Financial system/Related Articles

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Index

See the economics index for an index to topics referred to in the economics articles.

Parent articles

Economics

Subtopics

Related topics

Credit rating agency

Crash of 2008

Discount rate

Financial economics

Fiscal policy

International economics

Taxation

Glossary

Five other glossaries are available:

AB

  • Adverse selection [r]: a partial market failure that occurs when there are traders who take advantage of asymmetric information, raising uncertainty and leading to a reduction in the value of its products. [e]
  • Algorithm (finance) [r]: A computer program that is used to determine the quantity and timing of financial market transactions without further instructions from its owner. [e]
  • Alpha (finance) [r]: (i) The component of a stock's expected return that is not attributable to market volatility (ii) a measure of an investment manager's performance. [e]
  • Amortization [r]: An term that is used in accounting as an alternative to depreciation. [e]
  • Ask price [r]: The price which a seller is prepared to accept for the sale of a good. [e]
  • Asset (accountancy) [r]: An accountancy term for possessions that have money value - including, for balance sheet purposes, cash, investments, property and amounts owed by debtors. [e]
  • Asset backed security [r]: A security for which the collateral and source of cash flow is a financial asset or a group of assets, such as loans, leases, credit card debt, company receivables or royalties, (but sometimes defined to exclude mortgages.) [e]
  • Asset (finance) [r]: A term used in finance to denote a legal claim on something that has monetary value, such as the acknowledgement of a debt or a share in the ownership of a company. [e]
  • Asymmetric information [r]: a situation in which a seller has information that is not available to potential buyers - or vice-versa. [e]
  • Austerity (fiscal) [r]: A term that is popularly applied to fiscal adjustment programmes, and to their consequences such as reductions of welfare spending [e]
  • Backwardation [r]: (i) The amount by which the spot price exceeds the forward price, (ii)a fee paid by a seller to defer the delivery of securities. [e]
  • Balance sheet [r]: An annual statement of a company's assets and its liabilities that is a component of its annual accounts. [e]
  • Bankruptcy [r]: Legally declared inability or impairment of ability of an individual or organization to pay its creditors. [e]
  • Base money [r]: Add brief definition or description
  • Bear (finance) [r]: A stock exchange speculator who sells stock, that he may or may not own, with the intention of buying it back at a profit when its price falls - as he expects it will. [e]
  • Beta [r]: A measure of the degree to which the rate of return of a share tracks that of the equity market as a whole (defined as the covariance between the share's rate of return and the average market rate, divided by the variance of the market rate). If beta = 1 the share's rate of return moves in line with the market rate; if it is negative, it falls when the market rate rises. [e]
  • Bid price [r]: The price that a buyer is prepared to pay for the purchase of a good. [e]
  • Bill (finance) [r]: {a) A loan with a duration of no more than a year (b)a documentary record of short-term indebtedness. [e]
  • Bill of Exchange [r]: A written order to pay the holder a stated sum of money at a stated date (otherwise known as a "draft", the person who is paid being termed the "drawer"). [e]
  • Bond (financial) [r]: A fixed-interest security that matures in more than a year and is issued by a government or a company. [e]
  • Boom (economics) [r]: A period of rapid growth in economic activity, during which the economy is working at or near full capacity, and during which prices are increasing. [e]
  • Bretton Woods [r]: An international conference held in 1944, which set up a system of fixed exchange rates linked to the US dollar which was to be freely convertible to gold, and created the International Monetary Fund. [e]
  • Broad money [r]: cash, current account deposits in banks and other financial institutions, savings deposits and time-restricted deposits (see also high-powered money). [e]
  • Broker [r]: Individual or firm that provides investment advise to clients and executes their buying and selling instructions, usually by acting as a market maker. [e]
  • Bubble (economics) [r]: A surge in prices that raises expectations of further increases, so generating further increases: a process that continues until confidence falters, the bubble "bursts" and prices rapidly revert to an objectively-based level. [e]
  • Bull (finance) [r]: A stock exchange speculator who buys stock with the intention of selling it at a profit when its price rises - as he expects it will. [e]
  • Buyback [r]: The repurchase of something previously sold, including (i) the purchase of a security by its issuer, (ii) the purchase of a security that had been sold short. [e]

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C

  • Capital adequacy ratio [r]: The ratio of a bank's capital to its risk weighted credit exposures. May be defined in terms of tier 1 (core) or tier 2 capital. [e]
  • Capital (banking) [r]: A bank's assets minus its liabilities. [e]
  • CDS [r]: An insurance agreement that guarantees protection against a bond default in return for a fee. [e]
  • Credit easing [r]: A method of making credit more available to individuals and businesses by changing the composition of the assets of the central bank towards less liquid and riskier private sector assets. Unlike quantitative easing, it may be done without expanding the money supply. [e]
  • CDS spread [r]: the annual percentage charge for a credit default swap [e]
  • Carry trading [r]: the practice of borrowing at a low interest rate in order to invest at a higher interest rate, or of selling the currency of a country that has low interest rates and buying the currency of a country that has high interest rates. [e]
  • CDS [r]: Credit-Default Swap. An insurance agreement that guarantees protection against a bond default in return for a fee. [e]
  • CDS spread [r]: the annual percentage charge for a credit default swap [e]
  • Central Bank [r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. [e]
  • Central counterparty [r]: An organisation that facilitates the settlement of contracts by acting as the buyer to every seller and as the seller to every buyer. [e]
  • Certificate of deposit [r]: A claim issued by a bank in return for an interest-paying deposit, that can be traded on the interbank market. [e]
  • Closed end fund [r]: An investment company that invests in shares and bonds, and that limits the number of its own shares that it issues - such as an investment trust. [e]
  • Clearing house [r]: An organization associated with a futures/options exchange that guarantees the performance of both parties to a contract, collects margin and maintains records of the parties to the transactions (also known as a clearing corporation). [e]
  • Coco [r]: Contingent convertible bond [e]
  • Co-investment fund [r]: A fund that is managed and guaranteed by its major issuer(s), and to which others are invited to contribute on stated terms. [e]
  • Collateral (finance) [r]: An asset, or other property of a borrower, that a creditor is entitled by a loan agreement to receive if the borrower defaults on the terms of the loan. [e]
  • Collateralised debt obligation [r]: An asset backed security that is available in tranches of stated maturity date and risk category. [e]
  • Complex interactive system [r]: A system in which an event in one of its components can have significant repercussions in many other components; and which can exist in more states than can be enumerated - including "open systems" whose operation is affected by events that have been generated from outside (such as international trade in the case of an economic system). [e]
  • Commercial paper [r]: unsecured debt_instruments that are issued by corporations to meet short term financing needs (usually repayable after 3 months). [e]
  • Contingent convertible bond [r]: A bond that converts automatically into shares in a stipulated contingency (for a bank the stipulated contingency is normally that its reserve ratio falls below a stipulated level). Often called a "coco": also known as an "enhanced capital note". [e]
  • Contingent valuation [r]: A survey-based method of estimating the value of a non-monetary cost or benefit from the answers to questions designed to reveal the subjects' willingness to pay to avoid a cost, or to enjoy a benefit. [e]
  • Contracyclical regulation [r]: a policy of raising banks' statutory minimum capital adequacy ratios when asset prices are rising and relaxing them when asset prices are falling. [e]
  • Cost of capital [r]: The weighted average of the rates of return paid by a company on its equity (share issue) and on its debt (bonds and commercial borrowing). [e]
  • Counterparty [r]: The legal term that is used to refer to each of the organisations or persons that are engaged in a transaction. [e]
  • Covered bond [r]: A bond that is secured by other assets so that the investor can lay claim to those assets should the issuer of the bond become insolvent. [e]
  • Covered interest rate differential [r]: The difference between the interest rates on similar securities (such as government bonds) in two countries, after allowing for the cost of hedging against exchange rate changes by operating in the forward market. [e]
  • Credit default swap [r]: An insurance agreement that guarantees protection against a bond default in return for a fee. [e]
  • Credit easing [r]: A method of making credit more available to individuals and businesses by changing the composition of the assets of the central bank towards less liquid and riskier private sector assets. Unlike quantitative easing, it may be done without expanding the money supply. [e]
  • Credit (finance) [r]: The ability to use or possess goods and services without immediate payment (including bank credit, which is part of the money supply). [e]
  • Credit crunch [r]: the failure of the banking system to satisfy the economy's need for credit. [e]
  • Credit risk [r]: The risk that the value of a loan-based security will fall as a result of defaults on the part of borrowers (as distinct from interest rate risks and exchange rate risks). [e]
  • Currency board [r]: a government agency that maintains a fixed exchange rate between a country's currency and another currency - usually the United States dollar. [e]
  • Currency mismatch [r]: The situation created when a government's bond issue is denominated in terms of a foreign currency so that the cost of serving it varies with the exchange rate. [e]

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D

  • Dark pool [r]: An electronic trading system that does not publish trading prices. [e]
  • Debenture [r]: (i) A document acknowledging receipt of a fixed interest loan: (ii) a fixed-interest security issued by a company in acknowledgment of a fixed-interest loan. [e]
  • Debt instrument [r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. [e]
  • Debt intolerance [r]: The attitude of investors to a country's bond issue arising from a belief that the country in question is more likely than other equally indebted countries to default on the servicing of their public debt, as a result of which the market- determined discount rate on that country's bonds is increased to an extent known as a risk premium. [e]
  • Debt trap [r]: the situation in which the national debt continues to grow faster than national income so that more and more of the government’s budget has to be devoted to interest payments. [e]
  • Default (finance) [r]: The failure of a debtor to comply with the terms of a loan. [e]
  • Deflation [r]: a persistent sequence of reductions in the general level of prices. [e]
  • Deposit insurance [r]: An arrangement under which depositors in a bank that becomes unable to meet demands for withdrawals, are compensated to the extent of a substantial proportion of the amount of their deposits. [e]
  • Depreciation (accounting) [r]: A regular accounting transfer into a fund that is to be used to repay the debt that had notionally been incurred to pay for a capital asset. [e]
  • Derivative [r]: An asset whose value depends upon the expected value of another asset. [e]
  • Direct investment [r]: investment in a company's foreign operations. [e]
  • Dividend (finance) [r]: The amount of the profit of a business that is paid out to holders of its ordinary shares, usually expressed either as an amount per share, or as a percentage of a share's nominal value. [e]
  • Discount_rate [r]: (i) The percentage by which current value exceeds value in a year's time. (ii) The rate at which banks may borrow at their central bank's discount window. [e]
  • Discount window [r]: A facility provided by central banks that enables a bank to make secured short-term loans at its central bank's discount rate. [e]
  • Distressed exchange [r]: The substitution of a bond by its issuer with an financial asset of lower value. [e]
  • Distress sale [r]: The sale of an asset that the seller would otherwise prefer to retain, that is necessary to meet an unexpectedly urgent demand to fulfil a financial obligation - usually for a price that is below its normal market value. [e]
  • Dollarization [r]: The use of a foreign currency instead of, or in parallel with, a country's domestic currency. [e]

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EF

  • Efficient market hypothesis [r]: The hypothesis that all regulated financial markets are efficient markets. [e]
  • Equity (finance) [r]: (i)The residual value of a firm or of an asset (such as a house), after all financial claims upon it have been allowed for; (ii) an ordinary share in a company, so that the term "equities" refers to ordinary shares in general. [e]
  • Euro [r]: The official currency of the European Monetary Union. [e]
  • European Central Bank [r]: The central bank for Europe's single currency, the euro, whose monetary policy is primarily required to maintain the euro's purchasing power. [e]
  • Exchange rate risk [r]: The risk of financial loss resulting from a change in exchange rates, for example when, as a result of a currency mismatch and a falling exchange rate, a loan has to be serviced in a currency other than that in which it is denominated. [e]
  • Exchange rate depreciation [r]: A reduction of the number of units of a foreign currency that exchange on international markets for a unit of the currency to which the term refers [e]
  • Fair value [r]: An accounting convention under which the balance sheet valuation of an asset is an estimate of a price that would be fair to both a seller and a buyer of that asset, taking account of the advantages of the transaction to each (replacing the "historical" convention under which assets were valued at the price at which they had been acquired). [e]
  • Federal funds rate [r]: The overnight interest rate at which banks lend balances at the Federal Reserve to other banks. [e]
  • Feedback [r]: The use of information from the monitoring of system performance either to modify or to maintain that performance. [e]
  • Fiat money [r]: money whose value is determined solely by government order, or "fiat" (as distinct from commodity money that has value because of its scarcity or cost of production). [e]
  • Fiduciary duty [r]: An obligation to act in the interests of another. [e]
  • Financial asset [r]: An asset that derives it value from a legal claim - including stocks, bonds and loans. [e]
  • Financial_Intermediary [r]: A go-between organisation that obtains finance from investors (or savers) and lends it to corporations (or other borrowers). Financial intermediaries include banks, building societies (or savings and loans associations) , life insurance companies and credit unions. [e]
  • Fiscal adjustment [r]: The change in the primary budget balance required to meet a specified criterion (usually a requirement to return to fiscal sustainability). [e]
  • Fiscal policy [r]: Policy concerning public expenditure, taxation and borrowing and the provision of public goods and services, and their effects upon social conduct, the distribution of wealth and the level of economic activity. [e]
  • Fiscal rule [r]: A set of numerical targets for budgetary aggregates intended to impose a permanent constraint on the budget deficit, and public debt. [e]
  • Fiscal transfer [r]: A financial transfer from a central authority to a subsidiary in a federal system, or to a member of a "fiscal transfer union" among member governments of an economic community. [e]
  • Forward contract [r]: an undertaking to buy or supply a security or commodity at a specified price on a specified future date. [e]
  • Forward market [r]: A market in which goods or securities are traded for delivery after a specified time interval (in contrast to a spot market). [e]
  • Freddie Mac [r]: (Federal Home Loan Mortgage Corporation) Fannie Mae clone created to provide competition to Fannie Mae. [e]
  • Front running [r]: The practice of making use of personal information affecting the future value of an asset in order to take a position in the market for that asset. [e]
  • Fund (finance) [r]: (i) (noun) A sum of money that is put aside for a specified purpose (such as "sinking fund" for the repayment of a debt). (ii) (noun) A professionally managed collection of financial assets. (iii) (verb) To provide financial resources to pay for a project. (iv)(verb) To convert short-term debt into long-term debt. [e]
  • Funding [r]: (i) The provision of finance for a particular purpose: (ii) the process of selling long-term securities and using the procceds to redeem short-term debt. [e]
  • Futures contract [r]: A forward contract that is traded on an exchange. [e]

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GHIJKL

  • Gearing [r]: The ratio of a company's debt to its capital assets. [e]
  • Group of Seven [r]: A forum in which the finance/treasury ministers of seven industrialized countries confer: Canada, France, Germany, Italy, Japan, United Kingdom, and United States; gradually yielding in influence to the Group of Twenty; differs from the head of government level Group of Eight [e]
  • Group of Twenty [r]: An informal group of twenty industrialised countries. [e]
  • Haircut (finance) [r]: (i) A percentage that is subtracted from the par value of the assets that are being used as collateral (for example, the commission that is charged on a repo transaction). (ii) In a debt restructuring agreement, the percentage reduction in the amount of debt that is due to be repaid to the creditors. [e]
  • Hedging [r]: Protecting against price changes by simultaneously buying(/selling) an asset and making a futures contract to sell(/buy) it. [e]
  • Hedge fund [r]: A limited-membership, aggressively-managed investment fund, often escaping regulation. [e]
  • Herding (banking) [r]: A tendency to base decisions upon the actions of others - on the part of bankers, depositors or investors see also Panic (banking). [e]
  • IMF [r]: The International Monetary Fund. [e]
  • Information cascade [r]: A succession of incremental information distortions occurring as a result of herding behaviour. [e]
  • Insolvency [r]: Inability to meet a debt - or other financial - obligation. [e]
  • Interbank market [r]: a market in which a group of banks lend to each other (for example, see LIBOR). [e]
  • Independent fiscal agency [r]: A monitoring agency that is independent of a country's fiscal authorities, and which publishes assessments of its fiscal sustainability. [e]
  • Interest rate risk [r]: The risk that the value of a fixed-rate security or loan will fall as a result of a rise in interest rates. [e]
  • Lender of last resort [r]: An institution, that is prepared to lend money to any solvent bank that encounters a serious liquidity risk, or a threatened bank run. (The term has sometimes also been applied to financial assistance to avert insolvency that could occur for other reasons, or to financial assistance to governments). [e]
  • Leverage [r]: (i) The use of borrowing to increase the amount of money that is available for investment or consumption. (ii) A proportional measure of indebtedness, such as the ratio of a company's debt to its shareholders' equity (the same as British "gearing"), or the ratio of the indebtedness of a household to the net value of its assets (ie net of its debts). [e]
  • Liabilities (accounting) [r]: Amounts owed to creditors - including, for balance sheet purposes, a company's shareholders. [e]
  • LIBOR [r]: (London Interbank Offer Rate) the rate of interest at which a group of banks (16 banks from seven countries, including the United States, Switzerland and Germany) are willing to lend to each other for periods ranging from a day to a year . [e]
  • LIBOR-OIS spread [r]: The difference between the LIBOR rate and the Overnight index swap rate that is used as an measure of the state of confidence in the money market and an indicator of banks' willigness to lend, and is normally within the range 0.1% to 0.3%. [e]
  • Liquidity [r]: (i) The quantity of available assets in its possession that an organisation could rapidly exchange for cash (assets that cannot be exchanged for cash at a particular time are considered to be "illiquid" at that time); (ii) the funding that is unconditionally available to settle claims through monetary authorities (termed "official liquidity"). [e]
  • Liquidity risk [r]: the risk that assets cannot be sold at time when cash is needed to meet a commitment. [e]
  • Liquidity spiral [r]: a situation in which falling asset prices can prompt banks to reduce the supply of credit, causing further falls in asset prices. [e]
  • Long position [r]: The position of having bought a security or derivative (often with the intention of selling it when its market price increases - in contrast to the intention of a short position). [e]

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MN

  • Margin account [r]: an arrangement that enables customers to buy securities with money borrowed from a broker, subject to a minimum maintenance level related to the market values of the securities. [e]
  • Margin call [r]: a demand for the additional securities required to maintain the minimum maintenance level of a margin account when security prices fall. [e]
  • Market maker [r]: A person or company that serves as an intermediary between buyers and sellers by undertaking to buy or sell goods at specified bid and offer prices. [e]
  • Market risk [r]: The risk that the value of an investment in a financial product will fall as a result of a fall in the market for that product. [e]
  • Mark to market [r]: A version of the fair value accounting convention that values a security at its current market price. [e]
  • Money market [r]: A market for short-term debt instruments (generally of maturity after less than one year) such as certificates of deposit, commercial paper, and Treasury bills. [e]
  • Moral hazard [r]: Motivation to take an otherwise unwarranted risk because the cost of an unfavourable outcome would be borne by someone other than the risk-taker. [e]
  • Naked CDS [r]: A CDS on a bond, purchased as a speculation by traders who have not invested in the bond. [e]
  • Negotiable [r]: Able to be transferred or assigned to the legal ownership of another person, who then becomes entitled to any benefit that accrues to it. [e]
  • Netting (finance) [r]: A means of reducing the number of settlement payments between two organisations by paying the aggregate value of their transactions during a chosen period. [e]
  • Noise traders [r]: Traders who buy or sell shares for reasons unconnected with information about the issuing companies or the markets in which they operate. [e]
  • Novation [r]: Replacement of the old by the new - including (i) the replacement of the existing terms of an agreement, and (ii) the replacement of the existing parties to an agreement. [e]
  • OIS [r]: (OIS) an interest rate swap contract in which a fixed rate is swapped with a published daily overnight index rate . [e]

OPQ

  • OIS [r]: Overnight index swap [e]
  • Open ended fund [r]: An investment company that invests in shares and bonds, and which does not limit the number of its own shares that it issue - such as a mutual fund, unit trust, open ended investment company (OEIC). [e]
  • Option [r]: A right, but not an obligation, to buy (or to sell) an asset, usually at a stipulated price (termed the "exercise price") and at a stipulated time. An option to buy is called a "call option" and an option to sell is called a "put option". [e]
  • Ordinary share [r]: A share in the ownership of a business that entitles the holder to all of its distributed profits (and in the amount returned to them on liquidation) after the holders of preference shares and debentures have been paid what is due to them. [e]
  • Overnight index rate [r]: The weighted average rate for overnight transactions published by a central bank or market association. [e]
  • Overnight index swap [r]: (OIS) an interest rate swap contract in which a fixed rate is swapped with a published daily overnight index rate . [e]
  • Over-the-counter market [r]: A situation in which securities are traded otherwise than in a regulated exchange or stock market - usually by telephone or online. [e]
  • Panic (banking) [r]: A fear of default that creates a generalised reluctance to grant credit. [e]
  • Paris Club [r]: An informal group of creditor countries that seeks solutions for debtor nations facing payment difficulties, and if necessary arranges agreed rescheduling of their debts. [e]
  • Par value [r]: The nominal value of a bond, share or other asset, as indicated on the holder's ownership document. [e]
  • Peer to peer lending [r]: An online system that enables prospective borrowers to post a loan listing, and prospective investors to review loan listings and invest in listings that meet their criteria. [e]
  • Preference share [r]: A share in the ownership of a business that entitles the holder to priority over the holders of ordinary shares in the payment of dividends and in the distribution of the proceeds of liquidation of the business, after the holders of debentures have been paid what is due to them. [e]
  • Principal (finance) [r]: The original sum that is invested or lent. [e]
  • Prime rate [r]: The interest rate that commercial banks charge for loans involving the lowest risk of default - such as loans to large companies. [e]
  • Primary market [r]: An organisational arrangement under which buyers deal directly with sellers. [e]
  • Portfolio [r]: in finance, a managed collection of securities. [e]
  • Portfolio insurance [r]: A way of protecting a portfolio against market risk by selling short on the share index futures market, or by buying put options on the share index. [e]
  • Position (finance) [r]: The balance between the amount of shares held (a long position) and the amount that will be required to meet a commitment (a short position). [e]
  • Quantitative easing [r]: An increase in the central bank's monetary liabilities as a result of its purchases of corporate or government securities. [e]
  • Qualitative easing [r]: A shift in the composition of the assets of the central bank towards less liquid and riskier assets (in order to reduce credit [[spreads] and improve the functioning of private credit markets) - also known as credit easing. [e]

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RS

  • Random walk (finance) [r]: The movement of the price of an asset over time that is entirely unpredictable; closely related to the same mathematical term. [e]
  • Recovery rate (finance) [r]: The amount that a creditor would receive in final satisfaction of a claim on a defaulted credit - usually as a percentage of the claim's market value (but sometimes of its par value, or issue price). [e]
  • Redemption yield [r]: the yield provided by a bond or other fixed-interest security taking account of the difference between its purchase price and the amount payable when it matures (also known as yield to maturity). Calculated as the internal rate of return of the security. [e]
  • Repurchase agreement [r]: A contract giving the seller of an security the right or obligation to buy it back at a specified price on a given date. Used as a way of borrowing or lending using the security as collateral. (The interest rate charged is known as the "repo rate"). [e]
  • Reserve ratio [r]: The ratio of a bank's reserves to its deposits, a minimum value of which is set by its central bank with the effect of limiting the proportion of its deposits that the bank is permitted to lend. [e]
  • Restructure (debt) [r]: Renegotiate an agreement between a debtor and that debtor's creditors to reduce and/or delay payments of interest and/or the repayment of principal. [e] [e]
  • Risk premium [r]: The ratio of the rate of return from an asset to the rate of return available from a risk-free investment. [e]
  • Roll-over [r]: The reinvestment in a similar asset of money released by the maturity of a bond. [e]
  • Secondary market [r]: A market in securities or commodities in which transactions are made between dealers, acting on behalf of prospective buyers and sellers. [e]
  • Securitisation [r]: The conversion of a cash flow into a marketable security (usually a claim upon debt repayments) and often categorised according to the expected risk of default (examples include collateralised debt obligations and structured investment vehicles.) [e]
  • Security (finance) [r]: (i) A general term for all claims upon property or income, including stock, shares, debentures, and bonds that are traded on stock exchanges and other financial markets; (ii) a term used synonymously with collateral. [e]
  • Selling short [r]: Selling borrowed stock in the expectation that its price will fall, and with the intention of subsequently buying it back and returning it. [e]
  • Settlement (finance) [r]: The completion of a financial transaction by the transfer of a security to the buyer and a payment to the seller [e]
  • Share (finance) [r]: A share in the ownership of a company (synonymous with the US term stock). [e]
  • Sharpe ratio [r]: Measure of the rate of return per unit of variability of an investment portfolio, obtained by subtracting the current risk-free interest rate from the portfolio's current rate of return and dividing the result by the standard deviation of its rate of return. [e]
  • Short position [r]: The position of having sold a borrowed security or derivative (usually with the intention of buying it back and returning it if - as expected - its price falls) [e]
  • Sovereign spread [r]: the difference between the yield on a country's bond issue and the yield on a comparable bond issued by a benchmark country such as the United States or Germany. [e]
  • Special drawing right [r]: an international reserve asset, that can be exchanged for usable currencies, that is issued to member countries by the International Monetary Fund to supplement their official reserves, and whose value is based on a basket of four international currencies. [e]
  • Spread [r]: (i) The difference in yield between two bonds, also (ii) The difference between the bid price and the ask price offered by a market maker, and (iii) The price difference between futures contracts that differ in delivery date. [e]
  • Sovereign wealth fund [r]: a government investment vehicle that invests in foreign currency-denominated assets, and whose management is distinct from that of official reserves. [e]
  • Spot market [r]: A market in which goods or securities are traded for immediate delivery (in contrast to a forward market). [e]
  • Stock (finance) [r]: A share in the ownership of a company. [e]
  • Stop-loss [r]: An order to sell an asset if its market price falls by more than a specified amount (a form of herding). [e]
  • Structured investment vehicle [r]: (SIV) a fund that borrows money - usually at LIBOR rates - by the issue of asset backed commercial paper and uses it to finance longer term loans at higher interest rates. [e]
  • Subprime lending [r]: Lending at interest rates above the prime rate because of an above-minimal risk of default. [e]
  • Swap contract [r]: An agreement to exchange financial obligations between two organisations with complementary needs, for example an agreement to swap fixed interest obligations for variable interest obligations. [e]
  • Syndicated bank loan [r]: A facility created by a conglomerate of banks for the provision of loans to borrowers who wish to raise larger sums than they could obtain from a single bank. [e]
  • Systemic failure [r]: Add brief definition or description
  • Systemic risk [r]: In financial economics, the risk that failure in one part of a financial system could impair the functioning of that system. [e]

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TUVWXYZ

  • Toxic debt [r]: Debt whose repayment with due interest is deemed unlikely. Financial assets secured upon toxic debt cannot normally be traded on established markets. [e]
  • Tight coupling [r]: a characteristic of a system such that a malfunction of one component leads to significant malfunctions of other components. [e]
  • Underwriting [r]: (i) The assessment of the creditworthiness of a financial operator. (ii) A service provided at the launch of a new security by which, for a fee, the underwriter guarantees the sale at a stipulated price of a stipulated volume of the security. (iii) The provision of insurance of an asset. [e]
  • Value at Risk [r]: The largest loss on an investment portfolio that is expected to occur during a stated period at a stated probability[1]. [e]
  • Wholesale banking [r]: transactions other than those with a bank's retail customers, including trading in derivatives and in the interbank markets, stock markets and foreign exchange markets. [e]
  • Writedown (accounting) [r]: A reduction of the accounting valuation of an asset that is shown on the balance sheet of a business, in response to a change in its estimated market value. [e]
  • Yield (finance) [r]: The internal rate of return of initial and projected cash flows: a term that may be qualified to indicate which initial amount is referred to, as in "coupon yield", "nominal yield" and "market yield"; or which projected cash flows are referred to, as in "current yield", "dividend yield", "earnings yield", etc. [e]
  • Yield spread [r]: the difference between the annual percentage yield on an asset and a notionally risk-free rate such as the rate on US Treasury bonds (but see CDS spread). [e]

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