Financial economics/Glossary

(For definitions not shown below, see the economics glossary [1])

• Agency cost [r]: Add brief definition or description
• Arbitrage [r]: transactions to take advantage of a price differences of a product in different markets by buying where it is cheap and selling where it is dear. The possibility of arbitrage often prevents the occurrence of price differences. ^[e]
• Basel I & Basel II [r]: international banking regulations put forth by the Basel Committee on Bank Supervision of the Bank for International Settlements requiring banks' minimum capital adequacy ratios to be related to the riskiness of their loans. ^[e]
• Beta [r]: A measure of the degree to which the rate of return of a share tracks that of the equity market as a whole (defined as the covariance between the share's rate of return and the average market rate, divided by the variance of the market rate). If beta = 1 the share's rate of return moves in line with the market rate; if it is negative, it falls when the market rate rises. ^[e]
• Capital adequacy ratio [r]: The ratio of a bank's capital to its risk weighted credit exposures. May be defined in terms of tier 1 (core) or tier 2 capital. ^[e]
• CDO [r]: Collateralised Debt Obligation. A portfolio of corporate bonds, grouped into tranches that are ranked by estimated risk. ^[e]
• CDS [r]: Credit-Default Swap. An insurance agreement that guarantees protection against a bond default in return for a fee. ^[e]
• Central Bank [r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. ^[e]
• Corporation [r]: Please do not use this term in your topic list, because there is no single article for it. Please substitute a more precise term. See Corporation (disambiguation) for a list of available, more precise, topics. Please add a new usage if needed.
• Cost_of_capital [r]: The weighted average of the rates of return paid by a company on its equity (share issue) and on its debt (bonds and commercial borrowing). ^[e]
• Covariance [r]: A statistical parameter that indicates whether two random variables show a related linear trend. ^[e]
• Debt_instrument [r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. ^[e]
• Derivative [r]: An asset whose value depends upon the expected value of another asset. ^[e]
• Discount_rate [r]: (i) The percentage by which current value exceeds value in a year's time. (ii) The rate at which banks may borrow at their central bank's discount window. ^[e]
• Discount window [r]: A facility provided by central banks that enables a bank to make secured short-term loans at its central bank's discount rate. ^[e]
• Dividend discount model [r]: The value of a share is (definitionally) equal to the total of its discounted future dividend payments. ^[e]
• Financial_Intermediary [r]: A go-between organisation that obtains finance from investors (or savers) and lends it to corporations (or other borrowers). Financial intermediaries include banks, building societies (or savings and loans associations) , life insurance companies and credit unions. ^[e]
• Financial_regulator [r]: The United States Securities and Exchange Commission gives as its mission "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation". Financial regulators in other countries have similar responsibilities. ^[e]
• Gearing: see Leverage
• Hedging [r]: Add brief definition or description
• Interest [r]: Add brief definition or description
• Leverage [r]: Add brief definition or description
• Liquidity [r]: Add brief definition or description
• Moral hazard [r]: Add brief definition or description
• Noise_traders [r]: Add brief definition or description
• Option [r]: Add brief definition or description
• Portfolio insurance [r]: Add brief definition or description
• Prime rate [r]: Add brief definition or description
• Reserve ratio [r]: Add brief definition or description
• Random_walk [r]: Add brief definition or description
• Risk premium [r]: Add brief definition or description
• Securitisation [r]: Add brief definition or description
• Selling short [r]: Add brief definition or description
• Standard deviation [r]: Add brief definition or description
• Stop loss [r]: Add brief definition or description
• Subprime lending [r]: Add brief definition or description
• Swap: see CDS
• Value at risk [r]: Add brief definition or description
• Variance [r]: Add brief definition or description