G-3

Question 1

Back-testing

Answer 1

With reference to portfolio strategies, the application of a portfolio strategies’ selection rules to historical data to assess what would have been the strategy’s historical performance

Question 2

Backup lines of credit

Answer 2

A type of credit enhancement provided by a bank to an issuer of commercial paper to ensure that the issuer will have access to sufficient liquidity to repay maturing commercial paper if issuing new paper is not a viable option

Question 3

Balance of payments

Answer 3

A double-entry bookkeeping system that summarizes a country’s economic transactions with the rest of the world for a particular period of time, typically a calendar quarter or year

Question 4

Balance of trade deficit

Answer 4

When the domestic economy is spending more on foreign goods and services than foreign economies are spending on domestic goods and services

Question 5

Balance sheet

Answer 5

The financial statement that presents an entity’s current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as part of a particular point in time (the date of the balance sheet);

Also called statement of financial position or statement of financial condition

Question 6

Balance sheet ratios

Answer 6

Financial ratios involving balance sheet items only

Question 7

Balanced

Answer 7

With respect to a government budget, one in which spending and revenues (taxes) are equal

Question 8

Balloon payment

Answer 8

Large payment required at maturity to retire a bond’s outstanding principal amount

Question 9

Bar chart

Answer 9

A price chart with four bits of data for each time interval - the high, low, opening, and closing prices. A vertical line connects the high and low. A cross-hatch left indicates the opening price and a cross-hatch right indicates the close

Question 10

Barter economy

Answer 10

An economy where economic agents as house-holds, corporations, and governments “pay” for goods and services with another good or service

Question 11

Base rates

Answer 11

The reference rate on which a bank bases lending rates to all other customers

Question 12

Basis point

Answer 12

Used in stating yield spreads, one basis point equals one-hundredth of a percentage point, or 0.01%

Question 13

Basket of listed depository receipts

Answer 13

An exchange-traded fund (ETF) that represents a portfolio of depository receipts

Question 14

Bearer bonds

Answer 14

Bonds for which ownership is not recorded; only the clearing system knows who the bond owner is

Question 15

Behavioral finance

Answer 15

A field of finance that examines the psychological variables that affect and often distort the investment decision of investors, analysts, and portfolio managers

Question 16

Behind the market

Answer 16

Said of prices specified in orders that are worse than the best current price; i.e. for a limit buy order, a limit price below the best bid

Question 17

Benchmark

Answer 17

A comparison portfolio; a point of reference or comparison

Question 18

Benchmark issue

Answer 18

The latest sovereign bond issue for a given maturity. It serves as a benchmark against which to compare bonds that have the same features but that are issued by another type of issuer

Question 19

Benchmark rate

Answer 19

Typically the yield-to-maturity on a government bond having the same, or close to the same, time-to-maturity

Question 20

Benchmark spread

Answer 20

The yield spread over a specific benchmark, usually measured in basis points

Question 21

Bernoulli random variable

Answer 21

A random variable having outcomes 0 and 1

Question 22

Bernoulli trial

Answer 22

An experiment that can produce one of two outcomes

Question 23

Best bid

Answer 23

The highest bid in the market

Question 24

Best effort offering

Answer 24

An offering of a security using an investment bank in which the investment bank, as agent for the issuer, promises to use its best efforts to sell the offering, but does not guarantee that a specific amount will be used

Question 25

Best-in-class

Answer 25

An ESG implementation approach that seeks to identify the most favorable companies in an industry based on ESG considerations

Question 26

Best offer

Answer 26

The lowest offer (ask price) in the market

Question 27

Beta

Answer 27

A measure of the sensitivity of a given investment or portfolio to movements in the overall market

Question 28

Bid

Answer 28

The price at which a dealer or trader is willing to buy an asset, typically qualified by a maximum quantity

Question 29

Bid-ask spread

Answer 29

The difference between the prices at which dealers will buy from a customer (bid) and sell to a customer (offer or ask). It is often used as an indicator of liquidity.

Question 30

Bid-offer spread

Answer 30

see bid-ask spread

Question 31

Bid size

Answer 31

The maximum quantity of an asset that pertains to a specific bid price from a trader

Question 32

Big data

Answer 32

The vast amount of data being generated by industry, governments, individuals, and electronic devices that arises from both traditional and non-traditional data sources

Question 33

Bilateral loan

Answer 33

A loan from a single lender to a single borrower

Question 34

Binomial model

Answer 34

A model for pricing options in which the underlying price can move to only one of two possible new prices

Question 35

Binomial random variable

Answer 35

The number of successes in n Bernoulli trials for which the probability of success is constant for all trials and the trials are independent

Question 36

Binomial tree

Answer 36

The graphical representation of a model of asset price dynamics in which, at each period, the asset moves up with probability p or down with probability ( 1 - p )

Question 37

Bitcoin

Answer 37

A cryptocurrency using blockchain technology that was created in 2009

Question 38

Block brokers

Answer 38

A broker (agent) that provides brokerage services for large-size trades

Question 39

Blockchain

Answer 39

A type of digital ledger in which information is recorded sequentially and then linked together and secured using cryptographic methods.

Question 40

Blue chip

Answer 40

Widely held large markets capitalization companies that are considered financially sound and are leaders in their respective industry or local stock market

Question 41

Bollinger Bands

Answer 41

A price-based technical analysis indicator consisting of a moving average plus a higher line representing the moving average plus a set number of standard deviations from average price (for the same number of periods as used to calculate the moving average) and a lower line that is a moving average minus the same number of standard deviations

Question 42

Bond

Answer 42

Contractual agreement between the issuer and the bondholders