Claritas Terms Chapters 1-12 (PT 2) – Flashcards
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Long-term debt
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Money borrowed from banks or other lenders that is to be repaid over periods of greater than one year
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Loyalty
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An expectation that employees will place the employer's interests above their own and will not misappropriate a company's property
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Macroeconomics
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The branch of economics that deals with aggregate economic quantities, such as national output and national income
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Maintenance margin
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The amount that must be maintained in the margin account every day after the transaction is opened
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Managed floating exchange rate system
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A floating exchange rate system in which the central bank intervenes to stabilize its currency, usually to maintain the exchange rate within a certain rate
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Management fees
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Fees that limited partners must pay general partners to compensate for them managing investments
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Margin call
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Request for additional equity, such as to depsit additional cash or securities, to meet the maintenance margin requirement
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Marginal cost
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The cost of consuming or producing an additional unit of a good or service
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Marginal revenue
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The additional revenue from selling an additional unit of a product or service
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Margins
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Cash or securites that are pledged as collateral
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Market bid-ask spread
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Difference between the best bid price and the best offer price
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Market equilibrium
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The condition in which the quantity willingly offered for sale by sellers at a given price is just equal to the quantity willingly demanded by buyers at the same price
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Market makers
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Dealers who are willing to make a market ( trade on demand) in specified securities at their bid and ask price
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Market manipulation
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Abusive trading practice that involves taking actions intended to move the price of a stock in order to make a short-term profit
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Marekt order
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Instructions to a broker or exchange
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Market risk
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The risk of changes in market conditions, which affect expected cash flows as well as supply and demand and, therefore, prices
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Market to market
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Settling profits or losses based on current spot ( market) prices
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Maturity date
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Date when the borrower must repay the amount borrowed
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Median
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The value of the middle term in the data set that has been sorted into ascending or descending order; the value for which as many outcomes are above it as there are below it
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Merit-based
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Regulatory system in which regulators attempt to protect investors by limiting the products sold to investors
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Microeconomics
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The branch of economics that deals with markets and decision making of individual economic units, including consumers and businesses
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Middle office
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Core activities of a firm, such as risk management information systems, proprietary trading, corporate finance, portfolio management, and research
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Mode
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The most frequently occuring value in a data set
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Model risk
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The risk arising from the use of models, including inappropriate underlying assumptions, unavailability and inaccuracy of historical data, data errors, and misapplication of models
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Monetarists
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Economists who believe that the rate of growth of the money supply is the primary determinant of the rate of inflation
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Monetary policy
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Actions taken by a nation's central bank to affect aggregate output and prices through changes in bank reserves, reserve requirements, or the target interest rate
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Money laundering
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A process in which criminals use financial services to transfer money from illegal operations to other legal activites; the money becomes "clean" in the process
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Money market funds
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Special class of open-end funds that for most purposes appear to investors as uninsured interest-paying bank accounts. Unlike other open-end funds, regulators permit money market funds to accept deposits and satisfy redemptions at a constant price per share if they meet certain conditions
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Money markets
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Financial markets for securities that have a maturity shorter than a year
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Monopoly
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A market in which there is no competition
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Moral hazard
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Tendency for people to be less careful about avoiding losses once they have purchased insurance, potentially leading to losses occuring more often when people are insured than when they are not
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Mortgage-backed securities
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A type of structured debt security created from a pool of underlying residential mortgage (home) loans
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Multiplier effect
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An initial increase (decrease) in spending produces an increase (decrease) in GDP and consumption greater than the intitial change in spending
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Mutual fund
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Investment company that holds portfolios of investment securities and assets
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Net asset value (NAV)
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Total net value of a fund (the value of all assets minus the value of all liabilities) divided by the current total number of fund shares outstanding
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Net book value
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Calculated as the gross value of an asset minus accumulated depreciation, where accumulated depreciation is the sum of all reported depreciation expenses for the particular asset
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Net exports
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The difference between exports and imports of goods and services; also called balance of trade
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Net income
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The difference between revenue and expenses; income available to distribute to shareholders
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Net present value
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The present value of future cash flows less the cost of the investment, or the present value of cash inflows minus the present value of cash outflows
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Net profit margin
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An indicator of profitability; indicates how much (percentage) of each monetary unit of revenue is left after all costs and expenses are covered
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Nominal GDP
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A measure of GDP that uses the current market value of goods and services
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Non-current assets
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Assets used over a number of years to generate income for the company; examples include machinery, equipment, buildings, land, and intangible assets
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Non-discretionary relationship
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Relationship that permits the service provider to undertake only specific tasks that are authorized on a per task basis
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Non-investment-grade bonds
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Bonds rated BB+ or lower by Standard and Poor's and Fitch and Ba1 or lower by Moody's. Also called high-yield bonds or junk bonds
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Non-tariff barriers
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A range of measures, such as certification, licensing, sanctions, or embargoes, that make it more difficult and expensive for foreign producers to compete with domestic producers
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Normal distribution
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A symmetrical distribution in which the mean, median, and mode are the same value. The distribution is completely described by its mean and variance (or standard deviation)
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Normal goods
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Goods that are consumed in greater quantities as income increases
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Offer exchange rate
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The exchange rate at which the bank or dealer will sell the foreign currency; also called the ask exchange rate
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Oligopoly
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A market dominated by a small number or large companies because the barriers are to entry are high
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Open market operations
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Activities that involve the purchase and sale of government bonds from and to commercial banks and/or designated market makers
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Open-end mutual funds
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Investment companies that issue or redeem their shares when investors want to buy and sell shares
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Operating income
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Income generated by the company from its usual business activities before taking into account financing costs and taxes. It is often referred to as earnings before interest and taxes (EBIT)
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Operating leverage
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The extent to which operating costs are fixed versus variable
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Operating profit margin
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A profitability ratio calculated as operating income divided by revenue
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Operational risk
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The risk of losses from humans, systems, and processes failures and from events that are beyond the control of the organization but affect its operations
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Operationally efficient markets
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Markets in which trades are easy to arrange with low transaction costs. These markets have small bid-ask spreads, and they can absorb large orders without substantial impact on prices
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Opportunity cost
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The cost of any activity measured in terms of the value of the best alternative that his not chosen; the value that investors forgo by choosing a particular course of action. For example, the cost of not having cash to invest, spend, or hold; the cost of giving up opportunites to use cash
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Option contract
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An agreement in which the buyer of the option has the right, but not the obligation, to trade the underlying
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Order-drive markets
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Markets that use rules to arrange trades based on the orders that traders
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Orders
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Specifications of what instrument to trade, how much to trade, and whether to buy or sell
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Outliers
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Values that are unusual compared with the rest of the data set by being especially small or large in numerical value
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Over-the-counter markets
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Another name for quote-driven markets dating from when securities were literally traded over a counter in the dealer's office
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Own price elasticity of demand
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The percentage change in quantity demanded as well as a result of a percentage price change of the same (own) product
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Par value
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The stated value or face valueof a security; the amount the investor would be entitled to receive in a liquidation scenario, which also serves as the principal value on which coupon payments are calculated
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Passive Investment managers
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Managers who follow a buy-and-hold approach and seek to match the return and risk of an appropriate benchmark
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Pay-as-you-go plans
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Pension plans in which the sponsors pay pension benefits out of current revenues
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Payout policies
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Guiding principles that specify how much money an institution, such as a foundation or an endowment fund, can take from long-term funds to use for current spending
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Pension funds
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Institutional investors who hold investment portfolios for the benefit of future and current retirees
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Perfectly competitive
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A market structure in which there is a high degree of competition
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Performance bond
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A guarantee, usually provided by a third party, such as an insurance company, to ensure payment in case a party fails to fulfill its contractual obligations
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Performance measurement
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The process of measuring the perfomrance of investments, including the calculation of reward-to-risk ratios
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Physical capital
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The means of production; tangible goods such as equipment, tools, and buildings
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Policies
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Principles of action adopted by an organization
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Political risk
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The risk of a change in the ruling political party of a country that leads to, for example, potential changes in policies that affect taxation, interest rates, investment incentives, and procurement
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Pooled investment vehicles
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Investment companies that pool funds from many
