Placement News Bulletin : 2019-20

Placement News Bulletin : 2020-21

the Oracle GD/PI Prep | Fin Serv & Banking

Financial Services Terms Explained

• Bear: An investor who expects prices to fall.

• Bull: An investor who expects prices to rise.
• Primary Market: The part of the capital market that deals with the issuance and sale of equity-backed
securities to investors directly by the issuer, for the first time.
• Secondary Market: The secondary market is where investors buy and sell securities they already own.
• Capital Market: The market for the purchase and sale of medium- and long-term financial instruments,
including bonds, notes, swaps, and equities.
• Commodities: Raw materials, such as precious metals or grains, for which contracts are bought and sold
on commodities exchanges.
• Convertible Bonds: Corporate securities (usually preferred shares or bonds) that are exchangeable for a
set number of another form (usually common shares) at a fixed price.
• IPO (Initial Public Offering): The inaugural issuance of stock or other securities by a company for sale to
the public.
• LBO (Leveraged Buy-Out): A strategy involving the acquisition of another company using a significant
amount of borrowed money (bonds or loans) to meet the cost of acquisition.
• Securitisation: The process of distributing risk by aggregating debt instruments in a pool and then issuing
new securities backed by the pool.
• CDS (Credit Default Swaps): A credit default swap (CDS) is a financial derivative or contract that allows
an investor to "swap" or offset his or her credit risk with that of another investor. According to the agree-
ment, the seller of the CDS will compensate the buyer in the event of a debt default or other credit
event.
• Spot Market: A commodities market where goods sell for cash and get immediately delivered.
• Recapitalisation: Alteration of a corporation’s capital structure, such as exchanging a proportion of debt
for equity. Often triggered by solvency issues and probability of bankruptcy.
• Hedge Fund: A hedge fund is an investment fund that trades in relatively liquid assets and uses more
complex and non-traditional trading techniques to improve performance, such as short selling, leverage,
and derivatives. It is more aggressive, risky, and exclusive than mutual funds.
• CGT (Capital Gains Tax): The tax levied on any capital gain that is profit or gain arising from the sale of a
‘capital asset’.
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Placement News Bulletin : 2020-21

the Oracle GD/PI Prep | Fin Serv & Banking

• Future: A standardized contract traded on an exchange. This is an agreement between two parties to buy
or sell an asset at a specified price on a given date.
• Forward: Similar to Future but the terms of the agreement (such as the delivery time and quantity) may
be more “personalized” than is the case with standardized futures contracts.
• NCLT (National Company Law Tribunal) : Adjudicating authority in case of insolvency proceedings for
corporate persons
• DRT (Debt Recovery Tribunal): Adjudicating authority in case of insolvency proceedings for individuals
and partnership firms
• AML (Anti-Money Laundering): A set of laws, regulations, and procedures that aim at preventing crimi-
nals from disguising illegally obtained funds as legitimate incom
• VC (Venture Capital): It is the financing given to startup companies and small businesses by wealthy in-
vestors, investment banks, and any other financial institutions. The investment does not have to be fi-
nancial, but can also be offered via technical or managerial expertise.
• PE (Private Equity) : Private equity is capital invested in a company or other entity that is not publicly
listed or traded.
• AUM (Assets under management) : It refers to the total market value of the investments that a person
or entity manages on behalf of clients.
• Bid-Ask Spread: The difference between the bid and ask prices is known as the spread. Ask price is the
value point at which the seller is ready to sell and bid price is the point at which a buyer is ready to buy.
The smaller the spread, the greater the liquidity of the given security.
• Multibagger stocks: Equity shares of a company which generate returns multiple times higher than its
associated cost of acquisition
• Restructuring: The process of reorganising the ownership, financing and/or operations of a company
with the goal of making it more profitable.
• Due Diligence: An analysis that aims at preventing harm to both parties involved in a transaction by re-
viewing financial records.
• Equity crowdfunding: It is the process whereby people (i.e. the 'crowd') invest in an early-stage unlisted
company (a company that is not listed on a stock market) in exchange for shares in that company.
• Regtech (Regulatory Technology): Regtech, is a new technology that uses IT to enhance regulatory pro-
cesses and help businesses comply with regulations efficiently and less expensively.
 Placement News Bulletin : 2019-20

Placement News Bulletin : 2020-21

the Oracle GD/PI Prep | Fin Serv & Banking

• Future: A standardized contract traded on an exchange. This is an agreement between two parties to buy
or sell an asset at a specified price on a given date.
• Insurtech (Insurance Technology): It refers to the use of technology innovations designed to squeeze out
savings and efficiency from the current insurance industry model.
• DLT (Distributed ledger technology): A digital system for recording the transaction of assets in which the
transactions and their details are recorded in multiple places at the same time
• Pip: A pip is a standardized unit and is the smallest amount by which a currency quote can change. It is
commonly referred to as 1/100th of 1%, or one basis point.
• P2P Lending (Peer-to-peer Lending): It is the practice of lending money to individuals or businesses
through online services that match lenders with borrowers.
• Bite-size insurance: It is a non-comprehensive plan, focusing on a specific need and comes with a low
premium and lower cover.
• Microfinance: It is a banking service provided to unemployed or low-income individuals or groups who
otherwise would have no other access to financial services. It allows people to take on reasonable small
business loans safely, and in a manner that is consistent with ethical lending practices.
• QE (Quantitative easing): It is a monetary policy whereby a central bank buys government bonds or oth-
er financial assets in order to inject money into the economy to expand economic activity.
• GDPR (General Data Protection Regulation): It is a regulation in EU law on data protection and privacy in
the European Union and the European Economic Area.
• Green investing: Investment activities that focus on companies or projects that are committed to the
conservation of natural resources, the production and discovery of alternative energy sources, the imple-
mentation of clean air and water projects, and/or other environmentally conscious business practices
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Placement News Bulletin : 2020-21

the Oracle GD/PI Prep | Fin Serv & Banking

Banking Terms Explained

• Retail Banking: It allows consumers to manage their money by giving them access to basic banking ser-
vices, credit, and financial advice.
• Corporate Banking: It involves working directly with businesses to provide them loans, credit, savings
accounts, and checking accounts which are specifically designed for companies rather than for individu-
als.
• Subsidiary: A company in which 50%-100%of the control is held by the parent company
• Collateral: In a “secured loan” situation, a borrower pledges specific property as collateral to a lender, to
ensure repayment of the loan.
• Central Bank: A state institution typically independent of the government, which takes care of issuing
currency, setting interest rates, and controlling inflation.
• Loan Syndication: It involves multiple lenders and a single borrower and usually occurs for loans involv-
ing international transactions, different currencies, and a necessary banking cooperation to guarantee
payments and reduce exposure. It is headed by a managing bank who is responsible for negotiating con-
ditions and arranging the syndicate in return for a fee from the borrower.
• Consortium: It occurs when multiple banks come together to finance a single project owing to its huge
size or large risk. All the banks play an equal role in managing the project and it typically happens within
the boundaries of a nation.
• LTV (Loan-to-Value): The LTV comparison is a ratio of the fair-market value of an asset compared to the
amount of the loan that will fund it.
• 5 C’s : Credit analysis is governed by the “5 Cs”- character, capacity, condition, capital and collateral.
• Sustainable Banking: It refers to any form of financial service integrating environmental, social and gov-
ernance (ESG) criteria into the business or investment decisions for the lasting benefit of both clients and
society at large.
• Basel III: Basel III is an international regulatory accord that introduced a set of reforms designed to im-
prove the regulation, supervision and risk management within the banking sector.
• LIBOR: LIBOR is the benchmark interest rate at which major global banks lend to one another.