A type of bond issued by a corporation. Corporate bonds often pay higher rates than government or municipal bonds, because they tend to be riskier. The bond holder receives interest payments (yield) and the principal, usually $1000, is repaid on a fixed maturity date (bonds can mature anywhere between 1 to 30 years). Generally, changes in interest rates are reflected in bond prices. Bonds are considered to be less risky than stocks, since the company has to pay off all its debts (including bonds) before it handles its obligations to stockholders. Corporate bonds have a wide range of ratings and yields because the financial health of the issuers can vary widely. A high-quality Blue Chip company might have bonds carrying an investment-grade rating such as AA (with a low yield but a lower risk of default), while a startup company might have bonds carrying a "junk bond" rating (with a high yield but a higher risk of default). Corporate bonds are traded on major exchanges and are taxable.
The act of engaging in trade of securities, specifically in the
options market. Investors are given the choice to buy or sell the
security at a specific price by a specific time, but they are not
required to do so.
Recording the price or value of a security, portfolio, or account on a daily basis, to calculate profits and losses or to confirm that margin requirements are being met.
The increase or decrease in the speed of payments received from foreign exchange transactions. The speed of payments increases if the exchange rates increase, and decrease if the exchange rates decrease. If investors expect the exchange rate to increase, they might rush payments ("leads") in order to improve their position. If they expect rates to fall they might wait on the payments ("lags").
A statistical indicator providing a representation of the value of the securities which constitute it. Indices often serve as barometers for a given market or industry and benchmarks against which financial or economic performance is measured.
Real Time Gross Settlement System A system that streamlines that settlement of large-value transactions between banks and other financial institutions. Instead of moving physical amounts of cash, the banks transfer funds electronically. When one bank transfers money to another, the funds are immediately credited to the second bank and debited to the first.
The length of time an asset was held (the time between the trade date of the purchase and the trade date of the sale). The holding period determines whether a gain or loss is short-term or long-term for tax purposes. A long-term holding period is one year and one day. The short-term holding period is less than one year.
An individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. Such investments are characterized by high levels of risk and a potentially large return on investment.
An economic rule which states that in an efficient market, a security must have a single price, no matter how that security is created. For example, if an option can be created using two different sets of underlying securities, then the total price for each would be the same or else an arbitrage opportunity would exist.
A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. also called aftermarket.
Collateralized Debt Obligation. An investment-grade security backed by a pool of various other securities. CDOs can be made up of any type of debt, in the form of bonds or loans, and usually do not deal with mortgages. CDOs, like CBOs and CMOs, are divided into slices, each slice is made up of debt which has a unique amount of risk associated with it. CDOs are often sold to investors who want exposure to the income generated by the debt but do not want to purchase the debt itself.
A coefficient which measures risk-adjusted performance, factoring in the risk due to the specific security, rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better than would have been expected given its beta (volatility).
The first currency in a currency pair. In a currency exchange, the exchange rate is quoted as the units of one currency in terms of a single unit of a base currency. For example, in a currency exchange of U.S. dollars for Japanese Yen, the base currency is the U.S. dollar.
The required rate of return in a discounted cash flow analysis, above which an investment makes sense and below which it does not. Often, this is based on the firm's cost of capital or weighted average cost of capital, plus or minus a risk premium to reflect the project's specific risk characteristics. also called required rate of return.
A single account at a brokerage or bank which includes both banking
and brokerage services. Most asset management accounts allow
checking, a debit or credit card, automatic transfer of excess
funds into a money management account, and margin loans. also called
central assets account
