Investment, Risk & Taxation
Active Management - CORRECT ANSWER-A type of investment approach
employed to generate returns in excess of an investment benchmark index.
Active management is employed to exploit pricing anomalies in those securities
markets that are believed to be subject to mispricing by utilising fundamental
analysis and/or technical analysis to assist in the forecasting of future events and
the timing of purchases and sales of securities.
Alpha - CORRECT ANSWER-The return from a security or a portfolio in excess
of a risk-adjusted benchmark return.
Alternative Investment Market (AIM) - CORRECT ANSWER-The London Stock
Exchange's (LSE) 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 a full list on the LSE.
American Depositary Receipt (ADR) - CORRECT ANSWER-An ADR is a security
that represents securities of a non-US company that trades in the US financial
markets.
Annual Equivalent Rate (AER) - CORRECT ANSWER-AER is a notional rate that
is quoted on the interest paid on savings and investments.
Arbitrage - CORRECT ANSWER-Arbitrage is the process of deriving a risk-free
profit from simultaneously buying and selling the same asset in two different
markets, where a price difference between the two exists.
Asset Allocation - CORRECT ANSWER-The process of deciding on the division
of a portfolio's assets between asset classes and geographically before deciding
upon which particular securities to buy.
Auction - CORRECT ANSWER-System used to issue securities where the
successful applicants pay the price that they bid. Examples of its use include the
UK Debt Management Office when it issues gilts. Auctions are also used by the
, London Stock Exchange to establish prices, such as opening and closing options
on SETS.
Authorised Corporate Director (ACD) - CORRECT ANSWER-Fund manager for
an open-ended investment company (OEIC).
Bear Market - CORRECT ANSWER-A persistent downward trend in equities
prices is often called a bear market.
Beneficiaries - CORRECT ANSWER-The beneficial owners of trust property.
Beta - CORRECT ANSWER-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.
Bonus Issue - CORRECT ANSWER-The free issue of new ordinary shares to a
company's ordinary shareholders, in proportion to their existing shareholdings
through the conversion, or capitalisation, of the company's reserves. By
proportionately reducing the market value of each existing share, a bonus issue
makes the shares more marketable. Also known as a capitalisation issue or scrip
issue.
Bull Market - CORRECT ANSWER-A situation of persistently rising share prices
is often called a bull market.
Bunds - CORRECT ANSWER-Bonds issued by the German government, with a
maturity of anything up to 30 years.
Call Option - CORRECT ANSWER-An option that gives the buyer the right, but
not the obligation, to buy an underlying asset.
Capital Asset Pricing Model - CORRECT ANSWER-The CAPM is a multi-factor
model that expresses a simple relationship between risk and return. It indicates
the expected return from holding an asset, based on a risk-free rate of return plus
a risk premium.
Active Management - CORRECT ANSWER-A type of investment approach
employed to generate returns in excess of an investment benchmark index.
Active management is employed to exploit pricing anomalies in those securities
markets that are believed to be subject to mispricing by utilising fundamental
analysis and/or technical analysis to assist in the forecasting of future events and
the timing of purchases and sales of securities.
Alpha - CORRECT ANSWER-The return from a security or a portfolio in excess
of a risk-adjusted benchmark return.
Alternative Investment Market (AIM) - CORRECT ANSWER-The London Stock
Exchange's (LSE) 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 a full list on the LSE.
American Depositary Receipt (ADR) - CORRECT ANSWER-An ADR is a security
that represents securities of a non-US company that trades in the US financial
markets.
Annual Equivalent Rate (AER) - CORRECT ANSWER-AER is a notional rate that
is quoted on the interest paid on savings and investments.
Arbitrage - CORRECT ANSWER-Arbitrage is the process of deriving a risk-free
profit from simultaneously buying and selling the same asset in two different
markets, where a price difference between the two exists.
Asset Allocation - CORRECT ANSWER-The process of deciding on the division
of a portfolio's assets between asset classes and geographically before deciding
upon which particular securities to buy.
Auction - CORRECT ANSWER-System used to issue securities where the
successful applicants pay the price that they bid. Examples of its use include the
UK Debt Management Office when it issues gilts. Auctions are also used by the
, London Stock Exchange to establish prices, such as opening and closing options
on SETS.
Authorised Corporate Director (ACD) - CORRECT ANSWER-Fund manager for
an open-ended investment company (OEIC).
Bear Market - CORRECT ANSWER-A persistent downward trend in equities
prices is often called a bear market.
Beneficiaries - CORRECT ANSWER-The beneficial owners of trust property.
Beta - CORRECT ANSWER-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.
Bonus Issue - CORRECT ANSWER-The free issue of new ordinary shares to a
company's ordinary shareholders, in proportion to their existing shareholdings
through the conversion, or capitalisation, of the company's reserves. By
proportionately reducing the market value of each existing share, a bonus issue
makes the shares more marketable. Also known as a capitalisation issue or scrip
issue.
Bull Market - CORRECT ANSWER-A situation of persistently rising share prices
is often called a bull market.
Bunds - CORRECT ANSWER-Bonds issued by the German government, with a
maturity of anything up to 30 years.
Call Option - CORRECT ANSWER-An option that gives the buyer the right, but
not the obligation, to buy an underlying asset.
Capital Asset Pricing Model - CORRECT ANSWER-The CAPM is a multi-factor
model that expresses a simple relationship between risk and return. It indicates
the expected return from holding an asset, based on a risk-free rate of return plus
a risk premium.
