Investor's glossary: financial terms in plain English
Stock market terms with the formula, the calculation method and a list of pitfalls. Every multiple is explained once and surfaces as a tooltip.
- Margin adequacy levelAn indicator comparing a client's collateral with the broker's requirement for the open positions.
- Margin callA demand for additional funds when collateral falls short.
- Margin requirementThe broker's demand to top up the account when collateral falls short.
- Margin tradingTrading with money borrowed from the broker against the assets held in the account.
- Margined optionAn option whose premium is not paid up front but transferred in instalments through daily revaluation.
- Market capitalisationThe market value of all a company's shares: share price multiplied by the number of shares.
- Market impactThe price shift caused by the order itself as it consumes resting size on its way through the book.
- Market liquidityThe market's capacity to absorb large orders without moving the price much.
- Market makerA participant committed to quoting both sides of a security within a limited spread.
- Market maker obligationsThe contractual terms under which a participant maintains two-sided quotes for an agreed share of trading time.
- Market noiseThe part of price fluctuation unconnected to new information and not reproduced on a second look.
- Market orderAn instruction to buy or sell immediately at the best available price.
- Market panicMass selling in which the decision to sell is caused by the falling price itself rather than by news about the asset.
- Market regimePrice behaviour that holds for a stretch of time: directional movement, sideways trade, or a period of elevated swing.
- Market riskThe risk that a price moves against you because the whole market moved, not because anything happened at the issuer.
- Market shareThe portion of an industry's sales that belongs to a company.
- Market tierAn informal ranking of securities by liquidity and by how much attention the market pays them.
- Market timingTrying to step in and out at good moments instead of staying invested. It requires two correct decisions in a row — when to leave and when to come back.
- Material eventAn event an issuer must announce publicly without delay.
- MaterialityThe threshold below which a misstatement or an omission would not change a reader's decision. Anything below it is folded into a single line.
- Mean reversionThe assumption that a quantity which has moved far from its usual level — a price, a spread, a multiple — will in time come back to it.
- Meeting agendaThe closed list of matters on which a meeting is entitled to decide.
- Meeting quorumThe minimum share of votes at which a shareholders' meeting is competent to decide.
- Meeting record dateThe day on which the circle of holders entitled to vote is fixed: a date of its own, distinct from the dividend one.
- Mental accountingSplitting money into separate mental pockets when it is in fact one pool of capital.
- MergerA combination in which a new legal entity replaces the previous ones and their shares are exchanged for its securities.
- Minimum variance portfolioThe point on the efficient frontier with the smallest achievable dispersion: weights chosen so that the assets' movements cancel each other out as fully as possible.
- Minority shareholderThe holder of a small stake with no influence over company decisions.
- Model riskThe risk that the model behind a decision is itself wrong: assumptions do not hold, parameters were fitted, a formula is used outside the range where it works.
- Modified durationAn estimate of a bond's price change for a one-percentage-point shift in yield.
- MomentumAn approach that relies on a recent price move continuing.
- Monetary aggregatesA way of sorting the money supply by how readily it can be spent, from cash to time deposits.
- Monetary baseMoney issued by the central bank: cash in circulation plus banks' balances held at the regulator.
- Monetary transmission mechanismThe route by which a policy rate decision reaches prices and demand: through money-market rates, the yield curve, loans and deposits.
- Money market fundA fund investing in short-term instruments with minimal sensitivity to interest rates.
- Money supplyThe total amount of money circulating in an economy.
- Money-weighted returnA performance measure that accounts for the size and timing of cash movements.
- Moral hazardThe change in behaviour of someone shielded from consequences: expecting a rescue, a participant takes risk it would otherwise avoid.
- Morning sessionAn additional trading period before the main session opens.
- Mortgage cover poolThe set of loans and claims whose payments service a mortgage-backed bond.
- Mortgage-backed bondA security whose payments are backed by what borrowers pay on a pool of mortgage loans.
- Moving averageThe average price over recent periods, recalculated at each step.
- Moving average crossoverThe moment a fast average crosses a slow one; used as a formal marker that the movement regime has changed.
- Municipal bondDebt of a city or district, serviced out of the local budget.
- Mutual fund (PIF)A fund whose units are bought and redeemed through the management company rather than on an exchange.
- Naked option sellingSelling an option without a position in the underlying capable of covering the obligation.
- Narrative fallacyThe urge to explain a price move with a coherent story: the explanation is assembled after the fact and turns the accidental into the inevitable.
- Nasdaq 100An index of the largest non-financial companies listed on Nasdaq, dominated by technology businesses.
- National Clearing CentreThe organisation that stands between buyer and seller and guarantees settlement.
- National rating scaleA system of grades in which credit quality is compared among borrowers of one country rather than against the whole world at once.
- Negative convexityA property of callable issues: when rates fall the price rises by less than it falls when rates rise.
- Negative priceA situation in which a party pays to hand an asset over: holding it costs more than giving it away.
- Negotiated deals modeA mode in which two parties agree terms in advance and submit matching orders addressed to each other.
- Negotiated tradeA trade in which the order is addressed to a named counterparty instead of the common queue.
- Net asset value (NAV)The value of a fund's assets less its liabilities.
- Net asset value per unitThe fund's net assets divided by the number of units: how much of the fund's property one unit represents as valued on a given date.
- Net debtTotal debt less cash and cash equivalents.
- Net debt / EBITDAHow many years a company would need to clear its net debt using its entire EBITDA.
- Net incomeWhat remains after every expense, interest payment and tax.
- Net marginThe share of revenue that survives all the way down to net profit.
- Net present valueThe present value of all a project's future flows less what was invested in it.
- Net working capitalCurrent assets less current liabilities.
- Net-of-fee returnThe change in a unit's calculated price — what the holder actually received after every expense taken out of the fund's property.
- NetbackThe price of a commodity at the field, obtained by deducting transport costs and duties from the export price.
- New share issueAn issue of new shares that increases the total count.
- Nikkei 225The oldest Japanese equity index, weighted by share price.
- Nominal GDPThe value of everything a country produced over a period, measured in the prices of that same period.
- Nominal returnThe change in the value of an investment before adjusting for inflation.
- Nominee holderAn entity recorded in the register in place of the ultimate owners, whose rights are held further down the chain.
- Non-controlling interestThe portion of subsidiaries' equity that does not belong to the group.
- Non-current liabilitiesDebts falling due more than a year from the reporting date.
- Non-deliverable forwardA forward under which no currency is delivered: the parties settle the difference between rates.
- Non-listed segmentThe part of the admitted-securities list with the lightest requirements on the issuer and on disclosure.
- Non-monetary inflationPrice growth driven not by the quantity of money but by harvests, tariffs, logistics or a one-off tax change.
- Nonfarm payrollsThe monthly estimate of jobs in the US economy excluding agriculture — among the loudest releases in the global calendar.
- Normalised earningsProfit stripped of one-off and untypical effects: what the company earns under conditions normal for it.
- Normalised working capitalThe level of working capital normal for the business, cleared of the seasonal peak and of one-off swings.
- Notes to the accountsThe explanations attached to the statements: accounting policy, debt structure, related party dealings.
- OFZ (Russian federal loan bonds)Rouble-denominated debt issued by the Russian state.
- OPEC+The agreement among oil exporting countries to restrain or raise production in a coordinated way.
- OTC exchange rateThe rate formed in direct deals between banks, away from the exchange order book.
- OTC marketSecurities transactions concluded outside organised trading.
- Off-balance-sheet exposureObligations that never reached the balance sheet: guarantees given for third parties, sureties, committed future purchases.
- Offer priceThe price at which new shares are sold to subscribers in an additional issue.
- Official exchange rateThe rate set by the central bank and used for accounting and tax.
- Official metal priceThe price of a precious metal published by the Bank of Russia for accounting and settlement.
- Oil benchmarkA crude grade whose price serves as the reference point for other grades.
- On-balance volumeA running sum of volume: an interval's volume is added when it closes above the previous one and subtracted when it closes below.
- One-off itemsIncome and expenses unrelated to regular operations.
- Open interestThe number of contracts on an instrument that remain open.
- Open market operationsA central bank buying and selling securities to manage how much money is in the system.
- Open-ended mutual fundA fund whose unit can be bought from and redeemed with the management company on any working day at the calculated value, without having to find a buyer on an exchange.
- Open-market buybackA form of repurchase in which the issuer or its subsidiary buys its own shares through ordinary exchange orders.
- Opening auctionThe mechanism that sets the first price of the session from accumulated orders.
- Operating cash flowThe money the core business actually delivered to the bank account over the period.
- Operating expensesThe cost of running the core business: production, selling and administration — everything except interest and tax.
- Operating leverageHow strongly profit responds to a change in revenue when costs are fixed.
- Operating marginOperating profit divided by revenue.
- Operating profitProfit from the core business: revenue less cost of sales and operating expenses.
- Operating results releasePublication of physical business volumes ahead of the financial statements: output, units sold, freight carried, customer numbers.
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