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124 terms · 24 in-depth pages · Crypto Wiki · Glossary

124 pages

A

Active managementPicking securities to beat a benchmark index.Funds and asset management AlphaAn investment’s outperformance beyond what its market risk explains.Risk and quant Asset allocationHow a portfolio is split between stocks, bonds, cash and other assets.Funds and asset management

B

Balance sheetA snapshot of a company’s assets on one side, its debts and equity on the other.Accounting and financial analysis Bank of EnglandThe United Kingdom’s central bank.Central banks Bank of JapanJapan’s central bank, long at negative rates.Central banks Basel IIIInternational rules on bank capital and liquidity.Banking and credit Basis pointOne hundredth of a percentage point: 3.00% to 3.25% is 25 basis points.Bonds and rates Bear marketA sustained fall in prices, by convention at least 20% from a peak.Markets BetaA stock’s sensitivity to market moves: 1.5 means 50% more reactive.Risk and quant Bid-ask spreadThe gap between the best buying and selling prices: a hidden cost of every trade.Markets BitcoinThe first cryptocurrency, with supply capped at 21 million coins.Crypto-assets Bitcoin ETFA listed fund holding bitcoin, available from a brokerage account.Crypto-assets BlockchainA shared, tamper-proof ledger of transactions kept by a network of computers.Crypto-assets BondA debt security: the issuer pays coupons, then repays at maturity.Bonds and rates Bond yieldA bond’s annual return at its market price: it rises when the price falls.Bonds and rates BrentNorth Sea crude, the global benchmark for oil prices.Markets Budget deficitPublic spending in excess of revenue over a year.Macroeconomics Bull marketA sustained rise in prices, by convention at least 20% from a trough.Markets BundThe German government bond, the euro area’s risk-free benchmark.Bonds and rates

C

CAC 40The index of the 40 largest companies listed in Paris, weighted by free float.Markets CET1 ratioA bank’s core equity divided by its risk-weighted assets.Banking and credit CommoditiesRaw goods traded on markets: energy, metals, farm products.Markets Compound interestInterest earning interest: capital grows exponentially.Savings and personal finance Consumer price index (CPI)The price of a representative basket of goods and services: the official inflation gauge.Macroeconomics Control premiumThe extra an acquirer pays above the share price to take control.Markets Core inflationInflation excluding energy and food, steadier and watched by central banks.Macroeconomics CorrectionA 10 to 20% drop from a market’s peak, shorter than a bear market.Markets CorrelationFrom -1 to +1, how far two assets move together.Risk and quant CouponThe periodic interest a bond pays.Bonds and rates Credit ratingA grade (AAA to D) from an agency on an issuer’s ability to repay.Bonds and rates Credit spreadThe extra yield of a corporate bond over government debt: a gauge of default risk.Bonds and rates

D

DeflationA general, lasting fall in prices that leads people to put off purchases.Macroeconomics Discounted cash flow (DCF)Valuing a company by discounting its future cash flows.Accounting and financial analysis DiversificationSpreading investments across weakly correlated assets to cut risk.Funds and asset management DividendThe share of profit paid out to shareholders, in cash or in shares.Stocks Dividend yieldThe annual dividend divided by the share price.Stocks Dollar-cost averagingInvesting the same amount at regular intervals to smooth the purchase price.Savings and personal finance DurationA bond’s price sensitivity to rates: in years, the price drop for a one-point rise.Bonds and rates

E

Earnings per share (EPS)Net income divided by the number of shares.Accounting and financial analysis EBITDAEarnings before interest, tax, depreciation and amortisation: the business’s raw profitability.Accounting and financial analysis ECB (European Central Bank)The euro area’s central bank, aiming at 2% inflation over the medium term.Central banks EquityCapital put in by shareholders plus retained earnings.Accounting and financial analysis ETF (exchange-traded fund)A listed fund that tracks an index at low cost.Funds and asset management Exchange rateThe price of one currency in another, e.g. 1 euro = 1.10 dollars.Markets

F

Fed (Federal Reserve)The US central bank, with a dual mandate: stable prices and maximum employment.Central banks Financial riskThe chance an investment returns less than expected, or loses value.Risk and quant Forward guidanceA central bank’s signals about the future path of its rates.Central banks Free cash flowCash generated by the business after investment: what can pay dividends and debt.Accounting and financial analysis Free floatThe share of capital actually available to trade, excluding stable holders.Stocks Futures contractA commitment to buy or sell an asset at a set date and price.Derivatives

G

GDP (gross domestic product)The value of everything a country produces over a period: its change measures growth.Macroeconomics GoldA precious metal and historical safe haven, quoted in dollars per ounce.Markets Growth stocksShares of fast-growing companies, often expensive and sensitive to rates.Stocks GuidanceThe targets a company announces for the coming quarters.Accounting and financial analysis

H

Hedge fundA lightly regulated fund using varied strategies: leverage, short selling, derivatives.Funds and asset management HedgingTaking a position that offsets possible losses on another.Derivatives High yieldBonds of low-rated companies, paying more and carrying more risk.Bonds and rates

I

ImpairmentAn accounting cut in an asset’s value that hits profit without cash going out.Accounting and financial analysis InflationA general, lasting rise in prices that erodes money’s purchasing power.Macroeconomics Initial public offeringA company’s first listing, opening its capital to the public.Markets ISM indexThe Institute for Supply Management’s PMI survey, the most watched in the US (manufacturing and services).Macroeconomics

L

LeverageBorrowing to invest more than one’s stake: gains and losses are magnified.Derivatives Life insurance (French)France’s favourite savings wrapper, in guaranteed euro funds or unit-linked funds.Savings and personal finance LiquidityHow easily an asset can be bought or sold quickly, in size, without moving its price.Markets Livret AFrance’s regulated, tax-free savings account, at a state-set rate.Savings and personal finance

M

Margin callA demand for more funds when a leveraged position loses value.Derivatives Market capitalisationA company’s stock-market value: number of shares times the share price.Stocks Mergers and acquisitionsTwo companies combining, by merger or by one buying the other.Markets MortgageA loan to buy a home, usually at a fixed rate over 20 to 30 years.Banking and credit Moving averageThe average of recent prices (50 or 200 days) that smooths the trend.Risk and quant

N

NasdaqThe US electronic exchange and its index, dominated by technology stocks.Markets Net debtFinancial debt minus cash: compared with EBITDA (leverage).Accounting and financial analysis Net incomeWhat remains of revenue after every cost and tax.Accounting and financial analysis Net interest marginThe gap between interest earned on loans and paid on deposits.Banking and credit Nonfarm payrolls (NFP)US jobs added each month outside farming, released on the first Friday.Macroeconomics

O

OAT (French government bond)The French government bond, benchmark of France’s borrowing cost.Bonds and rates OPEC+The cartel of oil-exporting countries and allies that sets output quotas.Markets Operating marginOperating profit divided by revenue.Accounting and financial analysis OptionThe right, not the obligation, to buy (call) or sell (put) an asset at a set price.Derivatives Output gapThe gap between actual and potential GDP: positive means overheating.Macroeconomics

P

P/E ratioPrice divided by earnings per share: how many years of profit the market pays for.Stocks Passive investingTracking an index instead of trying to beat it.Funds and asset management PCE price indexThe household spending price index, the Fed’s preferred inflation gauge.Macroeconomics PEA (French equity savings plan)A French tax wrapper for investing in European stocks.Savings and personal finance PMIA monthly survey of purchasing managers: above 50 activity grows, below 50 it shrinks.Macroeconomics Policy pivotWhen a central bank switches from hiking rates to cutting them, or the reverse.Central banks Policy rateThe rate a central bank sets to steer the cost of credit across the economy.Central banks Potential growthThe growth rate an economy can sustain without stoking inflation.Macroeconomics Private equityInvesting in unlisted companies, often with debt (LBO).Funds and asset management Public debtEverything the state and public bodies have borrowed, often as a share of GDP.Macroeconomics Purchasing powerWhat an income can buy: it falls when prices rise faster than wages.Macroeconomics

Q

Quantitative easing (QE)Large-scale bond buying by a central bank to push down long-term rates.Central banks Quantitative tightening (QT)The central bank shrinks its balance sheet by not reinvesting maturing bonds.Central banks Quarterly earningsAccounts published every quarter: revenue, margins, profit, guidance.Accounting and financial analysis

R

Real interest rateThe nominal rate minus inflation: the true cost of money.Bonds and rates RecessionA decline in activity, often defined as two consecutive quarters of falling GDP.Macroeconomics RevenueA company’s total sales over a period, before any costs.Accounting and financial analysis RSI (relative strength index)An oscillator from 0 to 100: above 70 overbought, below 30 oversold.Risk and quant

S

S&P 500The index of 500 large US companies, the world’s benchmark for equities.Markets Safe havenAn asset sought in a crisis: gold, Swiss franc, yen, Treasuries.Markets ShareA unit of ownership in a company, with rights to dividends and votes.Stocks Share buybackA company buys back its own shares, lifting earnings per remaining share.Stocks Sharpe ratioExcess return divided by volatility: performance per unit of risk.Risk and quant Short sellingSelling a borrowed security to buy it back lower: a bet on a fall.Markets SpreadThe gap between two yields, for instance France against Germany at 10 years.Bonds and rates StablecoinA crypto-asset designed to hold a stable value, pegged to the dollar or euro.Crypto-assets StagflationWeak or no growth combined with high inflation.Macroeconomics Standard deviationA statistical measure of dispersion around the mean.Risk and quant Stock indexA basket of shares whose value sums up how a market moves: S&P 500, CAC 40, Nikkei.Markets

T

Takeover bidAn offer to buy a listed company’s shares at a set price, usually at a premium.Markets TariffsTaxes on imports that make foreign goods dearer.Macroeconomics Taylor ruleA formula giving the “right” policy rate from inflation and the output gap.Central banks Trade balanceExports minus imports of goods: a surplus or a deficit.Macroeconomics Trading volumeThe number of shares traded over a period: it confirms or tempers a price move.Markets TreasuriesUS government debt, the world’s benchmark for rates.Bonds and rates

U

Unemployment rateThe share of the labour force without a job and looking for one.Macroeconomics

V

ValuationAn estimate of what a company is worth, from multiples or discounted cash flows.Stocks Value at Risk (VaR)The largest loss expected over a period at a given probability.Risk and quant Value stocksShares cheap relative to earnings or assets, often with high dividends.Stocks VIXThe 30-day volatility expected on the S&P 500, read from option prices: the “fear gauge”.Risk and quant VolatilityHow widely a price swings, measured by the standard deviation of its returns.Risk and quant

W

Weighted average cost of capitalThe minimum return required by shareholders and lenders, weighted by their share.Accounting and financial analysis

Y

Yield curveA government’s yields by maturity. Inverted, it has often preceded recessions.Bonds and rates

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