Investment Banking Terms And Definitions Pdf

investment banking terms and definitions pdf

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The words, expressions, institutions and definitions of the Banking and Finance industry can often seem dense and confusing to an undergraduate, even to one aspiring to the financial world themselves. So, we've brought together a glossary for the most common terms to help you get up to speed. An item of property owned by a person or company regarded as having a value, and which can meet a debt.


Select the first letter of the word from the list below to jump to the appropriate section of the glossary. If the term you are looking for starts with a number or symbol, choose the " " link. Alternative Minimum Tax AMT - Federal tax, revamped by the Tax Reform Act of , aimed at ensuring that wealthy individuals, trusts, estates and corporations pay at least some tax. Annual report - The yearly audited record of a corporation or a mutual fund's condition and performance that is distributed to shareholders.

Annualized - A procedure where figures covering a period of less than one year are extended to cover a month period. Annualized rate of return - The average annual return over a period of years, taking into account the effect of compounding.

Annualized rate of return also can be called compound growth rate. Asset allocation - The process of dividing investments among cash, income and growth buckets to optimize the balance between risk and reward based on investment needs. Asset class - Securities with similar features. The most common asset classes are stocks, bonds and cash equivalents. Average maturity - For a bond fund, the average of the stated maturity dates of the debt securities in the portfolio.

Also called average weighted maturity. In general, the longer the average maturity, the greater the fund's sensitivity to interest-rate changes, which means greater price fluctuation. A shorter average maturity usually means a less sensitive - and consequently, less volatile - portfolio. Balanced fund - Mutual funds that seek both growth and income in a portfolio with a mix of common stock, preferred stock or bonds.

The companies selected typically are in different industries and different geographic regions. A market in which prices decline sharply against a background of widespread pessimism, growing unemployment or business recession.

The opposite of a bull market. Benchmark - A standard, usually an unmanaged index, used for comparative purposes in assessing performance of a portfolio or mutual fund. Beta - A measurement of volatility where 1 is neutral; above 1 is more volatile; and less than 1 is less volatile. Blue chip - A high-quality, relatively low-risk investment; the term usually refers to stocks of large, well-established companies that have performed well over a long period. The term Blue Chip is borrowed from poker, where the blue chips are the most valuable.

Board of Trustees - A governing board elected or appointed to direct the policies of an institution. The issuer promises to repay the full amount of the loan on a specific date and pay a specified rate of return for the use of the money to the investor at specific time intervals. Breakpoint - The level of dollar investment in a mutual fund at which an investor becomes eligible for a discounted sales fee.

This level may be achieved through a single purchase or a series of smaller purchases. Bull market - Any market in which prices are advancing in an upward trend. In general, someone is bullish if they believe the value of a security or market will rise. The opposite of a bear market. Capital - The funds invested in a company on a long-term basis and obtained by issuing preferred or common stock, by retaining a portion of the company's earnings from date of incorporation and by long-term borrowing.

Capital gain - The difference between a security's purchase price and its selling price, when the difference is positive. Capital gains ex-date - The date that a shareholder is no longer eligible for a capital gain distribution that has been declared by a security or mutual fund. Capital gains long term - The difference between an asset's purchase price and selling price when the difference is positive that was earned in more than one year.

Capital gains reinvest NAV - The difference between an asset's purchase price and selling price when the difference is positive that was automatically in vested in more shares of the security or mutual fund invested at the security's net asset value. Capital gains short term - The difference between an asset's purchase price and selling price when the difference is positive that was earned in under one year. Capital loss - The amount by which the proceeds from a sale of a security are less than its purchase price.

Capitalization - The market value of a company, calculated by multiplying the number of shares outstanding by the price per share. Cash equivalent - A short-term money-market instrument, such as a Treasury bill or repurchase agreement, of such high liquidity and safety that it is easily converted into cash.

Common stock - Securities that represent ownership in a corporation; must be issued by a corporation. Contingent deferred sales charge CDSC - A back-end sales charge imposed when shares are redeemed from a fund. This fee usually declines over time.

Custodian - A bank that holds a mutual fund's assets, settles all portfolio trades and collects most of the valuation data required to calculate a fund's net asset value NAV. Cut-off time - The time of day when a transaction can no longer be accepted for that trading day.

Default - Failure of a debtor to make timely payments of interest and principal as they come due or to meet some other provision of a bond indenture. Distribution schedule - A tentative distribution schedule of a mutual fund's dividends and capital gains. Diversification - The process of owning different investments that tend to perform well at different times in order to reduce the effects of volatility in a portfolio, and also increase the potential for increasing returns.

Dividend - A dividend is a portion of a company's profit paid to common and preferred shareholders. Dividends provide an incentive to own stock in stable companies even if they are not experiencing much growth.

Companies are not required to pay dividends. Dividend reinvest NAV - Dividends paid to the shareholder of record that are automatically invested in more shares of the security or mutual fund that are purchased at the security's net asset value. Dividend yield - Annual percentage of return earned by a mutual fund.

The yield is determined by dividing the amount of the annual dividends per share by the current net asset value or public offering price. Dollar cost averaging - Investing the same amount of money at regular intervals over an extended period of time, regardless of the share price. By investing a fixed amount, you purchase more shares when prices are low, and fewer shares when prices are high.

This may reduce your overall average cost of investing. Dow Jones Industrial Average Dow - The most commonly used indicator of stock market performance, based on prices of 30 actively traded blue chip stocks, primarily major industrial companies. The Average is the sum of the current market price of 30 major industrial companies' stocks divided by a number that has been adjusted to take into account stocks splits and changes in stock composition.

EPS - The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Equities - Shares issued by a company which represent ownership in it. Ownership of property, usually in the form of common stocks, as distinguished from fixed-income securities such as bonds or mortgages.

Stock funds may vary depending on the fund's investment objective. Stock funds may vary, depending on the fund's investment objective. Ex-Dividend - The interval between the announcement and the payment of the next dividend for a stock. Ex-Dividend date - The date on which a stock goes ex-dividend. Typically about three weeks before the dividend is paid to shareholders of record. Exchange privilege - The ability to transfer money from one mutual fund to another within the same fund family.

Expense ratio - The ratio between a mutual fund's operating expenses for the year and the average value of its net assets. Expense ratio date - Amount, expressed as a percentage of total investment that shareholders pay annually for mutual fund operating expenses and management fees. Federal Funds Rate Fed Funds Rate - The interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements.

The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate, which are periodically changed by banks and by the Federal Reserve Board. Federal Reserve Board The Fed - The governing board of the Federal Reserve System, it regulates the nation's money supply by setting the discount rate, tightening or easing the availability of credit in the economy. Fixed income fund - A fund or portfolio where bonds are primarily purchased as investments.

There is no fixed maturity date and no repayment guarantee. Fund - A pool of money from a group of investors in order to buy securities. The two major ways funds may be offered are 1 by companies in the securities business these funds are called mutual funds ; and 2 by bank trust departments these are called collective funds.

Growth investing - Investment strategy that focuses on stocks of companies and stock funds where earnings are growing rapidly and are expected to continue growing. Growth stock - Typically a well-known, successful company that is experiencing rapid growth in earnings and revenue, and usually pays little or no dividend. Growth-style funds - Growth funds focus on future gains. A growth fund manager will typically invest in stocks with earnings that outperform the current market.

The manager attempts to achieve success by focusing on rapidly growing sectors of the economy and investing in leading companies with consistent earnings growth. The fund grows primarily as individual share prices climb. Index - An investment index tracks the performance of many investments as a way of measuring the overall performance of a particular investment type or category.

It tracks the performance of large U. Inflation - A rise in the prices of goods and services, often equated with loss of purchasing power. Interest rate - The fixed amount of money that an issuer agrees to pay the bondholders. It is most often a percentage of the face value of the bond. Interest rates constitute one of the self-regulating mechanisms of the market, falling in response to economic weakness and rising on strength.

Interest-rate risk - The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. Investment advisor - An organization employed by a mutual fund to give professional advice on the fund's investments and asset management practices. Investment company - A corporation, trust or partnership that invests pooled shareholder dollars in securities appropriate to the organization's objective. Mutual funds, closed-end funds and unit investment trusts are the three types of investment companies.

Investment objective - The goal of a mutual fund and its shareholders, e. In exchange for signing a letter of intent, the shareholder would often qualify for reduced sales charges. A letter of intent is not a contract and cannot be enforced, it is just a document stating serious intent to carry out certain business activities. The performance of all mutual funds is ranked quarterly and annually, by type of fund such as aggressive growth fund or income fund.

Mutual fund managers try to beat the industry average as well as the other funds in their category. Liquidity - The ability to have ready access to invested money. Mutual funds are liquid because their shares can be redeemed for current value which may be more or less than the original cost on any business day.

Important banking terms - SBI, IBPS PO/ Clerk/ SO/ RRB Exam

One of our mentor will revert to you within 48 hours. Meanwhile you can Enjoy the Free Study Material. There are a lot of banking terms, to which we are not that much familiar but you will find questions related to some of the banking terms in the bank exams in the banking awareness section. These banking terms are not only important from the exam point of view, but also asked in the interviews. It was created by Government of India with a purpose to deal with the complaints of customers of the banks related to various services rendered by the banks. Deflation: It is a decrease in the general price level of goods and services. Inflation: It can be defined as a sustained increase in the general level of prices for goods and services.

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Complete List of Banking Terms with Definitions For Bank Exams

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Select the first letter of the word from the list below to jump to the appropriate section of the glossary. If the term you are looking for starts with a number or symbol, choose the " " link. Alternative Minimum Tax AMT - Federal tax, revamped by the Tax Reform Act of , aimed at ensuring that wealthy individuals, trusts, estates and corporations pay at least some tax.

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Most countries have institutionalized a system known as fractional reserve banking , under which banks hold liquid assets equal to only a portion of their current liabilities.

Glossary of Investment Terms

It seems that you're in Germany. We have a dedicated site for Germany. This dictionary covers the terminology of the international financial marketplace.

Asset Class Capabilities

Also, a different term referring to entry-level career position in many investment banks. Asset: an item with economic value that is owned or controlled by an individual, business or government. Bonds: a government, or company can raise capital by issuing a bond. The difference between bonds and loans is that bonds can be traded between investors who are lending to the issuer. Broker: intermediary between a buyer and a seller, receiving commission on the trade. Chinese walls: information barriers within investment banks to manage potential compliance and conflict of interest issues.

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ASSET CLASS – An investment category; i.e. equities (stocks), fixed income or investor psychology; these terms are most often used to refer to the stock account established at a bank, mutual fund, or brokerage that allows wage-​earning A tax-deferred defined benefit or defined contribution plan that is established.



The Bank of England moves base rates by changing the dealing rates at which it buys bills from the discount houses. The equivalent term in the USA is the “prime​.