TERM |
SOURCE |
DEFINITION |
Arbitrage |
WFM |
Taking advantage of an anomaly in prices or rates in different markets - buying in one and simultaneously selling in the other. |
Assets |
WFM |
The side of the bank's balance sheet dealing with lending. |
Back Office |
WFM |
Account and Settlement Procedures. |
Bear |
WFM |
A pessimist, selling securities in the belief of a falling market, hence a 'bear market'. |
Bond |
WFM |
A certificate issued by a borrower as receipt for a loan longer than 12 months, indicating a rate of interest and date of repayment. |
Bonds |
HSMRW |
Securities, usually paying a fixed rate of interest, which are sold by companies and governments.
|
Bonds |
IW |
A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.
Read more
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Broker |
WFM |
An agent for buying/selling securities or intermediary for a loan or sale of foreign exchange. |
Cap |
WFM |
An agreement with a counterparty which sets up an upper limit to interest rates for the cap buyer for a stated time period. |
Capital |
IW |
1. Cash or goods used to generate income either by investing in a business or a different income property.
2. The net worth of a business; that is, the amount by which its assets exceed its liabilities.
3. The money, property, and other valuables which collectively represent the wealth of an individual or business.
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Capital Market |
IW |
A market where debt or equity securities are traded.
Read more |
Capital Market |
Wikipedia |
Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities.
These markets channel the wealth of savers to those who can put it to long-term productive use, such as
companies or governments making long-term investments.[1]
Financial regulators, such as the UK's Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC),
oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties.
|
Capital Markets |
HSMRW |
The capital markets consist of the share market, the market for bonds (which deals in mid- to long-term loans) and the money markets (which deals in large short-term loans)
Unlike the other two capital markets, the share market does not deal in loans but in selling part shares of companies.
All the capital markets enabl;e investors to buy and sell quit freely.
This liquidity is a great benefit because it makes most of these investments almost as liquid as cash, although prices may change unpredictably. |
Capital Markets |
WFM |
The market for medium and long-term securities. |
Commodity |
HSMRW |
Any raw material.
|
Commodity |
IW |
You can check our Commodities Data Model.
A Commodity is any raw material.
1. In other words, it is a physical substance, such as food, grains, and metals, which is interchangeable with
another product of the same type, and which investors buy or sell, usually through futures contracts.
They can be either soft Commodities, such as Coffee, Sugar and Wheat, or hard Commodities, such as Gold and Platinum.
The price of the commodity is subject to supply and demand.
Risk is actually the reason exchange trading of the basic agricultural products began.
For example, a farmer risks the cost of producing a product ready for market at sometime in the future because
he doesn't know what the selling price will be.
2. More generally, a product which trades on a commodity exchange; this would also include foreign currencies and
financial instruments and indexes.
Read more
|
Commodity Market |
Wikipedia |
A commodity market is a market that trades in primary rather than manufactured products.
Soft commodities are agricultural products such as wheat, coffee, cocoa and sugar.
Hard commodities are mined, such as gold, rubber and oil.[1]
Investors access about 50 major commodity markets worldwide with purely financial transactions
increasingly outnumbering physical trades in which goods are delivered.
Futures contracts are the oldest way of investing in commodities.
Futures are secured by physical assets.[2]
Commodity markets can include physical trading and derivatives trading using spot prices, forwards,
futures, and options on futures.
Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.[3] |
Counterparty Risk |
WFM |
The risk involved if a counterparty fails to settle. |
Coupons |
WFM |
Issued with bearer bonds to enable the holder to claim the interest. |
Debenture |
WFM |
In the UK, a bond secured on assets. In the US and Canada, a bond not secured on assets ! |
Derivative |
HSMRW |
These include options, forward contracts and the like.
They are often said not to be 'real' assets, because they may expire and become worthless..
|
Derivatives |
IW |
A financial instrument whose characteristics and value depend upon
the characteristics and value of an underlier, typically a Commodity,
bond, equity or currency. Examples of derivatives include futures and options.
Read more
|
Derivatives |
Wikipedia |
Derivatives include futures contracts, Swaps (1970s-), Exchange-traded Commodities (ETC) (2003-), forward contracts have become the primary trading instruments in commodity markets.
Futures are traded on regulated commodities exchanges.
Over-the-counter (OTC) contracts are "privately negotiated bilateral contracts entered into between the contracting parties directly".[5] [6] |
Derivatives (Financial) |
Wikipedia |
A financial derivative is a financial instrument whose value is derived from a Commodity termed an underlier.[2]
Derivatives are either exchange-traded or over-the-counter (OTC).
An increasing number of derivatives are traded via clearing houses some with Central Counterparty Clearing,
which provide clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market.[4] |
Equities |
HSMRW |
Another name for shares.
|
Equity |
WFM |
General term for shares. |
Equity |
IW |
1. An ownership interest in a corporation in the form of common stock or preferred stock.
2. Total assets minus total liabilities; here also called shareholder's equity or net worth or book value.
3. Real Estate: The difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house).
4. In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.
Read more
|
Financial Instrument |
Wikipedia |
A financial instrument is a tradable asset of any kind; either cash, evidence of an ownership interest in
an entity, or a contractual right to receive or deliver cash or another financial instrument.
According to IAS 32 and 39, it is defined as "any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity".[1]
Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:
Cash instruments are financial instruments whose value is determined directly by the markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer.
Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying entities such as an asset, index, or interest rate. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives.[2]
Alternatively, financial instruments can be categorized by "asset class" depending on whether they are equity based (reflecting ownership of the issuing entity) or debt based (reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further categorised into short term (less than one year) or long term.
Foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category. |
Financial Transactions |
Wikipedia |
A financial transaction is an agreement, communication, or movement carried
out between a buyer and a seller to exchange an asset for payment.
It involves a change in the status of the finances of two or more businesses or individuals.
The buyer and seller are separate entities or objects, often involving the exchange of items of value, such as information, goods, services, and money.
It is still a transaction if the goods are exchanged at one time, and the money at another.
This is known as a two-part transaction: part one is giving the money, part two is receiving the goods. |
Floating Rate |
WFM |
A loan with the interest rate varied at agreed intervals, linked to a base rate, for example LIBOR. |
Floor |
WFM |
An agreement with a counterparty which sets a lower limit to interest rates for the floor buyer for a stated time period. |
Forward Contract |
WFM |
A contract to buy or sell a commodity or security for future delivery at a price agreed today.
. |
Fungible |
IW |
Interchangeable.
The term is often used to apply to financial instruments which are identical in specifications.
For example, options and futures contracts are highly fungible, since they are highly standardized arrangements.
On the other hand, forwards and swaps are not, since they are customized arrangements.
Instruments that are highly fungible tend to be very liquid, and so transaction costs tend to be low.
|
Fungible stocks |
HSMRW |
UK bonds that are issued after an identical issue and merged with it.
|
Futures |
IW |
A standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index,
at a specified price, on a specified future date.
Unlike options, futures convey an obligation to buy.
The risk to the holder is unlimited, and because the payoff pattern is symmetrical, the risk to the seller is unlimited as well.
Dollars lost and gained by each party on a futures contract are equal and opposite.
In other words, futures trading is a zero-sum game.
Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date.
The exchange of assets occurs on the date specified in the contract.
Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange,
are regulated by overseeing agencies, and are guaranteed by clearinghouses.
Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily.
Finally, by making an offsetting trade, taking delivery of goods, or arranging for an exchange of goods, futures contracts can be closed.
Hedgers often trade futures for the purpose of keeping price risk in check. also called futures contract
Read more
|
Futures Contract |
WFM |
Similar to Forward but not expected to go to delivery as the position will be closed out with the opposite contract. |
Gilt |
IW |
A bond issued by the UK government.
Gilts are the UK equivalent of a U.S. Treasury securities.
Read more
|
Gilts |
WFM |
Term applied to UK and Irish government bonds. From 'gilt-edged' or virtually guaranteed. In general use for UK government stock from the 1930s onwards. |
Hedging |
WFM |
A technique for limiting risk. For example, if a price movement would cause loss, a purchase is made of an options or futures contract giving the opposite result; if a rise in interests rates causes loss, a position is taken with interest rate options/futures so that a rise in interest rates will yield a profit. |
Interest Rate Swaps |
IW |
An exchange of interest payments on a specific principal amount.
This is a counterparty agreement, and so can be standardized to the requirements of the parties involved.
An interest rate swap usually involves just two parties, but occasionally involves more. Often, an interest rate swap
involves exchanging a fixed amount per payment period for a payment that is not fixed (the floating side of the swap
would usually be linked to another interest rate, often the LIBOR).
In an interest rate swap, the principal amount is never exchanged, it is just a notional principal amount.
Also, on a payment date, it is normally the case that only the difference between the two payment amounts is turned over
to the party that is entitled to it, as opposed to exchanging the full interest amounts.
Thus, an interest rate swap usually involves very little cash outlay.
Read more.
|
Investment Banking |
WFM |
Banking implying a high involvement with securities - new equity issues,rights issues, bond issues, investment management, etc.. Also advice to either party for mergers and acquisitions. |
Liabilities |
WFM |
The side of a bank's balance sheet dealing with borrowing - that is deposits, formal loans from others. Also share capital. |
Liquidity |
HSMRW |
How quickly an asset can be turned into cash. |
Margin |
IW |
1. Using money borrowed from a broker/dealer to purchase securities; here also called buying on margin.
2. The amount of equity required for an investment in securities purchased on credit.
3. The face value of a loan minus the value of the pledged collateral.
Read more on InvesterWords.
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Money |
IW |
Legal tender, cash.
|
Money Market |
WFM |
The market for Money Instruments with a maturity date of less than one year.
|
Money Market |
Wikipedia |
As money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing,
lending, buying and selling with original maturities of one year or less.
Trading in the money markets is done over the counter and is wholesale.
Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit,
bills of exchange, repurchase agreements, federal funds, and short-lived mortgage-, and asset-backed securities.[1]
It provides liquidity funding for the global financial system. Money markets and capital markets are parts of financial markets.
The instruments bear differing maturities, currencies, credit risks, and structure.
Therefore they may be used to distribute the exposure.[2]
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend.
Participants borrow and lend for short periods of time, typically up to thirteen months.
Money market trades in short-term financial instruments commonly called "paper".
This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity.
The core of the money market consists of interbank lending—banks borrowing and lending to each other using commercial paper,
repurchase agreements and similar instruments.
These instruments are often benchmarked to (i.e. priced by reference to) the London Interbank Offered Rate (LIBOR)
for the appropriate term and currency.
|
Money Market Hedge |
IW |
Borrowing and lending in multiple currencies, for example to eliminate currency risk by
locking in the value of a foreign currency transaction in one's own country's currency.
Read more
|
Options |
wIkipedia |
In finance, an option is a contract which gives the buyer (the owner) the right, but not the obligation,
to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date.
The seller has the corresponding obligation to fulfill the transaction – that is to sell or buy – if the buyer (owner)
"exercises" the option.
The buyer pays a premium to the seller for this right.
An option which conveys to the owner the right to buy something at a specific price is referred to as a call;
an option which conveys the right of the owner to sell something at a specific price is referred to as a put.
Both are commonly traded, but for clarity, the call option is more frequently discussed. |
Pork Belly Futures |
Wikipedia |
The pork belly futures contract became an icon of futures and Commodities trading, frequently used as a placeholder name for
commodities in general and appearing in several depictions of the field in popular media (such as the 1974 movie For Pete's Sake
and the 1983 movie Trading Places).
Inaugurated in 1961 on the Chicago Mercantile Exchange (CME), frozen pork belly futures were developed as a risk management device to
meet the needs of meat packers who processed pork and had to contend with volatile hog prices, as well as price risks on processed products held in inventory.
The futures contracts were useful in guiding inventories and establishing forward pricing.
The unit of trading was 20 short tons (40,000 lb or 18,000 kg) of frozen, trimmed bellies.
(Bellies typically weigh around 6 kg (13 lb).)
Pork bellies can be kept in cold storage for an extended period of time, and generally it was the frozen bellies that were most actively traded.
Spot prices vary depending on the amount of inventory in cold storage and the seasonal demand for bacon as well as the origin of the pork;
in the past, the former drove the prices of the futures as well.
In more recent years pork belly futures' prominence declined;
eventually they were among the least-traded contracts on the CME, and were delisted for trading on July 18, 2011.[3]
|
Security |
IW |
An Investment Instrument offered by a corporation, government or other organisation which offers evidence of debt or Equity (qv)
|
Swaps |
IW |
An exchange of streams of payments over time according to specified terms.
The most common type is an interest rate swap, in which one party agrees to
pay a fixed interest rate in return for receiving a adjustable rate from another party.
Read more
|
Swaptions |
IW |
An option on a swap, usually an interest rate swap.
Read more
|