In today’s digital era, on average, people have the attention span of a goldfish: that’s why it’s important to get to the point, correctly and succinctly. Take a look at our financial glossary for a vocabulary boost.
This presentation offers users a simple guide to learning the basic structure of hedge funds. Guiding users through hedge fund structures, covering topics such as:
• Hedge funds’ typical partnership structure
• Organizational structure at many hedge funds
• Due to their structure, only certain types of investors can invest with hedge funds
• The role of portfolio managers
• The typical role of general counsels, auditors, and administrators at hedge funds
• How prime brokers interact with hedge funds
• Executing brokers and their role in the hedge fund industry
• Fee structure at hedge funds
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
This has been prepared a business coach who gives finance training to corporate. This is for a more informal set up/ audience as it includes more colors, themes, images and less of text.
This presentation offers users a simple guide to learning the basic structure of hedge funds. Guiding users through hedge fund structures, covering topics such as:
• Hedge funds’ typical partnership structure
• Organizational structure at many hedge funds
• Due to their structure, only certain types of investors can invest with hedge funds
• The role of portfolio managers
• The typical role of general counsels, auditors, and administrators at hedge funds
• How prime brokers interact with hedge funds
• Executing brokers and their role in the hedge fund industry
• Fee structure at hedge funds
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
This has been prepared a business coach who gives finance training to corporate. This is for a more informal set up/ audience as it includes more colors, themes, images and less of text.
Financial markets and their impact on economyShivkumar Menon
Financial Markets - This deck captures the movement of Money markets and Capital Markets, its impact on different stakeholders viz. Individuals, businesses, markets and the economy
Determinants of exchange rates - International Business - Manu Melwin Joymanumelwin
International parity conditions: Relative purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
An introduction to Private Equity, the private equity investment model, private equity strategy, private equity structure, private equity performance and how it is achieved
Financial markets and their impact on economyShivkumar Menon
Financial Markets - This deck captures the movement of Money markets and Capital Markets, its impact on different stakeholders viz. Individuals, businesses, markets and the economy
Determinants of exchange rates - International Business - Manu Melwin Joymanumelwin
International parity conditions: Relative purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
An introduction to Private Equity, the private equity investment model, private equity strategy, private equity structure, private equity performance and how it is achieved
The Renaissance of Stable Value: Capital Preservation in Defined ContributionCallan
*Stable value funds are low-risk investment options in participant directed plans that mix capital preservation with return generation. They invest in high-quality, short- and intermediate-duration fixed income securities, and utilize wrap contracts to insulate individual plan participants from market value fluctuations.
*Stable value funds serve as an alternative to more volatile or risky asset classes and are a direct substitute for a money market fund. They typically offer a more attractive yield than money market funds, except during periods when short-term rates are rising rapidly.
*This paper describes how the underlying mix of securities and issuer characteristics have evolved since the financial crisis, and why Callan sees stable value as a healthy and important part of the U.S. retirement plan marketplace.
Introduction
In this paper, we seek to answer questions defined contribution (DC) plan sponsors and their participants may have about stable value funds, including mechanics, instruments, liquidity, and implementation considerations. We also look at risk and performance, address benchmarking issues, cover recent trends, and provide key takeaways for DC plan sponsors.
Stable value funds are popular with DC plans and 529 college saving investors. According to Callan’s DC Index™, 65% of DC plans offer a stable value fund, and typically 14% of total plan assets are in such funds when offered.
We believe stable value can be an effective investment option for DC plan participants seeking capital preservation.
Revisiting A Panicked Securitization MarketIOSR Journals
With the passage of Finance Bill 2013 on April 30 in Lok Sabha proposing to Levy a 30% distribution tax on the investors in securitization deals through special purpose vehicles, there is a stir in the securitization market. The principal investors (banks) were paying the tax on their net income from the securitization transaction through SPVs. Now, they will be taxed on the gross income as per the new Finance Bill. The new securitization guidelines issued in May 2012 dipped the volume of fresh issue to Rs. 28,400 crore from Rs. 44,500 crore in the preceding fiscal.
Many people tend to over complicate saving and investing. This overabundance of information can sometimes generate so many different answers and opinions that you just give up on the question. You don't need brain surgery to fix a sprained wrist, and you don't need to be a pro to build a diversified portfolio and accumulate wealth. This article shows the benefits and the simplicity of investing in a mutual fund.
Credit risk refers to the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to do. The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances. For example:
• A consumer may fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan
• A company is unable to repay amounts secured by a fixed or floating charge over the assets of the company
• A business or consumer does not pay a trade invoice when due
• A business does not pay an employee's earned wages when due
• A business or government bond issuer does not make a payment on a coupon or principal payment when due
• An insolvent insurance company does not pay a policy obligation
• An insolvent bank won't return funds to a depositor
• A government grants bankruptcy protection to an insolvent consumer or business.
To reduce the lender's credit risk, the lender may perform a credit check on the prospective borrower, may require the borrower to take out appropriate insurance, such as mortgage insurance or seek security or guarantees of third parties, besides other possible strategies. In general, the higher the risk, the higher will be the interest rate that the debtor will be asked to pay on the debt.
Kuwait Petroleum Corporation: Transforming leadership for 2030 and beyondLondon Business School
This case study explores the custom programme developed by London Business School for the Kuwait Petroleum Corporation in conjunction with the National Technology Enterprises Company Kuwait. The study examines the scale and accomplishments of the programme, as well as the unique tripartite collaboration between the three key stakeholders that delivered its success.
Together, Microsoft and London Business School created The Public Sector Course: a customised programme, tailoring a Massive Open Online Course (MOOC) model for Microsoft’s public sellers specifically. The programme aims to empower participants to build trust and credibility with customers.
Learn more about our customised programmes: https://www.london.edu/programmes/executive-education/topic/executive-education-for-organisations/custom-programmes
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Active vs. passive – practitioner perspectives - Tim Hodgson, Head of the Thinking Ahead Institute, Willis Towers Watson
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking
Portfolio construction today - Cliff Asness, Managing & Founding Principal, AQR Capital Management
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking – Private Equity
Partners Capital View of the Future of Private Equity Investing
Stan Miranda, Founder and CEO, Partners Capital Investment Group
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Risk taking the ATP way - Kasper Lorenzen, Chief Investment Officer, ATP
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Is factor investing a bubble? - René M. Stulz, Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Sharpening the Arithmetic of Active Management - Lasse Pedersen, Professor of Finance, Copenhagen Business School and NYU; and Principal, AQR Capital Management
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
Insight Summit 2017: Intelligent Risk Taking - Active vs passive investing
Money management in equilibrium - Jonathan Berk, A.P. Giannini Professor of Finance, Graduate School of Business, Stanford University
Presented at the third annual Insight Summit conference held on 7 November 2017 by London Business School’s AQR Asset Management Institute.
The ten commandments of business innovation | London Business SchoolLondon Business School
From his new book Breaking Bad Habits, LBS's Freek Vermeulen explores the ten commandments your business must follow to reinvigorate your organisation.
http://www.freekvermeulen.com/
Find out how Smurfit Kappa partnered with London Business School to design two precisely calibrated learning journeys that transformed participants from two distinct strands of leadership.
Systemic Risk in the Asset Management Industry - Michael Mendelson, Principal, AQR Capital Management
Presented at the AQR Asset Management Institute conference, Perspectives: Systemic Risk in Asset Management held on 26 April 2017 at London Business School.
Myths and Realities of ETFs and Index Investing - Ananth Madhavan, Managing Director, Global Head of Research for ETF and Index Investing, BlackRock
Presented at the AQR Asset Management Institute conference, Perspectives: Systemic Risk in Asset Management held on 26 April 2017 at London Business School.
Presented at the AQR Asset Management Institute conference, Perspectives: Systemic Risk in Asset Management held on 26 April 2017 at London Business School.
Together with London Business School (LBS), Nordea created the Strategic Leadership Programme to empower its next-generation leaders to: think strategically about the future and about customers; align functions and strategies to the overarching Nordea Future Relationship Bank Strategy; and build trust across the whole business.
Learn more about our customised programmes: http://bit.ly/2mzsMM5
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
VAT Registration Outlined In UAE: Benefits and Requirementsuae taxgpt
Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
https://viralsocialtrends.com/vat-registration-outlined-in-uae/
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Skye Residences | Extended Stay Residences Near Toronto Airportmarketingjdass
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Affordable Stationery Printing Services in Jaipur | Navpack n Print
Financial Glossary
1. Jargon buster
Financial terminology
1
Jargon buster
Financial
glossary
Speaking the language of finance with confidence is
often a deal-breaker. If you need to brush up on your
financial terminology, take a look at our AtoZ guide.
www.london.edu
2. Jargon buster
Financial terminology
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Active return
Return on an investment relative to a benchmark.
For example, if a portfolio has a benchmark return
of 5% but the actual return is 8%, then the active
return is 3% (actual return minus the benchmark return).
Active returns can be positive or negative depending
on whether the actual return outperforms the
benchmark or not.
3. Jargon buster
Financial terminology
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Arbitrage
Exploiting usually small differences in the price
of securities, currencies, commodities, or other
assets to make a profit. Arbitrage can only happen
in an inefficient market.
6. Jargon buster
Financial terminology
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The formula that made it possible to create prices
in the derivatives market. The formula is named after
its creators: Fischer Black and Myron Scholes.
Black-Scholes
7. Jargon buster
Financial terminology
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A certificate issued by a government, company
or other organisation promising to repay borrowed
money at a fixed rate of interest at a specified time.
Bond
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Financial terminology
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The value that a convertible bond would have if it was no
longer convertible. The bond value represents the market
value of the bond less the value of the conversion option.
Bond value
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Financial terminology
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Organisations that buy investment services. These
include private equity funds, mutual funds, life insurance
companies, unit trusts, hedge funds and pension funds.
Buy-side
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Financial terminology
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For investors, it refers to their stock of wealth, which can be put to work in
order to earn income.
For companies, it typically refers to sources of financing such as newly issued
shares.
For banks, it refers to their ability to absorb losses in their accounts. Banks
normally obtain capital either by issuing new shares, or by keeping hold of
profits instead of paying them out as dividends. If a bank writes off a loss on
one of its assets – for example, if it makes a loan that is not repaid – then the
bank must also write off a corresponding amount of its capital. If a bank runs
out of capital, then it is insolvent, meaning it does not have enough assets to
repay its debts.
Capital
12. Jargon buster
Financial terminology
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The composition of a company’s mixture of debt and
equity financing. A company’s debt-equity ratio is often
referred to as its gearing.
Capital structure
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Financial terminology
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A small company created from a larger one. A company
undertaking a carve-out is not selling a business unit
outright, and may instead sell an equity stake in that
business or spin the business off on its own while
retaining an equity stake itself.
Carve-outs
14. Jargon buster
Financial terminology
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A measure of a company’s financial performance based
on the cash flow a company produces with its invested
capital.
Cash return on
gross investment (CROGI)
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Financial terminology
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A bond that uses a variety of high-yield junk bonds as
collateral. These bonds are separated, or pooled, into
tranches with higher and lower levels of risk.
Collateralised bond
obligations (CBO)
16. Jargon buster
Financial terminology
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A tradable derivative. A number of loans or debt securities
payable by various companies are put into a pool, and
new securities are issued which pay out according to the
pool’s collective performance.
Collateralised debt
obligation (CDO)
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Financial terminology
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Convexity
A measure of the way that bond duration and prices
change when interest rates fluctuate as shown in the
curve of the price to yield relationship. The shape of the
typical curve is convex.
18. Jargon buster
Financial terminology
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How a company is managed, in terms of the institutional
systems and protocols meant to ensure accountability
and sound ethics. The concept encompasses a variety of
issues, including disclosure of information to shareholders
and board members, senior executive pay, potential
conflicts of interest among managers and directors,
supervisory structures, etc.
Corporate
governance
19. Jargon buster
Financial terminology
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Derivatives that investors use to protect against, or bet
on, an entity being unable to repay its debts. The credit
default swaps market is believed to have played a big
part in the 2008 financial crisis.
Credit default
swap (CDS)
21. Jargon buster
Financial terminology
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A financial market where participants can issue new
debt, known as the primary market, or buy and sell debt
securities, known as the secondary market. This is usually
in the form of bonds, but it may include notes, bills, and
so on.
Debt market
22. Jargon buster
Financial terminology
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A financial contract which provides a way of investing in a particular product
without having to own it directly. For example, a stock market futures contract
allows investors to make bets on the value of a stock market index such
as the FTSE 100 without having to buy or sell any shares. The value of a
derivative can depend on anything from the price of coffee to interest rates
or what the weather is like. Credit derivatives such as credit default swaps
depend on the ability of a borrower to repay its debts. Derivatives allow
investors and banks to hedge their risks, or to speculate on markets. Futures,
forwards, swaps and options are all types of derivatives.
Derivative
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Financial terminology
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A way of estimating the attractiveness of an investment.
DCF analysis uses future free cash flow projections and
discounts them (most often using the weighted average
cost of capital) to arrive at a present value, which is
used to evaluate the potential for investment. If the value
arrived at through DCF analysis is higher than the current
cost of the investment, the opportunity may be a good
one.
Discounted cash
flow (DCF)
24. Jargon buster
Financial terminology
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The process of selling subsidiary business interests or
investments. Not to be confused with disinvestment,
which is a reduction in a company’s capital goods.
Divestment
26. Jargon buster
Financial terminology
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Dual-listed company
A merger between two companies, in which they agree
to combine their operations and cash flows, and make
similar dividend payments to shareholders in both
companies, while retaining separate shareholder registries
and identities. In most cases, the two companies are
listed in different countries.
29. Jargon buster
Financial terminology
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A condition where a company cannot meet, or has
difficulty paying off its financial obligations to its creditors.
The chance of financial distress increases when a firm
has high fixed costs, illiquid assets, or revenues that are
sensitive to economic downturns.
Financial distress
33. Jargon buster
Financial terminology
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The qualitative and quantitative information that
contributes to the economic well-being and the
subsequent financial valuation of a company, security
or currency. Analysts and investors analyse these
fundamentals to develop an estimate as to whether the
underlying asset is considered a worthwhile investment.
For businesses, information such as revenue, earnings,
assets, liabilities and growth are considered some of the
fundamentals.
Fundamentals
34. Jargon buster
Financial terminology
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A futures contract is an agreement to buy or sell a
commodity at a predetermined date and price. It could
be used to hedge or to speculate on the price of the
commodity. Futures contracts are a type of derivative and
are traded on an exchange.
Futures
35. Jargon buster
Financial terminology
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Same as leverage. The extent to which a company’s
operations are funded by lenders versus shareholders. A
company with a high proportion of debt to equity is highly
geared and is more vulnerable to fluctuations in business
activity. It presents a higher risk for shareholders.
Gearing
36. Jargon buster
Financial terminology
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A private investment fund which uses a range of
sophisticated strategies to maximise returns including
leveraging and derivatives trading. Despite its name,
hedging is rarely used.
Hedge fund
37. Jargon buster
Financial terminology
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A strategy to minimise risk. It involves deliberately taking
on a new risk that offsets the existing one. For example,
an importer of a commodity may sell futures contracts to
offset losses if prices fall.
Hedging
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The first sale of stock by a company to the public. A
company can raise money by issuing either debt or
equity. If the company has never issued equity to the
public, it’s known as an IPO.
Initial public
offering (IPO)
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A financial instrument based on an underlying financial
security whose value is affected by changes in interest
rates. Interest-rate derivatives are hedges used by
institutional investors such as banks to combat the
changes in market interest rates.
Interest-rate
derivatives
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Need for intermediation occurs due to the imperfect
nature of markets and everyday situations where the
complete (‘perfect’) knowledge about providers and
seekers (and about what they seek) is not available to
everyone.
Intermediation
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Agreement between two or more companies to cooperate
on a particular project or a business that serves their
mutual interests. In most cases, the agreement involves
the parties taking a share in the capital of a joint venture
company, and sharing costs and earnings in proportion to
that share.
Joint venture
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The acquisition of another company using a significant
amount of borrowed money (bonds or loans) to meet the
cost of acquisition.
Leveraged buy-out
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Modern portfolio theory is based on the simple idea that
diversification can produce the same total returns for
less risk. Combining many financial assets in a portfolio
is less risky than putting all your investment eggs in one
basket. Harry Markowitz was awarded a Nobel Prize in
Economics for developing this theory. However, when it
came to investing his own money, Markowitz didn’t use
MPT, but chose a simpler rule which allocates money
equally across a number of funds under consideration.
Modern portfolio
theory (MPT)
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An investment fund that gathers capital from a number
of investors to create a pool of money that is then re-
invested into stocks, bonds and other assets. Mutual
funds are known as unit trusts in the UK.
Mutual fund
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A value that helps people decide whether to go ahead
with an investment or project. It is the current value of the
investment plus the present value of future cash flows,
minus the initial cost of the investment plus the present
value of any future cost.
Net present value (NPV)
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A type of derivative that gives an investor the right to buy
(or to sell) something at an agreed price and at an agreed
time in the future. Options become much more valuable
when markets are volatile, as they can be an insurance
against price swings.
Options
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Greeks – the quantities representing the sensitivity of
the price of derivatives such as options to a change
in underlying parameters on which the value of an
instrumentor portfolio of financial instruments is
dependent.
Exotics – Exotics are derivatives that are complex or are
available in emerging economies.
Options: Greeks,
Exotics
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Deciding on the weights of securities so that they best
suit the goal of the portfolio, such as: ‘maximise return for
a given risk’.
Portfolio
optimisation
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A simple way of judging whether shares are cheap or
expensive. It is the ratio of the market price of a share to
the company’s earnings (profit) per share.
Price-earning ratio
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A firm that specialises in buying up troubled or
undervalued companies, taking them private with the aim
of running them better and later taking them public or
selling them at a profit.
Private equity firm
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In the UK, a way of creating public-private partnerships by
funding public infrastructure projects with private capital.
Private finance
initiative (PFI)
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A financial ratio that measures a company’s profitability
and the efficiency with which its capital is employed.
Return on capital
employed (ROCE)
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An accounting principle under generally accepted
recognition accounting principles (GAAP) that determines
the specific conditions under which income becomes
realised as revenue. Generally, revenue is recognised only
when a pecific critical event has occurred and the amount
of revenue is measurable.
Revenue
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The process of managing the risk you want to bear, and
minimising your exposure to the risk you do not want.
Some of the ways that companies manage risk include
hedging, diversification, buying insurance and, simply,
avoidance.
Risk management
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The part of the financial industry involved with the
creation, promotion, analysis and sale of securities. Sell-
side individuals and firms work to create and service
stock products that will be made available to the buy-side
of the financial industry.
Sell-side
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The sale of a borrowed security, commodity or currency
with the expectation that the asset will fall in value.
Strategic asset The practice of realigning a portfolio’s
asset composition in allocation order to accommodate
changes in market.
Shorting
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An exchange of securities between two parties. For
example, if a firm in one country has a lower fixed interest
rate and one in another country has a lower floating
interest rate, an interest rate swap could be mutually
beneficial.
Swap
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The strategy of selecting stocks that trade for less
than their intrinsic values. Value investors actively seek
stocks of companies that they believe the market has
undervalued.
Value investing
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Private equity to help new companies grow. An alternative
source of finance for entrepreneurs who might otherwise
have to rely on a bank loan.
Venture capital
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A graph of the relationship between the yields and
maturities of different bonds of similar quality, currency
denomination and risk (usually government bonds).
Yield curve