Investopedia Flashcards
(119 cards)
Alligator Spread
An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favourable market movements. Usually used in the options market.
Bear market
A market condition in which the prices of securities are falling, and widespread pessimism causes negative sentiment to be self-sustaining.
Black market
Economic activity that takes place outside the government sanctioned channels. Allows participants to avoid government price or controlled taxes.
Bubble theory
A school of thought that believes that the prices of assets can temporarily rise far above their true values and these bubbles are easily identifiable.
Capital Gain
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.
Capital markets
Markets for buying and selling equity and debt instruments.
Compound Annual Growth Rate (CAGR)
The mean annual growth rate of an investment over a specified period of time more than one year.
CAGR = (end value/beginning value)^(1/no. Of years)-1
Dead Cat Bounce
A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend.
Depreciation
A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting reasons.
Draghi effect
The calming effect of European Central Bank President, Mario Draghi, on global financial markets.
Due Diligence
An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to sale.
Elephants
Slang for large institutions that have funds to make high volumes of trades.
Emerging markets ETF
An exchange traded fund that focuses on the stocks of the emerging market economies.
Endowment effect
In behavioural finance, the endowment effect describes a circumstance in which an individual values something which they already own more than something which they do not yet own.
Exchange Traded Funds (ETFs)
ETFs are tools that provide more diversification. They track other ETFs rather than individual stocks, bonds or derivatives.
Financial instrument
A real or virtual document representing a legal agreement involving some sort of monetary value. Usually equity or debt based.
Fisher effect
An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and nominal inflation rates. It states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
Abenomics
Nickname for the multi-pronged economic program by Japanese Prime Minister Shinzo Abe. Abenomics seeks to remedy two decades of stagnation by increasing the nation’s money supply, boosting government spending and enacting reforms to make the economy more competitive.
Game Theory
A model of optimality taking into consideration not only benefits less costs, but also the interaction between participants.
Goldilocks Economy
An economy that is not so hot that it causes inflation and not so cold that it causes recession.
Gorilla
A company that dominates an industry without having a complete monopoly.
Group of Ten (G10)
Eleven industrialised nations that meet on an annual basis to consult each other on international finance matters.
Halo Effect
The halo effect is a term used in marketing to explain the bias shown by customers towards certain products because of a favourable experience with other products made by the same manufacturer or maker.
Insurance
Insurance is a contract purchased by individuals or companies that manage their risk.