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Over 500+ Financial market words along with definitions have been updated in this Glossary. Experts and equity analysts use these terminology to describe the situation of the stock market. Understanding these terminology can assist you in becoming more knowledgeable about stocks and other equity investments.
Accrued interest stands for the interest that has been earned but not collected. This generally happens because of the difference in the accounting cycle and cash flow cycle.
Investment companies and fund sponsors manage some funds in an effort to generate higher returns over index-managed funds. These are known as actively managed funds.
Algorithmic trading, also known as automated or algo trading, uses computer programs to place trades in pre-defined patterns at high speed, beyond human capability.
AMC stands for Asset Management Company. It is an entity that invests clients’ pooled funds into different instruments to achieve their financial objectives.
An American Depository Receipt is a negotiable instrument issued by a U.S. bank representing shares traded on the U.S. stock exchange, denominated in dollars.
AMFI has allotted all its registered employees a unique identification number known as AMFI Registration Number (ARN).
AMFI stands for Association of Mutual Funds in India — an industry body that promotes ethical practices and protects investor rights in the mutual fund industry.
Amortization is the process of repaying a financial obligation through regular installments over time, often used for intangible assets.
The annual interest rate is the effective rate paid or earned on a loan or investment due to compounding over time. Also known as the Effective Annual Interest Rate.
An annual report is a yearly publication by publicly listed companies outlining their activities and financial performance for investors.
The total premium amount paid annually, even if paid in multiple installments such as monthly or quarterly.
Anti-Money Laundering (AML) refers to the set of procedures and laws used to prevent income generation through illegal means.
Arbitrage funds invest in securities to profit from price differences between the cash and derivatives markets. These are a type of hybrid mutual fund.
Arbitrage is the simultaneous buying and selling of securities in different markets to profit from price differences.
Arbitrators are appointed bodies responsible for resolving disputes between investors and brokers. Their decisions are considered final.
The Articles of Association is a company document that defines its rules, objectives, and internal governance structure.
ASBA stands for Application Supported by Blocked Amount — a SEBI process for IPOs where the applicant’s funds are blocked and debited only upon allotment.
The ask price is the price at which a seller is willing to sell a security. A lower ask price is more favorable for the buyer.
Asset allocation is the process of distributing investments across asset classes to balance risk and reward according to an investor’s goals.
Asset valuation refers to determining the fair market value of items such as property, securities, or a company.
“At par” means that a security is trading at its face value, commonly used for bonds and other debt instruments.
An auction is a process in which buyers place competitive bids for an asset or service, with the highest bidder securing it.
An audit is an official examination of a company’s financial statements by an independent entity to ensure accuracy and compliance.
Auditors are professionals who verify the accuracy and reliability of an organization’s financial statements.
Bad debt occurs when a borrower fails to repay the money to the creditor as agreed. It can also refer to situations where the cost of debt recovery exceeds the repayment amount.
The Balance of Payments summarizes a country’s financial transactions with the rest of the world, including trade in goods, services, and income. It’s also known as the Balance of International Payments.
Balanced funds are mutual funds that include both stocks and money market instruments. The proportion of each varies by fund.
Balanced schemes are another term for balanced funds that invest in both equity and debt instruments.
The bank rate is the interest rate charged by a country’s central bank to commercial banks for loans and advances. It’s also called the discount rate in American English.
Base metals are abundant and inexpensive metals such as aluminum, copper, tin, zinc, and lead, as opposed to precious metals like gold or silver.
Bearer stocks are physical share certificates that give ownership to whoever holds them. The issuing company doesn’t record ownership, and dividends are paid to whoever presents the coupon.
A bearish view indicates an expectation that the price of a security will decline, with investors attempting to profit from this downward movement.
Beta measures the volatility of an investment compared to the market. A beta above 1 means higher volatility, while below 1 means less volatility.
The bid–ask spread is the difference between the price buyers are willing to pay (bid) and the price sellers are willing to accept (ask).
The bid price is the price a buyer is willing to pay for a security.
A block deal involves a minimum trade value of ₹5 crores or at least 5 lakh shares, typically conducted between institutional investors.
Blue chip companies are large, reputable firms known for providing high-quality goods or services and consistent financial stability.
A board lot is the standard number of shares defined by a stock exchange for trading as one unit, helping simplify transactions.
A bond is a fixed-income instrument where an investor lends money to a borrower (typically a corporation or government) for regular interest payments and eventual principal repayment.
A bonus is an extra payment or reward given to employees for achieving specific goals or as recognition of commitment.
The book building process determines the demand and price of shares during an Initial Public Offering (IPO) by collecting investor bids.
The book runner is the lead underwriter responsible for managing the issuance of equity, debt, or hybrid securities for a company.
Borrowed capital refers to funds obtained from external or internal sources other than equity, such as loans or credit facilities.
A broker acts as an intermediary between buyers and sellers, facilitating transactions in return for a commission.
BSE stands for the Bombay Stock Exchange, Asia’s first stock exchange, located in Mumbai, India.
A bulk deal refers to a trade involving at least 0.5% of a company’s total shares, executed during trading hours in one or more transactions.
A bullish view reflects an expectation that a stock’s price will rise, with investors seeking to profit from the upward movement.
The laggard is a stock or security that has been underperforming. Such stocks provide lower than average returns when compared to the market.
This is an economic factor that is measurable and that changes after the economy starts to follow a pattern or a trend. Such indicators also lag the asset price and a move in the market occurs even before the indicator provides the signal.
Laissez Faire is a belief that states that businesses and economies have a proper functioning if there is no government interference. This is also one of the capitalism guiding principles.
Large cap, also known as big cap, is used as a reference to a company that has a market capitalization value higher than $10 billion.
LBP is the currency symbol used for Lebanese Pound, which is the currency used in Lebanon. The LBP is made of 100 qirsh and is presented with the ( _ _) symbol.
Lead Manager is an investment or a commercial bank which holds a primary responsibility to organize a given bond or a credit issuance. The banks will assess various market conditions, negotiate the terms with the issuer and also find other lending firms to create a syndicate.
Lead Reinsurer, also known as lead underwriter, is the one responsible to negotiate the rates and the terms of the reinsurance treaty. Lead reinsurer is the first party that would sign the reinsurance contract.
Lead Time is the time which elapses between the start of a process and its completion. This is very closely examined in project management, manufacturing, and supply chain management as the firm wants to reduce the time taken for the product delivery to market.
Lead Underwriter is an investment bank that gets a primary directive to organize the IPO or a secondary offering for firms which have already traded publicly.
When an expected change in exchange rates leads to the change in the normal payment of foreign exchange transactions, it is known as leads and lags. When an expected increase in the rates can speed up the payment, a decrease can slow the payments down.
This is a term used in accounting to classify an asset on the balance sheet of a company which is leased. To be classified as leased asset, the company should have an operating lease agreement.
Leveraged Buy-out occurs when there is an acquisition of a company by using the amount of money borrowed to meet the acquisition costs. The assets of the company that is being acquired and that of the acquiring company, are often used as collateral for loans.
Life cycle funds refer to a specific category of asset allocation or mutual fund where in a fund portfolio, the proportional depiction of asset class is adjusted automatically at the time of the mutual fund’s time horizon.
A limit order is a take profit order that is placed with the brokerage firm to sell or buy a specified amount of financial instruments at the set price or a better price. Limit order is not a market order.
Liquid assets are the assets that can easily be converted into cash and there is no major impact on the price that is received in the open market. These assets include government bonds and money market instruments.
Load refers to the commission or a charge which an investor is charged when buying or selling shares in mutual funds. This can be a onetime fee that is charged when the investor buys into the fund or when the mutual fund is redeemed or can also be charged on annual basis.
This is also referred to as lock in or locked up period and is a prefixed amount of time when the large shareholders of a company, after an IPO are restricted from selling the shares they hold.
Long term capital gains are the gains that are obtained from an investment that is held for more than 12 months before being sold. The amount gained is the difference between the value of sale and the purchase value.
Loro Account is used in reference to a Vostro account, where a correspondent bank holds an account on the behalf of another bank. Such accounts form an essential part of correspondent banking and the bank holding the funds would act as the custodian.
Lower circuit in stock market occurs when the markets are falling consistently. Investors find it hard to exit their positions from the stocks that have hit the lower circuit.
When an economic recession and its recovery resemble the shape of "L" in charting, it is known as L-Shaped Recovery. Such chart represents various economic measures like GDP, employment and industrial output.
Macroeconomics refers to the field of economics that studies the behavior of the aggregate economy. In macroeconomics, various factors like price levels, inflation, national income, GDP, and unemployment change.
The manufacturing index is based entirely on the surveys conducted on manufacturing firms. This index helps to monitor the production, employment, new orders, investors, and supplier deliveries.
When an investor borrows money from the broker to purchase shares, it is called a margin. This is similar to a loan taken from the brokerage to trade.
Margin trading occurs when a trader is allowed to buy more shares than he would normally be able to with the funds available in the trading account. One needs to have a margin account for the same.
The amount by which a said resource falls short of a mark is called a marginal deficit. This is mostly used for knowing the difference between the inflow and outflow of cash.
Market capitalization is the company’s value that is traded on the share market. This is calculated by multiplying the total number of stocks by the present share price.
Market forecast can be termed as an important component of stock market analysis. It helps to study the trends and characteristics of the target market.
Market lot is the number of stocks investors purchase in a single transaction. In terms of options, market lot refers to the number of contracts that are in one derivative security.
Market risk refers to the possible loss an investor can experience due to factors that also affect the performance of stock markets. This is also known as systematic risk and is hard to eliminate via diversification.
MTM or Mark to market is the value of accounts which can change with time. Examples of MTM are assets and liabilities. MTM provides a real appraisal of the current financial situation of a company.
MCX is the Multi Commodity Exchange of India Ltd. and is the independent commodity exchange of India. MCX was established in the year 2003 and is located in Mumbai.
Mergers are deals that unite two different companies into a new company. There can be various kinds of mergers and also many reasons why companies undergo a merger.
When a company has a market capitalization that varies between $2 billion to $10 billion, it is called a mid cap company. This falls in between the pack of large cap and small cap companies.
A model portfolio can vary from investor to investor. It is made keeping the financial needs and the risk appetite of the investor in mind. An ideal investment portfolio would be designed keeping factors like age, savings, income, assets, and financial obligations in mind.
Monetary policy refers to the actions taken by the central bank or other equivalent regulatory board which determine the rate of growth and the size of the money supply and this in turn shows an effect on the interest rates.
A process where large amounts of funds that are obtained from serious crimes like terrorist activities, drug trafficking are shown to be originated from a legitimate source, is known as money laundering.
Money market is the market where instruments that have high liquidity and short maturities are traded. This is mostly used by investors for borrowing or lending for the short term and the maturities here range from overnight to a year.
Monthly income plans are financial instruments that provide a fixed monthly payment to investors. This is treated as a stable source of income by many and is opted mostly by retired persons or by those who do not have other fixed monthly sources of income.
Monthly income scheme or MIS refers to the investment option which provides a monthly pay to investors. These are of low risk and are preferred mostly by senior citizens.
Moving average is used in stock analysis to study the price movements of a share. The two commonly used moving averages are simple moving average and exponential moving average.
Multi caps are mutual funds that are diversified where the investors invest in stocks across market capitalization.
Multiplier is the adjustment that is made to the P/E ratio of a company by taking the present interest rates into account. This is also used to discount the future earnings and also helps investors to compare the growth expected for the money they invested.
MFSS or mutual fund service system is a collection system that functions online. This is provided by NSE so that eligible members can place redemption or subscription orders online depending on the orders that are received from their investors.
Mutual funds are investment options that are made of a pool of funds that are collected from a number of investors. These funds are in turn invested in securities like bonds, stocks, and other money market instruments.
NAV is the per share value of a mutual fund or any exchange traded fund. Net Asset Value is the value of assets of an entity minus the value of the entity’s liabilities.
National Commodity & Derivatives Exchange Limited (NCDEX) is a commodity exchange in India that operates online. This is an exchange platform that enables traders to trade in commodity derivatives. NCDEX is a public limited company and was incorporated on 23rd of April in 2003 under the Companies Act of 1956.
NEFT, which stands for National Electronic Funds Transfer, is the system of money transfer used in India to transfer funds from one bank to another. The banks and the branches which support NEFT transactions need to be a part of the NEFT network.
Net interest income or NII is the difference of the income earned by a bank through interest from its lending activities and the interest paid by the same to the depositors. Net interest income = Interest earned – Interest paid.
Net worth of an entity is the amount by which the company’s assets exceed the liabilities. This is an indication of good financial health.
Netting is a general concept used in financial markets that is used to offset the value of a number of positions or the payments that are due to get exchanged between two parties or more. This helps to determine which party has owed remuneration in the multiparty agreement.
This is a concept used to measure the profitability of a company and can be calculated by the present value of the future profits that are expected by the company for a said period of time.
NFO or New Fund Offer is the offering where investors get to purchase units from a closed-end mutual fund. This offer occurs during the launch of a mutual fund and helps the firm to raise capital for securities purchase.
Niche marketing is business promotion and selling of a product or a service dedicated to a specialized market segment.
NOC or Network Operation Centre is also known as Network Management Centre and refers to the management of a network over a computer, satellite network, or telecommunication from one or more locations.
A nominee can be a person or a firm whose name the securities or any other properties get transferred to facilitate transactions, while leaving the customer who happens to be the actual owner.
A Non Banking Financial Company is a company that is registered under the Companies Act of 1956 of India and is engaged in services of loans and advances, stocks, hire and purchase of bonds, shares acquisition but does not include any kind of entity that does not have its principal businesses like agriculture etc.
The debentures which cannot be converted back into shares or equities are known as non-convertible debentures.
Non-standard life refers to an individual who purchases the policy sold by an insurance company by paying an extra premium than the normal interest rate. This is one kind of substandard life insurance.
Non Tax Revenues are the revenue receipts that are not generated by public taxation. This revenue is generated from the dividends and profits earned by the government from its PSUs.
Non-performing assets are the loans that are in default or in arrears on the payments scheduled. In many cases, any debt is referred to as non-performing when the payments on the loan have not been paid for more than 90 days.
A Nostro account is an account that a bank has in foreign currency in a different bank. Nostro is the term that is derived from the Latin word which means "ours" and such accounts are used to facilitate foreign exchange and foreign trade transactions.
Novation as per business and contract law is an act of replacing one obligation to perform with another obligation. This also refers to adding an obligation to perform or replacing one party to get into an agreement with another.
NRI refers to Non-Resident Indian who happens to be the citizen of India and holds an Indian passport but has immigrated temporarily to a different country for more than six months for employment or education or for other purposes.
NSDL is National Securities Depository Limited, the Indian central securities depository which is based in Mumbai.
NSE, the National Stock Exchange of India Limited, was established in the year 1992 and is the largest financial market in India. NSE conducts transactions in equity, wholesale debt, and the derivative markets.
The obligation is the facility provided which allows the traders to sell the shares they have purchased in delivery before those shares get credited to the trader's demat account.
Obligation bond is a municipal bond that is used to secure a mortgage on physical assets or properties that can be liquidated.
Obsolete inventory is an inventory that has not seen any sales for a specified time even at the end of the product life cycle.
This is a crucial document that shows that a building has been constructed based on the permitted plan by following local laws.
Odd lot is the order amount for a security which is lesser than the normal trading unit for a said asset. Odd lots can have any number of shares between 1 and 100.
Odious debt is the money that is borrowed by one country from a different country and is then misappropriated by the rulers of the nation. The debt of a nation becomes odious debt when the funds borrowed are not used for the benefits of the nation’s citizens.
When a transaction gets settled between two parties after mutual agreement and terms without the involvement of a stock exchange, it is called an off market transaction.
An Offer Document includes all the relevant information which is similar to a Prospectus in case of a public issue and a Letter of Offer in case of the rights issues that gets filed with ROC and Stock Exchanges.
Omnibus clause is an automobile insurance clause which allows extended coverage to those individuals whose names are not included in the insurance policy.
One sided market is the market where the market markers need to provide a firm bid and firm ask for every security which they use to make the market. This is also known as a two way market.
OPEC, i.e. Organization of Petroleum Exporting Countries is the group that has 12 of the world’s major oil exporting countries.
This is a kind of mortgage which lets the borrower increase the mortgage amount at a later stage. This lets the borrower borrow more money from a lender if the said conditions are met.
Open ended schemes are mutual fund schemes that offer new units on a continuous basis to the public. These schemes offer units for sales and no duration for redemption is specified.
Open interest is mostly associated with futures and options and is the total number of future contracts or open options that exist on a given day and get delivered on another specified day.
Open position is the trade which is entered and is yet to get closed with the opposing trade. This can exist after a buy or after a short position.
Operational risk is the risk that remains after the financing and systematic risks are determined; it includes the risks that result from any breakdowns that can occur due to internal procedures or systems or people.
Option chain is the list of the put and the call options strike prices. This also includes the premiums for a said maturity period. The option quotes are often displayed as option chains by stock trading platforms.
Option Premium is the income an investor receives after he sells or writes the option contract to another party. This is also used to refer to the present price of any option contract.
Option spread is the difference between the option’s strike price and the market value.
Option strategies can be simultaneous and more often mixed and include buying or selling of more than one options that differ in more than one of the options variables.
Option Writer is a seller who sells option or who opens the position to collect the payment of premium from the buyer.
Option is the contract which lets the buyer the right but not obligation to sell or to buy an instrument at a said strike price on a said date depending on the kind of option.
Over the counter is used for those stocks that are traded via the dealer network. This is also used to refer to those debt securities or other kinds of financial instruments like derivatives which too are traded through a dealer network.
Oversubscribed is used for those situations in which there is a new security issue when a stock or even a bond gets underpriced or is in great demand.
Passive funds are those that are directly not dealt with by the investor. It is the fund manager who makes all kinds of financial decisions and paves investment plans for the client. These include buying and selling of shares, securities, and commodities.
Pay in refers to dates wherein the stock brokers pay for the securities bought by their clients. The payments are made to the respective stock exchange.
Pay outs are dates wherein the exchange releases payments to brokers for delivery of securities. The exchange makes the payments when stock brokers sell securities on behalf of their clients.
PE ratio is a very important determinant to let investors know if they have to buy the particular company’s shares or not. It is calculated by dividing the current market price of the share by its relevant Earnings per share or EPS. It lets investors know the rupee value of earnings of the company.
Point of Presence is a point of contact the Pension Regulating Authority of India infests on the citizens or pension holders across the nation. The POPs make sure that pension holders receive their pay-outs on time.
Pool account is a common account maintained by the fund manager where he/she lodges the funds of all clients in a separate bank account.
Portfolio risk is the potential risk or threat put to investors across all spheres. The risk involved with investors receiving lower rates of return or profits on the stocks, shares, bonds, or securities is known as portfolio risk.
Positional calls are those options which inform investors on what the prices or stock indices would be, over a weekly or a monthly time clause. Investors also look at prices of shares between 1-6 months to know where the stock of the said company is heading towards.
Preference share, otherwise known as a preferred stock, is one where dividends are paid out to stakeholders even before the common stockholders are paid off. In case the company goes bankrupt, the preference shareholders are entitled to be paid from the company.
The capital raised from the issuance of preference shares is what makes up the preference share capital.
Pre-opening sessions refer to the time slot before the actual onset of commencement of the share markets. Investors get a preview of how the shares or securities are going to fare at the market and how their orders or deals will be executed.
Price band is an auctioning technique wherein the seller places the upper and lower price range of an aforesaid stock or bond. The buyers place their bids within the said range. This method is often used at Initial Public Offerings or IPOs.
Primary market is a market which sells shares, stocks, and bonds to investment holders for the very first time. The deals predominantly take place at an IPO (Initial Public Offering).
Private equity firm is a financial console that provides starting capital or seed capital to private companies set up across the country. These include start-up firms as well. The investment company also provides strategies like leveraged buy-out, venture capital, and growth capital to aspiring entrepreneurs.
Private investment fund refers to an investment company which meets one of the following criteria: a) the firm has less than 100 investors to its credit, b) Else its investors have a substantial portion of their funds invested elsewhere. These are also known as hedge funds.
Private placement refers to the sale of securities to a select group of investors. This is also one of the methods employed by a company to raise its capital base. Retail investors cannot purchase the shares or stocks of this genre as they are prohibitively expensive. Banks, huge corporate houses, financial consoles, and insurance companies buy securities offered via private placement deals.
Professional clearing members refer to a cluster of members who are not involved in trading with shares or securities. These are typically banks or custodians who act on behalf of their clients to execute transactions or close deals.
Provisional contracts are those contracts or agreements entered by a company soon after its incorporation, but before it acquires the Certificate of Commencement of Business or COC’s.
Proxy is an option adopted by a shareholder who is not in a position to attend an Annual General Meeting of a company due to whatsoever reasons. He or she may appoint someone else to attend the meeting on his/her behalf and cast votes to appoint the directors of the company. This agent who acts on behalf of the designated shareholder is known as a proxy.
A Public Sector Undertaking or PSU is a firm run and managed by the Central Government with more than 51% of the paid-up capital sponsored by the Central Government.
A put option is an investment strategy or a privilege given to shareholders to buy or sell certain shares at the price specified by them on or before the lapse of the contract period.
Q stick indicator is a numerical identifier in candlestick charting and is calculated by taking an ‘n’ period moving averages comprising of the difference between opening and closing prices.
While a prospective owner utilizes his movable assets to purchase a house constituting penalty-free withdrawals, the costs involved refer to what is known as a qualified acquisition cost. The costs include those of buying, building, or re-building a home.
A qualified annuity is a kind of an investment or a financial product that not only accepts and grows funds but also brings about lucrative benefits in the form of accruing pre-tax dollars. The word ‘Qualified’ is given to the fund category by Internal Revenue Service or IRS to denote annuity that is qualified or eligible for tax deduction.
Qualified foreign investors or QFIs belong to the sub-category of foreign investors wanting to invest their capital in the Indian markets. QFIs comprise of residents, individuals, groups, or associations excepting countries as stated on the FATF (Financial Action Task Force) list.
Qualitative earnings refer to real-time profits attributed to higher sales turnover or lower costs. The earnings are not artificial by deceptive accounting practices like inflating inventory costs.
Quant fund refers to an investment fund that relies on picking investments that are purely qualitative in nature. The fund manager adopts computer-based models and uses qualitative analysis charts to pick on investments that are really doing well in the market.
The procedure wherein a governmental entity purchases shares and securities in the market to lower interest rates and to increase money supply is known as quantitative easing. This strategy is typically used to increase liquidity and promote increased lending sans printing fresh currency notes.
Quantitative trading refers to trading strategies that purely rely on mathematical computations and number-crunching methods in order to identify the right kind of trading opportunities. Quantitative analysis suits transactions involving purchase and sale of hundreds and thousands of shares.
Quartile is a unique type of statistical measure wherein a set of observations are bifurcated into four defined intervals. Moving averages and data are thereby computed for the final set of observations.
As a matter of fact, currencies are always paired while being quoted like US/EUR, meaning US dollar vs Euro. The first currency on the pair is known as the base currency, while the second currency on the pair is denoted as quote currency.
Rainbow option is an option wherein a single option is utilized or linked to two or more underlying assets. This move can be effected in the desired direction if the aforesaid assets show identical movements in favor of the option.
In order to reduce interest rates on repayment, credit card users transfer balances from one card to another. Rate tarts show significant balances when a special offer on the credit card, offering members with an interest close to zero percent, closes out.
Ratio spread is clearly defined as an investment strategy wherein a shareholder simultaneously holds on to unequal numbers of short as well as long positions. A commonly used ratio comprises two short options for every trading derivative or option purchased.
A recession is a sluggish state of the economy a country is grappled with. Employment opportunities are diminished, demand for goods and services reduces while the stocks of goods remain unsold.
Recurring expenses relate to the day-to-day expenses of an entity. These include payment of salaries or wages to employees, utilities, rent, and other incidental expenses.
Redemption is a process by which the investor is entitled to receive the principal money plus affiliated rate of interest through the sale of mutual fund investments, bonds, fixed deposits, and so on. Mutual funds can be redeemed by selling mutual fund shares.
A regulator can be an entity, corporate, bank, or a governmental agency aimed at governing the set of rules and regulations of the entity under consideration. A regulator can be a market-maker, as well.
Regulatory risk is defined as the risk involved with the change of rules, laws, or regulations by the Government or a legal entity. These can affect a business sector or the real-estate market.
Re-materialization is a process by which shares and securities prevalent in the de-mat form are converted into physical copies of share certificates. The nominee will have to fill in a Re-mat Request Form or RRF to get things sorted out.
Repo rate is defined as the rate at which the Central bank of the nation lends money to commercial banks in the eventuality of any shortfall of funds. For India, it is RBI (Reserve Bank of India) that is considered to be the Central Bank.
Repurchase is a process by which a company purchases some of its shares from the general
Scheme information document is a set of guidelines and rules for all open-ended schemes. This document also contains the risks associated with various mutual fund schemes.
Special Drawing Rights abbreviated as SDR refers to an international monetary reserve created in order to maintain existing reserves of member countries. These countries are affiliated to IMF (International Monetary Fund).
SEBI stands for Securities Exchange Board of India. It is a centralized authority that lays down rules and guidelines on how the stock exchanges dealing with shares and securities need to operate.
Secondary market is a market that deals with buying and selling of shares and securities already owned by the primary owners. In other words, the stocks and shares have already been subscribed by new shareholders in the primary market and they are sold.
These are mutual funds, stocks, or closed-ended funds that belong to businesses operating in a particular industry or a specific sector of the economy. For example, Oil Company shares.
Secured Premium Notes or SPNs are financial instruments that come with limited or detachable warranties. These securities are issued only after getting prior approval from the Central Govt.
Security market is a domain wherein widespread buying and selling of shares and securities take place. The market operates based on the demand and supply position of the economy, as such.
Security Transaction tax is a tax that is levied whenever you buy any form of share or security from the stock exchange. The proceeds go to the Central Govt.
The full form for SEK is Swedish Krona which is the official currency of Sweden.
Self-auction is a self-service kind of delivery and settlement of shares adopted by stock exchanges like BSE (Bombay Stock Exchange) or NSE (National Stock Exchange).
Self-certified Syndicate banks are financial institutions which are certified by SEBI (Securities Exchange Board of India). These banks allow investors to participate in the IPO program using (Applications Supported by Blocked Amount) ASBA payment methods.
A Self-regulatory organization or SRO is a centralized authority that lays down rules and guidelines on how stock exchange markets need to smoothly run in the economy. The main aim of the organization is to support the investors’ interest by maintaining ethics and fairness in the way the operations are conducted.
SGD is the full form for Singapore Dollars. SGD is the main medium of currency throughout the state of Singapore.
Short selling refers to a process wherein the securities do not belong to the seller, as such. It is done under the assumption that the price of the security will go down in the market.
Short-term capital gains are the profits you earn when you sell your shares, securities, or bonds within 6 months from the date of purchase. The income you earn on selling your securities within a short tenure of 6 months can attract short-term capital gains tax.
Bond issuing companies maintain a separate fund known as a Sinking Fund account. The deposits of investors are accumulated in the funds. When the company needs to issue funds to many bond-holders at once, it can disburse funds from the Sinking Fund account.
SIP stands for Simple Investment Plan. It is the best form of investment as it lets the investor deposit money in monthly equated installments. He/she can deposit money according to his/her income affordability. Interest is calculated on the amount accrued into the account over a period of time.
Small cap is an acronym used to classify companies that use a smaller amount of capital to start businesses. Short-term companies or start-ups benefit with this type of an investment plan.
SPAN typically stands for Standardized Portfolio Analysis of risk. This is a common investment strategy adopted by stock exchanges to determine the one day risk of traders’ accounts.
A speculator is a trader who invests in shares, securities, futures, or derivatives for a higher than average risk. This is in anticipation of higher than average profits.
Spot price refers to the current price at which a share is bought or sold in anticipation to receive immediate payments or affect instant delivery.
Corporate entities employ a strategy of letting consumers pay for their products or appliances by taking standing instructions for automatic debit from the bank account. Every month, the said money will be debited from the person’s account.
Statement of Additional Information or SAI is another portion of the prospectus that contains additional information about the fund. SAI also contains info on how the fund will operate in the market.
Statutory payments or dues refer to payments that need to be paid to the Govt., statutory bodies, or other regulatory authorities. These can take the form of various types of taxes people remit to the Govt.
Stock split is an investment strategy wherein the board of directors issue the outstanding shares amongst current shareholders. This strategy is implemented when there are more outstanding shares lying at the stock exchange.
Stop loss order is a protective strategy employed by traders to minimize their losses on buying and selling of shares or securities. A stop loss order gives a privilege to the investor to sell a share or security when it reaches a specific price.
Strangle is a strategy adopted by investors plying at the stock markets. The investors club call and put options on the derivative or security with different strike prices.
Strategic asset allocation is a process wherein set targets are placed upon different classes of assets including shares, derivatives, and bonds. The prices are then re
Financial businesses rely upon people, tools and equipment for performing their day to day operations. T & N days is a financial console which helps the business relocate from one place to another.
Tactical Asset Allocation or TAA is a comprehensive strategy that involves categorizing the various assets held by a company into different forms. This is to create a stronger market share for the aforesaid entity.
Tax Deducted at Source or TDS refers to certain percentage of an employee’s income that is instantly deducted from the person’s salary. The percentage of tax that stands deducted is prescribed by the Income Tax Authority of India as per provisions of the Act passed in 1961.
Tax deferral refers to a scenario wherein a tax payer can defer or postpone paying up taxes to a future point of time. The taxes can be deferred infinitely or lower slabs of taxation can be implied on certain forms of investments to enable the tax-payer to pay taxes without any defaults.
A T-Bill otherwise known as a Treasury bill is a short-term bond or obligation issued by financial companies based out of the US. These bonds are usually tendered in denominations of $1000 and can take up values going up to $5 million.
A term loan is a kind of a monetary loan that has a specified rate of interest. It is repaid anytime between one and ten years. The loan amount is usually repaid as regular equated installments.
A thematic fund is a variant of mutual fund which can offer investors with optimal rates of return. The funds are invested in different thematic stocks like international fortune 500 companies, commodities, companies operating with a multi-exposure domain, etc.
A thin market is usually a share broking firm dealing with a fewer number of stocks or shares. Otherwise known as a narrow market, it is characterized by huge trading positions in favor of the trader or investor.
Time Value of Money or TVM is the idea wherein the value of money at the present time is worth more than the same amount of money available at a future point of time. The underlying principle behind TVM is that the idle funds need to be deployed in revenue-earning sources so that the value of money multiplies over the course of time.
Trade day is the span a trading stock exchange is open all through the day. At the New York Stock exchange, a trading day starts at 9:30 am in the morning and closes off at 4 pm.
A trade deficit is a kind of economic measure representing negative balance of trade. The country’s imports exceed exports leading to outflow of domestic currency to foreign economies.
Trading cum clearing member otherwise known as TCM is a privilege available to the trader to transact his account and also perform trading transactions on behalf of his clients. The accounts of self and clients are managed through Metropolitan Clearing Corporation Ltd (MCCL).
A trigger price is a stop-loss order. The investor prescribes a certain limit below which the share or stock cannot be sold at.
Ultimate Beneficial owner or UBO refers to natural persons having complete control over land, property, assets and people. It also connotes that person on whose behalf a transaction is being conducted.
These are bonds or funds that have minimum investment threshold limits of less than 10 Lakhs. The bonds are repaid anytime between 3 and 9 months and don’t usually exceed a year.
Unamortized bond discount is an accounting convention calculated as the value of the bond at par (The value of the bond at maturity in other words the proceeds from the sale of bonds by the issuing or the selling company) less portion of the bond that has been amortized or indicated on the Profit and Loss Account.
Uncollected funds are deposits in the form of cheques but yet to be cleared from the banks the cheques are drawn for. In other words, uncollected funds are funds banks should account for, before the money is actually put into the depositor’s account.
Underpricing is defined as a term wherein the pricing of an IPO (Initial Public Offering) is way below its market-price. If the offer price of a particular stock is lesser than the price of the first trade, then the particular stock is said to be underpriced.
Underlying assets is a term commonly associated with the derivatives’ trading market. Derivative is usually the price of a stock or a financial instrument whose price is derived from a different asset, all together. Underlying asset is a financial instrument (A commodity, stock, futures, currency or index) on which a derivative’s price is based.
Underlying debts refer to a cluster of bonds belonging to a smaller Governmental entity, agency or financial corporation. These entities might find it challenging to raise a sufficient amount of capital if they do not have a robust financial health.
An undervalued stock is one wherein the price of a stock, share or commodity is presumed to be sold at a price less than the investment’s true value. The intrinsic value of the investment might be diminished if the company’s books of accounts reflect a shabby picture.
An underwriter is either an individual or an entity who is involved in evaluating and assuming the risk of another entity. An underwriter usually works for a fee such as commission, interest, premium or spread.
The underwriter’s discount is usually a significant portion of money underwriters earn with public issuance of stocks and shares. The difference between the underwriter’s price (Price at which the underwriters buy a group of shares, stocks and securities) and the price at which these are sold to the investors (Selling price) is what is known as underwriter’s discount, commission or spread.
Unfunded debt is a short-term debt that is usually repaid within a year from the date of its issuance.
Unit certificate is a bonded document containing the number of unit trusts a member holds with the Unit Trust Company. Unit trusts are open-ended investments.
Unit holders are investors who own one or more units in an investing console. Units are considered to be shares, and unit holders are like shareholders belonging to a Unit Trust company.
It is a feature wherein the market prices of shares or stocks are rising consistently. Given the volatility of markets, investors will have to take advice from brokers to have the transactions done.
USD is US Dollar denoted by the symbol US$. It is the unit of currency issued by the Government of the United States of America.
Valuation Opportunity Cost is the unprecedented increase in value of a firm that deals with investments. These are investments foregone on account of capital rationing. Capital rationing is nothing but placing a limit on investments a company can have.
Value Added Tax or VAT is a tax that is levied on consumers for any form of value addition made to the product during the time of manufacture and at the time of the final sale. VAT is calculated as the cost of the product less cost of materials used that have already been taxed.
Value at Risk is commonly abbreviated as VaR. This is a convenient technique adopted by financial advisors to assess or quantify the level of financial risk that is prevalent within a firm or a leading investment console at a given time-frame.
This is how Value at Risk or VaR model is being applied. Suppose a financial firm has assets worth XYZ, out of which 3 % assets have a one month VaR of 2 %. In other words 3 % of assets can decline in value to 2 % over a one month’s time-frame.
Value fund is a form of mutual fund or stock that has got its price undervalued. These are funds that can generate higher amount of dividends and belong to mutual funds’ category of investments.
Some of the investment firms and financial exchange companies provide investors with a dual advantage platform. They can perform trade with value oriented shares and stocks and get exposure to trade with higher volumes as well and the concept is known as value plus trading.
Value stock is a stock that is undervalued in relation to its core fundamentals (Dividends, earnings and sales turn-over). Despite yielding higher dividends to the investor, the valuer still undermines the same. These stocks are further characterized by a) high dividend yield b) Lower price to book ratios and c) Lower price to earnings ratio.
Vega in financial parlance is nothing but a way of measuring the worth of an underlying asset. The underlying value of an asset, stock or derivative is susceptible to changes due to the volatility thrown by the market.
Merger is nothing but two companies getting clubbed into one. A vertical merger happens when two companies operating at separate stages of the production process merge together to bring about the final finished product.
This is a trading strategy wherein a trader simultaneously purchases and sells two options belonging to the same type. The options or derivatives can have the same expiration dates but different strike prices.
Vienna Stock Exchange (VSX) is a stock exchange that is located in Vienna, Austria. Popularly abbreviated as VSX, it is one of the busiest stock exchanges that facilitate at least 60 % of stocks traded in Austria.
Vignette is a symbolic representation of the corporate or the company that is involved with issuing the shares, derivatives or investment bonds. The symbol or the logo of the issuing company (s) is depicted on the share certificate, in order to make counterfeiting of share certificates as difficult as possible.
Virtual currency is otherwise known as digital money. Though the currency is not issued by a central banking authority, one can store and transfer shares or securities using digital money. Some brokerage firms allow its members to use the virtual currency option to buy and sell shares.
Volatility Index is a sticker that is widely used by the Chicago Board Options Exchange or CBOE. Shortly abbreviated as VIX, the index reveals the market’s expectation in terms of volatility over a 30 day period. VIX is also construed using call and put options and trade analysis charts.
Trade exchange firms make use of volatility ratio as a technical indicator to identify price-ranges and break outs. The volatility ratio makes use of authentic price ranges an underlying stock or share is into.
Vostro account is an account of one bank held into the account of another bank. These accounts form an integral part of the correspondent banking system wherein the bank that holds or manages the funds of the other bank acts as a custodian for and manages the account of a foreign counterpart.
Wage push inflation is an economic syndrome by which the prices of goods and services are hiked up on account of increased wages paid to workers. Just to maintain corporate profits, the employers correspondingly increase the prices of goods and services they produce for the economy.
Wall Street is an 8 block long street situated at Lower Manhattan district of New York. It is the financial hub of United States of America. The New York Stock Exchange or NYSE is situated at Wall Street which involves itself in buying and selling of stocks and shares.
In order to mitigate losses arising from invasion, terrorism, revolution, military coup and other varied forms of political unrest, war risk insurance policies are taken up. Property owners and auto dealers take up war risk insurance policies so that they need not compensate for war-related events.
Warrant is the exclusive right to buy or sell shares at a certain price, before the expiration or lapse period of the discounted price. He/she must buy shares at given exclusive prices before the lapse of the expiration period as stated on the warrant deed.
It is a wash-sale if shares and securities are sold at losses and the stock-holder receives identical shares/ securities 30 days before or after the distress sale. Losses incurred via wash-sale deals cannot be deducted as stocks or securities come with contracts to get them sold, at the earliest.
Watch list is a list of securities that are closely watched by an exchange or a brokerage firm in order to spot irregularities.
A stock that is issued at a value much higher than a company’s valuing assets. The stock is overvalued on account of stock dividends excessively given away to share-holders, assets that were over-valued and also due to huge proportion of operational losses.
Weak dollar is a figurative value of a dollar losing its value against other foreign currencies. The dollar can lose its value against one or more foreign currencies. A US dollar gets exchanged for fewer units of foreign currency due to hiked up interest rates owing to the sluggish outlook faced by the US economy.
Wealth cycle is a step by step break-down of one’s financial journey aboard. These include Transition, Accumulation, Reaping of wealth benefits, Preservation and Wealth management.
Wealth management is a scientific way by which one can plan finances wisely in order to accumulate massive wealth and take care of the independent and future generations, as well. Investment planners need the right kind of guidance and counseling to plan taxes, investments, real-estate and retirement in a seamless and organized manner.
White knight is regarded as the ultimate savior of a company in the midst of a hostile take-over as it saves the company from being governed by fraudulent and money-minded group of individuals. It preserves the core business of the company and negotiates better take-over terms.
Whole sale price index or WPI is the point of sale of products at bulk quantities as products are sold to shop-owners and organizations rather than individual consumers. WPI is a measure to calculate inflation across economies.
Wide opening is a terminology that is used in the financial parlance to describe a stock, share or derivative that can be used for a wide number of purposes. Derivatives also help one perform number of functions like swaps, futures and forward options and therefore provide the investor with a wider opening at the stock markets.
The Widow and orphan stock belong to an elite group of stocks that pay investors with higher dividends and carry lower risk. These belong to blue chip companies stocks and are less likely to get impacted by economic down-turns.
Window contract is a guaranteed form of investment which allows investors to deposit their funds over the designated window period usually between 3 and 12 months. All the deposits made under the window contract deal are assured of the same credit rating.
Window dressing is a clever strategy adopted by fund managers or investment advisors of an aforesaid mutual fund entity to portray the financial conglomerate as a performer or the best investing domain, in order to attract more shareholders or stake owners into investing money into the firm.
Yankee Bonds are the bonds that are issued by a foreign bank or a company but are issued and traded in United States. Yankee Bonds are denominated in US dollars.
Year end dividend is the dividend that is paid to the stockholders based on the performance of the company in its previous year. It is not mandatory for companies to pay year end dividends to its stockholders even if it has performed well.
Yellow Sheets is a daily bulletin provided by National Quotation Bureau. Yellow Sheets provide the updated ‘ask’ and ‘bid’ prices for over-the-counter corporate bonds. It also provides the brokerages lists that make a market in corporate bonds.
Yield curve is used to study the relation between yields and maturity dates at a given time for similar kinds of bonds or treasuries.
This is also known as arbitrage-free option-pricing models. Investors can add suppositions or volatility assumptions along the yield curve using such models. Black-Derman-Toy is example for one such model.
The quotient of the yields of two bonds is known as the yield ratio.
The stock that is highly volatile and moves up and down with a pattern is known as a yo-yo stock. As these are very volatile, investment in such stocks can be risky.
YTM or Yield to Maturity is the rate of return that is paid on a bond or a fixed income security when it is bought and is held till the date of maturity. This is calculated based on market price, the coupon rate and the time to maturity.
This is a bond where the interest gets accumulated and is added to the principal balance. The interest gets paid at a later date when the interest is accreted and hence it is also called an accretion bond.
The account that requires the account holder to maintain a zero balance is a zero balance account. The ZBA account receives funds that are enough to cover those checks which are presented.
Zero-Coupon Bonds do not pay interest to the investor. After a year or more of maturing period, the Zero Coupon Bonds are purchased at the discounted face price.
Zero-beta portfolio is a portfolio created using risk free assets.
This is also known as a zero uptick and it is a trade which occurs at the price that is same as the trade preceding it but is higher than the trade that last occurred at a different price.
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