CISI CWM Financial Markets Glossary || All Correct.
Accounting Entity Concept correct answers In accounting, the principle that financial records
are prepared for a distinct unit or entity regarded
as separate from the individuals that own it. It
is also known as the entity concept or separate
entity concept.
Accruals Concept correct answers In accounting, this recognises income and
expenses in the periods in which they arise, ie,
when the transactions occur.
Acid Test Ratio correct answers An adaption of the current ratio. It is designed to
remove the problem of inventory. Alternatively
called the liquidity ratio or quick ratio.
AIM correct answers The London Stock Exchange's (LSE's) market for
smaller UK public limited companies (plcs). AIM
has less demanding admission requirements
and places less onerous continuing obligation
requirements upon those companies admitted
to the market than those applying for admission
to the Main Market and inclusion on the UKLA
Official List. Formerly the Alternative Investment
Market.
Alpha correct answers The return from a security or a portfolio in excess
of a risk-adjusted benchmark return.
Alternative Investments correct answers Investments outside the mainstream areas of
bonds, equities, cash and property. They normally
form a small proportion of portfolios. Examples
include hedge funds and venture capital.
American Style Options correct answers An option that can be exercised at any time.
(See also Asian Style Options, Bermudan Style
Options and European Style Options.)
Amortisation correct answers An accounting method of allocating the cost of
an intangible asset over its projected life. Like
depreciation, amortisation is a book entry whose
impact lies in the company's reported income
and financial positions, not in its cash position.
Any intangible assets with indefinite useful
economic lives do not undergo amortisation.
,Asian Style Options correct answers An option whose payoff depends on the average
price of the underlying asset over a certain period
of time. (See also American Style Options,
Bermudan Style Options and European Style
Options.)
Asset correct answers A resource with economic value that is owned
or controlled by an entity (eg, individual or
business), with the expectation it will provide a
future benefit. Assets can be current (ie, turned
into cash within one year) or non-current (ie, a
company's long-term investments); and tangible
or intangible. (See also Liability.)
Asset Turnover correct answers The efficient use of assets to produce sales. This
ratio helps to measure the productivity of a
company's assets.
At-the-Money correct answers An option whose strike price is equal to the
current, prevailing price in the underlying spot
or forward market.
Backwardation correct answers Commodities or futures markets where shorterdated
contracts trade at a higher price than
longer-dated contracts. (See also Contango.)
Balance Sheet correct answers A snapshot of a company's financial position
at a particular moment. The key information it
provides to shareholders, customers and other
stakeholders is what the company owns (its
assets), what the company owes others (its
liabilities) and the extent to which shareholders
are providing finance to the company (equity).
Also called the 'statement of financial position'.
Bank of England correct answers The central bank for the UK. Also referred to as
the BoE or 'the Bank'.
Base Rate correct answers The minimum rate at which banks will lend
money to individuals.
Basis correct answers The difference between the present cash
price and the nearby futures price of an asset.
Calculation is cash minus futures. Basis will be
negative in a contango.
, Bear correct answers An investor who believes the market in general,
or a particular investment, will fall. (See also
Bull.)
Bermudan Style Options correct answers An option that can be exercised at a range of
specific times (often on one day each month),
up to and including the expiry date. Considered
midway between an American (anytime) and a
European-style option (only at expiry). (See also
American Style Options, Asian Style Options
and European Style Options.)
Beta correct answers The relationship between the returns on a stock
and returns on the market. Beta is a measure of
the systematic risk of a security or a portfolio in
comparison to the market as a whole.
Black-Scholes correct answers An equation for valuing plain vanilla options
developed by Fischer Black and Myron Scholes
in 1973 for which they shared the Nobel Prize in
Economics.
Bond correct answers A debt security issued by an organisation such as
a government or corporation. Bonds pay regular
interest and repay their principal or face value at
maturity. One of the most common underlying
assets for derivative contracts.
Broker-Dealer correct answers A participant that facilitates deals in the
government bond markets. A broker-dealer
engages in the business of trading securities,
either for its own account or on behalf of its
customers. (See also Gilt-Edged Market Maker
and Inter-Dealer Broker.)
Bull correct answers An investor who believes the market in general,
or a particular investment, will rise. (See also
Bear.)
Call Option correct answers A call option gives the owner the right but not
the obligation to buy a pre-set amount of the
underlying financial instrument at a pre-set price
with a pre-set maturity date. (See also Option
and Put Option.)
Cap correct answers A financial contract giving the owner the right
Accounting Entity Concept correct answers In accounting, the principle that financial records
are prepared for a distinct unit or entity regarded
as separate from the individuals that own it. It
is also known as the entity concept or separate
entity concept.
Accruals Concept correct answers In accounting, this recognises income and
expenses in the periods in which they arise, ie,
when the transactions occur.
Acid Test Ratio correct answers An adaption of the current ratio. It is designed to
remove the problem of inventory. Alternatively
called the liquidity ratio or quick ratio.
AIM correct answers The London Stock Exchange's (LSE's) market for
smaller UK public limited companies (plcs). AIM
has less demanding admission requirements
and places less onerous continuing obligation
requirements upon those companies admitted
to the market than those applying for admission
to the Main Market and inclusion on the UKLA
Official List. Formerly the Alternative Investment
Market.
Alpha correct answers The return from a security or a portfolio in excess
of a risk-adjusted benchmark return.
Alternative Investments correct answers Investments outside the mainstream areas of
bonds, equities, cash and property. They normally
form a small proportion of portfolios. Examples
include hedge funds and venture capital.
American Style Options correct answers An option that can be exercised at any time.
(See also Asian Style Options, Bermudan Style
Options and European Style Options.)
Amortisation correct answers An accounting method of allocating the cost of
an intangible asset over its projected life. Like
depreciation, amortisation is a book entry whose
impact lies in the company's reported income
and financial positions, not in its cash position.
Any intangible assets with indefinite useful
economic lives do not undergo amortisation.
,Asian Style Options correct answers An option whose payoff depends on the average
price of the underlying asset over a certain period
of time. (See also American Style Options,
Bermudan Style Options and European Style
Options.)
Asset correct answers A resource with economic value that is owned
or controlled by an entity (eg, individual or
business), with the expectation it will provide a
future benefit. Assets can be current (ie, turned
into cash within one year) or non-current (ie, a
company's long-term investments); and tangible
or intangible. (See also Liability.)
Asset Turnover correct answers The efficient use of assets to produce sales. This
ratio helps to measure the productivity of a
company's assets.
At-the-Money correct answers An option whose strike price is equal to the
current, prevailing price in the underlying spot
or forward market.
Backwardation correct answers Commodities or futures markets where shorterdated
contracts trade at a higher price than
longer-dated contracts. (See also Contango.)
Balance Sheet correct answers A snapshot of a company's financial position
at a particular moment. The key information it
provides to shareholders, customers and other
stakeholders is what the company owns (its
assets), what the company owes others (its
liabilities) and the extent to which shareholders
are providing finance to the company (equity).
Also called the 'statement of financial position'.
Bank of England correct answers The central bank for the UK. Also referred to as
the BoE or 'the Bank'.
Base Rate correct answers The minimum rate at which banks will lend
money to individuals.
Basis correct answers The difference between the present cash
price and the nearby futures price of an asset.
Calculation is cash minus futures. Basis will be
negative in a contango.
, Bear correct answers An investor who believes the market in general,
or a particular investment, will fall. (See also
Bull.)
Bermudan Style Options correct answers An option that can be exercised at a range of
specific times (often on one day each month),
up to and including the expiry date. Considered
midway between an American (anytime) and a
European-style option (only at expiry). (See also
American Style Options, Asian Style Options
and European Style Options.)
Beta correct answers The relationship between the returns on a stock
and returns on the market. Beta is a measure of
the systematic risk of a security or a portfolio in
comparison to the market as a whole.
Black-Scholes correct answers An equation for valuing plain vanilla options
developed by Fischer Black and Myron Scholes
in 1973 for which they shared the Nobel Prize in
Economics.
Bond correct answers A debt security issued by an organisation such as
a government or corporation. Bonds pay regular
interest and repay their principal or face value at
maturity. One of the most common underlying
assets for derivative contracts.
Broker-Dealer correct answers A participant that facilitates deals in the
government bond markets. A broker-dealer
engages in the business of trading securities,
either for its own account or on behalf of its
customers. (See also Gilt-Edged Market Maker
and Inter-Dealer Broker.)
Bull correct answers An investor who believes the market in general,
or a particular investment, will rise. (See also
Bear.)
Call Option correct answers A call option gives the owner the right but not
the obligation to buy a pre-set amount of the
underlying financial instrument at a pre-set price
with a pre-set maturity date. (See also Option
and Put Option.)
Cap correct answers A financial contract giving the owner the right
