Financial-Investment-Banking Jargons Part-2

• Hedge: A combination of two or more securities into a single investment position for the purpose of reducing or eliminating risk.
• Income: The amount of money an individual receives in a particular time period.
• Index Fund: A mutual fund that holds shares in proportion to their representation in a market index, such as the S&P 500.
• Initial Public Offering (IPO): An event where a company sells its shares to the public for the first time. The company can be referred to as an IPO for a period of time after the event.
• Inside Information: Non-public knowledge about a company possessed by its officers, major owners, or other individuals with privileged access to information.
• Insider Trading: The illegal use of non-public information about a company to make profitable securities transactions
• Intrinsic Value: The difference of the exercise price over the market price of the underlying asset.
• Investment: A vehicle for funds expected to increase its value and/or generate positive returns.
• Investment Adviser: A person who carries on a business which provides investment advice with respect to securities and is registered with the relevant regulator as an investment adviser.
• IPO price: The price of share set before being traded on the stock exchange. Once the company has gone Initial Public Offering, the stock price is determined by supply and demand.
• Junk Bond: High-risk securities that have received low ratings (i.e. Standard & Poor’s BBB rating or below; or Moody’s BBB rating or below) and as such, produce high yields, so long as they do not go into default.
• Leverage Ratio: Financial ratios that measure the amount of debt being used to support operations and the ability of the firm to service its debt.
• Libor: The London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). The LIBOR rate is published daily by the British Banker’s Association and will be slightly higher than the London Interbank Bid Rate (LIBID), the rate at which banks are prepared to accept deposits.
• Limit Order: An order to buy (sell) securities which specifies the highest (lowest) price at which the order is to be transacted.
• Limited Company: The passive investors in a partnership, who supply most of the capital and have liability limited to the amount of their capital contributions.
• Liquidity: The ability to convert an investment into cash quickly and with little or no loss in value.
• Listing: Quotation of the Initial Public Offering company’s shares on the stock exchange for public trading.
• Listing Date: The date on which Initial Public Offering stocks are first traded on the stock exchange by the public
• Margin Call: A notice to a client that it must provide money to satisfy a minimum margin requirement set by an Exchange or by a bank / broking firm.
• Market Capitalization: The product of the number of the company’s outstanding ordinary shares and the market price of each share.
• Market Maker: A dealer who maintains an inventory in one or more stocks and undertakes to make continuous two-sided quotes.
• Market Order: An order to buy or an order to sell securities which is to be executed at the prevailing market price.
• Money Market: Market in which short-term securities are bought and sold.
• Mutual Fund: A company that invests in and professionally manages a diversified portfolio of securities and sells shares of the portfolio to investors.
• Net Asset Value: The underlying value of a share of stock in a particular mutual fund; also used with preferred stock.
• Offer for Sale: An offer to the public by, or on behalf of, the holders of securities already in issue.
• Offer for Subscription: The offer of new securities to the public by the issuer or by someone on behalf of the issuer.
• Open-end (Mutual) Fund: There is no limit to the number of shares the fund can issue. The fund issues new shares of stock and fills the purchase order with those new shares. Investors buy their shares from, and sell them back to, the mutual fund itself. The share prices are determined by their net asset value.
• Open Offer: An offer to current holders of securities to subscribe for securities whether or not in proportion to their existing holdings.
• Option: A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.
• Oversubscribed: When an Initial Public Offering has more applications than actual shares available. Investors will often apply for more shares than required in anticipation of only receiving a fraction of the requested number. Investors and underwriters will often look to see if an IPO is oversubscribed as an indication of the public’s perception of the business potential of the IPO company.
• Par Bond: A bond selling at par (i.e. at its face value).
• Par Value: The face value of a security.
• Perpetual Bonds: Bonds which have no maturity date.
• Placing: Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.
• Portfolio: A collection of investment vehicles assembled to meet one or more investment goals.
• Preference Shares: A corporate security that pays a fixed dividend each period. It is senior to ordinary shares but junior to bonds in its claims on corporate income and assets in case of bankruptcy.
• Premium (Warrants): The difference of the market price of a warrant over its intrinsic value.
• Premium Bond: Bond selling above par.
• Present Value: The amount to which a future deposit will discount back to present when it is depreciated in an account paying compound interest.
• Present Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will discount back to present when it is depreciated in an account paying compound interest.
• Price/Earnings Ratio (P/E): The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.
• Privatization: The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.
• Prospectus: A detailed report published by the Initial Public Offering company, which includes all terms and conditions, application procedures, IPO prices etc, for the IPO
• Put Option: The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.