Financial Market Jargon Buster
A financial market is a market that brings buyers and sellers together to trade in financial assets such as stocks, bonds, commodities, derivatives and currencies. The purpose of a financial market is to set prices for global trade, raise capital and transfer liquidity and risk. Although there are many components to a financial market, two of the most commonly used are money markets and capital markets.
Stock : A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.
Derivatives : A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset.
Comodities : It is any useful or valuable thing, especially something that is bought and sold. Grain, vegetables, and precious metals are commodities.
Venture capital : Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
Domiciliary account : This is an account that allows you save in US Dollars, Pounds Sterling or Euro; with your money valued at the prevailing exchange rate.
Bond: A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.
Equity : Equity is the value of an asset less the value of all liabilities on that asset.
Bank Equity : The bank capital represents the value of a bank’s equity instruments that can absorb losses and have the lowest priority in payments, if the bank liquidates.
Stock Trading : A stock trader or equity trader or share trader is a person or company involved in trading equity securities. Stock traders may be an agent, hedger, arbitrageur, speculator, stockbroker or investor.
Libor : Libor stands for London interbank offered rate. The interest rate at which banks offer to lend funds (wholesale money) to one another in the international interbank market. Libor is a key benchmark rate that reflects how much it costs banks to borrow from each other.
Money market : Money market is basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded.
Capital market : Capital markets are markets for buying and selling equity and debt instruments.
Financial securities :A security, in a financial context, is a certificate or other financial instrument that has monetary value and can be traded.
Futures : Contracts for assets (especially commodities or shares) bought at agreed prices but delivered and paid for later. It is a tradeable financial contract.
Debt Instrument : A debt instrument is a paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract.
Financial Instrument : Financial instruments are assets that can be traded.
Financial Cap : An upper limit (same as ceiling), or to set an upper limit. In finance, this is normally used with respect to interest rates
Growth stock – The basic idea behind a growth stock is that you want to buy it when it’s not worth much and then sell it when it’s worth a lot.
Mutual funds : A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities.
Treasury Instrument : Treasury bonds, bills and notes are also known as Treasury instruments. In finance, an instrument is a real or virtual document that represents a legal agreement having a monetary value, as all Treasury instruments do.
Economic Capital : Economic capital is the amount of capital that a firm, usually in financial services, needs to ensure that the company stays solvent. Economic capital is calculated internally and is the amount of capital the firm should have to support any risks it takes on
Growth stock : The basic idea behind a growth stock is that you want to buy it when it’s not worth much and then sell it when it’s worth a lot (“buy low, sell high”)
Equity Financing – Issuing of stocks to the general public, this is called equity financing.
Stock quote or stock table is a table with columns and rows showing financial and performance record of stocks usually within a period of time.
Dividends : Sum of money paid regularly by a company to its shareholders out of its profits decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.
Market Capitalization :
It is the current share price multiplied by all outstanding shares. This gives you a general idea of the size of a company.
Price to Earnings Ratio : It is the price to earnings of a company’s current share price divided by its EPS. This amount will show you about what investors are willing to pay per dollar of earnings. It can also be used as a metric to determine how much a company is over or undervalued.
Exchange Traded Funds
: Are funds that track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index.
: An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. It is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own.
Hedge Fund : In general, a hedge fund is a private partnership that operates with little to no regulation from the U.S. Securities and Exchange Commission (SEC). A hedge fund uses a range of investment techniques and invests in a wide array of assets to generate a higher return for a given level of risk than what’s expected of normal investments. In many cases, hedge funds are managed to generate a consistent level of return, regardless of what the market does.
This article will be continuously updated – Greenaira Team