreign exchange payments to advantage.
Lead time / lead underwriter / lease hold
time between initiation and completion; firm managing IPO; right to use property for a period.
Leveraged buy out (LBO)
acquiring a company using borrowed funds.
Life cycle funds / limit order / liquid assets
funds adjusting asset mix as investor ages; order to buy/sell at set price; assets easily convertible to cash.
Load / lock in period
fee for entering/exiting a fund; time before an investment can be sold.
Long term capital gains (LTCG) / Loro account
profit on assets held long term; account a bank holds on behalf of a foreign bank.
Lower circuit / L shaped recovery
lowest price limit for a stock; long, slow recovery after recession.
M
Macroeconomics / manufacturing index
study of economy wide phenomena; indicator tracking manufacturing activity.
Margin / marginal deficit / margin trading
amount borrowed to buy securities; excess of expenditures over revenue; trading using borrowed funds.
Market capitalisation / market forecast / market lot
value of all a company’s shares; prediction of market direction; standard trading unit.
Market risk / mark to market (MTM) / MCX
risk of investments declining due to market movements; valuing securities at current price; Multi Commodity Exchange.
Mergers / mid cap / model portfolio
combining companies; medium sized companies; sample investment portfolio.
Monetary policy / money laundering / money market
central bank policy controlling money supply; disguising proceeds of crime; market for short term debt instruments.
Monthly income plans / monthly income scheme
mutual funds aiming for regular income; scheme of Indian Post delivering monthly interest.
Moving average / multi cap / multiplier
average used to smooth price data; fund investing across market caps; factor used in valuation.
Mutual funds / Mutual Fund Service System (MFSS)
pooled investments in securities; online system for buying and selling mutual funds.
Market Depth
Measure of supply and demand shown in bid-ask orders at different prices.
Margin Trading
Buying/selling securities by borrowing funds from a broker.
Money Market
Segment of financial market for short-term debt instruments.
Mutual Fund NAV
Net Asset Value = (Fund assets – liabilities) ÷ number of units.
N
Net asset value (NAV)
per unit value of a mutual fund.
NCDEX / NEFT
National Commodity & Derivatives Exchange; electronic funds transfer in India.
Net interest income
difference between interest earned and paid.
Netting / net worth
offsetting obligations; assets minus liabilities.
New business profit / new fund offer (NFO)
profit from new insurance business; offering of a new mutual fund.
Niche marketing / NOC / nominee
targeting a specific market segment; no objection certificate; person designated to receive benefits.
Non banking financial corporation / non convertible debentures / non performing assets
financial institution not a bank; debentures that cannot be converted to shares; loans on which interest/principal is overdue.
Non standard life / non tax revenue
life insurance for high risk individuals; revenue earned by government other than taxes.
Nostro account / novation / NRI
account held by a bank in a foreign country; replacing an old obligation with a new one; Non Resident Indian.
NSDL / NSE
National Securities Depository; National Stock Exchange.
O
Obligation / obligation bond
commitment to perform; bond guaranteeing performance.
Obsolete inventory / occupancy certificate / odd lot
inventory no longer usable; certificate for occupancy of a building; quantity of shares less than normal trading unit.
Odious debt / offer document / off market
debt incurred by a regime for purposes not benefiting the people; prospectus of an issue; transaction settled outside clearing systems.
Omnibus clause / one sided market / OPEC
clause covering unspecified perils; market with only bids or offers; Organisation of the Petroleum Exporting Countries.
Open ended schemes / open end mortgage
mutual fund that issues and redeems units continuously; mortgage allowing further borrowing.
Open interest / open position
total number of outstanding contracts; position that has not been closed.
Operational risk / option chain / option premium / options
risk of loss from inadequate processes; listing of option prices; price paid for an option; derivative giving right but not obligation to buy/sell.
Option spread / option strategies / option writer
combining options with different strikes; trading strategies using options; seller of an option.
Oversubscribed / over the counter (OTC)
demand exceeding supply in an issue; trading directly between parties outside exchanges.
P
Passive funds
funds aiming to replicate index performance.
Pay in / pay out
settlement of securities into or out of a demat account.
Point of presence / pool account
physical location of a service provider; account where client funds are pooled.
Portfolio risk / positional calls
risk of loss from a portfolio; calls based on holding positions longer than a day.
Preference share / preference share capital
share with preferential dividend rights; capital raised through preference shares.
Pre opening session / price band / primary market
short session before normal market; range within which a stock can trade; market for new issues.
Private equity firms / private investment fund / private placement
firms investing directly in companies; pooled fund for private investments; sale of securities to a select group.
Professional clearing member / proxy
member clearing trades on behalf of others; person authorised to vote at shareholder meetings.
Public sector undertaking (PSU) / put option
government owned corporation; option giving right to sell.
P/E Ratio
Price-to-Earnings ratio; stock price ÷ EPS, a key valuation metric.
Payout Ratio
% of earnings distributed to shareholders as dividends.
Preference Shares
Shares with fixed dividend rights, senior to common equity.
Q
Q stick indicator
indicator measuring difference between open and close prices to identify trends.
Qualified acquisition cost / qualified annuity
costs of buying or building a home under US education savings rules; annuity meeting certain IRS requirements.
Quality of earnings / quant fund
assessment of earnings sustainability; fund using quantitative models.
Quantitative easing / quantitative trading
monetary policy of buying securities to inject liquidity; trading based on mathematical models.
Quartile / quote currency / quote driven market
one of four equal groups in a distribution; second currency in a pair; market where dealers quote both bid and ask prices.
R
Rainbow option / rate tart / ratio spread
option depending on multiple assets; borrower moving debt to get lowest rate; spread involving selling and buying different option ratios.
Recurring expenses / redemption / regulator
routine operating expenses; returning units for payment; authority overseeing markets.
Regulatory risk / re materialisation
risk that regulation will negatively affect an investment; converting dematerialised securities back to physical form.
Repo rate / re purchase of units
rate at which central bank lends to commercial banks; mutual fund buying back its units.
Reserve Bank of India / retail investor
India’s central bank; individual investor.
Retained earnings / rights issue / riskometer
profits kept by a company; issue to existing shareholders; SEBI’s risk rating scale for mutual funds.
Registrar & transfer agency (RTA) / RTGS (Real Time Gross Settlement)
entity handling mutual fund records; system for instant fund transfers.
S
Scheme information document (SID) / SDR / SEBI
document detailing mutual fund scheme; special drawing rights; Securities and Exchange Board of India.
Secondary market / sector funds / secured premium note (SPN)
market for existing securities; funds investing in a specific sector; convertible instrument with detachable warrant.
Security market / security transaction tax (STT)
market where securities are bought and sold; tax on transactions of securities.
SEK / self auction / self certified syndicate banks / SRO
Swedish krona; sale of investor’s shares for non payment of dues; banks authorised to accept IPO applications; self regulatory organization.
SGD / short selling / short term capital gains (STCG)
Singapore dollar; selling borrowed securities; gains from assets held for a short period.
Sinking funds / SIP / SPAN / speculators
funds set aside to repay debt; systematic investment plan; risk calculation system for derivative positions; people taking risk to profit from price changes.
Spot price / standing instructions / SAI / statutory dues
current market price; instructions to debit/credit accounts regularly; Statement of Additional Information; compulsory payments such as taxes.
Stock split / stop loss order / strangle
dividing shares to reduce price; order to sell if price falls; options strategy using call and put with different strike prices.
Strategic asset allocation / strike price / subscription / subsidies
long term allocation of assets; price at which an option can be exercised; money paid for a new issue; government financial assistance.
Swaps / systematic transfer plan (STP) / systematic withdrawal plan (SWP)
contracts to exchange cash flows; plan transferring money from one scheme to another; plan allowing periodic withdrawals.
SIP (Systematic Investment Plan)
Regular periodic investment plan into mutual funds.
Settlement Price
Official closing price used for marking futures to market.
Switching
Moving investment from one mutual fund scheme to another.
STT (Securities Transaction Tax)
Tax levied on securities transactions in India.
T
Tactical asset allocation
short term adjustments to long term asset mix.
Tax deducted at source (TDS) / tax deferral
tax collected at the time of payment; postponement of tax liability.
Treasury bill (T bill) / term loans / thematic fund
short term government debt; loans for a fixed term; fund investing in a particular theme.
Thin market / time value of money (TVM)
market with few trades and high volatility; concept that money today is worth more than money later.
T & N days / trade day / trade deficit
period of T plus N days for settlement; day on which a trade is executed; situation where imports exceed exports.
Trading cum clearing member (TCM) / trigger price
member authorised for both trading and clearing; price that triggers a stop loss order.
T+1 / T+2 Settlement
Timeline for settlement of trades (1 or 2 business days after transaction).
Turnover
Total value of securities traded in a period.
U
Ultimate beneficial owner (UBO)
person who ultimately owns or controls a company.
Ultra short term bond funds
funds investing in debt securities with very short maturity.
Unamortised bond discount / uncollected funds
portion of discount on bonds not yet amortised; cheques deposited but not yet cleared.
Underlying asset / underlying debt
asset on which a derivative is based; debts secured by pledged assets.
Underpricing / undervalued
issuing a security at a price below its intrinsic value; asset trading below its value.
Underwriter / underwriter’s discount
firm guaranteeing subscription of a security issue; fee earned by underwriter.
Unfunded debt / unit certificate / unit holder
debt not backed by sinking fund; document evidencing ownership of a unit; investor in a mutual fund.
Upper circuit / USD
maximum daily price rise allowed for a stock; United States dollar.
V
Valuation opportunity cost / value added tax
cost of opportunities foregone in valuations; consumption tax levied on value added.
Value at risk / value at risk model
statistical measure of the potential loss; model estimating that risk.
Value fund / value plus trading / value stock
fund investing in undervalued companies; trading strategy of buying undervalued and shorting overvalued shares; stock considered cheap relative to fundamentals.
Vega / vertical mergers / vertical spread
option sensitivity to volatility; merger of firms at different stages of production; options strategy using calls or puts at different strike prices.
Vienna Stock Exchange (VSX) / vignette
Austrian securities exchange; stamp indicating tax paid.
Virtual currency option / volatility index (VIX) / volatility ratio
option denominated in digital currency; index measuring expected volatility; ratio comparing volatility measures.
Vostro account
account a bank holds on behalf of a foreign bank.
W
Wage push inflation / Wall Street / warrants
inflation caused by rising wages; US financial district; long term option to buy a stock.
War risk insurance
policy covering losses from war related events.
Wash sale / watch list / watered stock
sale and repurchase of the same security within 30 days, disallowing tax deduction; list of securities monitored by exchanges; stock issued at a value higher than underlying assets.
Weak dollar / wealth cycle / wealth management
US dollar losing value relative to other currencies; stages of personal financial journey; structured approach to managing finances.
Whole sale price index (WPI) / wide opening
measure of price changes at wholesale level; term describing a wide range of derivative uses.
Widow and orphan stock / window contract / window dressing
low risk stock paying high dividends; short term investment contract with specified deposit period; practice of making results appear better by year end.
X
No entries
No Data to Show.
Y
Yankee bonds
bonds issued by foreign entities but denominated and traded in US dollars.
Year end dividend
dividend paid at the end of a company’s financial year based on performance.
Yellow Sheets
daily bulletin providing bid and ask prices for over the counter corporate bonds and listing brokerages.
Yield curve
relationship between yields and maturities for similar bonds.
Yield curve option pricing models
arbitrage free models for pricing options by making assumptions along the yield curve.
Yield ratio
ratio of yields on two bonds.
Yo yo stock
highly volatile stock that swings up and down.
YTM (yield to maturity)
total return expected from a bond if held to maturity.
Z
Z Bond
bond in which interest accrues and is added to principal; interest is paid later.
Zero balance account
account that maintains zero balance; funds are transferred in to cover cheques.
Zero beta portfolio
portfolio of risk free assets with zero systematic risk.
Zero coupon bonds
bonds sold at a discount that pay no periodic interest; investors receive face value at maturity.
Zero plus tick
trade executed at the same price as the preceding trade but higher than the last trade at a different price.