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GLOSSARY
THE A TO Z OF FINANCE AND INVESTMENTS.
EXPAND YOUR BUSINESS VOCABULARY
AND MASTER THE KEY CONCEPTS OF
THE FINANCIAL INDUSTRY.
THE INVESTMENT
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FOUNDATIONS CERTIFICATE
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INVESTMENT FOUNDATIONS GLOSSARY 2
Beta Brokers
A generic term for market risk, systematic risk, Trading services providers who act as agents and, in exchange
or non-diversifiable risk. for a commission, arrange trades by finding sellers for their clients
who want to buy and buyers for their clients who want to sell.
Bias
A set of assumptions and stereotypes that people have about Business cycles
those different from themselves. Biases may be conscious or Economy-wide fluctuations in economic activity.
unconscious — that is, intentional or unintentional.
Buy-side analysts
Bid exchange rate Analysts who work for organisations, typically a type of
The exchange rate at which a bank or currency dealer will buy institutional investor, that buy securities. They analyse data about
foreign currency. companies and the markets in which they operate and review
potential investments.
Bid prices
Prices at which a dealer is willing to buy an asset or a security, Buy-side firms
typically qualified by a maximum quantity (bid size). Institutional investors and investment managers who purchase
investment products and services from sell-side firms.
Block brokers
Brokers who help investors who want to trade large blocks Buying on margin
of securities. When an investor uses a margin loan to purchase securities,
this action is referred to as ‘buying on margin’. See margin loan.
Blockchain
A system of record-keeping that is maintained by independent Buyouts
computers in a peer-to-peer (decentralised) network. Private equity investment strategy that consists of financing
established companies that require capital to restructure and
Board of directors facilitating a change of ownership.
A group of people whose job is to monitor the company’s business
activities on behalf of its shareholders. Call market
Market in which trades can be arranged only when the market is
Bond called, which is usually once a day.
A formal contract that represents a loan from an investor
(bondholder) to an issuer. The contract describes the key terms Call option
of the debt obligation, such as the interest rate and the maturity. The right (but not the obligation) to buy an underlying at the
exercise price until the option expires.
INVESTMENT FOUNDATIONS GLOSSARY 4
Dealers Devaluation
Trading services providers who participate in their clients’ trades The decision made by a country’s central bank to decrease the
and stand ready to buy or sell when their clients want to sell or value of the domestic currency relative to other currencies.
buy, providing liquidity and profiting when they can buy securities
for less than they sell them. Also called market makers. Direct discrimination
When an individual is discriminated against because of a personal
Debt-to-equity ratio characteristic they possess or are perceived to possess.
A measure of financial leverage that indicates the extent to which
debt is used in the financing of the company. Direct finance
When providers and users of capital interact, the providers usually
Default have a direct claim on the users (e.eg., right to certain assets and
A situation in which the bond issuer fails to make the earnings generated by the user). See also direct investments.
promised payments.
Direct investments
Defined benefit pension plans Purchase of securities issued by companies, governments, and
Pension plans that promise a certain amount to their beneficiaries individuals and of real assets, such as real estate, art, or timber.
during their retirement.
Direct listing
Defined contribution pension plans Some regulators and markets allow an issuer to use a direct
Pension plans in which participants contribute to their own listing, which permits raising capital outside of the traditional
retirement plan accounts, usually through employee payroll IPO process. In a direct listing, the issuer does not need to use
deductions. In some cases, the pension sponsor also contributes the services of an underwriter. The shares that are involved in
an agreed-on amount to the participants’ accounts. the IPO are shares owned by existing investors, founders, or
employees. Although a direct listing does not provide a cash
Deflation flow to the company, it does provide liquidity for the issuer’s
A persistent and pronounced decrease in prices across most existing shareholders.
products and services in an economy.
Discount rate
Demand The rate used to calculate the present value of some
The quantity of a product or service buyers are willing and able future amount.
to buy at a given price.
INVESTMENT FOUNDATIONS GLOSSARY 7
Stagflation Supply
When a high inflation rate is combined with a high level of The quantity of a product or service sellers are willing and able
unemployment and a slowdown of the economy. to sell at a given price
INVESTMENT FOUNDATIONS GLOSSARY 20
Variance
A measure of dispersion that is equal to the standard deviation
squared (i.e., the standard deviation multiplied by itself).