!

Glossary!
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A!
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Accrued!Interest!"!The!amount!of!interest!that!the!buyer!owes!the!seller!on!a!transaction!involving!fixed!
income!securities,!such!as!most!bonds!and!notes.!
Accounting!Standards!Board!"!Sets!accounting!standards!in!the!United!Kingdom.!
Agency!Transaction!"!A!trade!in!which!the!firm!operates!as!a!broker,!that!is,!it!executes!trades!as!an!agent!and!
charges!a!commission!for!the!service.!
All!Ordinaries!"!A!type!of!bond!index.!
American!Depository!Receipt!(ADR)!"!A!share!or!stock!that!is!issued!by!an!American!bank!and!that!is!backed!
by!foreign!securities.!
Analysts'!Estimates!"!Forecasts!by!investment!analysts!about!the!future!financial!performance!of!companies,!
in!particular!future!earnings!reports.!
!Arbitrage!"!Taking!advantage!of!small!price!differences!in!securities!or!goods!in!different!markets!to!make!a!
profit.!Arbitrage!involves!buying!something!to!sell!in!another!market!or!at!another!time.!
As"of!"!A!term!used!to!describe!any!trade!processed!not!on!the!actual!trade!date,!but!‘as!of’!the!actual!trade!
date.!
Asset!"!Anything!owned!by!a!corporation!or!other!legal!entity.!
Asset!Backed!Securities!(ABS)!"!Bonds!that!are!based!on!underlying!pools!of!assets.!
Asset!Allocation!"!The!apportionment!of!an!investment!portfolio!among!various!asset!classes!or!markets!
(cash,!fixed!interest,!property!and!shares)!in!line!with!the!investment!outlook!of!the!investor!or!investment!
manager.!
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B!
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Backwardation!"!Futures!prices!tend!to!rise!over!the!life!of!a!contract.!Backwardation!describes!a!market!
condition!in!which!near"term!contracts!trade!at!a!higher!price!than!longer"term!contracts.!
Basis!Point!"!Usually!one!hundredth!of!a!percentage!point!(0.01!percent),!used!in!quoting!movements!in!
interest!rates!or!yields!on!securities.!
Bear!"!An!investor!who!expects!share!prices!to!fall!and!thus!is!likely!to!sell!short.!
Bear!Market!"!A!market!in!which!prices!are!generally!declining.!
Bearer!Stocks!"!Stock!not!registered!in!the!name!of!an!owner,!who!can!remain!anonymous.!Common!in!
Europe.!
Beneficial!Owner!"!The!owner!of!a!security!who!is!entitled!to!all!the!benefits!associated!with!ownership.!
Blue!Chip!"!A!stock!considered!reliable!with!regard!to!dividend!income!and!capital!value.!
Block!Trade!"!A!trade!involving!a!large!quantity!of!stock!or!large!dollar!amount!of!bonds.!A!block!trade!would!
usually!involve!at!least!10,000!stock!shares!or!over!US!$200,000!in!bonds.!
Bond!"!A!debt!instrument;!a!security!that!represents!the!debt!of!a!corporation,!a!municipality,!the!federal!
government!or!any!other!entity.!A!bond!is!usually!long"term!in!nature—10!to!30!years.!
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Brokerage!"!The!commission!or!a!charge!made!by!an!intermediary,!like!a!stockbroker,!for!carrying!out!a!
transaction.!
Bull!"!An!investor!who!expects!share!prices!to!rise.!
Bull!Market!"!A!market!in!which!prices!are!generally!rising.!
Buy"side!"!The!part!of!the!financial!markets!that!buys!and!sells!securities!to!grow!their!clients’!assets.!
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C!
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Capital!Markets!"!Markets!in!which!long"term!debt!and!equity!securities!are!bought!and!sold.!
Call!"!An!option!to!buy!a!security!or!commodity.!
Cash!Dividend!"!Dividends!that!corporations!pay,!on!a!per"share!basis,!to!stockholders!from!their!earnings.!
CEDEL!"!One!of!the!two!major!clearing!entities!in!Europe.!
Chinese!Walls!"!Regulations!that!prevent!conflicts!of!interest!arising!in!integrated!securities!firms.!
Clearing!and!Settlement!"!The!process!of!completing!a!transaction.!
Closed"end!Investment!Funds!"!Investment!funds!with!a!fixed!share!capital.!
Collateral!"!An!asset!pledged!to!support!a!loan.!
Commercial!Paper!"!Short"term!unsecured!debt!sold!by!corporations!and!financial!institutions!as!an!
alternative!to!bank!borrowings.!
Commission!"!Payments!made!by!the!provider!of!a!product!to!its!seller!for!its!sale!or!maintenance.!
Commodities!"!Raw!materials!such!as!grain!or!precious!metals.!Contracts!for!the!purchase!and!sale!of!
commodities!are!sold!on!commodities!exchanges.!
Commodity!Swap!"!An!exchange!between!two!parties,!usually!future!for!physical.!
Contango!"!When!prices!for!future!delivery!in!a!commodities!market!are!higher!than!those!for!cash!or!spot!
transactions.!The!gap!between!a!cash!price!and!a!forward!quotation!is!often!based!on!current!interest!rates!
plus!storage!and!insurance!costs!to!cover!the!cost!of!holding!the!commodity!for!the!relevant!period.!
Convertible!"!A!bond!or!share!that!has!the!option!to!convert!into!another!bond!or!share!at!a!fixed!date!or!set!
of!dates!and!under!fixed!terms.!
Coupon!"!A!small!certificate!that!is!detachable!from!a!bond!to!be!exchanged!for!dividends,!interest!payments,!
etc.!Also!means!the!rate!of!interest!payable!on!a!fixed!interest!security.!
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D!
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Deal!Team!"!A!group!of!investment!bankers!who!work!together!to!finance!a!business!transaction.!Usually!
comprised!of!bankers!from!all!levels,!from!Managing!Director!to!Analyst.!
DAX!"!Abbreviation!for!the!German!Stock!Index.!Commonly,!the!term!DAX!refers!to!the!DAX!30,!a!
capitalization"weighted!index!that!comprises!30!German!Blue!Chips.!
Debenture!"!Unsecured!bonds!that!are!only!issued!by!creditworthy!firms.!
Derivatives!"!A!financial!instrument!whose!characteristics!and!value!depend!upon!the!characteristics!and!
value!of!an!underlying!instrument!or!asset,!typically!a!commodity,!bond,!equity!share!or!currency.!
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Disclosure!"!Release!of!information!relevant!to!a!transaction.!In!a!securities!transaction,!the!dealer!must!
disclose!details!of!any!commission!or!remuneration!generated!by!the!transaction!and!any!other!relevant!
interests!they!have.!
Dividend!"!A!portion!of!a!corporation’s!assets!paid!to!stockholders!on!a!per"share!basis.!Preferred!stock!is!
supposed!to!pay!a!regular!and!prescribed!amount.!Common!stock!pays!varying!amounts!when!declared.!
Due!Diligence!"!Obligation!to!be!thorough!and!to!proceed!with!care!and!caution!in!matters!on!behalf!of!the!
client.!
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E!
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Earnings!per!Share!"!Referred!to!as!either!Earnings!per!Share!or!EPS.!Earnings!divided!by!number!of!shares!
issued.!The!earnings!figures!used!are!after"tax!but!before!extraordinary!items.!
Euribor!"!Stands!for!the!Euro!Interbank!Offered!Rate,!a!euro"denominated!interest!rate!charged!by!large!banks!
among!themselves!on!euro"denominated!loans.!Analogous!to!LIBOR!for!the!euro.!
Euroclear!"!One!of!two!major!clearing!entities!in!Europe.!
Eurobond!"!Bonds!issued!in!Europe!outside!the!jurisdiction!of!any!single!country.!A!eurobond!may!or!may!not!
be!denominated!in!the!currency!of!the!issuer.!
Equity!"!The!ownership!of!an!investment.!
Equity!Income!Fund!"!Fund!investing!in!high"yielding!equities!in!order!to!pay!above"average!dividends.!Capital!
growth!is!not!a!priority.!
Exchange!Floor!"!Location!at!a!securities!exchange!where!transactions!take!place.!
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F!
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Face!Value!"!Nominal!value!on!the!face!of!a!certificate!or!bond;!market!value!is!often!very!different!from!face!
value.!
Financial!Accounting!Standards!Board!"!Establishes!and!communicates!standards!of!financial!accounting!and!
reporting!in!the!United!States.!
Financial!Models!"!Tools!used!to!determine!the!value!of!an!investment!in!a!company,!commodity,!currency,!
government!initiative,!etc.!To!build!a!financial!model,!an!analyst!may!consider!past!performance,!current!
market!trends,!political!climate!and!the!overall!value!of!the!issuer.!
Fixed!Income!"!Interest"bearing!notes,!bonds!and!bills!that!pay!a!specified!percentage!of!interest!over!the!life!
of!the!loan.!
FX!"!Abbreviation!for!foreign!exchange.!
Forward!"!Basically,!an!over"the"counter!future.!Whereas!the!terms!of!a!futures!product!are!fixed,!the!terms!
of!a!forward!are!generally!negotiable.!
Future!"!A!contract!that!sets!the!price!at!the!time!of!the!transaction!at!which!a!delivery!will!be!made!at!a!later!
date.!
FSA!"!Financial!Services!Authority.!
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FTSE!"!The!Financial!Times!Stock!Exchange!Index!of!100!Leading!Shares,!or!FTSE!100!Index!(pronounced!
footsie),!is!a!share!index!of!the!100!largest!companies!listed!on!the!London!Stock!Exchange.!The!index!is!seen!
as!a!barometer!of!success!of!the!British!economy!and!is!the!leading!share!index!in!Europe.!It!is!maintained!by!
the!FTSE!Group,!which!originated!as!a!joint!venture!between!the!Financial!Times!and!the!London!Stock!
Exchange.!
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G!
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Generally!Accepted!Accounting!Principles!(GAAP)!–!A!common!set!of!accounting!principles,!standards!and!
procedures!that!companies!use!to!compile!their!financial!statements,!made!up!of!historical!accounting!and!
reporting!practices!and!authoritative!standards.!
Gilts!"!Government!bond!of!Great!Britain.!
Going!Short!"!The!selling!of!a!currency!or!instrument!not!owned!by!the!seller.!
Going!Long!"!The!purchase!of!a!stock,!commodity!or!currency!for!investment!or!speculation.!
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H!
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Hedge!Fund!"!A!fund,!usually!used!by!wealthy!individuals!and!institutions,!which!is!allowed!to!use!aggressive!
strategies!that!are!unavailable!to!mutual!funds,!including!selling!short,!leverage,!program!trading,!swaps,!
arbitrage!and!derivatives.!Hedge!funds!are!exempt!from!many!of!the!rules!and!regulations!governing!other!
mutual!funds,!which!allow!them!to!accomplish!aggressive!investing!goals.!They!are!restricted!by!law!to!no!
more!than!100!investors!per!fund,!and!as!a!result!most!hedge!funds!set!extremely!high!minimum!investment!
amounts,!ranging!anywhere!from!US!$250,000!to!over!US!$1!million.!
Hedging!"!A!strategy!for!balancing!risks,!as!in!“to!hedge!one's!bets.”!
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I!
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Indices!"!Mathematical!expressions!of!the!value!of!various!groupings!of!assets.!They!enable!the!performance!
of!various!market!sectors!to!be!measured!over!time.!Examples!are!the!All!Ordinaries,!All!Industrials,!and!5"!to!
10"year!bond!indices.!
Investment!Trust!"!A!company!that!uses!its!shareholders'!funds!to!own!and!manage!a!portfolio!of!stocks!and!
shares!for!profit.!
IPO!"!Initial!Public!Offering,!or!the!first!issue!of!stock!or!other!securities!by!a!company!for!sale!to!the!public.!
Issue!"!A!series!or!quantity!of!financial!securities!made!available!for!sale.!
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J!
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Junk!bond!"!A!high"risk!bond!with!a!low!credit!rating!(below!investment!grade).!High"risk!is!usually!associated!
with!a!high!yield.!
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K!
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L!
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LIBOR!"!London!Inter"Bank!Offered!Rate.!The!rate!at!which!banks!lend!to!one!another.!
LSE!"!London!Stock!Exchange.!
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M!
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Macroeconomics!–!The!economics!of!an!industry!(such!as!steel)!or!a!government!that!includes!the!widest!
variety!of!factors!(inflation,!interest!rates,!monetary!policy,!government!budgets,!unemployment,!exchange!
rates!and!balance!of!payments!information)!that!contribute!to!an!assessment!of!the!entity's!strength!or!
weakness.!
Money!Markets!"!Refers!to!financial!investments!that!are!generally!under!one!year!in!duration!and!generally!
only!open!to!banks!and!other!financial!institutions.!
MTN!"!Medium"term!notes;!bonds!with!a!maturity!of!two!to!ten!years.!
Mutual!Fund!"!A!fund!operated!by!an!investment!firm!that!raises!capital!from!shareholders!to!invest!in!stocks,!
bonds,!options,!commodities!or!money!market!securities.!These!funds!offer!investors!the!advantages!of!
diversification!and!professional!management.!
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N!
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NASDAQ!"!Started!in!the!US!as!an!automated!over"the"counter!securities!quotes!system!and!evolved!into!the!
world's!first!electronic!stock!market.!
NYSE!"!New!York!Stock!Exchange.!Oldest!and!largest!stock!exchange!in!the!US.!Located!on!Wall!Street!in!New!
York!City.!Uses!a!trading!floor!to!conduct!transactions.!
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O!
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OEICS!"!Open"Ended!Investment!Companies.!A!substitute!for!unit!trusts!with!a!single!price!for!buying!and!
selling.!
Offer!"!The!price!at!which!a!market!maker!is!willing!to!sell!shares.!Also!known!as!the!ask!or!asking!price.!
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Offshore!Center!"!Financial!center!free!of!many!taxes!and!constraints,!such!as!the!Bahamas,!Bahrain!and!the!
Cayman!Islands.!
Option!"!A!contract!that!entitles!the!buyer!to!buy!(call)!or!sell!(put)!a!predetermined!quantity!of!an!underlying!
security!for!a!specific!period!of!time!at!a!pre"established!price.!
Origination!"!The!process!of!preparing,!submitting!and!evaluating!a!loan!application;!generally!includes!a!
credit!check,!verification!of!employment!and!a!property!appraisal.!
Over"the"Counter!Market!(OTC)!"!Comprises!a!network!of!telephones!and!telecommunications!systems!over!
which!unlisted!securities!and!other!issues!trade.!It!is!primarily!a!dealers'!market.!
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P!
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Portfolio!Manager!"!A!person!responsible!for!the!profitable!direction!of!certain!aggregated!investments.!
Protected!Funds!"!Funds!with!limited!vulnerability!to!market!setbacks.!
Private!Equity!"!Investment!capital!provided!by!individuals!or!closely!held!companies.!
Public!Offerings!"!Process!and!documents!related!to!making!securities!available!for!sale!to!the!public.!
Purchasing!Power!Parity!"!A!method!of!valuation!which!states!that!the!correct!exchange!rate!between!two!
currencies!is!the!one!that!equalizes!the!price!of!the!same!traded!item!in!both!countries.!
Put!"!An!option!to!sell!shares,!bonds!or!a!commodity.!
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Q!
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Qualitative!Research!"!Research!into!how!an!investment's!results!were!achieved!including!the!quality!of!the!
people,!strategies,!systems!and!infrastructure!that!achieved!them.!
Quantitative!Research!"!Numbers"related!research!using!statistical!analysis!of!past!performance!of!
companies,!products,!segments,!etc.!
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R!
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Repo!"!A!repurchase!agreement;!an!investment!vehicle!in!which!the!seller!agrees!to!buy!back!the!security!for!
an!agreed!upon!price,!usually!at!a!start!time.!Repos!are!short"term!money!market!instruments.!
RPI!"!Retail!Prices!Index.!A!measure!of!consumer!inflation.!
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S!
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S&P!500!"!An!index!of!500!stocks.!
Securities!"!Stocks!and!bonds.!
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Securitization!"!The!process!of!aggregating!similar!instruments,!such!as!credit!portfolios!or!catastrophe!risks,!
and!marketing!them!to!investors!as!a!negotiable!security.!
Sell"side!"!The!part!of!the!financial!markets!that!services!individual!investors.!Often!called!market!makers.!
Settlement!Date!"!The!day!when!a!transaction!is!to!be!completed.!On!this!day,!the!buyer!is!to!pay!and!the!
seller!is!to!deliver.!
Settlement!Price!"!Average!price!at!the!close!of!the!day's!trading.!It's!used!to!set!the!next!day's!fluctuation!
limits!and!to!determine!margin!calls!on!futures!contracts.!
Short!Account!"!Account!in!which!the!customer!has!sold!securities!not!owned!or!does!not!intend!to!deliver!
against!sale.!Before!a!customer!may!sell!short,!a!margin!account!must!be!opened.!
Staffer!"!The!person!who!manages!deal!flow!for!a!particular!group!of!investment!bankers.!Typically,!staffers!
are!mid"level!bankers!with!experience!working!on!a!variety!of!different!transactions.!
Stock!"!A!security!that!represents!ownership!in!a!corporation!and!is!issued!in!shares.!
Stock!dividends!"!A!dividend!paid!by!corporations!from!retained!earnings!in!the!form!of!stock.!The!corporation!
declares!the!dividend!as!a!percentage!of!shares!outstanding.!
Stock!Loan/Borrow!"!Part!of!the!cashiering!function,!this!operation's!department!is!responsible!for!lending!
excess!(e.g.,!stock)!and!obtaining!stock!when!needed!by!the!firm.!
SWAPs!"!The!exchange!between!two!parties!of!currency,!interest!payment!or!commodities.!
SEC!"!Securities!and!Exchange!Commission.!Primary!federal!regulatory!agency!for!the!securities!industry!in!the!
US.!Responsible!for!protecting!investors!from!fraudulent!activity!in!the!securities!markets.!
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T!
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Tombstone!"!An!advertisement!placed!for!information!purposes!after!bonds!or!notes!are!sold.!Describes!
certain!details!of!the!issue!and!lists!the!managing!underwriters!and!the!members!of!the!underwriting!
syndicate.!
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U!
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Unit!Trust!"!Fund!of!stocks!and!shares!held!by!a!trustee!for!the!benefit!of!subscribing!investors;!an!easy!means!
of!obtaining!a!spread!of!investments.!The!British!equivalent!of!a!mutual!fund.!
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V!
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W!
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White!Knight!"!Someone!who!rescues!a!takeover!target!from!an!unwanted!bidder.!
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X!
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Y!
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Yield!"!Rate!of!return!on!investment.!Also,!the!dividend!payable!on!a!share!expressed!as!a!percentage!of!the!
market!price.!
Yield!Curve!"!A!curve!that!shows!the!relationship!between!yields!and!maturity!dates!for!a!set!of!similar!bonds,!
usually!Treasuries,!at!a!given!point!in!time.!
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Z!