WSU Lexicon

The language of finance.

380 entries, each with a definition, a common trap, a worked example and the questions candidates actually ask. A new entry every day.

A · 17 entries

Absolute ReturnAbsolute return is an investment objective that targets positive performance in all market environments, measured on a standalone basis rather than against a market index.
Accelerated DepreciationAccelerated depreciation is any depreciation method that charges a larger share of an asset's depreciable cost to early periods and less to later ones.
Accrual AccountingAccrual accounting records revenues when they are earned and expenses when they are incurred, regardless of when cash actually moves.
Accrued InterestAccrued interest is the coupon income a bond has earned since its last payment date but has not yet paid out.
Active ManagementActive management is an investment approach in which the manager deliberately deviates from a benchmark's holdings and weights to try to earn a return above it.
Agency ProblemThe agency problem is the conflict that arises when one party (the agent) acts on behalf of another (the principal) but holds different incentives and better information.
AlphaAlpha is the return a portfolio earns beyond what its risk exposure justifies, measured against a benchmark or a CAPM-implied expected return.
American Depositary ReceiptAn American Depositary Receipt is a dollar-denominated certificate issued by a US depositary bank that represents a specified number of shares in a foreign company held on deposit abroad.
American OptionAn American option is an option contract that the holder may exercise at any point up to and including the expiration date.
AmortizationAmortization is the systematic allocation of the cost of a finite-life intangible asset over its useful life, recognized as a non-cash expense on the income statement.
Amortizing BondAn amortizing bond repays principal gradually over its life: each scheduled payment covers interest plus part of the outstanding principal, so no lump sum is owed at maturity.
AnchoringAnchoring is the cognitive error of fixing on an initial reference value (a purchase price, a 52-week high, a prior forecast) and then adjusting estimates insufficiently away from it.
AnnuityAn annuity is a finite series of equal cash flows paid at regular intervals.
ArbitrageArbitrage is the simultaneous purchase and sale of identical or equivalent assets at different prices to capture a riskless profit with no net capital at risk.
Arithmetic Mean ReturnThe arithmetic mean return is the simple average of a set of periodic returns: sum the individual period returns and divide by the number of observations.
Asset-Backed SecurityAn asset-backed security is a debt instrument whose payments come from a pool of financial assets (auto loans, credit card receivables, equipment leases, student loans) sold to a special purpose entity that issues the notes.
At the MoneyAn option is at the money when its strike price equals, or sits very close to, the current price of the underlying.

B · 20 entries

BackwardationBackwardation is a market condition in which the futures price of an asset trades below the current spot price, producing a downward-sloping forward curve where nearer-dated contracts are more expensive than longer-dated ones.
Balance SheetThe balance sheet is the financial statement that reports a company's assets, liabilities, and owners' equity at a single point in time.
Balance of PaymentsThe balance of payments is the double-entry accounting record of all transactions between a country's residents and the rest of the world over a period.
BasisBasis is the difference between the spot (cash) price of an asset and the price of a futures contract on it, conventionally quoted as spot minus futures.
Bayes' FormulaBayes' formula is the rule for revising a probability once new information arrives: the updated (posterior) probability equals the prior probability multiplied by the likelihood of the new evidence, divided by the unconditional probability of that evidence.
Bear MarketA bear market is a sustained decline in a broad market index, conventionally defined as a drop of 20% or more from a recent peak.
Behavioral FinanceBehavioral finance is the field that explains investor and market behaviour using observed psychology rather than strict rationality.
BenchmarkA benchmark is the reference portfolio or index against which a manager's return and risk are judged.
Best ExecutionBest execution is the duty of an investment professional to trade client orders on the most favourable terms reasonably available, weighing price, commissions and fees, speed, likelihood of execution and settlement, and order size as a package rather than any single factor.
BetaBeta measures an asset's sensitivity to movements in the overall market, computed as the covariance between the asset's returns and market returns divided by the variance of market returns.
Bid-Ask SpreadThe bid-ask spread is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller will accept (the ask).
Binomial DistributionThe binomial distribution is the discrete probability distribution of the number of successes across a fixed number of independent trials, where each trial has only two possible outcomes and the same probability of success p.
Blue ChipA blue chip is the common stock of a large, well-established company with a long record of stable earnings, sound finances, and often uninterrupted dividends.
Bond IndentureA bond indenture is the master legal contract governing a bond issue.
BootstrappingBootstrapping is the sequential technique for extracting zero-coupon spot rates from the observed prices or par yields of coupon-paying bonds.
Bull MarketA bull market is a sustained period of broadly rising asset prices, conventionally identified once a major index has advanced 20% or more from a prior trough.
Bullet BondA bullet bond is a debt security that pays fixed periodic coupons over its life and repays the entire face value in one lump sum at maturity.
Business CycleThe business cycle is the recurring pattern of expansion and contraction in aggregate economic activity around an economy's long-run growth trend.
Business RiskBusiness risk is the uncertainty surrounding a firm's operating income, arising from unexpected deviations in demand, prices, input costs, or margins.
Buying on MarginBuying on margin is purchasing securities using cash borrowed from a broker, with the securities serving as collateral.

C · 58 entries

Call OptionA call option is a contract granting the buyer the right, not the obligation, to purchase an underlying asset at a fixed strike price on or before expiration.
Callable BondA callable bond is a bond that grants the issuer the right to redeem it before maturity at specified call prices and dates.
Capital Allocation LineThe capital allocation line is the straight line plotting every risk–return combination available from mixing a risk-free asset with one specific risky portfolio.
Capital Asset Pricing ModelThe Capital Asset Pricing Model states that an asset's expected return equals the risk-free rate plus its beta multiplied by the equity risk premium.
Capital BudgetingCapital budgeting is the process by which a firm identifies, evaluates and selects long-term investment projects.
Capital CallA capital call is a formal notice from a private fund's general partner requiring limited partners to transfer a portion of their previously committed capital, typically within days, to fund an investment, fees, or expenses.
Capital Market LineThe Capital Market Line is the straight line from the risk-free rate that is tangent to the efficient frontier at the market portfolio.
Capital StructureCapital structure is the mix of debt, equity, and hybrid securities a company uses to finance its assets and operations.
Carried InterestCarried interest is the share of a fund's investment profits paid to the general partner as performance compensation, commonly 20% of gains.
Cash Conversion CycleThe cash conversion cycle measures the number of days between paying suppliers for inventory and collecting cash from customers.
Cash Flow StatementThe cash flow statement reports the actual cash a company received and paid during a period, classified into operating, investing, and financing activities.
Central Limit TheoremThe central limit theorem states that the sampling distribution of the sample mean approaches a normal distribution as sample size grows, whatever the shape of the underlying population, provided observations are independent with finite variance.
Circuit BreakerA circuit breaker is a pre-set rule that halts or restricts trading when prices move beyond specified thresholds within a session.
Clean PriceThe clean price is the quoted price of a bond excluding any accrued interest since the last coupon date.
ClearinghouseA clearinghouse is the central counterparty that steps between buyer and seller once a derivatives trade is agreed, becoming buyer to every seller and seller to every buyer.
Coefficient of VariationThe coefficient of variation is the ratio of a distribution's standard deviation to its mean, expressed as dispersion per unit of average value.
Collateralized Debt ObligationA collateralized debt obligation is a structured security backed by a pool of debt instruments (corporate bonds, bank loans, or other securitizations) whose cash flows are sliced into tranches ranked by seniority.
Commercial PaperCommercial paper is a short-term, typically unsecured promissory note issued by large, highly rated corporations to fund working capital and seasonal cash needs.
CommoditiesCommodities are physical goods such as crude oil, natural gas, gold, copper, grains and livestock that trade in standardised units.
Common StockCommon stock is an equity security conveying a residual ownership claim on a company: holders rank behind creditors and preferred shareholders in liquidation, normally vote on corporate matters, and receive dividends only if and when the board declares them.
Common-Size AnalysisCommon-size analysis restates financial statement line items as percentages of a common base, allowing comparison across firms of different sizes and across periods.
Comparative AdvantageComparative advantage is the ability to produce a good at a lower opportunity cost than a trading partner, measured in units of forgone alternative output rather than raw productivity.
CompoundingCompounding is the process of moving a cash flow forward in time so that earned returns themselves earn returns.
Conditional ProbabilityConditional probability is the likelihood of an event occurring given that another event has already happened, written P(A|B) and computed as the joint probability P(AB) divided by P(B), which must be greater than zero.
Confidence IntervalA confidence interval is a range built around a sample statistic that is expected to contain the true population parameter a stated percentage of the time.
Confirmation BiasConfirmation bias is the tendency to seek out, favour, and recall information that supports an existing belief while discounting evidence that contradicts it.
Conflict of InterestA conflict of interest is any situation in which a member's personal interests, business relationships, or competing duties could reasonably be expected to impair independence and objectivity or interfere with obligations to clients, prospective clients, and employers.
Consumer Price IndexThe Consumer Price Index is a statistical measure of the average price level of a fixed basket of goods and services purchased by a typical household.
ContangoContango is a market condition in which futures prices trade above the current spot price, producing an upward-sloping futures curve.
Continuous CompoundingContinuous compounding is the limiting case of compounding as the number of periods per year approaches infinity.
Convertible BondA convertible bond is a debt security that gives the holder the right to exchange it for a predetermined number of the issuer's common shares.
ConvexityConvexity is the second-order measure of a bond's price sensitivity to yield changes, capturing the curvature that duration's straight-line estimate misses.
Core InflationCore inflation is a price index that strips out food and energy components to isolate the persistent trend in consumer prices.
Corporate BondA corporate bond is a debt security issued by a company that obligates it to pay periodic coupons and repay principal at maturity.
Corporate GovernanceCorporate governance is the system of internal controls, policies, and procedures that defines the rights, duties, and relationships among a company's shareholders, board of directors, managers, and other stakeholders.
CorrelationCorrelation is a standardized measure of the linear relationship between two variables, calculated as their covariance divided by the product of their standard deviations.
Cost of CapitalCost of capital is the minimum return a company must earn on invested funds to satisfy the investors who supplied them.
Cost of CarryCost of carry is the net cost of holding the underlying asset from today until a contract's delivery date: financing, storage, and insurance costs, less any benefits of ownership such as income, dividends, or convenience yield.
Cost of DebtCost of debt is the rate of return lenders require to hold a company's debt, measured as the current market yield on its borrowings rather than the historical coupon.
Cost of EquityCost of equity is the rate of return shareholders require for holding a company's shares, given the risk they bear.
Counterparty RiskCounterparty risk is the risk that the other party to a bilateral contract defaults before settling its obligations, leaving the surviving party with an unrealised gain it cannot collect.
CouponA coupon is the periodic interest payment a bond makes to its holder, calculated as the stated coupon rate multiplied by the bond's par value.
Coupon RateThe coupon rate is the annual interest a bond pays, stated as a percentage of its par value.
CovarianceCovariance measures the degree to which two random variables move together, calculated as the expected product of their deviations from their respective means.
CovenantA covenant is a legally binding clause in a bond indenture that constrains the issuer's conduct for the protection of lenders.
Covered BondA covered bond is a debt security issued by a financial institution and secured by a segregated pool of high-quality assets, typically mortgages or public-sector loans.
Covered CallA covered call is an option strategy combining a long position in an underlying asset with a short call written on that same asset.
Credit Default SwapA credit default swap is a bilateral derivative in which the protection buyer pays a periodic premium to the protection seller in exchange for compensation if a specified reference entity suffers a credit event, such as bankruptcy or failure to pay.
Credit RatingA credit rating is an ordinal, letter-grade opinion issued by an agency such as S&P, Moody's or Fitch on the creditworthiness of a borrower or a specific debt issue.
Credit RiskCredit risk is the risk that a borrower fails to make full and timely payments of interest or principal, causing the lender or bondholder to suffer economic loss.
Credit SpreadA credit spread is the extra yield a bond offers over a default-risk-free benchmark of comparable maturity, compensating investors for credit risk.
Cross-Price ElasticityCross-price elasticity of demand measures the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
Currency PegA currency peg is an exchange rate regime in which authorities fix the domestic currency's value to another currency or a basket, then defend that rate through foreign exchange intervention, reserve management and interest rate policy rather than letting the market clear it.
Currency SwapA currency swap is an over-the-counter agreement in which two parties exchange interest payments denominated in two different currencies, usually exchanging the notional principals at initiation and re-exchanging them at maturity at a pre-agreed rate.
Current RatioThe current ratio is a liquidity measure equal to current assets divided by current liabilities.
Current YieldCurrent yield is a bond's annual coupon income divided by its current market price, expressed as a percentage.
Cyclical StockA cyclical stock is the equity of a company whose earnings track the business cycle closely, expanding sharply in economic upturns and contracting in recessions.
Cyclical UnemploymentCyclical unemployment is the portion of joblessness caused by fluctuations in the business cycle, arising when aggregate demand falls short of the economy's productive capacity.

D · 23 entries

Dark PoolA dark pool is a private trading venue, typically registered as an alternative trading system, that does not display orders publicly before execution.
Days Sales OutstandingDays sales outstanding measures the average number of days a company takes to collect cash from credit customers.
Default RiskDefault risk is the probability that a borrower or bond issuer fails to make a promised interest or principal payment in full and on time.
Defensive StockA defensive stock is an equity whose revenues, earnings and price are relatively insensitive to the business cycle, typically carrying a beta below 1.
Deferred Tax AssetA deferred tax asset is a balance-sheet item representing future tax relief.
Deferred Tax LiabilityA deferred tax liability is a balance-sheet item arising when taxable income is temporarily lower than pretax accounting profit, so tax actually paid is less than reported tax expense.
DeflationDeflation is a sustained decline in the general price level of goods and services, meaning the inflation rate is negative.
DeltaDelta measures the sensitivity of an option's price to a small change in the price of the underlying asset.
DepreciationDepreciation is the systematic allocation of a tangible long-lived asset's cost, less estimated residual value, over its useful life.
DerivativeA derivative is a financial contract whose value is derived from the price or level of an underlying asset, rate, index, or event.
Digital AssetsDigital assets are assets that exist only in electronic form, with ownership recorded on a distributed ledger or blockchain rather than by a traditional custodian.
Diluted EPSDiluted EPS is earnings per share recalculated as if all dilutive potential common shares (convertible bonds, convertible preferred, options and warrants) had been converted or exercised.
Dirty PriceThe dirty price, also called the full or invoice price, is the total amount a bond buyer actually pays at settlement.
Discount RateThe discount rate is the rate of return used to translate future cash flows into present value.
DisinflationDisinflation is a slowdown in the rate of inflation while the price level continues to rise.
Disposition EffectThe disposition effect is the tendency of investors to sell positions trading above their purchase price too readily while holding losing positions too long.
Distressed DebtDistressed debt is the debt of issuers in or near bankruptcy, default, or severe financial stress, trading far below par.
DiversificationDiversification is the practice of combining assets whose returns are less than perfectly positively correlated so that portfolio risk falls below the weighted average risk of the holdings.
Dividend Discount ModelThe dividend discount model values a share of common stock as the present value of all expected future dividends, discounted at the investor's required return on equity.
Dividend PolicyDividend policy is a company's established approach to returning cash to shareholders: whether to pay dividends at all, how large and how stable the payments should be, and how much to distribute through repurchases instead.
Dividend YieldDividend yield is annual dividend per share divided by the current market price per share, expressing the cash income a shareholder receives as a percentage of the price paid.
DrawdownA drawdown is the peak-to-trough percentage decline in the value of a portfolio or asset before a new peak is reached.
DuPont AnalysisDuPont analysis decomposes return on equity into its underlying drivers.

E · 21 entries

EBITEBIT, or earnings before interest and taxes, measures profit generated from a firm's operations before financing costs and income taxes are deducted.
EBITDAEBITDA is earnings before interest, taxes, depreciation, and amortization: operating income with non-cash D&A charges added back.
ESGESG stands for environmental, social, and governance: three categories of largely non-financial factors that investors analyse alongside traditional financials to identify risks and opportunities.
EV/EBITDAEV/EBITDA is a valuation multiple that divides enterprise value by earnings before interest, taxes, depreciation and amortisation.
Earnings Per ShareEarnings per share is net income less preferred dividends, divided by the weighted average number of common shares outstanding over the period.
Earnings QualityEarnings quality is the degree to which reported earnings are both sustainable and a faithful representation of a firm's true economic performance.
Earnings YieldEarnings yield is earnings per share divided by market price per share, expressed as a percentage.
Economies of ScaleEconomies of scale exist when a firm's long-run average total cost per unit falls as output expands, driven by spreading fixed costs, bulk purchasing power, specialisation of labour, and more efficient technology.
Effective Annual RateThe effective annual rate (EAR) is the annual return that reflects intra-year compounding, expressed with a periodicity of one.
Effective DurationEffective duration estimates the approximate percentage change in a bond's price for a small parallel shift in the benchmark yield curve, obtained by revaluing the bond with a pricing model at higher and lower curves.
Effective Tax RateThe effective tax rate is reported income tax expense divided by pre-tax accounting income.
Efficient FrontierThe efficient frontier is the set of portfolios that deliver the highest expected return for each level of risk: equivalently, the lowest risk for each level of expected return.
Efficient Market HypothesisThe efficient market hypothesis holds that security prices fully reflect available information, so investors cannot consistently earn risk-adjusted excess returns by trading on that information.
ElasticityElasticity measures the responsiveness of one variable to a percentage change in another, calculated as the percentage change in the dependent variable divided by the percentage change in the driver.
Enterprise ValueEnterprise value is the total market value of a company's operating business, independent of how it is financed.
European OptionA European option is a contract that may be exercised only on its expiration date, not before.
Event-DrivenEvent-driven is a hedge fund strategy category that seeks profit from corporate events such as mergers, spin-offs, restructurings, bankruptcies and recapitalisations.
Ex-Dividend DateThe ex-dividend date is the first trading day on which a buyer of a share is no longer entitled to the declared dividend.
Exchange-Traded FundAn exchange-traded fund is a pooled investment vehicle whose shares trade intraday on a stock exchange like a common share.
Expected ReturnExpected return is the return an investor anticipates earning on an asset over a period, given today's price and the cash flows the investor forecasts.
Expected ValueExpected value is the probability-weighted average of all possible outcomes of a random variable, calculated by multiplying each outcome by its probability and summing the results.

F · 22 entries

FIFOFIFO (first-in, first-out) is an inventory cost flow assumption under which the earliest costs incurred are assigned to cost of goods sold, leaving the most recent purchase costs in ending inventory.
Fair DealingFair dealing is the CFA Institute standard requiring members to treat all clients fairly and objectively when disseminating investment recommendations, taking investment action, or changing a rating.
Fallen AngelA fallen angel is a bond that was rated investment grade at issuance but has since been downgraded to below investment grade (high yield) status.
Fiduciary DutyFiduciary duty is the legal and ethical obligation to act solely for the benefit of another party, placing that party's interests ahead of one's own or one's employer's.
Finance LeaseA finance lease is a lease the lessee accounts for as an asset purchase funded by borrowing: a right-of-use asset and a lease liability go on the balance sheet, and the single rent payment is split into interest expense and amortization of the asset.
Financial DistressFinancial distress is the condition in which a company struggles to meet its debt and other fixed obligations on time, forcing costly concessions to lenders, suppliers, customers and employees.
Financial LeverageFinancial leverage is the use of fixed-cost financing, primarily debt, to fund assets so that returns to shareholders are magnified.
Fiscal PolicyFiscal policy is the government's use of spending and taxation to influence aggregate demand, output and employment.
Fisher EffectThe Fisher effect is the proposition that the nominal interest rate reflects the real interest rate plus expected inflation, so that (1 + nominal) = (1 + real) × (1 + expected inflation).
Floating-Rate NoteA floating-rate note (FRN) is a bond whose coupon resets periodically to a short-term reference rate, such as SOFR, plus a fixed spread known as the quoted margin.
Forward ContractA forward contract is a customized, over-the-counter agreement in which two parties commit today to trade an asset at a fixed price on a specified future date.
Forward P/EForward P/E, also called leading P/E, divides a stock's current price by forecast earnings per share for the next twelve months or next fiscal year.
Forward RateA forward rate is an interest rate set today for borrowing or lending over a specified period that begins at a future date.
Forward Rate AgreementA forward rate agreement (FRA) is an over-the-counter forward contract that locks in an interest rate on a notional amount for a future period.
Free Cash Flow to EquityFree cash flow to equity (FCFE) is the cash generated by a business that is available to common shareholders after operating costs, taxes, reinvestment in fixed and working capital, and payments to debtholders.
Free Cash Flow to the FirmFree cash flow to the firm (FCFF) is the cash generated by operations that is available to all capital providers (debt and equity) after operating taxes, working capital needs and capital expenditures.
Free FloatFree float is the portion of a company's outstanding shares that is genuinely available for trading by public investors, excluding strategic, restricted or locked-in stakes held by founders, governments, affiliates and other long-term insiders.
Frictional UnemploymentFrictional unemployment is joblessness caused by the time it takes to match available workers with suitable vacancies.
Front RunningFront running is the practice of executing a trade for one's own account, the firm's account, or a favoured party ahead of a known pending client order, in order to profit from the price impact that order is expected to cause.
Fund of FundsA fund of funds is a pooled vehicle that invests in a portfolio of other funds (typically hedge funds or private equity funds) instead of buying securities directly.
Future ValueFuture value is the amount a sum of money invested today grows into by a stated future date, given an assumed rate of return and compounding frequency.
Futures ContractA futures contract is a standardized, exchange-traded agreement to buy or sell a specified quantity of an underlying asset at a set price on a future date.

G · 10 entries

GDP DeflatorThe GDP deflator is a broad price index equal to nominal GDP divided by real GDP, multiplied by 100.
Gate ProvisionA gate provision is a clause in a fund's offering documents that caps the amount of capital investors may redeem on any single redemption date, typically as a percentage of fund net asset value or of an individual holding.
Geometric Mean ReturnThe geometric mean return is the single compound rate of growth that links a starting value to an ending value over multiple periods.
Global MacroGlobal macro is a hedge fund strategy that takes directional positions on economy-wide variables (interest rates, currencies, equity indices, commodities and sovereign credit) based on top-down views of policy, growth and inflation, usually expressed through liquid derivatives and leverage.
GoodwillGoodwill is the intangible asset recorded in an acquisition when the purchase price exceeds the fair value of the identifiable net assets acquired.
Gordon Growth ModelThe Gordon growth model values a share as next year's expected dividend divided by the required return on equity minus a constant dividend growth rate (V0 = D1 / (r − g)).
GreenwashingGreenwashing is the practice of overstating or misrepresenting the environmental, social, or sustainability credentials of an investment product, strategy, or firm.
Gross Domestic ProductGross domestic product is the total market value of all final goods and services produced within a country's borders over a defined period.
Gross MarginGross margin is gross profit divided by revenue, where gross profit equals revenue less cost of goods sold.
Growth StockA growth stock is an equity priced on expectations of above-average future earnings or revenue expansion.

H · 9 entries

Hedge FundA hedge fund is a privately offered pooled investment vehicle that pursues absolute returns using flexible strategies, including leverage, short selling and derivatives.
HedgingHedging is taking an offsetting position (usually a derivative) whose payoff moves opposite an existing exposure, so gains on one leg absorb losses on the other.
HerdingHerding is the behavioral tendency of investors to imitate the trades of the crowd rather than act on their own analysis, suppressing private information in favour of observed consensus.
High-Water MarkA high-water mark is the highest cumulative value an investor's fund account has reached at a previous incentive-fee calculation date.
High-Yield BondA high-yield bond is a debt security rated below investment grade: BB+/Ba1 or lower by the major agencies: reflecting elevated default risk.
Holding Period ReturnHolding period return is the total percentage return earned on an investment over one defined period, combining any income received with the change in price, divided by the beginning value.
Hurdle RateA hurdle rate is the minimum rate of return a proposed investment must be expected to earn before management will approve it.
HyperinflationHyperinflation is an extreme, accelerating rise in the general price level that destroys a currency's purchasing power and its use as a store of value.
Hypothesis TestingHypothesis testing is a formal statistical procedure for judging a claim about a population parameter using sample evidence.

I · 26 entries

Illiquidity PremiumThe illiquidity premium is the additional expected return investors require for holding an asset that cannot be sold quickly at or near fair value.
ImpairmentImpairment is the write-down of an asset's carrying amount on the balance sheet when its recoverable value falls below book value.
Implied VolatilityImplied volatility is the volatility input that, when entered into an option pricing model such as Black-Scholes-Merton, makes the model value equal the option's observed market price.
In the MoneyAn option is in the money when immediate exercise would produce a positive payoff.
Income ElasticityIncome elasticity of demand measures the responsiveness of quantity demanded to a change in consumer income, calculated as the percentage change in quantity demanded divided by the percentage change in income.
Income StatementThe income statement reports a company's financial performance over a reporting period, presenting revenue, expenses, and the resulting profit or loss.
Index FundAn index fund is a pooled investment vehicle that seeks to replicate the return of a specified market index rather than outperform it.
Index RebalancingIndex rebalancing is the scheduled adjustment of an index's constituent weights back to the levels dictated by its stated weighting scheme.
InflationInflation is a sustained increase in the general price level of goods and services in an economy, which erodes the purchasing power of a unit of currency.
Inflation PremiumThe inflation premium is the part of a nominal interest rate that compensates lenders for the loss of purchasing power they expect over the life of a loan.
Information RatioThe information ratio measures active return per unit of active risk: a portfolio's mean return in excess of its benchmark divided by the standard deviation of that excess return (tracking error).
InfrastructureInfrastructure is an alternative asset class comprising long-lived physical assets that deliver essential public services: toll roads, airports, ports, pipelines, utilities, telecom towers, hospitals.
Initial Public OfferingAn initial public offering is the first sale of a company's shares to public investors, converting a private issuer into a listed one.
Insider TradingInsider trading is buying or selling securities while in possession of material nonpublic information, or passing that information to others who trade on it.
Intangible AssetsIntangible assets are identifiable non-monetary assets that lack physical substance, such as patents, trademarks, licences, customer lists and capitalised software.
Interest Coverage RatioThe interest coverage ratio measures how many times a company's operating earnings cover its interest obligations, calculated as EBIT divided by interest expense.
Interest RateAn interest rate is the price of money for a period: the compensation a borrower agrees in advance to pay a lender, stated as a percentage of the amount borrowed.
Interest Rate ParityInterest rate parity is the no-arbitrage relationship linking spot rates, forward rates and nominal interest rates: the forward premium or discount on a currency pair must offset the interest rate differential between the two currencies over the same horizon.
Interest Rate RiskInterest rate risk is the exposure of a bond's price and realised return to changes in market yields.
Interest Rate SwapAn interest rate swap is a derivative in which two counterparties agree to exchange interest payment streams on a stated notional amount, most commonly one fixed-rate stream against one floating-rate stream tied to a reference rate such as SOFR, over a set series of dates.
Internal Rate of ReturnThe internal rate of return is the discount rate at which a project's net present value equals zero: the rate that exactly equates the present value of expected cash inflows with the initial outlay.
Intrinsic ValueIntrinsic value is the value of an asset justified by its fundamentals (expected future cash flows, growth and risk) assuming full knowledge of the asset's characteristics.
Inventory TurnoverInventory turnover measures how many times a company sells and replaces its inventory over a period, calculated as cost of goods sold divided by average inventory.
Inverted Yield CurveAn inverted yield curve is a downward-sloping term structure in which short-maturity yields exceed long-maturity yields on comparable-credit bonds, typically government securities.
Investment GradeInvestment grade describes issuers and bonds rated BBB– (S&P/Fitch) or Baa3 (Moody's) and above, signalling relatively stable cash flows and a low historical probability of default.
Investment Policy StatementAn investment policy statement is the written agreement that governs a portfolio, setting out the investor's return objectives, risk tolerance and constraints (liquidity, time horizon, tax, legal and unique circumstances) plus governance, the benchmark and rebalancing rules.

J · 1 entry

J-CurveThe J-curve is the characteristic path of a private fund's performance: negative in the early years, then rising above zero as investments mature.

K · 1 entry

KurtosisKurtosis is the fourth standardized moment of a distribution, measuring how much probability mass sits in the tails relative to a normal distribution.

L · 10 entries

LIFOLIFO (last-in, first-out) is an inventory cost flow assumption under which the most recently acquired units are charged to cost of goods sold first, leaving the oldest costs on the balance sheet.
LIFO ReserveThe LIFO reserve is the disclosed difference between a company's inventory carrying amount under LIFO and what it would be under FIFO.
Leveraged BuyoutA leveraged buyout is the acquisition of a company financed largely with borrowed money, where the target's own assets and cash flows secure and service the debt.
Limit OrderA limit order is an instruction to buy or sell a security at a specified price or better: a buy limit executes only at or below the limit, a sell limit only at or above it.
Line of CreditA line of credit is a pre-arranged bank borrowing facility that lets a company draw funds up to a stated maximum, repay, and redraw as needed.
LiquidityLiquidity is the ability to convert an asset into cash quickly, at low transaction cost, and without materially moving its price.
Lock-Up PeriodA lock-up period is the contractually fixed minimum time an investor's capital must remain in a fund before any redemption is permitted.
Lognormal DistributionA lognormal distribution describes a random variable whose natural logarithm is normally distributed.
Long/Short EquityLong/short equity is a hedge fund strategy that buys equities expected to outperform while short selling those expected to underperform, aiming to profit from relative security selection.
Loss AversionLoss aversion is the behavioral tendency to feel the pain of a loss more intensely than the pleasure of an equivalent gain, measured relative to a reference point rather than total wealth.

M · 25 entries

Macaulay DurationMacaulay duration is the weighted-average time, in years, until a bondholder receives the bond's cash flows, where each date is weighted by the present value of that cash flow as a share of the bond's full price.
Management FeeA management fee is the recurring charge a fund manager levies for operating the portfolio, quoted as an annual percentage of assets under management or, in private funds, of committed capital.
Margin CallA margin call is a broker's demand for additional cash or collateral when the equity in a margin account falls below the maintenance margin requirement.
Marginal CostMarginal cost is the increase in total cost from producing one additional unit of output, measured as the change in total cost divided by the change in quantity.
Mark to MarketMark to market is the practice of revaluing a position at current market prices rather than at its original cost.
Market CapitalizationMarket capitalization is the total market value of a company's outstanding common equity, calculated as the current share price multiplied by the number of shares outstanding.
Market CorrectionA market correction is a decline of roughly 10% or more, but less than 20%, in a major index from its recent peak.
Market MakerA market maker is a dealer that continuously posts both bid and ask quotes in a security and stands ready to trade against its own inventory.
Market NeutralMarket neutral describes a strategy constructed so that its net exposure to broad market movements is approximately zero, typically a beta near zero achieved by offsetting long and short positions.
Market OrderA market order is an instruction to a broker to execute a trade immediately at the best price currently available.
Market PriceMarket price is the price at which an asset actually trades: an observed number set by buyers and sellers.
Matching PrincipleThe matching principle is the accrual-accounting rule that expenses be recognized in the same reporting period as the revenues they helped generate, regardless of when cash moves.
Material Nonpublic InformationMaterial nonpublic information is information that would likely affect a security's price, or that a reasonable investor would want before trading, and that has not yet been broadly disseminated to the market.
Merger ArbitrageMerger arbitrage is an event-driven hedge fund strategy that seeks to capture the spread between a takeover target's market price and the announced offer price.
Modern Portfolio TheoryModern Portfolio Theory is the framework, introduced by Harry Markowitz in 1952, that treats investment decisions at the portfolio level rather than security by security.
Modified DurationModified duration is the approximate percentage change in a bond's price for a 100 basis point change in its yield to maturity.
Monetary PolicyMonetary policy is the set of actions a central bank takes over the money supply and short-term interest rates to pursue its mandate, typically price stability and, in some jurisdictions, maximum employment.
Money SupplyThe money supply is the total stock of money circulating in an economy at a point in time, measured in aggregates of decreasing liquidity: narrow money (currency and transaction deposits) and broader measures that add savings, time deposits and money market balances.
Money-Weighted ReturnThe money-weighted return is the internal rate of return on a portfolio: the discount rate that sets the present value of all cash inflows and outflows, including the terminal value, equal to zero.
MoneynessMoneyness describes the relationship between an option's strike price and the current price of the underlying, indicating whether immediate exercise would produce a positive payoff.
Monopolistic CompetitionMonopolistic competition is a market structure with many sellers offering differentiated but close-substitute products, low barriers to entry, and modest pricing power.
MonopolyA monopoly is a market structure with a single seller of a product that has no close substitutes, protected by high barriers to entry.
Monte Carlo SimulationMonte Carlo simulation is a computational technique that repeatedly draws random values from assumed probability distributions for a model's uncertain inputs, generating thousands of trial outcomes.
Mortgage-Backed SecurityA mortgage-backed security is a bond whose cash flows derive from a pool of mortgage loans.
Municipal BondA municipal bond is a debt security issued by a state, city, or local government entity to fund public spending.

N · 6 entries

Net Asset ValueNet asset value is the fair value of a fund's assets minus its liabilities, usually expressed per share or per unit.
Net Present ValueNet present value is the sum of a project's expected cash flows discounted at the required rate of return, minus the initial investment.
Net Profit MarginNet profit margin is net income divided by revenue, expressed as a percentage.
Nominal Interest RateA nominal interest rate is a rate stated in money terms, before any adjustment for inflation.
Normal DistributionThe normal distribution is a continuous, symmetric probability distribution completely described by two parameters: its mean and its variance.
Notional AmountThe notional amount is the reference quantity of the underlying specified in a derivative contract, used to scale the contract's payments.

O · 8 entries

OligopolyAn oligopoly is a market structure in which a small number of sellers dominate an industry, each large enough that its pricing and output choices materially affect rivals.
Open Market OperationsOpen market operations are a central bank's purchases and sales of securities, typically government bonds, with banks and dealers in the secondary market.
Operating LeaseAn operating lease is a lease that does not effectively transfer control of the underlying asset to the lessee.
Operating LeverageOperating leverage is the sensitivity of operating income to changes in sales, driven by the share of fixed costs in a company's cost structure.
Operating MarginOperating margin is operating income divided by revenue, expressed as a percentage.
Opportunity CostOpportunity cost is the value of the single best alternative forgone when a choice is made.
Option PremiumThe option premium is the price the buyer pays the writer to acquire an option contract.
Out of the MoneyAn option is out of the money when immediate exercise would produce no payoff, so its intrinsic value is zero.

P · 28 entries

Par ValuePar value is the stated principal amount a bond issuer contractually repays at maturity, and the base on which periodic coupon payments are calculated.
Passive ManagementPassive management is an investment approach that seeks to replicate the return of a designated index or benchmark rather than outperform it.
Payback PeriodThe payback period is the time required for a project's expected cash inflows to recover its initial outlay.
Payout RatioThe payout ratio is the share of earnings distributed to shareholders as cash dividends, calculated as dividends divided by net income (or dividends per share divided by EPS).
Penny StockA penny stock is a very low-priced share of a small, often thinly traded company, commonly quoted over-the-counter rather than on a major exchange.
Perfect CompetitionPerfect competition is the market structure in which many small firms sell an identical product, face no meaningful barriers to entry or exit, and have no pricing power.
PerpetuityA perpetuity is a stream of identical cash flows that continues indefinitely with no maturity date.
Phillips CurveThe Phillips curve is the relationship between unemployment and inflation, traditionally drawn as an inverse trade-off: as unemployment falls below its natural rate, wage and price inflation accelerate.
Population ParameterA population parameter is a fixed number that describes a whole population, such as its true mean μ or true standard deviation σ.
Preferred ReturnA preferred return, or hurdle rate, is the minimum return a private fund must deliver to limited partners before the general partner may collect carried interest.
Preferred StockPreferred stock is a hybrid equity security that pays a stated dividend and ranks ahead of common stock for dividends and for claims on assets in liquidation, but behind all debt.
Prepayment RiskPrepayment risk is the uncertainty that borrowers in a securitized pool repay principal faster or slower than the contractual amortization schedule, altering the timing of an investor's cash flows.
Present ValuePresent value is the value today of a cash flow, or stream of cash flows, scheduled to occur in the future, obtained by discounting each amount at a rate reflecting the opportunity cost and risk of waiting.
Price Elasticity of DemandPrice elasticity of demand measures the responsiveness of quantity demanded to a change in a good's own price, calculated as the percentage change in quantity demanded divided by the percentage change in price.
Price Return IndexA price return index measures only the change in the market prices of its constituent securities, excluding any income they generate.
Price Value of a Basis PointThe price value of a basis point (PVBP) is the estimated change in a bond's full price, in currency units, when its yield to maturity shifts by one basis point.
Price-to-Book RatioThe price-to-book ratio divides market price per share by book value of equity per share, comparing what investors pay to the accounting net asset value the firm reports.
Price-to-Earnings RatioThe price-to-earnings ratio divides a company's share price by its earnings per share, showing what investors pay for each unit of earnings.
Price-to-Sales RatioThe price-to-sales ratio divides a company's share price by its annual revenue per share, equivalently market capitalisation by total sales.
Primary MarketThe primary market is where securities are created and sold for the first time, with the proceeds flowing to the issuer or selling shareholder.
Private CreditPrivate credit is lending by non-bank investors directly to borrowers through privately negotiated loans that are not issued or traded in public markets.
Private EquityPrivate equity is an alternative asset class in which capital is invested in the equity of companies that are not publicly listed, or in public companies taken private.
Protective PutA protective put is a hedging strategy combining a long position in an asset with a long put on that asset.
Purchasing Power ParityPurchasing power parity is the theory that exchange rates adjust so that an identical basket of goods costs the same across countries.
Put OptionA put option is a contract giving its buyer the right, but not the obligation, to sell the underlying asset at a fixed strike price on or before expiration.
Put-Call ParityPut-call parity is the no-arbitrage relationship linking a European call and put with the same underlying, strike, and expiration: holding the underlying plus a put (protective put) must cost the same as holding the call plus a risk-free bond maturing at the strike (fiduciary call).
Putable BondA putable bond is a bond that grants the holder the right to sell it back to the issuer at a pre-set price on specified dates before maturity.
p-ValueThe p-value is the probability of obtaining a test statistic at least as extreme as the one observed, assuming the null hypothesis is true.

Q · 2 entries

Quantitative EasingQuantitative easing is an unconventional monetary policy in which a central bank buys large quantities of longer-dated government and other securities, paying with newly created bank reserves.
Quick RatioThe quick ratio measures a company's ability to meet current liabilities using only its most liquid assets: cash, short-term marketable securities, and receivables, divided by current liabilities.

R · 20 entries

R-SquaredR-squared, or the coefficient of determination, is the fraction of the variation in the dependent variable explained by the regression model.
Rate of ReturnA rate of return is the gain or loss on an investment over a period, stated as a percentage of the amount invested: income received plus the change in price, divided by the starting value.
Real Estate Investment TrustA Real Estate Investment Trust (REIT) is a company or trust that owns, and usually operates, income-producing property funded by pooled investor capital.
Real GDPReal GDP is the total value of final goods and services produced in an economy, measured at constant base-year prices.
Real Interest RateA real interest rate is an interest rate measured in purchasing power: the nominal rate with expected inflation stripped out.
RebalancingRebalancing is the periodic realignment of portfolio weights back to the targets set in the strategic asset allocation after market movements cause drift.
RecessionA recession is the contraction phase of the business cycle: a significant, broad-based decline in economic activity that persists for more than a few months, visible in falling real output, employment, income, and spending across many sectors of the economy.
Reinvestment RiskReinvestment risk is the danger that interim cash flows from a bond (coupons, sinking-fund payments, called or prepaid principal) must be reinvested at lower rates than the original yield, lowering the investor's realised return below the yield to maturity.
Repurchase AgreementA repurchase agreement (repo) is a short-term collateralised borrowing arrangement in which one party sells securities and simultaneously agrees to buy them back at a set price on a set date.
Required Rate of ReturnThe required rate of return is the lowest return an investor will accept for holding an asset, given its risk.
ResidualA residual is the difference between an observed value of the dependent variable and the value predicted by the estimated regression line.
Return on AssetsReturn on assets measures how much profit a company generates from its total asset base, calculated as net income divided by average total assets.
Return on EquityReturn on equity measures net income available to common shareholders as a percentage of average shareholders' equity.
Revenue RecognitionRevenue recognition is the accounting principle that determines when and in what amount revenue is recorded in the income statement.
Rights OfferingA rights offering is a share issue in which a company grants existing shareholders the right to buy new shares, pro rata to their current holdings, at a price below the prevailing market price.
RiskRisk is exposure to uncertain outcomes, including the possibility of loss.
Risk AversionRisk aversion is an investor's preference for certainty over uncertainty, meaning additional risk is accepted only in exchange for additional expected return.
Risk ToleranceRisk tolerance is the amount of risk an investor is both willing and able to bear in pursuit of return.
Robo-AdviserA robo-adviser is an automated digital platform that builds and manages a client portfolio using algorithms driven by an online questionnaire covering goals, time horizon and risk tolerance.
Roll YieldRoll yield is the gain or loss a futures investor realizes when an expiring contract is closed and replaced with a longer-dated one.

S · 37 entries

SOFRSOFR, the Secured Overnight Financing Rate, is a broad measure of the cost of borrowing cash overnight collateralised by US Treasury securities.
Sample StatisticA sample statistic is a number calculated from a sample, such as the sample mean X̄ or the sample standard deviation s, and used to estimate the corresponding population parameter.
Sampling ErrorSampling error is the difference between a sample statistic and the corresponding population parameter it estimates: for example, the sample mean minus the true population mean.
Scenario AnalysisScenario analysis is a risk technique that measures how a portfolio, project, or firm would perform under a small number of internally consistent sets of assumptions (typically a base case plus favourable and adverse states of the world) with multiple variables shifted together in each case.
Seasoned Equity OfferingA seasoned equity offering (SEO), or follow-on offering, is the sale of additional shares by a company whose stock already trades publicly.
Secondary MarketThe secondary market is where already-issued securities trade between investors rather than being sold by the issuer.
SecuritizationSecuritization is the process of pooling cash flow-generating assets (mortgages, auto loans, receivables) and selling them to a special purpose entity that issues debt securities backed by those pooled cash flows.
Security Market LineThe Security Market Line is the graphical form of the CAPM: a straight line plotting required return against beta, with the risk-free rate as its intercept and the market risk premium as its slope.
Share BuybackA share buyback is a corporate transaction in which a company repurchases its own outstanding shares, distributing cash to shareholders as an alternative to a dividend.
Sharpe RatioThe Sharpe ratio measures excess return per unit of total risk: the portfolio's return minus the risk-free rate, divided by the portfolio's standard deviation.
Short SellingShort selling is the sale of a borrowed security in the expectation of repurchasing it later at a lower price.
Simple Linear RegressionSimple linear regression estimates a straight-line relationship between one independent variable and one dependent variable.
Sinking FundA sinking fund is an indenture provision requiring the issuer to retire a specified portion of a bond issue's principal on a set schedule before maturity, typically at par.
SkewnessSkewness measures the asymmetry of a probability or return distribution around its mean.
Soft DollarsSoft dollars are brokerage commissions generated by client trades that a manager directs to a particular broker in exchange for research or related services.
Sovereign BondA sovereign bond is a debt security issued by a national government to fund its budget, typically paying fixed coupons and repaying principal at maturity.
SpeculationSpeculation is taking deliberate market exposure with the objective of profiting from an anticipated price movement, without an offsetting underlying position.
Spot RateA spot rate is the yield used to discount a single cash flow to be received at one specific future date: equivalently, the yield to maturity on a default-free zero-coupon bond of that maturity.
StablecoinA stablecoin is a digital asset engineered to hold a constant value against a reference asset, usually a fiat currency such as the US dollar.
StagflationStagflation is the simultaneous occurrence of high inflation, stagnant or contracting output, and elevated unemployment.
StakeholderA stakeholder is any party whose interests are affected by a company's decisions and performance.
Standard DeviationStandard deviation is the square root of variance: a measure of how widely observations disperse around their mean, expressed in the same units as the data.
Standard ErrorThe standard error is the standard deviation of a sample statistic across repeated samples.
Statement of Changes in EquityThe statement of changes in equity is a primary financial statement that reconciles the opening and closing balances of every component of owners' equity over a period, including contributed capital, retained earnings, accumulated other comprehensive income, treasury shares and non-controlling interests.
Stock SplitA stock split is a corporate action that increases the number of shares outstanding by a set ratio while proportionally reducing the price per share and the par value.
Stop-Loss OrderA stop-loss order is a conditional instruction that stays dormant until the market reaches a specified stop price, at which point it converts into a market order.
StraddleA straddle is an option position combining a call and a put on the same underlying with identical strike price and expiration.
Straight-Line DepreciationStraight-line depreciation allocates an asset's depreciable base (historical cost minus estimated residual value) in equal annual amounts across its estimated useful life.
Strategic Asset AllocationStrategic asset allocation is the long-term target mix of asset classes an investor holds, derived from the objectives and constraints in the investment policy statement.
Stress TestingStress testing is a risk management technique that measures how a portfolio, balance sheet or institution would perform under extreme but plausible adverse conditions, applying severe shocks to key risk factors such as rates, spreads, equity prices or liquidity.
Strike PriceThe strike price, or exercise price, is the fixed price at which an option holder may buy (call) or sell (put) the underlying asset if the option is exercised.
Structural UnemploymentStructural unemployment is joblessness caused by a persistent mismatch between the skills, technology, or location of available workers and the requirements of available jobs.
Substitution EffectThe substitution effect is the portion of the change in quantity demanded that arises purely from a change in a good's price relative to substitutes, holding the consumer's real purchasing power (utility) constant.
SuitabilitySuitability is the requirement that an investment recommendation or action fit the client's stated objectives, constraints, risk tolerance and circumstances.
Sustainable Growth RateThe sustainable growth rate is the maximum rate at which a firm can grow earnings and dividends without issuing new equity, while holding its capital structure and profitability constant.
SwapA swap is an over-the-counter derivative in which two parties agree to exchange series of cash flows on set dates over a defined tenor, with payments calculated from a notional amount.
Systematic RiskSystematic risk is the portion of an asset's total risk that stems from economy-wide factors (interest rates, inflation, growth shocks, geopolitics) and therefore cannot be removed by diversification.

T · 16 entries

Tactical Asset AllocationTactical asset allocation is the deliberate, short-term deviation of portfolio weights from the strategic (policy) allocation in order to exploit perceived mispricings or shifts in the economic and market environment.
Term Structure of Interest RatesThe term structure of interest rates is the relationship between yield and time to maturity for bonds of identical credit quality and currency.
Time Value of MoneyThe time value of money is the principle that a sum available today is worth more than the same sum received later, because it can be invested to earn a return.
Time Value of an OptionThe time value of an option is the portion of its premium that exceeds intrinsic value, compensating the seller for the possibility that the underlying moves favourably before expiration.
Time-Weighted ReturnThe time-weighted return is the compound growth rate of a single unit of currency invested in a portfolio, obtained by chain-linking the holding period returns of each subperiod between external cash flows.
TokenizationTokenization is the process of issuing digital tokens on a blockchain or other distributed ledger that represent ownership claims on an underlying asset, such as real estate, private equity, bonds or art.
Total Return IndexA total return index measures the performance of its constituents from both price appreciation and income (dividends or coupons) assumed to be reinvested in the index at the ex-date.
Tracking ErrorTracking error is the standard deviation of a portfolio's active return (the return difference between the portfolio and its benchmark) measured over time.
Trade CreditTrade credit is short-term financing granted by a supplier that lets a buyer receive goods or services now and pay later, typically under stated terms such as 2/10, net 30.
TrancheA tranche is one of several classes of securities issued against a single pool of securitised assets, each with a defined priority of claim on the pool's cash flows and losses.
Treasury BillA Treasury bill is a short-term debt obligation of the U.S. government, issued with an original maturity of one year or less.
Treynor RatioThe Treynor ratio measures excess return per unit of systematic risk: portfolio return minus the risk-free rate, divided by portfolio beta.
Two and TwentyTwo and twenty is the shorthand for the classic alternative-investment fee structure: a 2% annual management fee charged on assets or committed capital, plus a 20% incentive fee on profits.
Type I ErrorA Type I error occurs when a true null hypothesis is rejected: a false positive.
Type II ErrorA Type II error is the failure to reject a null hypothesis that is actually false: a missed detection.
t-TestA t-test is a hypothesis test that compares a sample statistic to its hypothesized value using the Student's t-distribution.

U · 3 entries

UnderlyingThe underlying is the asset, rate, index or other variable whose value determines the payoff of a derivative contract.
Unemployment RateThe unemployment rate is the share of the labour force that is without work but actively seeking and available for employment.
Unsystematic RiskUnsystematic risk is the portion of an asset's total risk that stems from factors specific to one firm, issuer or industry: litigation, a failed product, management fraud.

V · 7 entries

Value StockA value stock is an equity that trades at low valuation multiples relative to fundamentals such as book value, earnings, or cash flow, and typically carries an above-average dividend yield.
Value at RiskValue at Risk (VaR) is the minimum loss expected on a portfolio over a specified period at a specified probability level.
VarianceVariance is the expected squared deviation of a variable's outcomes from its mean, the standard measure of dispersion in finance.
Variation MarginVariation margin is the cash a derivatives counterparty must post, or receives, to settle daily mark-to-market gains and losses on a position.
Venture CapitalVenture capital is private equity financing provided to early-stage, high-growth companies in exchange for minority equity stakes.
Vintage YearA vintage year is the calendar year in which a private fund makes its first capital call or initial portfolio investment, marking the start of its deployment period.
VolatilityVolatility is the standard deviation of an asset's returns, usually stated on an annual basis.

W · 5 entries

WarrantA warrant is a long-dated option issued by a company itself that entitles the holder to buy newly issued shares at a fixed exercise price.
Weighted Average CostWeighted average cost is an inventory costing method that assigns the same average cost per unit (total cost of goods available for sale divided by total units available) to both cost of goods sold and ending inventory.
Weighted Average Cost of CapitalThe weighted average cost of capital (WACC) is a firm's blended required return across all capital providers, calculated by weighting the after-tax cost of debt and the cost of equity by each source's proportion of total capital.
Working CapitalWorking capital is the difference between a company's current assets and its current liabilities, measuring the short-term resources available to fund day-to-day operations.
Working Capital ManagementWorking capital management is the administration of a firm's current assets and current liabilities (cash, receivables, inventory, payables and short-term borrowing) so that the company can fund day-to-day operations and meet near-term obligations without tying up capital that earns no return.

Y · 3 entries

YieldA yield is a rate of return implied by an instrument's current market price and the cash flows it promises or is expected to pay.
Yield CurveThe yield curve is a plot of yields to maturity against time to maturity for bonds of one issuer or credit class that are otherwise identical in currency, coupon structure, and liquidity.
Yield to MaturityYield to maturity is the single discount rate that equates a bond's present value of promised cash flows to its current market price.

Z · 2 entries

Z-ScoreA z-score is the number of standard deviations an observation lies above or below the mean of its distribution, calculated as (X − μ) / σ.
Zero-Coupon BondA zero-coupon bond is a debt security that makes no periodic interest payments and is issued at a discount to par, delivering its entire return as price appreciation toward face value at maturity.