The introduction on 6 April 2006 of wide-ranging pension reforms designed to simplify and streamline the pension's system.

Where an option is neither sold nor exercised but allowed to lapse at expiry.

Asset-backed commercial paper.

Selling for a price in excess of par value.

An asset valuation model that bases prices on economic fundamentals.

A time draft on which the drawee has accepted an obligation to make payment.

An organisation that accepts or guarantees bills of exchange and so finances trade deals and goods being shipped.

Insurance which pays benefits in the event of an accident. Items typically covered are medical expenses and loss of earnings.

Loss payments and reserves on losses are allocated to the year in which the loss has occurred (accident year). Such losses are monitored in time intervals (e.g. monthly, quarterly, yearly) until all losses are finally settled. The losses allocated to a given accident year are measured against the earned premium income of the same period.

Insurance which pays a lump sum in the event of death of the insured.

A statement by a commodity broker to a client when a futures transaction is closed out, sometimes referred to as a purchase and sale statement (P&S)

The date to which accounts are prepared for a company. When a company is incorporated, it will usually have an accounting reference date which is the last day of the month in which the anniversary of its incorporation falls.

UK body that sets accounting standards.

Amounts owed by an organisation or individual to another for goods or services it has received.

Amounts due to an organisation or individual from another for goods or services it has supplied.

A term used in company accounts where income is due or a cost is incurred during an accounting period but has not been received or paid.

A type of CMO bond also called a Z bond. This bond is often the last one to mature. It pays no interest while the principal on earlier bonds are being paid. Because this bond accrues interest rather than pay it out, it is analogous to a zero-coupon bond.

A money market instrument that accrues interest until it matures.

The rate of build-up of a pension in a scheme where the calculation is based on salary.

Benefits earned by an employee in respect of his/her pension based on years of service with his/her employer.

The amount of interest that has accumulated on a credit agreement, a bond or any other financial instrument.

A bond that, rather than paying coupons, accrues them to maturity.

Dividend that is due to holders of cumulative preference shares but which has not yet been paid.

See Catastrophe Exposure and Cumulative Liability.

An accumulation and maintenance trust is one in which the beneficiaries will become entitled to the property or at least the income when they reach a certain age. This must not be more than age 25.

A superannuation fund is where the benefits received by members result from investment earnings to their contributions made on their behalf by employers.

An index that measures movement in the value of a market, taking into consideration both price movement and income growth.

(UK) A type of investment structure where the income from the trust's investments is reinvested into the trust, instead of being paid out to the investors as dividends.

A momentum indicator that attempts to gauge supply and demand by determining whether investors are generally 'accumulating' (buying) or 'distributing' (selling) a certain stock by identifying divergences between stock price and volume flow.

See 'acid test'.

A financial ratio similar to the current ratio, defined as current assets minus stocks divided by current liabilities.

A term used to describe the takeover of a company by another.

The reinsurer's acquisition cost consists of reinsurance commission, reinsurance brokerage, reinsurance premium tax and other costs (such as fire brigade charges).

A market-wide directional movement or a market condition in which most stocks and sectors are moving in the same direction.

An act occasioned exclusively by forces of nature, uncontrolled and uninfluenced by the power of man and which is of such a character that it could not have been prevented or escaped from by any amount of foresight or prudence. E.g. lightning, tempest, perils of the sea, tornadoes, earthquakes.

A fund whose objective is to outperform the market average (index) by actively seeking out stocks that will provide superior total return.

When an asset manager makes choices of investment looking to get the best return for his/her clients. This can be done through a bottom-down (investing in sectors) or top-up (stock selection) approach to portfolio management.

A loose term denoting that there is a high degree of liquidity in a stock market.

An insurance term which refers to the basic things that people need to be able to do in order look after themselves - e.g. wash and feed themselves.

The physical commodity that underlies a futures contract or is traded in the physical.

A person trained and specialising in risk, statistics and finance.

Taxes which are charged as a percentage of the value of an asset.

See 'State Second Pension'

(UK) An additional allowance single people can claim if they are single, separated or widowed and have young children living with them.

(UK) A term that applies to trusts without an interest in possession (for example a discretionary trust) and defines the additional rate of tax on income.

Additional payments to a tax-deferred savings account or an occupational pension scheme by an employee to boost his/her pension at retirement.

Contract terms and conditions which vary according to the performance of contracts, e.g. Contingent Commissions such as sliding scale and profit commissions, variable rates, loss participations.

(US) A mortgage whose interest rate is can change over the term of the loan according to interest rates on US Treasury securities.

Stock that pays dividend which is linked to floating interest rates.

If a company's earnings figures are distorted either positively or negatively by exceptional one-off occurrences in the year, its directors can choose to clarify the performance by releasing adjusted earnings.

(US) A person's income on which federal income tax is calculated.

A company experiencing financial difficulties may be put into the charge of a court-appointed administrator. Going into administration means the company cannot be wound up without the court's permission.

An insolvency practitioner appointed when a company goes into receivership.

An individual or organisation legally appointed by a court to settle the affairs of a deceased person who failed to make a will.

A negotiable certificate issued by a U.S. bank that represents ownership in the shares of a foreign company trading on US financial markets. ADRs are denominated in U.S. dollars and enable US investors to buy shares in foreign companies without undertaking cross-border transactions.

See Deposit Premium.

A broker who not only deals in stocks and shares on behalf of his client, but also advises on what shares should be bought and sold for the portfolio.

The Swedish equivalent of the Footsie index.

A written statement signed on oath and witnessed by a commissioner for oaths, usually a qualified solicitor.

An extreme form of materialism in which consumers overwork and accumulate high levels of debt to purchase more goods.

Dealings made on a stock exchange after its official closure time. These deals are rolled over and included in the following day's transactions.

A term used on occasions in life assurance policy documents, which indicates that the assured has proven his/her age by showing a birth certificate to the insurance company.

An income tax personal allowance available to those aged over 65.

A security issued by a US federal agency or government sponsored enterprise.

A person appointed by a principal to act on the latter's behalf in business.

See Stop Loss Reinsurance.

A document in which the purchaser agrees to buy a property and the seller agrees to sell it under agreed terms and conditions. Also called sales contract, binder or earnest money contract.

A deduction of either 50% or 100% which is made from the value of land in the UK, Channel Islands or Isle of Man when it is assessed for inheritance tax purposes.

Commission, fee or wages levied for services.

This provides the rationale and the principle of profit sharing in Shirkah arrangements. Earning profit is legitimized only by engaging in an economic venture, risk sharing and thereby contributing to the economy.

Arrangement where a valuable asset is placed as a collateral for a debt. The collateral is disposable in the event of a default. Pawn Broking.

Resale of goods at a discount to the original cost.

Safe keeping.

Pledge, Collateral; legally, Rahn means to pledge or lodge a real or corporeal property of material value, in accordance with the law, as security, for a debt or pecuniary obligation so as to make it possible for the creditor to recover the debt or some portion of the goods or property. In the pre-Islamic contracts, Rahn implied a type of earnest money which was lodged as a guarantee and material evidence or proof of a contract, especially when there was no scribe available to put it into writing. The institution of earnest money was not accepted in Islamic law and the common Islamic doctrine recognized Rahn only as a security for the

(responsibility, amenability or suretyship Lit.)

In Islamic Finance it is a third party guarantor. Legally in Kafalah a third party becomes surety for the payment of a debt. It is a pledge given to a creditor that the debtor will pay the debt, fine etc. (See Suretyship)

Pledge, Collateral; legally, Rahn means to pledge or lodge a real or corporeal property of material value, in accordance with the law, as security, for a debt or pecuniary obligation so as to make it possible for the creditor to recover the debt or some portion of the goods or property. In the pre-Islamic contracts, Rahn implied a type of earnest money which was lodged as a guarantee and material evidence or proof of a contract, especially when there was no scribe available to put it into writing. The institution of earnest money was not accepted in Islamic law and the common Islamic doctrine recognized Rahn only as a security for the payment of a debt.

Basically, in pre-Islamic times it was exchange of gold for gold, silver for silver and gold for silver or vice versa. In Islamic law such exchange is regarded as "sale of price for price" (Bai al Thaman bil Thaman), and each price is consideration of the other. It also means sale of monetary value for monetary value -- currency exchange.

In pre-Islamic times it was exchange of gold for gold, silver for silver and gold for silver or vice versa. In Islamic law such exchange is regarded as ‘sale of price for price’ (Bai al Thaman bil Thaman), and each price is consideration of the other. It also means sale of monetary value for monetary value – currency exchange.

Absolute power of attorney.

Al-‘Aariyah Means "trust", is associated with trustworthiness, faithfulness and honesty it is a loan of a particular piece of property, the substance of which is not consumed by its use, without anything taken in exchange, In other words, it is the gift of usufruct of a property or commodity that is not consumed on use. (Opposite term, see Qard)

Support paid to the dependent spouse after divorce.

An order to a broker to buy or sell the entire amount of the order in one transaction or not deal at all. AON does not automatically cancel an order if it cannot be filled as designated, but could be executed without the AON requirement

See: 'all or none'

More recently called the S&P/All Ordinaries share price index; it is a share price index that measures the market prices of the major stocks listed on the Australian Stock Exchange (ASX).

When one listed company bids for another company (listed or private) and the shareholders of the target company only get shares in the bidding company for their shares in the target company.

Loss adjustment expenses identified by a claim file in the insurer’s records, such as attorney’s fees for the investigation of and/or defence of the insured policyholder for the specific claim..

A retirement income arranged through a fund manager that allows an individual to draw a pension from a lump sum investment, which is earning a return.

A formal notification to the writer of an option from a clearing house that an option has been exercised by an option holder and that the writer is obliged to buy/sell the underlying instrument at the exercise price to meet his/her obligations.

A method of distributing securities to applicants for a new issue. If an issue is not oversubscribed, each applicant gets whatever they applied for. However in the other case some mechanism has to be used to decide how many shares each applicant gets.

A confirming document from a company that newly issued shares have been allotted to an applicant.

(UK) Tax allowances are concessions by the Inland Revenue which can be used to reduce a person's taxable income.

Asset-liability management.

The expected return of a stock or a portfolio if the market rate of return is zero.

(UK) A term previously given to the most actively traded shares on the London Stock Exchange along with beta, gamma and delta shares. This classification was replaced by the normal market size classification in January 1991.

Use of a self-financing market neutral strategy to generate alpha in one market while investing in another.

Investment in items other than stocks, bonds or other securities. For example, wine, art and antiques.

Formed in 1995 (AIM) is a trading platform for small, young and growing companies from all over the world operated by the London Stock Exchange.

See: 'rainbow option'

Reliability or trustworthiness. Important value of Islamic society in mutual dealings. It also refers to deposits in trust. A person may hold property in trust for another, sometimes by implication of a contract.

An option which can be exercised at any time until expiry (unlike European style options which can only be exercised at expiry).

An association based in Chicago whose purpose is to provide information about stocks, mutual funds and bonds to individual investors.

See ADR.

A provision which allows an option any time prior to expiration.

An international company whose services include travel and financial products.

An option that can be exercised anytime during the contract, as opposed to the European option which can only be exercised at maturity. The majority of exchange-traded options are American.

A stock exchange located in Manhattan where stocks of small to medium sized companies are traded.

See 'American-style option'.

A warrant which can be exercised at any time until final expiry.

(UK) The accounting process whereby payment of an interest bearing liability done over time through regular instalments that include both principal capital and interest.

Amounts such as taxes, fees, charges for service contracts and any prior credit that are included and paid as part of the base monthly payment.

The amount due before the purchaser takes the delivery of the vehicle/vessel which may include security deposit, title registration fees and other charges.

The amount of a contract (after down payment or trade-in) including all amounts that are financed by a creditor and that are not part of the finance charge. This may include insurance premiums, warranty charges, lender and other fees.

A professional working for a fund manager or broker whose job is to analyse key industry sectors (e.g. retail, oil, pharmaceuticals) and determine the prospects for the companies operating in them.

The financial summary of the state of affairs of a company over the course of a year. It includes a profit and loss account, a balance sheet and a statement of cash flows

A deductible applied annually to the total amount paid in claims during a policy period. Claims are generally subject to a per-occurrence deductible; the aggregate is the limit beyond which no further deductibles are applied.

See 'reversionary bonus'.

Compounding based on annual crediting of interest.

It is a notional rate that's generally quoted on interest paid on savings and investments.

The value in cash or other assets that may be given as a gift to a recipient each year without incurring a gift tax.

Each taxpaying individual in the UK is entitled to an annual exemption on capital gains for the current tax year.

A yearly meeting between directors of a company, where shareholders are invited to attend. Subjects normally discussed include audited accounts, election or re-election of directors and dividend payments to shareholders. The equivalent US term is 'Annual Meeting'.

A yearly meeting between directors of a company, where shareholders are invited to attend. Subjects normally discussed include audited accounts, election or re-election of directors and dividend payments to shareholders. The equivalent US term is 'Annual Meeting'.

Yearly interest rate charged on loans or other debits.

Return over a period of one year.

A report on the operations of a company (including financial statements) prepared once a year for shareholders and presented at its Annual General Meeting for approval.

The total annual return on an investment which includes dividend payments and capital gains/losses, excluding transaction costs and taxes.

A mathematical process where the rate of return on an investment for periods other than a full year are converted into annual terms.

A quoting convention for volatility. Resulting volatilities are referred to as annualised volatilities—as opposed to annual volatilities—to alert people to the fact that this is just a quoting convention.

A person in receipt of an annuity.

The commencement of regular payments from capital which has accumulated in an annuity.

A financial arrangement whereby, by investing a lump sum, the beneficiary receives periodic payments during a period of time. They are often used in the provision of retirement incomes.

See 'annuity'.

Investors can now choose to defer (up to the age of 75) the purchase of an annuity with their pension fund and take an income directly from the fund.

The date on which annuity benefit payments start to be paid to an annuitant.

A technique of variance reduction for the Monte Carlo method.

Laws designed to combat monopolies ("trusts") and other devices to suppress competition.

The process through which the monetary value of property that is part of an estate can be established.

The value that an asset gains over a period of time, as opposed to depreciation.

A pension plan in which employer and employee pay full rate National Insurance contributions equivalent to the employee contracting into S2P. This rate will be greater than the rate paid by contracting out of S2P. The difference between these rates, the contracted-out rebate, is paid by the Government into a scheme known as an appropriate personal pension plan which buys pension benefits at retirement age known as protected rights.

Any bank, stockyard, warehouse, depository or other facility that is authorised by an exchange for the delivery of commodities tendered on futures contracts.

An investment trust that satisfies certain conditions set by the tax authorities and accordingly is exempt from tax on capital gains made on profits from sales of investments within its portfolio.

A list of investments in which a financial institution such as a mutual fund is authorised to invest.

Autoregressive process.

The practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices.

A CDO sponsored for the purpose of adding value by repackaging collateral.

Any relationship that must prevail between certain prices if they are to be arbitrage-free.

A type of financial engineering model that generates prices that entail no arbitrage opportunities.

The approach to pricing instruments that underlies essentially all of financial engineering in complete markets.

A person or organisation that engages in arbitrage.

A clause providing an alternative dispute resolution process to resolve differences between the insurer and the insured without litigation.

Non refundable deposit or a down payment maid by a purchaser who conserves the right to confirm or cancel a sale

Autoregressive conditional heteroskedasticity

The arithmetic mean (or simply the mean) of a list of numbers is the sum of all the members of the list divided by the number of items in the list. Also called Average.

It is a simple type of discrete stochastic process whose increments form a white noise. Since a white noise has zero mean, a random walk is a martingale, a stochastic process equivalent to 'fair gamble'.

An arithmetic random walk with a constant drift.

Simple return.

autoregressive moving-average process.

The Arms Index is an indicator that uses advancing and declining stocks and their volume to measure intra-day market supply and demand and can be applied over short or longer time periods. It is calculated by dividing the Advance/Decline Ratio by the Upside/Downside Ratio. Also known as Trading Index (TRIN).

An amount on a loan, cumulative preferred stock or any credit instrument that is overdue.

Auction rate security.

In 2002, accounting firm Arthur Andersen was convicted on a single charge related to its auditing of Enron.

The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the Corporate Charter) are the primary rules governing the management of a corporation, and are filed with a state or other regulatory agency.

Advises on matters involving international capital markets.

An Asian option is an option where the payoff is not determined by the underlying price at maturity but by the average underlying price over some pre-set period of time.

Short for the Australian Securities and Investments Commission, an independent Australian government body that acts as Australia's corporate regulator. ASIC's role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.

The lowest price at which a dealer or market maker will sell a security.

The price at which an asset holder is willing to sell.

The price at which an asset holder is willing to sell.

Manager of the Granite Fund, a hedge fund that failed in 1994.

Economic resources owned by an individual or entity.

The process of choosing between assets classes (e.g. shares, bonds, property and commodities) or individual company stocks when constructing a portfolio.

The value of a company's assets divided by the number of shares on issue.

An investment strategy that seeks to identify companies whose net assets per share are worth significantly more than the current share price.

If a portfolio has assets which reprice before than its liabilities, it is said to be asset sensitive. This is because near term changes in earnings are going to be driven by interest rate resets on those assets.

The practice of acquiring a company then selling parts of it, in the hope that the cash realised from these sales will match the entire acquisition cost.

An exchange of two assets, for example the exchange of a fixed asset, such as a Treasury Bond, to a floating asset such as an index fund.

The ratio of annual sales divided by net assets employed in the business.

A type of default model.

Commercial paper secured by receivables or other assets.

An asset-backed security is a type of bond or note that is based on pools of assets.

Lending secured by assets.

Techniques for protecting a firm's solvency in the context of its liabilities.

Risk which is calculated taking into consideration the firms assets against its liabilities and risk exposures. Asset-liability risk is a leveraged form of risk. The capital of most financial institutions is small relative to the firm's assets or liabilities, so small percentage changes in assets or liabilities can translate into large percentage changes in capital.

An asset-or-nothing binary pays the value of the underlier (at expiration) if it expires in the money. It pays nothing otherwise.

A person to whom an asset or right is assigned.

The transfer of ownership of an item from one person to another.

See 'allocation notice'.

A person who assigns an asset or right to another party.

An association formed in 1932 to represent the interests of investment trust companies.

An association of firms across the UK and Ireland, which deal in stocks and shares for private investors.

It is the trade body representing the UK unit trust and investment funds (mutual funds) industry.

In the UK the term 'assurance' tends to be used where insurance is taken out against a risk which will inevitably occur. The common example of assurance is life assurance; as death is a risk certain to happen.

In the UK the assured is a person who has entered into a life assurance contract (policyholder). The person on whose life the policy is taken out is known as the life assured.

Australian Stock Exchange

In contrast when a client places a 'limit' order he actually dictates the price at which he is willing to buy or sell, and the broker can only make a deal within the limit given.

Selling for a price equal to par value. A bond's price may be above or below par due to changes in interest rates or change in the bond's credit quality.

The instruction a client gives a broker to obtain a quote on the price for a particular share.

A term used to describe an order where the broker is told by a client to buy or sell a stock at the best obtainable price for the current market.

This describes an option whose exercise price is equal to the current price of the asset underlying the option.

A condition in which the price of an option is equal to (or nearly equal to) the market price of the underlying security.

A plastic card enabling the holder to access an automated teller machine to obtain cash and statements.

The value or amount at which excess reinsurance (or insurance) protection comes into effect.

A floating-rate municipal security.

The official examination of a company's accounts by an independent qualified accountant.

A person appointed by a company to perform an audit. In the UK auditors are Chartered Accountants.

The report produced by a firm of Chartered Accountants which is part of a company's annual Report and Accounts. Auditors are required to certify that the accounts produced by their client companies have been prepared in accordance with normal accounting services

The maximum number of shares that a company is permitted to issue under its constitution.

The total number of shares a company is authorised to issue by reference to its memorandum and articles of incorporation.

The concept in technical analysis that a trend in a share price is more meaningful if the number of shares traded (the 'volume') is high. A trend with low volume has less authority.

The process of automatically transferring monthly payments from an existing account to pay for a credit agreement, i.e.. loan or credit card.

A correlation between a component of a stochastic process and itself lagged a certain period of time.

The automated trading system used by LIFFE, usually for after hours trading.

Also known as cash dispenser.

Capacity provided by treaty reinsurance.

A term used by the London Stock Exchange to denote a trade generated by the system through automatic execution.

A category of models for conditionally heteroskedastic processes.

A type of stochastic process.

A type of stochastic process.

It helps to determine if there is a price trend.

The average capitalization of all stocks in the portfolio. Capitalization or market value of an entire company is calculated by multiplying the number of shares outstanding by the per-share price.

Stated or dollar-weighted average time remaining until maturity on a fixed-income securities portfolio.

An average rate option (or average price option) is a cash-settled option whose payoff is based on the difference between the average value of the underlier during the life of the option and a fixed strike.

P/E is short for the ratio of a company's share price to its per-share earnings.

A term used by the London Stock Exchange to denote that a transaction was effected at a price based over a given period.

A term used by the London Stock Exchange to denote that a transaction was effected at a price based over a given period.

A form of Asian option whose payoff is linked to the average underlier value over a specified period.

A form of Asian option whose strike equals the average underlier value over a specified period.

Support/resistance lines that mark off an issue’s average true price range, which is determined by taking an exponential average of the difference between the higher of today’s high and yesterday’s close, and the lower of today’s low and yesterday’s close.

Method of accumulating assets by investing a fixed amount in securities at set intervals. Investors buy more shares when the price is low and fewer shares when the price is high.

An early hedge fund formed in 1949.

A religious foundation set up to assist the poor and needy.

A bankers acceptance is a short-term discount instrument that usually arises in the course of international trade.

Bonds with a denomination of less than a $1,000 par value. Baby bonds are a source of funds to corporations that lack access to large institutional markets and bring the bond market within reach of small investors.

A sales charge or commission paid when an individual sells an investment, such as a mutual fund or an annuity.

A charge imposed when investors redeem (sell) shares in mutual funds.

Administrative operations that support the trading of stocks and other securities.

A delta-neutral spread composed of more long options than short options on the same underlying instrument.

(US) Taxes that have not been paid on the due date or were underreported either by accident or by intention on a past tax return.

A system that uses a large historical price database to evaluate a trading system's profitability.

The combination of a life assurance policy and an annuity on the same life.

(UK) A situation where an investment organisation subsequently arranges with a foreign associate bank to lend the equivalent amount of foreign currency to the investment organisation.

When the reinsurance and insurance contract have the same terms and conditions.

Practice of adjusting historical values of an index to reflect past performance of an asset which has just been added to the index.

It is the situation where, and the amount by which, the price of a commodity for future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery.

Debt financing: the provision of financial resources required for production, commerce and services by way of sale/purchase of trade documents and papers. Bai al-Dayn is a short-term facility with a maturity of not more than a year. Only documents evidencing debts arising from bona fide commercial transactions can be traded.

Advance payment for goods which are to be delivered later. Normally, no sale can be effected unless the goods are in existence at the time of the bargain. But this type of sale forms an exception to the general rule provided the goods are defined and the date of delivery is fixed. One of the conditions of this type of contract is advance payment; the parties cannot reserve their option of rescinding it but the option of revoking it on account of a defect in the subject matter is allowed. It is usually applied in the agricultural sector where the bank advances money for various inputs to receive a share in the crop, which the bank sells in the market.

Contract which refers to the sale of goods on a deferred payment basis. Equipment or goods requested by the client are bought by the bank which subsequently sells the goods to the client an agreed price which includes the bank's mark-up (profit). The client may be allowed to settle payment by instalments within a pre-agreed period, or in a lump sum. Similar to a Murabaha contract, but with payment on a deferred basis.

A contract involving the sale of goods on a deferred payment basis. The bank or provider of capital buys the goods (assets) on behalf of the business owner. The bank then sells the goods to the client at an agreed price, which will include a mark-up since the bank needs to make a profit. The business owner can pay the total balance at an agreed future date or pay by installments over a pre-agreed period. This is similar to a Murabaha contract since it is also a credit sale.

Sale with a right in the seller, having the effect of a condition, to repurchase (redeem) the property by refunding the purchase price. According to majority of Fuqaha it is not permissible.

A contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. According to normal rules of the Shariah, no sale can be effected unless the goods are in existence at the time of the bargain, but Salam sale forms an exception given by the Holy

Prophet (SAW) himself to the general rule provided the goods are defined and the date of delivery is fixed. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies because these are regarded as monetary values exchange of which is covered under rules of Bai al Sarf, i.e. mutual exchange is hand to hand without delay. Barring this, Bai′Salam covers almost everything

which is capable of being definitely described as to quantity, quality and workmanship.

A common name for the IMF-coordinated emergency rescue loans to economies in crisis.

Treasury.

(A credit sale Lit.)

In Islamic Finance, a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal. It is a contract in which the seller earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments. He has to expressly mention cost of the commodity and the margin of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price.

A record of all the payments that flow between any individual country and all other countries. It is used to summarise all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers.

The difference between a country's exports and imports over a given period of time.

A financial statement which shows the types and composition of a company's assets, liabilities and shareholders' equity at a point in time.

A CDO (collateralized debt obligations) issued for the purpose of moving assets off the sponsor's balance sheet. Therefore the sponsoring organization that holds loans or debt can remove from its balance sheet.

A superannuation fund that diversifies its holdings over a range of asset classes such as shares, bonds, property and cash.

(US) A mutual fund which invests in a balance of common stock, bonds and preferred stock with an objective of income provision and some capital appreciation with low risk.

(US) The final payment on a loan which is significantly larger than those preceding it.

A self-regulated London exchange serving world wide interests. It is the world's premier maritime market for ship chartering and sale and purchase.

The selling of insurance and banking products through the same channel, most commonly through bank branches selling insurance.

(UK) Pay between the lower earnings limit and upper earnings limit which is used to determine National Insurance Contributions.

(US) The maximum credit an individual may secure from his/her bank.

The Bank for International Settlements (or BIS) is an international organisation of central banks based in Basel (Switzerland) which exists to foster cooperation among central banks and other agencies in pursuit of monetary and financial stability.

(UK) A system in which a paper slip/document instructs a bank branch to credit a sum of money to a specified account at that branch.

(US) A fund held by a section of the Federal Deposit Insurance Corporation as deposit insurance for banks excluding thrifts.

A moral, rather than a contractual commitment by a bank to provide a loan to a borrower up to a stated total amount over a stated period, typically one year.

The central bank of the United Kingdom, similar to the Federal reserve in the United States and the Bundesbank in Germany.

A crisis which prompts investors to believe that the bank might fail therefore causing massive deposit withdrawals.

A document, issued by a bank to its customers, listing details of debit and credit transactions over a given period.

A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market.

It is a cheque drawn on the bank (or building society) itself against either a cash deposit or funds taken directly from a person's bank account.

A reference sought from a bank by a company or individual regarding the creditworthiness of another company or individual in order to assess whether or not credit trading terms should be offered.

(UK) BACS is an APACS clearing company which provides an automated clearing service for payments originated by Settlement Members or those they sponsor.

The United States Glass-Steagal Act that separated commercial and investment banking and formed the FDIC.

When an individual is incapable of settling his/her debts and has been served a bankruptcy order by a court.

A chart with rectangular bars of lengths proportional to that value that they represent. Bar charts are used for comparing two or more values. The bars can be horizontally or vertically oriented. Sometimes a stretched graphic is used instead of a solid bar.

A trust which allows parents to give capital to a child and have the income from that capital treated as the child's rather than their own.

A term used on the London Stock Exchange to describe a share purchase or sale.

A term used by the London Stock Exchange to denote that certain conditions were agreed between the two participants at the time of trading.

A term used by value investors to describe the issue of shares in a company at a price below the per share book value of the company.

In February 1995 Britain's oldest merchant bank failed due to unauthorized trading by a single individual at its Singapore office.

Barrier option is a type of financial option where the option to exercise depends on the underlying crossing or reaching a given barrier level.

A warrant with an additional 'barrier' clause in the terms. Usually the warrant expires when a barrier level is breached.

An exchange of products or services between individuals without the involvement of money.

In foreign exchange markets, the base currency is the first currency in a currency pair.

See Premium.

The interest rate that British banks charge to their best customers. Similar to the prime rate in the US.

A mortgage in which the rate of interest paid by the borrower follows movements in the base rate.

An amendment to the 1988 Basel Accord that added capital requirements for market risk.

An international accord which established a set of minimal capital requirement for banks, replacing the earlier 1988 Basel Accord.

An initiative to globally harmonise capital requirements for banks and securities firms. Because of the fundamental differences between banks and securities firms (see: regulatory capital), the initiative soon ran into trouble.

See: 'State Pension'

The main rate of income tax in the UK.

See: 'State pension'.

A term used in conjunction with policies such as low cost endowment assurance and low start endowment assurance.

The price difference between the spot price of an asset and the price for the derivatives (e.g., futures and options) relating to that asset.

Usually one hundredth of a percentage point used in quoting movements in interest rates of yields on securities.

The risk linked to uncertain movements in the spread between a futures price and a spot price. Numerically, it is the amount by which the value of a derivative differs from the value for the asset underlying that derivative.

A warrant over a group of securities, often within a sector.

Committee set up by the Bank of International Settlements which drew up international capital adequacy standards for banks.

An investor who believes that a particular security or market is headed downward.

The purchase of a call with a high strike price against the sale of a call with a lower strike price.

A takeover bid which is so generous to the shareholders of the target company that the directors decide to accept the terms rather than face the wrath of their own shareholders.

A pessimistic market characterised by falling prices (opposite of bullish market).

The purchase of a put with a high strike price against the sale of a put with a lower strike price in expectation of declining prices.

A short-lived reversal of an upward trend, catching out bears and shorters who were hoping to profit from a fall in the share price.

A bond which does not record its owner's name. Possession of the bond certificate is therefore the only proof of ownership.

Stocks or shares which do not record owner's names and for which the companies do not keep a register of ownership. Possession of the certificate is therefore the only proof of ownership.

(UK) The practice of selling shares on one day and buying them back on the next.

Special features added on to a derivatives instrument or securities issue with the intention of attracting investors or reducing issue costs.

A price below the face value (or par value) of a security.

An index measure which compares performance of securities.

A loan made by an employer to an employee on which interest is either not charged or is less than the official rate. The difference between the interest charged and the official rate is taxable.

The true owner of a security or property which may be registered in another name.

A natural person or other legal entity who receives money or other benefits from a benefactor.

A person who benefits from: 1) a trust set up on his/her behalf; 2) the proceeds of a will, or 3) the proceeds of a life insurance policy.

The amount that will be paid out by a policy.

Benefits, excluding salaries, given to employees such as cars, medical insurance and gifts, which are taxed as income.

Property given as a gift under the terms of a will (See legacy).

A requirement by the Financial Services Authority that requires a financial adviser to provide the best advice to his/her clients, having first established a full understanding of the client's financial background.

The Stock Exchange rule that requires brokers to carry out a deal on behalf of a client at the best price available in the market.

The Best's rating system (developed by the rating agency A.M. Best Company) evaluates those factors that affect the overall performance of insurance companies to provide a weighted relative measure of a company's financial strength.

Ratings of financial reliability given by Best's Rating Service to insurance companies.

Measures a portfolio’s market risk. By definition, the beta of the market is 1.00. A portfolio with a beta of 1.10 is expected to perform 10% above market during “up” periods, and 10% below market during “down” periods.

A measurement of the movement of the price of a particular stock compared with the movement of the market as a whole during the same period.

See: 'rainbow option'

See: 'rainbow option'

The price that a prospective buyer is willing to pay for a security.

The price at which a market maker will buy a security.

The difference between the bid and ask price of a security.

(UK) The difference between the selling price and the purchase price for investments.

A bid-only warrant is a warrant which is 'sold-out' such that it may not be possible to buy any more.

A reference to the major operational changes on the London Stock Exchange which took place on 27th October 1986.

Nickname for the New York Stock Exchange.

(UK) The four largest clearing banks: Lloyds TSB, Barclays, HSBC and Royal Bank of Scotland.

The five four accountancy firms: KPMG, PriceWaterhouseCoopers, Ernst & Young and Deloitte & Touche.

An order in writing by one person to another to pay a specified sum to a specified person or bearer on a particular date.

A formal document for the transference of title to goods from the seller to buyer.

(US) The time between periodic billings for goods and services, typically one month.

This is a cash settled option that has a discontinuous payoff.

1. US: term for temporary cover issued by an insurer or a reinsurer.2. GB: An authority by an underwriter to an agent to grant cover on the underwriter's behalf. See Cover Note.

A reinsurance contract under which the reinsurer allows itself to be bound, within a specified grace period, on any risk that meets the criteria outlined in the contract.

Bank for International Settlements.

(US) A mortgage whereby the borrower makes a half monthly payment every two weeks instead of the usual 12 monthly payments.

A pricing formula for European options on commodities, forwards or futures.

A hidden segment of a country's economy that operates on barter and numerous unreported private cash transactions.

A company (or person) making an unwanted, hostile bid for another company.

Monday 19th October 1987 - the day when the Dow Jones Industrial Average fell a record 508 points affecting markets around the world.

Tuesday 29th October 1929 when stock prices on Wall Street crashed.

Wednesday 16th 1992 - the day the pound was driven out of the Exchange Rate Mechanism.

The original option pricing formula published by Black and Scholes in their landmark (1973) paper; it is used to price European options on non-dividend-paying stocks.

The original option pricing formula published by Black and Scholes in their landmark (1973) paper; it is used to price European options on non-dividend-paying stocks.

Another name for option pricing theory.

Prospective reinsurance that combines elements of both traditional and financial reinsurance to limit risk transfer.

A large holding or transaction of shares.

A large amount of securities being traded, typically at least 10000 shares of stock.

The volume of selling increasing rapidly and peaking abruptly.

A company on the London Stock Exchange with a large market capitalisation, stable earnings, consistent dividend record, and reputation as a reliable investment.

High-quality stock of well-known companies with large market capitalisation, extended records of earnings and dividends, well-respected management, and prospects for continued strong performance.

(US) Name of various state laws enacted to protect the public against securities fraud.

November 14, 1986, the day it was announced that Ivan Boesky had pled guilty to insider trading and was cooperating with government investigators.

An insider trader of the 1980s.

Bollinger bands, named after their founder John Bollinger, measure the support for, and resistance to price changes of any particular stock.

It means 'in good faith'. For example, a person entering in an insurance contract is required to disclose all pertinent information in good faith. Failure to do so could result in breach of contract, making it void. In contemporary English, "bona fides" is sometimes used as a synonym for credentials, background, or documentation of a person's identity.

The generic name for a tradable loan security issued by governments and companies as a means of raising capital.

(US) A short-term municipal or state note which is repaid from the proceeds of a forthcoming issue.

The difference between a bond's face value and the lower market price.

Yield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price.

A mutual fund which invests in bonds.

A measure of the quality and safety of a bond, based on the issuer's financial condition.

The interest investors can earn on a bond.

A calculation for converting semi-annual, quarterly, or monthly discount-bond or note yields into an annual yield.

(US) Money paid by life insurance companies to policyholders based on endowment policies and with-profit bonds.

See: 'scrip issue'.

Shares issued free by a company to its existing shareholders on a pro-rata entitlement basis.

A record maintained by a trading specialist of buy and sell orders for a given security.

A bond for which ownership records are maintained electronically in lieu of certificates.

Transfer of title from seller to buyer without physical movement of product.

The value of an asset or liability according to its balance sheet account balance.

Indications from investors of the numbers of shares at different prices they would be willing to purchase.

A forward pricing sales arrangement in which the cash price is determined, either by the buyer or seller, within a specified time at a previously agreed-upon basis applied to the then-current futures price.

The date at which a company's share register is closed off to identify the shareholders and to calculate any entitlement to new issues and dividends.

The books in which the transactions of a business are recorded.

A method of claim or premium reporting where the insurer simply receives an outline report showing summary information without individual customer details.

The individual who enters in a credit agreement with a financial institution.

An approach to stock picking which focuses on the search for shares whose prices have dropped extremely low.

Security analysis which focuses firstly on stocks of individual companies, secondly on industry performance and thirdly on the economy as whole.

The purchase of new shares by an underwriter who subsequently attempts to resell to the market for a profit.

A French or continental European stock exchange.

A four-sided option spread that involves a long call and a short put at one strike price as well as a short call and a long put at another strike price.

A type of bond devised by the US Treasury secretary, Nicholas Brady, in 1989, and issued by a number of Latin American sovereign borrowers to reschedule their international debt.

The number of stocks participating in either a rally or a decline.

The level of a company's sales at which neither a profit nor a loss is made.

The total value of all a company's separate operations if sold separately.

The point at which a price breaks out either above or below a stable established range or trendline. Once the price breaks above its resistance or below its support, its likely to continue in the same direction. Also referred to as a Trendline Violation.

An agreement made in Bretton Woods, USA, in 1944 which established a post war fixed currency rate between countries and subsequently the International Monetary Fund (IMF). The fixed exchange rate was replaced in the early 1970s by a floating exchange rate.

A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation.

See: 'gilt-edged stock' (gilts).

The widest of various measures used to gauge the growth of a nations' money supply. It includes all holdings of notes and coin by the public, as well as borrowings by non-bank financial institutions and all holdings in cash management trusts.

Term commonly applied to news wires carrying price and background information on securities and futures markets.

An individual or institution that charges a fee or commission for executing buy and sell orders submitted by an investor.

An intermediary who negotiates contracts of insurance/reinsurance between an insured and insurer/reinsured and reinsurer on behalf of the insured/reinsured.

A licensed real estate professional who receives a commission or fee for bringing buyer and seller together, often assisting in the negotiation of contracts between them.

A term used by the London Stock Exchange to denote that a transaction was between two member firms where neither firm is registered as a market maker in the security in question and neither is a designated fund manager.

Any individual or firm in the business of buying and selling securities for itself and others.

Any individual or firm in the business of buying and selling securities for itself and others.

An individual that arranges for the sale/purchase of vehicles/vessels through other parties.

An entity that arranges for the sale/purchase of vehicles/vessels through other parties.

Commission or fees charged by a broker for conducting transactions on behalf of its clients.

A simple continuous stochastic process that is widely used in physics and finance for modelling random behaviour that evolves over time.

The phenomenon of rising share prices amid a mood of general euphoria, leading to a 'bursting' and a reversal of prices.

An 18th century English law that severely restricted the formation of new corporations.

Slang term for a disreputable brokerage firm.

When, in an attempt to make a short-term profit, a broker confirms an order to a client without actually executing it.

A bank account set up to control a person's regular expenditure.

The gap between government spending and revenue.

Local regulations concerning the construction industry.

(UK) A scheme set up to give limited protection to people with share and/or deposit accounts in authorised building societies which fail.

Mutual non-profit-making institutions set up to lend money to their members for house purchase. In recent years some of the UK's largest building societies have demutualised and turned themselves into profit-making banks, with their profits being distributed to shareholders rather than their customers.

Insurance which covers the policyholder against certain building losses or damages which may occur.

Someone who believes that prices in markets are going to rise.

Terms frequently used to describe the outlook for short-and long-term market performance: Bull refers to the belief that stock prices are likely to rise; Bear refers to the expectation that prices will fall.

A foreign bond issued in the United Kingdom.

A bond issued in sterling by a foreign institution or government.

A bond with a single maturity date and no opportunities for early redemption.

Gold or silver in the form of ingots for bulk use.

Coins made from gold or silver.

An optimistic market characterised by rising prices (opposite of bearish market).

The rate at which a company is spending its cash reserves.

Ratio of excess losses in comparison to premium income.

It refers to recurring cycle of expansion, boom, bust, recession and trough.

(UK) A tax-efficient investment vehicle, designed to provide venture capital funds for small businesses. Replaced by the Enterprise Investment Scheme in 1994.

A deduction made from the value of business property when it is assessed for inheritance tax purposes.

Degree of uncertainty of realising expected future returns for the business resulting from factors other than financial leverage.

Traders use the butterfly strategy when they feel a particular stock will remain neutral during a certain period. By entering into a butterfly trade, the trader is betting that the underlying stock price will remain close to where it is currently.

An options spread that combines a long strangle with a short straddle.

(US) A 1792 trade agreement among the original 24 brokers in New York. The agreement was named for a Buttonwood tree that served as their informal meeting place on Wall Street.

The purchase by a listed company of its own shares.

An axiom whose underlying message is that stock market prices rise when there are positive rumours about a company, but often fail to sustain high levels when the facts become known.

Specific cover for perils/risks which are excluded from reinsurance contracts.

Purchase of stock and simultaneous writing of call options against stock position.

Purchase of stock and simultaneous writing of call options against stock position.

(UK) A document, relevant to life assurance, personal pension and unit trust products, which is given to prospective clients and provides information on the advice given, product's and commission's details.

The price at which units in a unit trust are bought by investors.

Purchase of stock and simultaneous writing of call options against stock position.

A facility enabling holders of deep out-of-the-money options to close their positions at a nominal 1/$1 per contract or 1 cent per option.

The main index of the French stock market introduced in 1988 with a base value of 1,000 and made up of France's largest 40 companies by market capitalisation.

Europe's 1993 Capital Adequacy Directive.

Europe's 1993 Capital Adequacy Directive.

Update to CAD (1998).

European regulation implementing the Basel II Accord.

The Cadbury Code is the unofficial name for the first Code of Best Practice on corporate governance, published in 1992.

(US) A plan enabling employees to choose from a variety of benefits according to their personal circumstances.

A theory which states that certain days of the week, weeks of the month, and months of the year are more likely to produce rise or fall in share prices than others.

An options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months.

According to the Gregorian calendar, the calendar year begins on January 1 and ends on December 31. For individual and corporate taxation purposes, a calendar year will generally comprise all of the year's financial information used to calculate income tax payable.

An option to purchase an asset.

(US) The date on which a bond may be redeemed by the issuer before maturity.

See: 'Call provision'

An option that gives the holder the right but not the obligation to purchase an asset for a pre-determined price (the exercise price) at or before the expiration date of the option.

An option which gives the holder the right but not the obligation to purchase a stated quantity of the underlying instrument at a specified price or before a given date.

A payment made by investors for new shares. The term would apply to payments made when a company first floats on the stock exchange and also when it has a rights issue.

The difference between a bond's call price and par value.

The price at which a bond is callable.

(US) The price at which a bond or preferred stock can be redeemed by the issuer. The call price will usually be greater than the par value to compensate the holder for loss of income and ownership.

Feature of some bond indentures allowing the issuing company to redeem bonds prior to maturity by paying holders a premium above face value.

The simultaneous purchase (sale) of a call at one exercise price and sale (purchase) of another call at a higher exercise price.

Warrants which give their owner the right to buy an underlying instrument and which would normally be used by an investor who thought the price of the underlying asset was due to rise.

A bond which allows the issuer to repurchase the bond for a specified price on certain dates prior to the bond's maturity.

Preferred stock that can be called by the issuer.

Voiding a buy or sell order.

Type of order given to a broker.

The act of terminating a contract earlier than the scheduled contract expiration. See Termination.

In financial services, the period after signing a contract during which customers are entitled to cancel their purchase.

(UK) The lowest possible bid price of units in a unit trust under FSA regulations which is usually lower than the quoted bid price.

A type of derivative instrument that offers protection against rising interest rates.

The measure of an insurer's/reinsurer's financial ability to accept risk as well as the maximum amount of business it can write.

Legal authority to enter into a contract.

The overall assets of an individual or company minus liabilities.

The section of a country’s balance of payments statement with the total of all international purchases and sales of assets including foreign direct investment, portfolio investment, bank loans, other securities and foreign currency holdings.

The process used by countries to remove restrictions on the flow of foreign capital in to and out of their territories.

A measure of the financial strength of a bank or securities firm, usually expressed as a ratio of its capital to its assets.

Formal allocation of capital charges to a firm's business transactions.

(UK) A tax allowance for businesses which takes account of depreciation of certain types of business assets such as plant and machinery.

A model describing the relationship between expected risk and expected return for financial assets.

It is used in finance to determine a theoretically appropriate required rate of return (and therefore the price if expected cash flows can be estimated) of an asset.

Assets purchased as a long-term investment to generate profit.

Capital required to support a given business transaction.

Measures to control foreign exchange transactions to manage capital flows.

The value of all the assets employed in a business, including equity and preference capital, fixed and current assets, and gross borrowings.

A company's expenditure to acquire capital assets.

The movement of foreign exchange, such as loans, loan repayment, bonds and foreign investment, from one country to another.

It measures the annual percentage growth rate required from the underlying instrument for investors to do equally well in terms of capital appreciation from its associated warrant.

The amount gained through the sale of an asset.

Tax payable by the individual taxpayer at rate equivalent to the taxpayer’s highest rate of income tax on gains arising from the sale of securities or other chargeable assets.

The appreciation of the market value of an asset.

The increase in value of an asset or an investment.

A line describing the optimal relationship between risk and reward for an investment portfolio.

It covers the difference between the capital which the country has invested in other countries, and the capital invested by other countries in it. Also known as capital account.

The ratio of a firm's capital to its assets.

Shares which entitle the holder to receive the capital appreciation from a split capital investment trust.

(US) The components which form a company's capital such as ordinary shares, preference shares, debentures and loan stock.

Any trading strategy that seeks to profit from inconsistencies in the relative pricing of a firm's debt and equity.

A UK tax on gifts made by an individual, whether made during their life or after death. Replaced by inheritance tax in 1986.

It refers to a company's share price multiplied by the total number of shares issued by the company.

See 'scrip issue'.

One of a series of options that comprise an interest rate cap.

Capital Asset Pricing Model.

A mortgage which guarantees the interest rate charged will not rise above a certain level.

A finance company related to a particular manufacturer or distributor.

An insurance company which is wholly-owned by one or more entities (parent organisations); the purpose of a captive is to insure the risks of its parent organisations.

A reinsurance company, which is owned by a corporation or association and provides reinsurance capacity for insurance policies taken out by the corporation or the association's members.

(UK) Where a company provides an employee with a company car which is also used privately.

A measurement unit which defines the purity of gold.

Wireless device used to report trades and quotes to the market data system.

Someone who becomes an account holder with a building society in the hope that they will benefit from a windfall handout when the building society demutualises.

A term applicable to personal pensions regarding tax rules which allow contributions made in the current tax year to be treated as though they were paid in the preceding tax year.

A term applicable to personal pensions regarding tax rules which allow an individual to make contributions, additional to the current tax year, for the six previous years if maximum contributions have not been made.

A member of a commodity exchange through whom another broker or customer elects to clear all or part of his trades.

Portion of the finance charge in bank loans covering the lender's costs in booking the loan and collecting payments plus a portion of bad debt expense; or broker's charge to customers for a margin account financing securities purchased on credit.

An options spread that is long (short) a ratio call spread and short (long) a ratio put spread.

A carve-out occurs when a parent company sells a minority (usually 20% or less) stake in a subsidiary for an IPO or rights offering.

An arbitrage transaction applied on a futures market where the cash or spot price of for example, a commodity is less than the futures contract price.

The value of assets that can be converted into cash immediately.

See 'ATM card'.

Collateralized debt obligations (CDOs) are a type of asset-backed security and structured credit product.

Assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper.

A defensive strategy using warrants to replace the exposure to assets at a lower price, thereby releasing cash.

The amount of money which flows in and out of a business.

A CDO whose payments to investors depend on the adequacy of collateral cash flow.

Structuring a fixed income portfolio so that each day's net cash flow is zero.

Risk due to uncertainty in future cash flows.

A collective investment scheme which relies on currency trading for its profits.

An instrument whose value, unlike that of a derivative instrument, is determined directly by the markets.

A small, short term loan which is to be repaid by next payday.

A Treasury bill issued with a non-standard maturity.

An expression used to describe the market in the underlying instrument (for example, shares, indices, commodities, etc.) on which a futures or options contract is based.

The price for cash settlement transactions.

settlement on the trade date or a derivative instrument as cash settlement if it settles for a cash payment in lieu of physical delivery of an underlier.

(US) The value of funds returnable to the insured upon the surrender of a cash value life insurance policy.

A security transaction in which settlement with payment and security delivery are to occur on the same day as the trade date.

(US) A life insurance policy which pays a benefit on the death of the insured but which also provides a savings element where benefits are payable before death.

A category of cash-flow risk measures.

A type of binary option. It pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security.

Warrants which are not exercised in exchange for a physical asset, but for a cash amount equal to their intrinsic value.

A financial ratio which shows how long a company can finance its own stock. It measures the number of days between the initial cash outflow (when the company pays its suppliers) to the time it receives cash from customers.

A sales incentive, commonly used on mortgages, which gives customers a cash sum as soon as the deal is signed.

Term for a type of insurance that is primarily concerned with losses caused by injuries to persons as well as potential legal liability imposed upon the insured as a result of such injuries.

Insurance which gives protection to a business or homeowner against property loss, damage and injury to a third party.

See: 'Cat standard'

A set of voluntary standards drawn up by the Treasury which companies can choose to adopt for their ISAs.

The amount of potential loss an insurance company is exposed to in a single catastrophic event, such as an earthquake or a hurricane, in a certain period of time.

It is a continuous probability distribution with the same general shape as a normal distribution except that it has much thicker tails.

It implies that a buyer must ensure that goods about to be purchased are free from defects and that he/she bears the risk.

Collateralized bond obligation.

Collateralized bond obligation.

Collateralized debt obligation.

The insurance company protected by pro-rata reinsurance.

The process of distributing the sum insured of a risk between reinsurer and reinsured under pro-rata reinsurance contracts. All premiums and losses relating to that risk are distributed in the same proportion.

The cedant’s acquisition costs and overhead expenses, taxes, licenses and fees, plus a fee representing a share of expected profits.

The national governing bank of a country, responsible for issuing currency, setting monetary policy, interest rates, exchange rate policy as well as the regulation and supervision of the private banking sector.

A theorem that explains why the normal distribution plays such an important role in probability theory.

(UK) A computerised database of investment firms authorised by the Financial Services Authority (FSA).

It is the automatic execution order book system on the London Stock Exchange.

(UK) A certificate issued by a building society or bank to its customers with interest bearing accounts, in which gross interest, tax deducted and net interest are itemised.

A certificate, issued by a bank to a depositor, indicating a sum of money has been deposited for a specified term and on which interest is paid.

The portion of the sum insured of a risk ceded to a reinsurer by the cedant.

Restricts the amount of the aggregate sum insured that can be ceded to a pro-rata reinsurance contract.

Cash-flow-at-risk, the cash flow equivalent of Value-at-Risk (VaR). CFaR-based systems determine the maximum shortfall of cash the firm is willing to tolerate.

Commodity Futures Trading Commission.

Capital gains tax, which is usually paid the profit arising from the sale of an asset.

In the US, a company can file for protection under Chapter 11 of the country's bankruptcy laws. The company continues to operate under existing management while working with its creditors to reorganise the business.

(UK) A transaction which leads to a chargeable gain and which promotes the issuing of a chargeable event certificate.

(UK specific) A certificate issued on the occurrence of a chargeable event. Details listed include the amount of the gain, number of years over which the gain has occurred, the date the transaction took place and that the certificate should be sent to the Tax Office to establish if a higher rate tax liability exists.

(UK) The amount chargeable to capital gains tax (CGT) from gains made on the disposal of an asset. In the case of stocks and shares, the investor's gain is the difference between the proceeds of selling the shares and the amount he/she paid for them adjusted for indexation.

A trust registered with the appropriate authority and which enjoys income tax advantages.

A central clearing house for Britain's charities. Allows supporters to make tax-efficient donations to many different charities via a single chequebook or credit card.

An archaic practice of devoting a corporation to some purpose other than that specified in its charter.

An investor who plots information about share prices and trading volumes on a chart, looking for patterns.

A term used in wills which refers to the personal possessions of the person who makes the will.

An account with a bank (or building society) which allows payments by cheque.

A card issued by a bank (or building society), which guarantees the payment of a cheque to the recipient up to a certain value.

A system which enables cheques to be transmitted between banks in order to transfer funds.

Clearing House Electronic Sub register System, which computerizes all ASX transactions and settlements.

A continuous probability distribution related to the normal distribution.

The world's largest exchange, which trades both financial and commodity futures, with US Treasury bond futures being the most frequently traded instrument.

The Chicago Mercantile Exchange (or Merc) was called the Chicago Butter and Egg Board until 1919 and is The world's second-largest exchange for futures and options on futures and the largest in the U.S.

Head of risk management.

(UK) An endowment assurance on the life of a child, which can be taken as cash at maturity or converted to a full endowment or whole life assurance.

After 1st September 2002, children born in the UK received a £250 voucher, which is invested and cannot be accessed until they turn 18.

See 'baby bond'.

An internal division between two departments of a bank or other financial institution whose aim is to avoid conflicts of interest.

A standard algorithm for calculating a positive definite matrix's Cholesky matrix.

A derivative that converts to a vanilla put or a vanilla call at the holder's choice.

An unjustified practice employed by some brokers or fund manager to increase their commissions by excessively trading in a client's account.

A defensive regulation which some stock exchanges have to limit the damage of a sharp fall in prices; for example circuit breakers allow the exchange to suspend trading when prices fall sharply.

(UK) An organisation which gives free advice on an extensive range of civil, legal and consumer matters.

Treasurer of Orange County, California whose speculative activities lead to the county's bankruptcy in 1994.

The rules which govern the management and timing of takeover bids involving companies listed on the London Stock Exchange, written and enforced by the Panel on Takeover and Mergers.

A demand by the insured/reinsured for an indemnity which is covered under the policy/contract.

Refers to a charge against an estate to settle an outstanding obligation, such as bills unpaid at the time of estate owner death.

Independent agent or employee of an insurance company who negotiates and settles claims.

A liability reinsurance contract covering all claims first advised by insureds to the insurer during the term of the reinsurance contract, regardless of when the insured’s loss occurred.

A liability non-proportional contract in which the reinsured's retention is higher than the limits on any one reinsured policy. Therefore, the contract is only exposed when two or more liability policies are involved in the same occurrence with an amount greater than the clash cover retention.

All listed options of a particular type (i.e., call or put) on a particular underlying instrument, e.g., all Barclays call options.

(UK) See: 'National Insurance contributions'

Line of business.

A method of accounting in pro-rata reinsurance whereby the right of the reinsurer to receive premiums or his liability to pay losses is treated as ceasing upon cancellation of the contract.

A bond price quoted without accrued interest.

The process of moving payments between accounts from different banks or branches.

A clearing house is an independent financial services company appointed by an exchange that provides clearing and settlement services for financial transactions.

A computerised payment system for clearing cheques in the UK.

A computerised payment system for clearing cheques in New York.

A document issued by an adviser/broker to a client outlining the basis of the relationship and the services for which the adviser/broker is authorised.

See: 'ratchet option'.

Collateralized loan obligation.

A company in which the directors control more than half the voting shares, or where such control is exercised by five or fewer people and their associates.

A securities market in which the difference between bid and offer prices is narrow and which reflects high volume trading in a 'liquid' stock.

A futures transaction where an equal and opposite trade closes an open position. This leaves a trader with what is known as a zero net position.

A collective fund which has a fixed number of issued shares traded on a stock exchange, which will rise and fall in value according to supply and demand like ordinary company shares. In the UK, this is equivalent to an investment trust.

Closed-form solution.

Linear VaR.

The two-month period before a company announces its results in which directors are not allowed to deal in its shares.

A formula that can be evaluated in a finite number of standard operations.

(US) It refers to a corporation with only a small number of shareholders.

The netting of obligations on derivative instruments that are terminated early.

Ending a transaction.

A closing agent or attorney assures that all documentation related to the sale of a house has been completed properly.

All of the costs to the buyer and seller which are associated with the purchase, sale, or refinancing of a property.

The closing price is the last price for a tradable instrument at the time the market closes.

The purchase of an option, by a writer, which has the same terms as an option which has previously been sold.

A futures expression which refers to a range of closely allied prices at which transactions were conducted at the close of a trading day.

The sale of an option, by a holder, identical to the option which is held.

A financial disclosure which includes an account of all funds received and expected at the closing, such as deposits for taxes and mortgage insurance.

Continuous Linked Settlement.

The bank that settles foreign exchange trades under Continuous Linked Settlement.

Collateralized Mortgage Obligation

A person who jointly applies for a loan with someone else.

The reinsured retains net and unprotected a share of a reinsurance layer or program.

An individual, business, entity, or trust that becomes a contractual borrower by signing the loan documents and promissory note with the primary borrower.

An addition or other change to an existing will.

A document on which changes or additions are made to an existing signed will.

Cost of Funds Index.

An approach by a salesperson to a prospect (prospective buyer) either by telephone or in person where no previous contact has been made.

A collar is an investment strategy that uses options to limit the possible range of positive or negative returns on an investment in an underlying asset to a specific range.

Assets held to secure an obligation.

An agreement between two parties for the ongoing collateralization of a repo, securities lending, derivative or other transaction.

A securitized interest in a portfolio of bonds.

A securitized interest in a portfolio of bonds, loans or other debt.

A type of mortgage-backed security.

A banking term which refers to the branch which accepts cheques to be credited to its customers' accounts and subsequently obtains the proceeds from the issuing banks, usually by a clearing arrangement.

It is a straddle using options with different exercise prices, where both the call and put options used are out of the money.

Insurance policies providing multiple property, casualty or liability cover.

A measure of profitability used by an insurance company to indicate how well it is performing in its daily operations.

Formerly an abbreviation for the Commodity Exchange in New York and now a division of the New York Mercantile Exchange after its merger with NYMEX. It is the main US market for metals futures and options trading in copper, gold and silver.

A bank that deals with deposits and loans from corporations or large businesses.

(UK) A retail bank which provides services to companies and individuals in the form of current, deposit and loan accounts as well as other financial services.

A mortgage on a non-residential building occupied by a business.

(US) A short-term note issued by banks and corporations with a range of maturities from 30 to 270 days.

Short-term promissory notes issued primarily by corporations.

An agent's fee for negotiating a deal or contract.

Another term used to describe brokerage firms.

An agreement between the lender and the borrower to loan money at a future date subject to terms and conditions.

Generic term that covers a wide range of items that can be traded, including metals (such as gold, and silver) and agricultural goods (such as wool and wheat).

(US) A US government-owned corporation established in 1933 which supports prices through purchases of excess crops.

US legislation passed in 1974 forming the Commodity Futures Trading Commission.

US legislation passed in 2000 clarifying that OTC derivatives markets were to remain largely unregulated.

(US) Created by the US Congress in 1974 to regulate exchange trading in futures.

(US) An individual or firm who directly or indirectly advises others about buying or selling futures or futures options.

Reinsurance contract that protects the reinsured and the reinsurer.

Non-preferred stock.

The US equivalent of 'ordinary share'.

(US) A mutual fund which invests solely in common stocks of companies.

The process of settling current outstanding and expected future obligations under a reinsurance contract.

A clause of a reinsurance contract that confirms complete discharge of all future obligations for reinsurance losses incurred by payment of a lump sum.

A bond that takes most of the prepayment in a PAC CMO structure.

A legal entity regulated under the Corporations Law.

The department in the London Stock Exchange which is responsible for the Regulatory News Service (RNS).

A business person who specialises in turning round failing companies.

See 'occupational pension scheme'.

(UK) A financial services sales representative who is authorised to give financial advice only on life assurance, pensions and unit trusts offered by his own company.

(US) The balance required to be kept on deposit at a bank by a borrower when taking out a loan. Should the borrower fail to repay the loan either in full or in part, this balance would be forfeited.

A number of the form a + bi, where a and b are real, and i is the imaginary number.

The act of complying with rules and regulations.

The average rate at which a particular financial parameter compounds up over a period of years.

Interest calculated on both the principal and the interest previously accrued.

An option on an option. The right, but not the obligation to buy or sell the right, but not the obligation to buy (long call) or sell (long put) an underlying asset

(UK) A with-profits life assurance bonus, normally added annually to the policy, which is based on the profits of the life company's investments.

A term used to describe an insurance policy in which a wide range of risks are covered. The name is used mainly in motor insurance.

Liquidation of a company brought about by a court order, usually as the result of a petition by an unpaid creditor.

See 'annuity'.

A condition where a stochastic process has non-constant conditional second moments.

A metric of annual prepayment for mortgage-backed securities.

Conditions which must be met before creditors disburse any loans.

A form of property ownership whereby the purchaser receives title to a particular unit and a proportionate interest in certain common areas.

Also referred to as a flat-top butterfly, it's an options strategy involving four strike prices that has both limited risk and limited profit potential. A long call condor spread is established by buying one call at the lowest strike, writing one call at the second strike, writing another call at the third strike, and buying one call at the fourth (highest) strike.

(UK) An independent non-profit making, non party political organisation which represents the interests companies in the UK.

A company which owns a number of other companies with widely diversified activities.

Aggregated forecasts drawn from a number of different brokers about the likely future earnings of a company.

Something of value given by one party to another in return for entering into a contract. To be enforceable under UK law, contracts require that each party has given consideration to the other, however small. Hence the reason for contracts entered into 'for consideration of £1'.

(US specific) A US system which collects and disseminates, electronically, current bid and asked quotations along with volume, from and to all market centers trading listed stocks.

A US high-speed system that continuously provides the last sale price and volume of any securities transaction in listed stocks to the public. All trades in NYSE-listed securities, regardless of the market centre on which such trades occur, are reported to and disseminated on the ticker system.

(US specific) Oversees the operations of the US 'consolidated tape', which it developed, under a formal 'CTA Plan' filed with the Securities and Exchange Commission. CTA is an independent, industry-wide organisation.

(US specific) Receives and disseminates, electronically, listed stock last-sale prices in all markets in which they trade. CTS is under the operational guidance of the Consolidated Tape Association (CTA).

A period where the market trades in a broad sideways pattern within a trend. Consolidations usually follow a strong market gain or fall and occur as buyers and sellers begin digesting the recent price move.

The process by which a company changes the structure of its share capital by reducing the number of shares on the market therefore increasing the each share.

See: 'irredeemable securities'

A bank jointly owned by a number of other banks.

(US) A plan which enables investors to accumulate shares in a mutual fund by purchasing them on a regular basis with a fixed dollar amount. In the UK, the same principles apply to savings plans for unit trusts, and the process is called 'pound cost averaging'.

The document that sets the rules by which a company will operate.

A product such as an automobile or appliance whose life expectancy is at least three years.

An index which tracks the prices of a variety of goods purchased by an average consumer, including food, clothing, utilities and medical care.

Information provided by a credit-reporting agency on a consumer's credit worthiness, and his/her eligibility for credit, insurance or employment.

The situation where the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date.

A situation in futures trading where the future delivery price is greater than the cash or nearby price.

(UK) Insurance policy that covers the home contents against damage, destruction and loss.

Legal proceedings to prevent or alter distribution of estate assets as described in a will.

A condition that must be met before a contract is binding.

Insurance cover for relatively remote possibilities.

An order to execute a transaction in one security that depends on the price of another security.

(UK) Life assurance where payment of the sum assured depends on conditions other than the death of the life assured.

Commission which is determined by the result of a pro-rata contract, e.g. Profit Commission, Sliding Scale Commission.

Contingent liabilities are potential obligations that will materialize only if certain events occur in the future, such as lawsuits, disputed claims, cases under appeal, possible tax assessments and contract disputes.

An option through which the premium is deferred and only paid if the option expires in-the-money.

Voting by preferred stockholders during a suspension of dividend payments.

A reinsurance contract that remains in effect until both parties mutually agree to terminate it or one of the parties sends the other a notice of cancellation.

A settlement system for foreign exchange trades.

A stochastic process that has a term associated with every real number.

Refers to continuous stochastic processes.

An entry made into an account or statement to nullify a previous entry.

A term used by the London Stock Exchange to denote that a trade was reported for a transaction previously automatically executed through the order book.

Process to set up a legally binding contract.

Invalidation of a contract by unforeseen circumstances.

The specified month to which a futures or options contract refers.

A note containing details of a stock exchange deal, which is sent by a broker to a client.

A contract between an insurer and the insured.

A contract between the purchaser and the seller of a property.

The minimum amount of a commodity or financial instrument which can be traded in a futures or option market.

The contracts theory of the firm.

An occupational pension scheme which has separate defined benefit and money purchase sections and which contracts out on both bases.

An occupational pension scheme that is contracted out on a money purchase basis i.e. where the employer pays minimum payments towards protected rights.

An occupational pension scheme that is contracted out on a salary related basis i.e. by providing benefits which are broadly equivalent to or better than a minimum standard.

(UK) A term which refers to contracting out of S2P (State Second Pension). A person can contract out by joining an employer's pension scheme which itself is contracted out or through an appropriate personal pension plan.

Insurance contract which covers works and damage to property on a site and third party liability.

CFDs are a derivative product designed for active traders who want to have extra leverage in their share trading. Instead of paying for purchases in full, they deposit a 'margin' with their broker which goes up and down in line with the rise and fall of their portfolio.

A theory that defines a firm as a collections of contracts-contracts between shareholders, board members, managers, employees, suppliers and customers. Under this theory, shareholders' stock represents a contract under which they provide capital to board members and receive dividends in return.

Investors who think they can make money on the stock market by doing exactly the opposite of what the majority of investors are doing.

See: 'waiver of premium'

A technique of variance reduction for the Monte Carlo method.

Any kind of lender agreement that is not backed in full by the Federal Housing Administration or guaranteed by the Veterans Administration.

The movement of a futures price towards that of the underlying instrument as the contract date approaches.

The process of converting convertible loan stock into ordinary shares.

A risk-free transaction in which an investor purchases a put and sales a call for shares of stock already held. The put and call should have identical exercise prices and expiration dates.

The terms which apply when convertible loan stock are converted into ordinary or preference shares.

A call of a convertible security by the issuer to force the holder to either accept cash or convert the security.

A market neutral trading strategy that exploits relative mispricing of a firm's convertible bonds.

Convertibles are bonds issued by companies which can be converted into ordinary shares or preference shares at a given price at a future date.

Securities that, at the discretion of the holder, are convertible into the ordinary shares of a company at a set price/ratio at specified time in the future.

Preferred stock that can be exchanged for (converted into) shares of common stock.

(US) Term life insurance which can be converted into cash value insurance. In the UK, the equivalent convertible term assurance, which can be converted into endowment assurance.

A factor sensitivities indicating a fixed income portfolio's second order (quadratic) sensitivity to the parallel shifts in the spot cure.

(UK) The legal transfer of real property from one owner to another.

(UK) The period during which a new policyholder can cancel an insurance/assurance policy.

A technical analysis indicator named after Edwin Coppock, an economist who was asked by the American Episcopalian Church to identify cheap buying opportunities for long-term investors.

A formula for approximating quintiles of a random variable based only on its first few cumulants.

Corporate bonds are issued by companies to raise capital. They are an alternative to issuing new shares on the stock market and are a form of debt finance.

A number of initiatives to reform the governance of corporations.

Practices that serve to optimise corporate risk.

Warrants issued directly by companies or investment trusts, exercisable into their own shares.

1) A group of people, such as a guild or city, with a legal collective identity. 2) A joint-stock, limited liability corporation.

(UK) Tax payable by a company on its profits.

A downward movement in the price of an individual stock, bond, commodity, index or the stock market as a whole.

A parameter, related to covariance, that indicates the tendency for two random variables to "move together" of "co-vary."

A symmetric matrix indicating all the correlations of a random vector.

A warrant designed to pay out a fixed amount for as long as an underlying asset price trades within a specified range or 'corridor'.

The cost price of an asset used to establish capital gains tax liability.

A regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans.

A method for settling physical commodity trades. When a price is quoted CIF, it means that the selling price includes the cost of the goods, the freight or transport costs and also the cost of marine insurance.

A collar whose strike prices are set so that the net cost of the collar is zero.

(UK) A local taxation system based on property value. There are eight bands of property values and the tax incurred by each dwelling increases in increments from band A to band H.

The risk of holding shares, bonds or other securities whose value are closely linked to particular country.

An interest payment made by a bond.

A bond that pays coupons.

The date on which a coupon is to be clipped from a bearer bond.

The date on which a coupon is paid.

Refers to the inclusion of a multiple in the formula for calculating the coupon rate on an inverse floating-rate CMO.

These represent an obligation of the issuer of a bond to pay interest on the bond at regular periods (usually every six months).

A bond's interest payments per dollar of par value.

A Treasury strip formed from a coupon of a Treasury security.

(UK) An office of the Supreme Court whose function is to manage and administer the property and affairs of people who, through mental disorder, are incapable of managing their own financial affairs.

A parameter that indicates the tendency for two random variables to "move together" of "co-vary."

A symmetric matrix indicating all the covariances and variances of a random vector.

A property of some stochastic processes

A formal agreement made in a deed.

The details of insurance provided by an insurance company to a policyholder.

A document confirming that recently-purchased insurance is in force.

A strategy that allows an investor to receive premium income in exchange for agreeing to double his stock position in the event of a downward price move.

An option strategy consisting of writing a call and a put with the same strike price and expiration against stocks that the holder owns.

In the case of call writing, covered means having a holding of shares at least equal to that implied by the short call option position, and in the case of put writing, covered means having a cash sum sufficient to take up the underlying security if if assigned on the short put position.

An average commercial paper rate reported by the Federal Reserve.

Conditional prepayment rate.

A spread between crude and refined oil prices.

One of the most devastating stock market crashes in American history.

In the trading terms, credit is the value of goods which one company will supply to another before payment is necessary.

Any process for assessing the credit quality of a counterparty.

A professional who performs credit analysis.

An item on a consumer report that identifies creditors who have requested a consumer report on the applicant.

A payment card which allows the owner to obtain goods and services without the requirement to pay cash and on credit terms.

A system for the distribution of bank giro credits and other credits between banks to enable funds to be transferred into specified accounts.

Methods used by lenders to ensure their customers settle their accounts within the agreed time period.

A credit crunch (also known as a credit squeeze or crisis) is a reduction in the general availability of credit or a sudden tightening of the conditions required to obtain a loan from the banks.

A swap designed to transfer the credit exposure of fixed income products between parties. Credit default swaps are amongst the most widely traded credit derivative products.

A financial instrument used to mitigate risk. It is a contract between two parties allowing the use of a derivative instrument to transfer credit risk from one party to another.

Any methodology that reduces the credit risk of a transaction with a counterparty.

The potential for loss in the event of a default.

A form of insurance designed to protect against default by a debtor.

A type of credit derivative.

A note issued to a person or company when goods are returned by them, cancelling the original invoice.

It takes into consideration both the likelihood of a counterparty defaulting as well as possible recovery rates in the event of a default.

A credit rating assesses the credit worthiness of an individual, corporation or a country.

An agency that holds information on consumers' credit rating.

A report requested by a lender on the credit standing of a prospective borrower.

Risk due to uncertainty in a counterparty's ability to meet its obligations.

It assesses the credit worthiness of an individual.

The difference between the yield on the debt securities of a particular corporate or sovereign borrower (or a class of borrowers with a specified credit rating) and the yield of similar maturity Treasury debt securities.

A spread strategy that increases the account's cash balance when it is established. A bull spread with puts and a bear spread with calls are examples of credit spreads.

A mutual association formed by people with a common affiliation such as employees, a union or a religious group in which pooled saving are made.

A ratio used to work out how many days on average it takes a company to pay its creditors.

People or companies who are owed money by debtors.

An electronic system of settlement for the equities market in the UK and Ireland which was set up in 1996 to replace the Stock Exchange's Talisman system.

Insurance which covers the insured against specified critical illnesses such as cancer, heart attack and multiple sclerosis etc.

A correlation between one component of a stochastic process and another lagged by a certain period of time.

Where one company holds shares in another company.

A term used by the London Stock Exchange to denote that a trade was effected as an agency cross or a riskless principle trade between two member firms at the same price and on the same terms.

A Monte Carlo estimator implemented without variance reduction.

A real function constructed by piecing together cubic polynomials on consecutive intervals.

Any of several methods of interpolating with cubic splines.

When a share is said to be 'cum dividend', it means that it is offered for sale with an entitlement to the next dividend payment attached.

When a company announces a rights issue, existing shareholders get the right to buy new shares usually at a discount to the current share price.

A parameter of a random variable similar to a moment.

The liability potential for multiple policies issued over multiple years by a single company to a single insured being held to apply to continuing injury or damage.

It is the total of the limits of liability of all reinsurance policies that a reinsurer has outstanding on a single risk.

(UK) When a company fails to pay a dividend, holders of cumulative preference shares are entitled to receive the missed payment when a dividend is next declared.

(US) Preferred stock whose dividends may be postponed but not cancelled.

The process whereby a delinquent borrower is brought back to "current" status

Any three letter code used to designate a particular currency.

A term used by the London Stock Exchange to denote that a trade was executed in one currency but converted for trade reporting.

A term used when money is borrowed in a foreign currency.

Losses an investor can incur on an overseas investment as a result of adverse shifts in exchange rates.

A swap in which two loans in different currencies are exchanged.

Tax imposed on foreign exchange transactions to reduce volatility and volume of flows.

The section of a country’s balance of payments statement which totals international transactions for import and export payments, interest on debts, profits from foreign direct investment and aid grants.

Balance on statement which does not include accrued interest between the last and next payment due.

A system designed to adjust accounting for changes in prices that affect a company's assets.

(US) Interest, dividend or other income payments received regularly from an investment source.

Debts owed by a company which are due for settlement within 12 months.

The ratio of a company's current assets to current liabilities.

It is the ratio of the annual interest payment and the bond's current price

A measure of the rate of change in an option's delta for a one-unit change in the price of the underlying stock.

The trademark for a system that uniquely identifies securities trading in the United States.

Fees charged by an institution that holds securities on behalf of an investor.

An institution that holds securities for investors.

Bank that keeps custody of stock certificates and other assets of a mutual fund, individual, or corporate client.

The safekeeping of securities and related services.

See: Her Majesty's Customs and Excise'

The cut-through clause is a provision in a reinsurance agreement which clarifies that, should the primary insurer becomes insolvent, the reinsurer is still liable for its stated share of the loss but that payment will be made directly to the insured and not to the insurer as is normally done.

Cyclical stocks are those companies who earnings tend to ebb and flow according to economic trends.

Stocks whose earnings fluctuate according to the business cycle.

A term used to describe a transaction, involving two derivatives, where there is no initial cost bourne by the investor when entering into the position.

The daily change in the price of a share or other security, i.e. the difference between the most recent price of a security and the previous day's closing price.

The highest price reached by a given security or index during a given day.

Interest that is accrued on a daily basis.

The lowest price reached by a given security or index during a given day.

The daily record setting out the prices of all trades in shares and other securities conducted on the London Stock Exchange.

A scandal in 1995 when a trader of T-bonds lost $1.1 billion.

A Contract of guarantee, security or collateral; or the Responsibility of entrepreneur/manager of a business; one of two basic relationships toward property, entailing bearing the risk of its loss; compare Amanah.

(US) The date by which a shareholder must own shares in order to qualify for a dividend.

A fixed interest security which has a specified date for repayment (redemption date).

The practice of buying shares at the beginning of a trading day in the hope that the rest of the market will be slow to react to the buying spree and that the price will therefore not rise until after the raid is complete.

An order placed with a broker to purchase or sell stock, a commodity or financial instrument at specified price limits.

A trader who buys and sells financial instruments within the same trading day such that all positions will usually be closed before the market close of the trading day.

The purchase and sale, or sale and purchase, of a security on the same day. Day traders aim to make small profits on a large number of 'intra-day' transactions.

Comes into existence as a result of any other contract or credit transaction. It is incurred either by way of rent or sale or purchase or in any other way which leaves it as a debt to another. Duyun (debts) ought to be returned without any profit since they are advanced to help the needy and meet their demands and, therefore, the lender should not impose on the borrower more than what he had given on credit.

Additional days which may be allowed by a company to a debtor over and above the due date for payment. For example, a life insurance company may allow days of grace for a policy to be kept in force after the date the premium is due for payment.

A phrase used by traders to describe the phenomenon of any stock to rally before dropping to new lows.

When the short moving average price of a stock falls below a longer moving average.

A transaction on a stock exchange by a broker or institution etc.

Risk of a planned merger or acquisition failing.

Commercial paper that is distributed through the agency of a commercial paper dealer. This is in contrast directly placed paper, that is distributed directly by the issuer to investors.

The cost of trading in an asset or security which will vary according to the broker and the tax jurisdiction in which the trade is carried out.

(UK) An income tax allowance which can be claimed if certain payments are being made to friendly societies on combined sickness and life insurance policies.

(UK) The amount payable by a life insurance company to the beneficiaries on the death of the insured.

(UK) Tax payable on a deceased person's estate.

A term used to refer to inheritance taxes against property or assets upon the death of the owner.

An unsecured corporate bond.

A payment card, which enables the holder to pay goods and services.

A note issued to a person or company indicating an amount owed.

An option position in which the price of the option bought is greater than the price of the option sold, decreasing the account's cash balance when it is established.

Money owed by an individual or company to another individual or company.

When borrowers who have a number of debts on different credit cards, store cards, overdrafts and loans decide to arrange a single loan to clear all outstanding balances.

A promise in writing to repay a debt such as a bond, bill or note.

An Executive Agency of the Treasury responsible for issuing gilts to fund the Government's borrowing activities.

When a company raise money to pay off existing debt.

A security such as a bond or note representing a loan which is repayable at some future date.

The temporary cessation of debt repayments which allows countries to reorganize and reschedule their debt repayment obligations.

A financial ratio indicating the relative proportion of equity and debt used to finance a company's assets.

Debt expenses as a percentage of monthly income.

A person or company who owes money to another person or company.

A ratio used to work out how many days on average it takes a company to get paid for what it sells. Calculated by dividing the figure for trade debtors shown in its accounts by its sales, and then multiplying by 365.

(US) All orders in a floor broker's possession that have not yet been executed.

The date on which a dividend is declared by a company's directors.

Expenses incurred by an insurer in a declaratory judgement action brought to establish whether there is coverage under a policy.

A cheaper option in which the payout is reduced over the length of the cover period.

Life assurance for a fixed period of time or specified age in which the sum assured decreases each year.

An investment or trading strategy of always holding just long positions.

An investment or trading strategy of always being net long the overall market.

An investment or trading strategy of always holding just short positions.

An investment or trading strategy of always being net short the overall market.

Under an insurance policy, the deductible is the maximum amount that an insured person must pay toward his own losses before he can recover from the insurer.

Reinsurance purchased by a reinsured to cover for the deductible required under the reinsurance policy.

For tax purposes, the portion of an estate that does not generate tax.

(US) An expense allowed by the Internal Revenue Service which is deducted from adjusted gross income to establish taxable income. These include interest payments and state and local taxes.

A legal document which transfers ownership of property from one party to another.

(UK) A signed document by which somebody formally agrees to make payments for a period of several years to a beneficiary.

A deed that establishes a trust. It is used in some loan transactions in place of a mortgage.

A document allowing beneficiaries to vary the gifts specified in someone's will even after the giver's death.

The issue of shares at a price much lower than the current trading price.

An option with an exercise price (strike price) significantly below (for a call option) or above (for a put option) the market price of the underlying asset.

An option with an exercise price (strike price) well above (for a call option) or below (for a put option) the market price of the underlying asset.

Used to describe an option or warrant that is unlikely to go into-the-money prior to expiration.

A situation when a debtor has not met its legal obligations according to the debt contract, e.g. it has not made a scheduled payment, or violated a covenant (condition) of the debt contract. Default may occur if the debtor is either unwilling or unable to pay their debt.

An "instantaneous" rate of default.

A mode of analysis for a portfolio credit risk model.

A type of model that assess the likelihood of default by the borrower.

The likelihood that a counterparty will default on an obligation.

The process of rendering a contract or deed null and void following a specified act.

Securities that are steadier than the average stock or bond and provide the investor a safe return on their money. Because of the corporation's business (e.g. utility and food industries), its securities are relatively resistant to general economic changes.

The shares of companies that are well-positioned to withstand recession, usually because the goods and services they sell are essential items rather than luxuries.

A period during which a bond can be either non-callable or non-refundable.

(UK) Also known as income drawdown and flexible pension. See 'personal pension plan'.

(UK) When a person defer payment of his/her state pension.

A bond that pays no coupons for its first few years.

Any of several types of bonds that defer the payment of interest.

A budget deficit occurs when an entity spends more money than it takes in.

See Loss Carry-Forward.

A fund that provides retirement benefits that is set according to an agreement.

In a defined contribution fund, the contributions made are defined by the employment contract and by the rules of the fund.

A pension plan in which benefits are dependent on contributions to and the growth of the pension fund.

A persistent decline in the price of goods and services (the inverse of inflation).

Accounts are classified as delinquent if the minimum contractual monthly amount due is not paid as scheduled.

The actual transfer of possession of securities from one party to another.

For physically settled futures contracts, the month during which delivery occurs.

Notification of delivery by a clearing house to a buyer. The notice is initiated by the seller in the form of a 'Notice of Intention to Deliver.'

The price to be paid under a forward contract.

The Greek factor sensitivities measuring a portfolio's first order (linear) sensitivity to the value of an underlier.

A linear approximation for how a portfolio's value will change in response to a small change in an underlier's value.

A portfolio containing that consists of positions with offsetting positive and negative deltas (exposure to changes in the value of the underlying instrument), and these balance out to bring the net delta of the portfolio to zero.

A term previously given to the shares of smaller companies least traded on the London Stock Exchange, along with alpha, beta and gamma shares. These terms were replaced by the normal market size classification in January 1991.

A quadratic approximation for how a portfolio's value will change in response to a small change in an underlier's value.

A quadratic remapping constructed from a portfolio's deltas and gammas.

Quadratic VaR measure.

Linear VaR.

A bank account balance to which the holder has instant access.

(US) A loan, with specific maturity date, which the lender can recall at any time.

A corporate restructuring in which one or more parts of a company split to become independent firms.

A condition in which stock ownership of corporations is fragmented and widely dispersed among numerous investors.

The process of changing ownership from the company's members to its shareholders.

The face value of currency, coins, and stocks and bonds.

For solvency reasons, some national legislations require insurance companies to lodge deposits for premium and loss reserves.

A measure introduced by the government to protect deposits, in full or in part, in the event of a "run" on a bank or banks.

(US) Financial protection of certain bank and credit union accounts by way of insurance provided by a federal agency.

A type of insurance premium where the insured deposits money with the insurer to obtain perpetual insurance against future losses.

(UK) A scheme set up to give limited financial protection to people with deposits in authorised banks which fail. The UK Deposit Protection Scheme covers 90% of a bank's total liability to a depositor subject to a set maximum.

(US) A bank organised in the US which provides all the stock transfer and agency services in connection with a depository receipt program.

US legislation that contributed to the deregulation of depository institutions.

(US) The DTC is a national clearing house for the settlement of trade in corporate and municipal securities and performs securities custody-related services for its participating banks and broker-dealers.

A non-cash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence

A severe recession over a lengthy period.

The volume of transactions necessary to move prices.

A type of financial instrument whose value is ‘derived’ from the price of underlying assets (e.g. an interest level or stock market index). They are designed to help companies “hedge” (protect themselves against the risk of price changes) or as speculative investments from which great profits can be made.

The body of financial theory used by financial engineers to value derivative instruments.

See Probabilistic Exposure Models.

Alternative name for a local volatility model.

The index for the largest 30 German companies quoted on the Frankfurt Stock Exchange.

The German derivatives exchange, where the bund, Euromark futures and Dax futures and options contracts are traded.

The reduction in value of a currency in comparison to another.

An options strategy involving the simultaneous purchase and writing of two options of the same type that have different strike prices and different expiration dates.

An informal name for derivatives pricing models based upon the original Black-Scholes methodology.

quanto swap

Binary option.

A method of calculating the net asset value of a company.

Allows equity participation and sharing of profit on a pro rata basis but also provides a method through which the equity of the bank keeps on reducing its equity in the project and ultimately transfers the ownership of the asset on of the participants. The contract provides for a payment over and above the bank share in the profit for the equity of the project held by the bank. That is the bank gets a dividend on its equity. At the same time the entrepreneur purchases some of its equity. Thus, the equity held by the bank is progressively reduced. After a certain time the equity held by the bank shall come to zero and it shall cease to be a partner. Musharaka form of financing is being increasingly used by the Islamic banks to finance domestic trade, imports and to issue letters of credit.

A payment system in which the payer authorises the payee to take funds from his bank account, usually on a monthly basis.

It enables companies to deliver price-sensitive announcements electronically to the London Stock Exchange's Regulatory News Service via a modem link.

Commercial paper sold directly to investors by the issuer.

Regular monthly payments which are electronically debited from an account.

(US) The purchase of shares in an open end mutual fund directly from the fund company rather than through a broker.

A reinsurer that deals with ceding companies without the use of an intermediary.

Taxes which are imposed directly on the individual.

A trading or investment strategy that takes net long or short positions in a market.

The purchases and sales made by directors of shares in the publicly quoted companies for which they work.

A bond price quoted with accrued interest.

(US) Insurance which provides an income to policyholders when they are unable to work due to an illness or injury.

The release of all relevant information by a company or individual in accordance with the requirements of a regulatory authority or a contract.

The amount by which the current value of a share is below its asset backing.

A discount broker charges a lower fee for executing buy and sell orders on behalf of investors.

A graph of discount factors as a function of maturity.

The factor by which a future cash flow must be multiplied in order to obtain its present value.

A money market instrument that pays no coupons and matures according to its face value.

The interest rate at which the US Federal Reserve lends money to member banks.

A convention for calculating yield on a discount instrument.

It is the current value of a company's free cash flow.

A mortgage which guarantees the interest rate charged will remain a set number of percentage points below the lender's standard variable rate. The rate changes as base rate moves up and down, but the relationship between base rate and the rate the borrower pays remains constant.

Prospective financial reinsurance where the premium is based upon the discounted expected reinsurer's outflow from the liabilities assumed under the contract.

The process of calculating the present value of a stream of future cash flows.

A stochastic process.

Refers to discrete stochastic processes.

An account whose holder has given an intermediary the authority to make buy and sell decisions on the customer's behalf.

A broker who not only deals in stocks and shares on behalf of his client, but who also makes the decisions about what should be bought and sold for the portfolio and has authority to execute those decisions without getting prior approval from the client.

The amount of income left to an individual after taxes have been paid.

A metric of how close debt is to a defaulting.

The period between the date a company's board of directors declares a stock dividend, known as the Declaration Date, and the Date of Record by which the shareholder must officially own shares to be entitled to the dividend.

A situation in which the price of an asset and an indicator, index or other related asset move in opposite directions.

The risk of price change due to the unique circumstances of a specific security, as opposed to the overall market.

A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction at the same time.

The amount of a company's earnings after tax which is then distributed to shareholders.

The ratio between a company's earnings and the net dividend paid to shareholders.

It values the price of a stock by using predicted dividends and discounting them back to present value.

The amount by which a company's yearly dividends grow compared with the previous year.

An Australian tax rule where the amount of corporate tax paid by a company is credited to shareholders of that company. The shareholder is assessed on the sum of the total amount of dividend and the imputation credit, but is allowed to claim the imputation credit as a tax rebate.

The percentage of earnings paid out as dividends.

A plan which allows private investors to reinvest cash dividends from their investments cheaply and easily back into the market.

A rate of return measure, which is calculated by dividing the dividend per share by the share's current market price.

(US) A strategy which enables investors to accumulate shares in stock or a mutual fund by purchasing on a regular basis. When the price is low, more shares will be bought whilst, when the price is high fewer shares are bought.

A bond issued in a country for domestic investors. Domestic bonds are denominated in that country's currency and are subject to local regulations.

A certificate of deposit issued by a bank or other financial institution.

The country in which a person lives or a company is registered.

The recipient of a gift; the giver of a gift.

A technical analysis term used to describe a chart on which the price of a security has made two approximately equal bottoms over a period of time.

The guaranteed payout of double the face value of a life insurance policy if the policyholder dies in an accident.

Taxation of corporate earnings and subsequent taxation of dividends.

A technical analysis term for two successive rises to the same price level.

The Dow Jones Industrial Average is the average of 30 large blue chip US corporations. It has been computed since 1896, a history that has aided its broad recognition across the world.

One of the main US share indexes which monitors the movement of 30 industrial companies traded on the New York Stock Exchange.

Market theory whereby a major stock market trend must be corroborated by a similar movement in selected industrial and transportation stocks.

Refers to a transaction made at a price lower than the preceding transaction.

An order in writing by one party to another party to pay a specified sum to a third party or bearer on a particular date.

The party instructed to make payment by a draft.

The party who issues a draft.

The investment bank that dominated the junk bond market of the 1980s.

A provision that specifies that the excess layer will “drop down” and attach if the limits of the primary layer or the retention are exhausted.

See: 'split capital investment trust'

(US) A closed end fund with a limited life and two main classes of shares. Holders of preferred shares receive all the income. Common shareholders receive all the fund's assets at expiry after preferred shareholders have been paid their fixed redemption price.

A type of remapping used in value-at-risk measures.

The date when any form of debt instrument becomes payable or matures.

The process of checking the accuracy of information contained in a company public statement, such as a prospectus, before recommending that company to others. Is also the act of one company investigating another company before buying its shares.

The investigative process carried out by companies before the acquisition of another firm. It involves checking the company's financial performance and liabilities before the acquisition is finalised.

Measures a bond’s average life on a present-value basis, incorporating yield, coupons, final maturity and call features.

A technique of asset-liability matching.

Named after the Dutch tulip auctions, this form of auction is one where the auctioneer starts with a high asking price , which is then lowered until a bidder accepts the auctioneers price.

Commission earned by a broker on both sale and purchase of a trade.

The practice of setting aside a proportion of the main earner's pension fund on divorce, which will benefit his or her partner.

A twist on the phrase 'ear bending' which is used to describe the way that the Bank of England lets the City know what it would like to happen in any given circumstance.

A feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.

A charge made by the mortgage lender if the borrower terminates a mortgage in advance of the terms of that particular mortgage. This may be a percentage of the total advance, the sum repaid or the balance outstanding.

For company pension schemes, an employee may retire at an early age provided it is authorised by the company. However, the amount of pension payable will be reduced in comparison to the amount payable at normal retirement age.

A charge imposed on holders of fixed-term investments in the event of withdrawal prior to maturity.

Income that comes from work such as a salary or wages, as opposed to unearned income such as bank interest and company dividends.

The premium earned under an insurance policy is the proportion of premium already paid during a certain period.

Any asset which produces income.

The annual profits of a company after deduction of tax, dividends to preference shareholders and bondholders. Earnings are usually expressed on a per-share basis and the earnings per share (EPS) figure is calculated by dividing total earnings by the average number of shares in issue for the relevant accounting period.

Theoretical earnings figure that is used to calculate state pensions or guaranteed minimum pensions.

Performance measure calculated by dividing a company's net profit after tax by the number issued shares.

The percentage of earnings retained by a company (i.e. not paid out in dividends).

Risk due to uncertainty in future reported earnings.

The earnings yield is the company's earnings per share as a percentage of the current market price of the share. So if the EPS was 8p and the current market price is 116p, the earnings yield 8/116 x 100 = 6.03%.

A category of earnings risk measures.

Several companies formed by European businessmen to exploit the spice trade of the 1600s.

Earnings before interest and tax. Calculated by taking the pre-tax profit of a company and adding back only the total interest charges which it has paid on debt.

(Earnings before interest, tax, depreciation and amortisation). EBITDA is a common way of measuring a company's profitability.

A method for settling physical commodity trades.

Equity collateralized obligation.

Capital held for economic (as opposed to regulatory) purposes.

Profit in excess of the opportunity cost of capital.

A generalisation of market value.

A measure of corporate performance which reveals whether a company is earning more or less than the amount which its capital is costing.

Economics is the social science that studies the production, distribution, and consumption of goods and services.

Equity default swap.

The annualised interest rate on a security.

A dollar-weighted average of interest rates paid on overnight Fed funds.

A theoretical set of portfolios, each offering an optimal risk-reward trade-off.

The theory that claims that the current price of a share reflects everything that is known about the company and its future earnings potential, and that is it impossible to beat the market consistently.

A Japanese hedge fund that failed in 2002.

A concept from linear algebra.

A concept from linear algebra.

See: 'rainbow option'

(US) It performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the US Securities and Exchange Commission (SEC).

An electronic payment system in which a plastic card is used to purchase goods or services.

An initial public offering, or new issue of shares, in which the process of applying for shares is handled electronically.

(US) The period that elapses between a claim being made and its settlement.

A prohibition by a government on certain or all trade with a foreign nation.

(UK) A special code used by employers when an employee's tax code is unknown. Individuals allocated this code will only receive a single person's allowance and may pay excessive tax.

Debt issued by governments or corporations in emerging countries.

The stock markets of countries which have a low per-head income compared with the developed world but which nevertheless have functioning stock exchanges.

Total remuneration of an employee or director including salary, bonuses and other benefits.

(US) A federal law which protects participants of private pension plans.

(US) A plan devised to encourage employees to purchase stock in their company, usually at a cheaper price.

The set that contains no elements.

A permanent fund bestowed upon an individual or institution to be used for a specific purpose.

(UK) A fixed-term life assurance policy in which provision is made for premiums to pay for life cover plus a savings/investment element. The policy pays out a sum of money on the death of the life assured or at a specified date (the maturity date) if the life assured survives the term.

(UK) An interest-only mortgage ultimately repaid by the proceeds of an endowment assurance policy which is assigned to the lender providing the mortgage.

See: 'endowment assurance'

(UK) A power of attorney which, subject to conditions and safeguards, continues in force even if the maker of the enduring power of attorney (the 'donor') becomes mentally incapable of conducting his/her affairs.

The granting of voting rights to holders of non-voting shares in a company.

An archaic practice for retiring government debt through a debt-for-equity swap.

In December 2001 Enron filed for bankruptcy in the midst of an accounting scandal.

It is a series of tax reliefs designed to encourage investments in small unquoted companies.

The extension of financial risk management to non-financial risks.

The value of a company's business rather than the company itself.

(UK) A region which offers special tax advantages to businesses (including exemption from business rates) as an incentive; the objective is to boost the area's economic and social development.

A property trust which invests in enterprise zones.

An entitlement issue, also known as an open offer, is an offer made by a quoted company to its shareholders inviting them to buy new shares in the company at a set price, which is normally lower than the current market price.

A federal law that prohibits discrimination in credit transactions on the basis of race, colour, religion, national origin, sex, marital status, age, source of income, or the exercise of any right under the Consumer Credit Protection Act.

An asset pricing model based on economic arguments about how prices should behave to maintain market equilibrium.

(US) A type of security, generally issued by a railroad, to pay for new equipment.

Secured corporate debt issued through a trust to finance transportation equipment.

The beneficiary designated to receive property held in trust.

The value of the vehicle/vessel minus the loan amount.

A synthetic CDO structured exclusively with equity default swaps.

A far out-of-the-money equity option structured much like a credit default swap.

Ownership that is securitized as stock that may be held by multiple investors and traded in secondary markets.

A hedge fund strategy that seeks to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, country, etc.

(UK) Options on the shares of companies.

A scheme designed to allow homeowners to release cash from the value of their property.

The excess return that an individual stock or the overall stock market provides over a risk-free rate.

A martingale measure which is equivalent to the "real world" probability measure.

Equivalent probability measures.

An options strategy which has the same risk-reward profile as another strategy.

(UK) Electronic Random Number Indicator Equipment, which selects the prizes in the premium bonds monthly draw.

A provision in reinsurance agreements which is intended to neutralize any change in liability or benefits as a result of an inadvertent error by either party.

The payment of a regular income, which increases annually by a given amount, by a life company to an annuitant in exchange for a lump sum either for life or shorter periods. The choosing of escalating annuity results in lower income compared with a level annuity over the initial years.

An amount set up by the lender into which the borrower makes periodic payments for taxes, hazard insurance, assessments, and mortgage insurance premiums. The funds are held in trust by the lender who pays the sums as they become due.

The totality of the legal rights, interests, entitlements and obligations attaching to property.

An agent who acts in the arrangements of property sales and purchases in return for a commission based on the selling price.

(UK specific) A former tax on a deceased person's estate and the forerunner of capital transfer tax which itself has been superseded by inheritance tax.

In the US, a tax imposed by the federal government or state on the net value of a deceased person's estate after deduction of an exclusion. The net proceeds, after estate tax has been paid, pass to the beneficiaries. If the sole beneficiary is a spouse, no tax is payable.

This usually represents the maximum loss on a property insurance envisaged under all but the most extraordinary circumstances.

The amount of premium estimated for the contract period to be renewed.

The policy of selecting stocks on the grounds of their ethical or environmental credentials.

The Ethical Investment Research Service (EIRIS) maintains a database which can be used to select an 'ethically sound' portfolio of stocks.

Expected tail loss.

A mathematic formula relates the exponential, sine and cosine functions.

Euro interbank offered rate.

The successor to the European Currency Unit (ECU), the euro was introduced as a non-physical form in 11 member states on 1st January 1999. The notes and coins for the old currencies, however, continued to be used as legal tender until new notes and coins were introduced on 1 January 2002.

A certificate of deposit issued outside a country but denominated in that country's currency.

As with other depositary receipts, the EDR is a certificate representing ownership of the issuer's underlying shares.

Refers to indicative short-term interest rates available for the euro.

A debt instrument structured like a medium-term note and issued in the unregulated Euro markets.

A pan-European grouping of regulated stock markets dedicated to high growth companies.

A bond, issued and underwritten by international syndicates of banks and issuing houses and sold to investors outside the country in whose currency it is denominated. A Eurobond is normally payable to the bearer and is free of tax.

A European payment scheme in which a person can use eurocheques and a guarantee card where the EC sign is displayed to purchase goods and obtain cash in the local currency of a European country outside his/her country of residence.

A currency which is deposited in banks outside its country of origin.

US dollar denominated deposits at non-US banks or foreign branches of US banks.

The markets for eurocredits, eurocurrencies and eurobonds - currencies and securities held in Europe and outside their country of origin.

EASDAQ was set up in 1996 as a pan-European stock market for technology and growth stocks.

An international organization of European countries formed after World War II to reduce trade barriers and increase cooperation among its members.

A weighted average of European Community currencies with weighting tending to be proportional to a country's economy.

A provision that permits exercise of an option only at expiration.

The monetary system of the EC which attempts to reduce the currency variations between members.

An option which can only be exercised by the holder at expiration date.

System of exercising options contracts in which the option buyer can exercise the contract only on the last business day prior to expiration (normally Friday). This system is widely used with index options traded on various U.S. Exchanges.

A warrant which can be exercised only at the final maturity date or at other fixed times.

Economic value added.

Some covers are arranged on an ""any one event"" basis. The primary function of this phrase is to identify those losses which may be aggregated together to form an ultimate net loss in respect of which a claim can be made.

Speculative trading strategy that seeks to exploit relative mispricing between securities whose issuers are involved in mergers, divestures, restructurings or other corporate events.

Purchase of a security without entitlement to current dividends, rights issues or scrip issues.

A bond sold without the right to the next interest payment.

Purchase of shares without entitlement to current dividends. This entitlement remains with the seller of the shares.

A payment made out of a sense of moral rather than legal obligation.

A payment made by the reinsured, despite the fact that it is not liable under the terms of the original policy.

Purchase of shares without entitlement to current rights issues. This entitlement remains with the seller of the shares.

(UK) Purchase of shares without entitlement to current scrip issues. This entitlement remains with the seller of the shares.

Refers to a bond trading too late for the buyer to receive an upcoming coupon.

The date on which a bond starts to trade ex-coupon.

Shares sold ex-dividend entitle the seller to retain the current dividend.

The date on which a stock starts to trade ex-dividend.

A method for settling physical commodity trades.

Costs which affect a company's profit (or loss). They are usually associated with normal activities but are exceptionally high.

(UK) The specified amount a policyholder must bear before the insurers pay a claim.

A form of reinsurance which, subject to a specified limit, indemnifies the reinsured for the excess/of the deductible that needs to be paid under the reinsurance contract should a claim arise.

Price determined by the exchange on the last trading day and used to calculate the invoicing amount paid for a futures contract reaching its maturity.

An alternative to physical settlement offered by many futures exchanges.

A transaction in which one party buys the physical commodity and simultaneously sells futures and the other party does the opposite - sells the physical commodity and simultaneously obtains a long futures position.

EPIC codes are the abbreviations given to company share quotations (e.g. the EPIC code for Vodafone is VOD). They serve the same function as 'ticker symbols' in the USA.

The mechanism by which members of the EC formerly operated their currency exchange rates within given upper and lower limits.

The price of one country’s currency relative to another.

Another term for currency risk.

Traded on a formal exchange such as the New York Stock Exchange or Chicago Board of Trade.

ETFs are a new kind of collective investment fund competing with investment trusts and unit trusts for investors' money.

(UK) A tax imposed on certain types of products including alcohol and tobacco.

(US) Federal and state taxes on the sale or production of certain types of products such as alcohol and tobacco.

A clause in an insurance policy which specifies items or conditions not covered.

A particular type of order which a client gives to his broker when buying shares. The client specifies the company he wants to buy shares in, a price, and the number of shares he is prepared to buy at that price.

A broker who buys and sells shares on the instructions of clients but offers no advice on what clients should buy or sell.

(US) An insurance policy taken out on the life of a company executive or senior employee whose death would cause significant loss to the company.

A pension plan which is tailored for directors and senior executive staff.

The individual named in a will responsible for carrying out the provisions specified in that will.

The feminine form of executor.

A security exempted from certain provisions of US securities laws.

(US) An allowable expense subtracted from gross income to reduce income tax liability.

When an option or warrant holder takes up his or her option to buy or sell the underlying instrument he/she is said to exercise the option or warrant.

A formal notice to the writer of an option from a clearing house that an option has been exercised by an option holder and that the writer is obliged to buy/sell the underlying instrument at the exercise price to meet his/her obligations.

The price set for buying (calling) or selling (putting) the asset underlying an option.

A fee levied on the sale of an investment, typically a unit trust.

(UK) Instead of making an initial charge, some unit trust companies make a charge if units are cashed in, for example, within five years. In the US this is known as a back end load.

The Price/Earnings ratio of a company at the time it is taken over by another company.

A derivative contract that is considered more sophisticated than plain vanilla contracts.

A warrant with complex exercise terms.

The expectation of a variable is the same as its expected value, and is also used with both meanings.

Default probability calculated for a one-year horizon.

The expected value of credit exposure at some point in the future.

Expected value of losses due to default over a specified period.

Expected tail loss.

The average portfolio loss, assuming that the loss exceeds some quantile of loss.

The portion of premium used to pay all the costs of acquiring, writing and servicing insurance and reinsurance.

When an employee incurs expenses wholly on behalf of his company which are not reimbursed, such expenses can be offset against tax.

A feature of a reinsurance contract that keeps track of the revenues and costs between the parties including positive or negative interest return on cash flow.

Pricing technique to establish the adequate premium for non-proportional reinsurance contracts based on the loss and premium experience of the portfolio in the past.

A legal term given to an investor whose experience is such that members of the FSA are entitled to assume that he fully understands the nature of the investment he is making.

The date when an option or contract expires.

The value of an option at expiration.

A moving average that gives extra weight to more recent price data.

The government department which helps companies finance exports, mainly by insuring them against the possibility of non-payment by their customers.

The proportion of a share portfolio at risk in a certain area.

It is an estimation of the extent to which a bank may be exposed to a counterparty in the event of, and at the time of, that counterparty’s default.

Scales that suggest distribution of Ground Up premium throughout the layers in a risk.

A risk limit based upon some exposure metric of risk.

Pricing technique to establish the adequate premium for non-proportional reinsurance contracts in which the original risk premium is split between the reinsured's deductible and the reinsurance cover.

Insurance which extends the term of a warranty, such as covering repairs on appliances.

If the reinsurance should expire while a loss is in progress, this clause states that reinsurers should pay their proportion of the entire loss providing that the loss had commenced before the expiration of the reinsurance.

An option whose expiration may be extended.

In reinsurance, monetary damages awarded to the insured or a third party claimant by a court on the part of the reinsured because the insurer had acted negligent or in bad faith in rejecting a settlement offer or preparing a defence.

A dividend paid additionally to the normal dividend when profits of a company are particularly high.

An EGM is a special meeting of a company and its shareholders which can be called by company directors or anyone with at least 10% of the voting rights on the company's shares.

Costs which affect a company's profit (or loss) and are not associated with normal activities.

The difference between an option's price and the intrinsic value.

A fund of funds of funds.

The value of a bond (or other debt instrument) that appears on the front, or face, of the certificate. Although a bond's price may change due to market conditions, the face value does not change. At maturity, the issuer redeems the bond at the face value amount.

The price of a bond at maturity.

The document that formalises a facultative reinsurance cession.

A contract under which the reinsured may cede risks of a defined class whereas the reinsurer is obliged to accept that risk.

It implies that both the original insurer and the reinsurer have the option of placing/retaining and accepting/rejecting individual risks.

It is a term in both law and accounting to based on an estimate of what a buyer would pay a seller for any piece of property or asset.

A rational and unbiased estimate of the potential market price of a good, service, or asset. In accounting, fair value is used as an estimate of the market value of an asset (or liability) for which a market price cannot be determined. In finance this term is used as the theoretical price at which a futures contract should trade to be equivalent to the purchase price of the underlying instrument. In options trading it is also used when referring to intrinsic value.

(To thrive, to become happy or to have luck and success Lit.).

Technically it implies success both in this world and in the Akhirah (Hereafter). The Falah presumes belief in one God, the apostlehood of Prophet Muhammad (Peace be upon him), Akhirah and conformity to the Shariah in behaviour.

Part of a loss which is not reimbursed by the pro-rata reinsurers, but falls back into the retention of the cedant.

A bond that was investment grade when issued, but has since degraded to junk quality.

Occurs when a market fails to carry on with the breakout, instead quickly reversing and returning to trade within the limits of the previous consolidation.

(UK) A type of term assurance in which, following the death of the life assured, instalments, rather than a lump sum, are paid to the beneficiary for the remainder of the policy term.

Official name for what was formerly the Federal National Mortgage Association.

An algorithm for rapidly valuing Fourier transforms.

The chief financial officer of Enron Corporation until the US Securities and Exchange Commission opened an investigation into his conduct in 2001. Fastow was one of the key figures behind the complex web of off-balance sheet special purpose entities used to conceal their massive losses.

Term used to describe executives who earn high salaries and bonuses.

A religious decree.

Federal Deposit Insurance Corporation

Short for the US Federal Reserve, the US central bank.

Deposits held by US banks in accounts at their regional Federal Reserve banks.

A market for unsecured short-term loans of Fed funds.

A rate of interest payable on overnight loans of Fed funds.

An electronic funds transfer system maintained by the Federal Reserve.

(US) A debt instrument with a high level of safety issued by a federal agency.

(US) The federal agency that acts as guarantor for funds deposited in member banks.

A bank established by the US Congress to consolidate debt issuances by federal agencies.

(US) A federal tax levied on gifted property, money or securities. The tax is payable by the donor and based on fair market value of the gift.

A private corporation created by Congress to support the secondary mortgage market. It sells participation certificates secured by pools of conventional mortgage loans; principal and interest is guaranteed by the federal government through the FHLMC.

A division of the Department of Housing and Urban Development, which insures residential mortgage loans made by private lenders.

(US) The federal law which directs employers to withhold a proportion of employees' salaries for payment to the government in order to provide future pension and other social security benefits.

(US) A government-backed corporation which purchases mortgages from lenders and resells them to investors. It is financed by the issue of debt securities. Equity shares, known as Fannie Maes, are traded on the New York Stock Exchange.

The central bank of the United States.

(US) A board of directors which directs the federal banking system, appointed by the President of the United States and confirmed by the Senate.

(US) The American central banking system which comprises 12 regional Federal Reserve Banks, their branches and all national and state banks within the system.

The International Federation of Stock Exchanges, a Paris-based organisation that encourages co-operative policies designed to stimulate a freer flow of capital across national boundaries.

An independent financial adviser whose income is derived from fees charged from customers rather than commissions from provider companies.

See: 'Collar'.

Fast Fourier transform.

Financial holding company.

(US) Trading floor network connecting all trading floor terminals for the NYSE.

The relationship between two numbers in the Fibonacci sequence.

Based on the number sequence developed by an Italian mathematician named Fibonacci - in theory, markets after moving substantially in one direction ‘back pedal’ or ‘correct’ a portion of the initial move. Using the Fibonacci number sequence, markets typically retrace 31.2% or 61.8% of the prior market move. 50% is commonly used as well. These retracement levels are usually used to derive targets for market moves as well as potential support and resistance levels.

Wash trading, bucketing, cross trading, or other types of trade to give the appearance of trading where no competitive trade has occurred.

An individual or institution responsible for acting in the best interests of another party to manage his/her assets. A fiduciary is bound by law and duty to put aside personal interests and act in good faith when making decisions for the benefit of another.

A subset of the S&P/All Ordinaries share index that measures price movements in the 50 leading stocks as listed on the ASX.

A particular type of order which a client gives to his broker when buying shares that consistes in filling a transaction immediately and completely or not at all.

The end of year dividend. In the UK, companies normally pay dividends twice per year, an interim and a final dividend, the latter normally being the larger of the two.

The results reported by a company for a full financial year.

The basis of determining a person's pension entitlement in a final salary scheme and which normally refers to an occupational pension.

A pension scheme in which an employee's pension is based on number of years of service and final salary with each employer.

A company whose main purpose is the financing of hire purchase transactions.

A professional person qualified to give advice to clients regarding financial products such as life insurance, pensions, mutual funds/unit trusts and taxation.

A practitioner of financial engineering.

The field of applied finance devoted to the design and pricing of derivative instruments.

Futures contracts where the underlying instruments are financial such as shares, interest rates, currencies and indexes etc.

A type of holding company authorized under US law following the repeal of Glass-Steagall to hold commercial banks, investment banks and insurance companies as affiliated subsidiaries.

An institution which accepts funds from the public and reinvests in bank deposits, bonds and stocks. These include banks and insurance companies.

An institution such as a bank, building society, credit union or insurance company which acts as a middleman between borrowers and lenders.

A pocket-sized pager with data screen which can display a variety of financial information including equities, bonds, futures and market news.

A professional person qualified to give clients financial planning service.

A process of money management that may include any or all of several strategies, including budgeting, tax planning, insurance, retirement and investment.

A form of reinsurance that enables a cedant to increase its statutory surplus by the amount of the ceding commission in the reinsured unearned premium reserve.

A specialised form of limited liability reinsurance whereby the financial and strategic motivations of the reinsured to effect the transaction take precedence over the risk transfer motivation. Also known as finite-risk reinsurance and non-traditional reinsurance.

Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly credit and market risk.

(UK) A Government Act introduced primarily to provide increased protection for investors and to regulate investment business conducted in the UK.

(UK) It replaced the Securities and Investments Board (SIB). The FSA, which came into being on 28th October 1997, carries all regulatory responsibilities for the UK financial services industry.

(UK) The Financial Services Compensation Scheme is the sole financial compensatory scheme set up by the Financial Services Authority (FSA) in December 2001.

US legislation that revoked the Glass-Steagal separation of investment and commercial banking.

The measure of a company's solvency.

(UK) A wide range of indices including shares, stocks and fixed interest securities published by the Financial Times.

An accounting period covering 12 consecutive months.

Islamic law. The science of the Shariah, an important source of Islamic economics.

Islamic jurisprudence. The science of the Shariah. It is an important source of Islamic economics.

Risk that is linked to investment in a particular firm and which is independent of market risk.

The first closing date is one of the milestones in the process by which one company takes over another.

A joint-life insurance policy which pays money to a surviving partner on the first partner's death.

A type of partial insurance which covers less than the full value of goods or property at risk. This policy is used commonly in the burglary or theft insurance where the possibility of total loss is extremely remote.

A mortgage which carries priority over any subsequent mortgages if the borrower goes into default and his/her assets have to be sold to pay creditors.

A fixed income security that has the first mortgage and senior claim on an asset or group of assets.

The first date on which notice of delivery on a futures contract can be given to the exchange.

Notice of intention to deliver a commodity in fulfilment of an expiring futures contract can be given to the clearing house by a seller no earlier than the first notice day.

Government policy that seeks to influence general economic activity through control of taxation and government spending.

A twelve month period used by a company for accounting purposes.

(US) An annuity which guarantees payments to an annuitant which are fixed for life or a specific period. Similar to a level annuity in the UK.

Assets of a company such as buildings and machinery which are used over a long period of time for the purpose of generating profits.

Commission which is fixed to a certain amount or percentage.

An investment strategy, generally associated with hedge funds, which consists of the discovery and exploitation of inefficiencies in the pricing of bonds, i.e. instruments from either public or private issuers yielding a contractually fixed stream of income.

Refers collectively to a spot curve, forward curve, discount curve, yield curve or any other curve that describes the time value of money.

A security such as a Treasury bond that pays a specified cashflow (e.g. six monthly coupon payments) over a specified period, and pays back the face value of the security at maturity.

When premiums paid are fixed throughout the life of the policy.

An interest rate that remains the same for the term of the loan.

Reinsurance premium for a non-proportional reinsurance contract defined as a fixed percentage of the reinsured's subject premium.

A type of mortgage where interest repayments to the lender are fixed until maturity or for a specified term.

One of two basic forms of lookback options.

An interest rate or currency swap in which fixed rate interest payments are swapped for floating rate payments.

Debt obligations issued by corporations, governments, or governments agencies which pay a fixed rate of interest over a defined time period.

Refers to a bond whose price is quoted as an invoice price instead of a clean price.

Reinsurance premium for a non-proportional reinsurance contract defined as a fixed absolute amount irrespective of loss experience or portfolio development.

The flat yield of a bond is the annual coupon payment divided by the current price. The major virtue of the flat yield for valuation is that it is extremely simple to calculate.

See: 'condor spread'.

A combined mortgage and current account.

When investors seek out less risky investments in times of uncertainty.

When a company offers its shares to the public and lists on a stock exchange.

A fixed income instrument whose coupon fluctuates with some designated reference rate.

A bond whose interest rate is reset periodically relative to a specified market rate.

A CMO tranch structured as a floater.

A floater issued by a corporate or agency borrower.

One of two basic forms of lookback options.

A type of derivative instrument that offers protection against declining interest rates.

One of a series of options that comprise an interest rate floor.

When a company lists its shares on a stock market.

A type of tax-advantaged bond issued by the US Treasury between 1953 and 1963.

The main original purpose of this clause was to protect against possible consequences of the reinsured's failure to provide the reinsurer with the documentation required. Nowadays it is interpreted in the sense that the reinsurer follows the reinsured's results arising under insurance policies subject to the exclusions and limitations of the reinsurance contract.

Reinsurances are contracts to indemnify for sums paid in satisfaction of liabilities under an original policy. Therefore the reinsurer is not obliged to pay if the reinsured is not liable under the original policy or if the loss is excluded by the terms of the reinsurance contract.

A reinsurer which follows the lead reinsurer on a cover being placed, accepting or rejecting the terms as presented.

Abbreviation for the Federal Open Market Committee, which is part of the Fed, and determines interest policy in the US.

Unforeseeable events, beyond the control of participants in a contract, which may excuse either side from fulfilling its liabilities.

The procedure by which a homeowner forfeits his property to the lender (mortgagee) following default.

A bond issued in one country and denominated in that country's currency by a foreign issuer.

A certificate of deposit issued within a country by a domestic branch of a foreign depository institution.

The purchase of land, equipment or buildings or the construction of new equipment or buildings by a foreign company. FDI also refers to the purchase of a controlling interest in existing operations and businesses (known as mergers and acquisitions).

It is currency issued by a foreign government. Foreign exchange is required to pay for imported goods and to meet foreign debt repayment obligations.

An agreement to exchange stipulated amounts of one currency for another at one or more future dates.

An agreement between a buyer and a seller, calling for delivery of a specified amount of a specified asset at a specified future date.

An agreement that calls for the future delivery of an asset at a price agreed to by the two parties involved in the contract.

A graph of forward prices/interest rates for different maturities.

The buying or selling of underlying instruments such as commodities, securities and currencies etc for delivery at a specified future date and a fixed price.

A loan that starts in a future date.

Market price quoted for a forward contract.

The setting of the price, which then remains fixed for forward dealing.

The interest rate payable on a forward loan that accumulates interest to maturity.

A cash-settled forward contract on a short-term loan.

Trade settlement on some date subsequent to spot settlement.

The forward purchase of a standard call option (ie right to buy) or put option (ie right to sell). On the forward start date the strike price of the option will be set at a predetermined level.

A trade for settlement on some future date.

An integral transform used in signal processing, physics and financial engineering.

(US) The trading of securities without brokers.

Forward rate agreement.

A licence, granted by one company (franchisor) to another company or person (franchisee), entitling the franchisee to produce or market a product or service in a specific area. The licence is usually reviewed periodically, typically every 6 months or annually.

The person or company accepting the right, granted by the franchisor to retail or provide services, using the franchisor's trade name or service marks, within the terms set in the franchise agreement.

A person or company who decides to expand the business by giving to selected franchisees the right to do business under their trade or service marks in accordance with the franchise agreement.

Dividends on shares with dividend imputation credits attached.

(UK) Dividends, paid by UK companies to other companies, with a tax credit reflecting the fact that the company which has paid the dividend has done so out of post tax profits.

Nick name for the Federal Home Loan Mortgage Corporation.

A method for settling physical commodity trades.

The amount by which a company's assets outweigh its liabilities, expressed as a percentage.

The amount by which a company's assets outweigh its liabilities, expressed as a absolute sum.

The amount of money that a business has at its disposal at any given time after paying out operating costs, interest payments on bank loans and bonds, salaries and other fixed costs.

A method for settling physical commodity trades.

An employee's pension scheme which is additional to but independent from his occupational pension scheme.

The permanent ownership of land or buildings.

Goldman Sachs arbitrager who became embroiled in the 1980's insider trading scandals.

A mutual organisation whose funds, after the deduction of running costs, are owned by its policyholders.

Benefits to employees additional to salary such as company cars, expense accounts and private medical insurance.

Financial risk management.

Floating rate note.

A charge imposed by a management company on a mutual fund or unit trust to cover administration costs and commission at the time of purchase.

The issuance of a policy by one insurer on behalf of another because the second insurer is not licensed in the jurisdiction in which the line of business is being written.

The standard promulgated by the Accounting Standards Board which requires that all sources of profit/loss must be included in a company's statement of its headline profit and Earnings Per Share.

An index of the share prices of the 300 largest European companies.

(UK) An index of a range of Government Securities (gilts) prices.

(UK) An index of the share prices of 30 leading companies in the UK.

(UK) An index of the share prices of the 100 largest companies (by market capitalisation) in the UK which is updated throughout the trading day in real time. The index was started in 1984 with a base of 1,000. See also FTSE Actuaries All-Share Index.

(UK) A combined index of the FTSE 100 and the FTSE 250. See also FTSE Actuaries All-Share Index.

(UK) The index of the share prices of the companies listed on the London Stock Exchange which are too small to qualify for the FTSE Actuaries All-Share Index.

(UK) The index of the share prices of over 800 leading companies and investment trusts on the London Stock Exchange.

British provider of financial indices and associated data services.

A company jointly owned by the London Stock Exchange and FT which creates and compiles financial indices showing the performance of stock markets.

(UK) An index of the share prices of the 250 largest companies (by market capitalisation) immediately following the largest 100 (FTSE 100).

(UK) The index of the share prices of the companies which are listed in the FTSE Actuaries All-Share Index but which are not large enough to appear in the FTSE 350 Index.

At termination of a reinsurance contract all liabilities and obligations of the reinsurer end.

(UK) An endowment policy in which the savings element is significantly increased.

(US) A guarantee of payment of interest and repayment of principal capital of a bond issued by a government authority.

An extensive property survey.

A broker who provides investment research, information, and advice, as well as the services involved in purchasing and selling securities. Full-service brokers usually charge the highest commission rates.

Earnings per share of a stock after converting all options, warrants and convertible securities into equivalent common stock.

When all money in a portfolio is invested in securities.

A life insurance policy which remains in force when the insured has paid premiums over part of the term of the policy but is unable to make further payments.

A type of remapping used in value-at-risk measures.

A professional whose job is to decide how the fund's money is invested.

An investment fund that invests in other investment funds.

A website which provides information on a variety of collective investment funds from several providers, and allows users to invest in those funds by transacting online.

The movement of assets from one mutual fund or unit trust to another.

The monetary value of a fund, calculated by adding up the value of its underlying assets.

Analysis of markets that predicts stock values on the basis of prospective earnings and dividends, interest rate expectations and risk considerations.

An approach to investment that focuses on analysis of a company's financial and business strengths, and how its performance has been converted into share price movements in the past.

A theorem that relates the existence of an equivalent martingale measure to the no-arbitrage condition and completeness of markets.

An arrangement whereby the reinsured retains funds of the reinsurer equivalent to outstanding Loss Reserves, sometimes referred to as Outstanding Claims Account (OCA) funds.

A type of reinsurance contract that allows the reinsured to delay all or part of the payment of premium to the reinsurer until a specified date.

Interchangeability resulting from standardization. Futures and options contracts for the same commodity and delivery month are fungible due to their standardized specifications for quality, quantity, delivery date and delivery locations.

A security or commodity is fungible if it is perfectly interchangeable with any other of the same type and class. Many financial securities are fungible: a share in a particular company is exactly the same as another share in the same company (of the same class if the company has more than one class of share).

The raising of capital by a borrower from his existing mortgage lender.

An exchange-traded derivative that is similar to a forward.

See 'futures contract'.

(US) An individual or organisation who accepts orders to buy or sell futures contracts or futures options.

A contract that commits the holder to the purchase or sale of an asset at an agreed price at a particular date in the future.

A legal agreement to make or take delivery of a specified instrument (for example, a commodity such as coffee or a financial instrument such as shares) at a fixed future date at a price determined at the time of dealing.

(US) The futures industry's national trade association.

The right to enter into a specified futures contract at a futures price equal to a stipulated exercise price.

A long-short futures position.

A group of the finance ministers and central bankers of the following 20 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, European Union.

Group of 30 Report.

Selective realization of gains to manipulate book value earnings.

The Greek factor sensitivities measuring a portfolio's second order (quadratic) sensitivity to the value of an underlier.

(UK) A term previously given to the shares of smaller companies traded far less frequently on the London Stock Exchange than alpha and beta shares. The term was replaced by the normal market size classification in January 1991.

Grant anticipation note.

A technique of asset-liability management used to assess interest rate risk or liquidity risk.

Generalized ARCH.

A formula for pricing European options on currencies.

(UK) A court order instructing a garnishee (a bank) that funds held on behalf of a debtor (the judgement debtor) should not be released until directed by the court.

An independent white noise with joint normal terms.

A measure of the indebtedness or leverage of a company (or an individual). The degree of gearing is often measured by use of the debt-to-equity ratio.

The degree of additional exposure gained by buying a warrant in comparison to buying its underlying asset.

A trade agreement between a large number of countries, dating back to 1948, which was set up to improve trading worldwide and to work towards the reduction of tariff barriers.

The legal right for a creditor to seize the assets of a debtor to satisfy an outstanding debt.

(US) It refers to a bond that is secured by a blanket mortgage on the issuing company's property.

A municipal bond backed by the general taxing authority of the issuer.

(US) A municipal bond whose interest and principal payments are supported by the full faith and credit of the issuing authority.

See 'personal equity plan'.

A generalization of the autoregressive conditional heteroskedasticity model.

A discrete stochastic process whose log returns are independent and identically normally distributed.

Log return.

Any element of absolute or excessive uncertainty in any business or a contract about the subject of contract or its price, or mere speculative risk. It leads to undue loss to a party and unjustified enrichment of other, which is prohibited.

Uncertainty, hazard, chance or risk. Technically, sale of a thing which is not present at hand; or the sale of a thing whose consequence or outcome is not known; or a sale involving risk or hazard in which one does not know whether it will come to be or not, such as fish in water or a bird in the air. Deception through ignorance by one or more parties to a contract. There are several types of gharar, all of which are haram.
The following are some examples:

Selling goods that the seller is unable to deliver
Selling known or unknown goods against an unknown price
Selling goods without proper description
Selling goods without specifying the price
Making a contract conditional on an unknown event
Selling goods on the basis of false description
Selling goods without allowing the buyer to properly examine the goods

The root Gharar denotes deception. Bay' al-Gharar is an exchange in which there is an element of deception either through ignorance of the goods, the price, or through faulty description of the goods. Bay' al-Gharar is an exchange in which one or both parties stand to be deceived through ignorance of an essential element of exchange. Gambling is a form of Gharar because the gambler is ignorant of the result of his gamble.

A transfer of an asset such as property or money from one person to another where no payment of any kind is given by the receiving person to the donor.

(US) A tax imposed by the federal government or state on the donor of a gift when the transfer of money or property passes from one individual to another.

Under federal gift tax laws, each individual is permitted to gift up to $12,000 in cash or other property each calendar year to as many individuals as the taxpayer may desire without any gift tax.

An investment is said to be gilt-edged if it has low risk/high security characteristics.

A gilt edged market maker is a dealer authorised by the Bank of England to make a market in government stocks (gilts).

Gilts are Fixed Income or index-linked bonds issued by the UK government; it is the UK equivalent of US Treasury Securities.

Official name for what was previously the Government National Mortgage Association.

(UK) Girobank was established in 1968 by the Post Office to provide a public banking facility for people without bank accounts.

Schemes whereby a donation to your chosen charities is automatically deducted from your salary by your employer.

The United States 1933 Banking Act that separated commercial and investment banking and formed the FDIC.

A bond that is issued both as a foreign bond and as a Eurobond.

A certificate which represents ownership of a given number of a company's shares and which can be listed and traded independently from the underlying shares.

A mutual fund which invests in securities in countries around the world such as Europe, Asia and the USA as well as the UK.

An investment or trading strategy of taking net long or short positions simultaneously in multiple markets around the world.

A type of function remapping.

Refers to the increasing economic integration and interdependence of countries.

The purchase of a security, commodity or financial instrument (e.g. shares) in the belief that the price will increase.

The process by which a privately held company first offers shares of stock to the public. This is done via an Initial Public Offering (IPO).

It means to sell an asset without first owning it with the expectation of it decreasing in value.

A plastic payment card which normally allows the holder higher spending limits over a standard card.

The setting of the price of gold by dealers.

A period during the 1600s when Dutch art, social tolerance and commerce flourished.

This term refers to what happens when the short moving average price of a stock (for example, its 20-day moving average) cuts above a longer moving average (for example, its 50-day average).

An economy whose growth is believed to be neither too fast or too slow.

An order to a broker to buy or sell shares at a specified price which remains valid until cancelled by the client.

The value of a business to a purchaser over and above its net asset value.

(US) A government-owned corporation which guarantees payment of interest and principal of mortgage-backed pass through securities.

The short- and long-term bonds the government sells to finance its expenditures.

Any private corporation chartered by the US Federal Government and granted privileges to advance specific purposes.

The period during which an insurance policy remains in force even though the premium has not been paid.

In calculus, a vector of partial derivatives.

In multivariate calculus, an approximation for a function constructed from its gradient.

In multivariate calculus, an approximation for a function constructed from its gradient and Hessian.

(US) A mortgage scheme in which monthly payments commence at a lower level and increase over a period of a few years to a higher level.

The Financial Services Modernization Act.

A hedge fund that failed in 1994.

Index-linked savings certificates, initially introduced for people above retirement age.

A short term debt obligation issued by state and municipal governments or private businesses in anticipation of the receipt of a future grant awarded for the successful installation of energy conversation or pollution control measures.

The proof of legal authority required by the person who is entrusted with dealing with a deceased person's estate where there is a will.

(UK) A term used by some assurance companies as an alternative to assured.

The person from whom a grant is made or a trust is set up.

A set of factor sensitivities used for measuring risk exposures related to options or other derivatives.

(US) When a takeover target company buys back its own shares at a premium price.

A company (or person) making an unwanted counter bid for another company.

The unofficial trading of securities before their formal issue.

Before any deductions, particularly tax deductions.

The value of all goods and services created within an economy. It equals gross national product minus income from abroad.

Total annual income of a person or a company before any expenses.

Interest earned by deposits before tax is deducted.

The amount of insurance a company commits on a risk, including the amount it has reinsured.

The difference between the selling price of an item and the purchase or manufacturing cost, expressed as a percentage of the selling price.

The amount of income that an individual receives each month before income tax.

The total value of all goods and services produced by a country. Real growth in GNP measures the increase in output after making adjustments for inflation.

A rating base for excess of loss reinsurance. It is the written premium of a primary insurer for the lines of business covered by a reinsurer, minus cancellations, refunds and reinsurance premium paid to other reinsurers who are providing coverage on the same lines.

The difference between turnover and the cost of making a product or providing a service, before taking into account overheads, salaries and wages, and interest payments.

See 'redemption yield'.

Simple return plus 1.

The yield on a security before the deduction of tax.

UK shareholders receive dividends with a tax credit of 10%. This means that a notional 10% tax has already been paid by the company paying the dividend.

(UK) Rent payable by the owner of a leasehold property to the freehold owner.

The total amount of loss sustained by the reinsured before taking into account the credit) due from reinsurance recoverable(s).

Insurance provided for company employees by employers.

An influential 1993 industry report on OTC derivatives.

A bond which gives capital growth at maturity.

A fund that aims to achieve above average rates of growth over the longer term.

The approach to investing which aims to invest in fast-growing companies which are rapidly increasing their turnover and profits.

Stocks whose earnings have grown at an above average rate over a number of years and which are expected to continue to grow at a high rate for some time to come.

A document, supplied by a manufacturer, indicating that in the event of product failure it will be repaired or replaced.

(UK) A life policy in which there is a minimum sum payable on the death of the life assured.

A bond in which a single premium secures a guaranteed amount at its maturity date

A bond in which a single premium secures a guaranteed regular income until maturity.

The minimum pension payable by a pension scheme in order that members may contract out of S2P (State Second Pension).

An insurance policy will automatically renewed provided premiums are paid.

(UK) It refers to the minimum sum payable by a life policy either on the death of the life assured or on maturity.

Some unit trusts offer a floor price and guarantee their bid price will not be allowed to fall below that level.

An individual, institution or other entity that guarantees to repay a debt if the borrower defaults.

An individual or institution named by a court to manage the property of a person who is adjudged incapable of handling his or her own affairs.

(US) Dutch regulations do not permit their companies to issue ADRs linked to active home-country shares, even if those shares are held by a depository bank. Instead, the appropriate quantity of underlying home-country shares are cancelled and the equivalent amount of New York Shares (guilder shares) are issued.

Pioneered RiskMetrics.

Anything permitted by the Shariah.

That which is permissible. In Islam there are activities, professions, contracts and transactions which are explicitly prohibited (haram) by the Qur'an or the Sunnah. Barring them, all other activities, professions, contracts, and transactions etc. are halal. An activity may be economically sound but may not be allowed in the Islamic society if it is not permitted by the Shari'ah.

A rogue trader whose speculative activities during the 1980s and 1990s cost Sumitomo Corp. USD 1.8 billion.

A 1992 legal decision that invalidated existing derivatives contracts with numerous UK local councils.

The main Hong Kong share price index, similar to Australia's S&P/All Ordinaries index.

Anything prohibited by the Shariah.

Unlawful.

A currency which is generally accepted throughout the world and which is unlikely to devalue.

Making regulations consistent across industries.

Lit: bill of exchange, promissory note, cheque or draft. Technically, a debtor passes on the responsibility of payment of his debt to a third party who owes the former as debt. Thus the responsibility of payment is ultimately shifted to a third party. Hawala is a mechanism for settling international accounts, by book transfers.

(transfer; legally Lit.)

Agreement by which a debtor is freed from a debt by another becoming responsible for it or the transfer of a claim of a debt by shifting the responsibility from one person to another contract of assignment of debt. It also refers to the document by which the transfer takes place.

An insurance policy that pays for loss raising from certain hazards, such as fire and flood.

Default intensity.

A common chart formation in which a share price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines.

A senior manager with responsibility for financial risk management within a firm.

The Inland Revenue limit on how much money can be paid into a free-standing additional voluntary contribution scheme.

Generic term for insurance covering costs incurred due to illness, injury and disability.

A type of investment vehicle where investors in the fund allow its managers to use higher risk investment techniques to leverage up return potential.

The number of stocks required to hedge against the price risk of holding one option.

The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes.

A person designated by a will or by the court to receive the assets of the deceased.

(UK) The government department which collects customs and excise duties and VAT.

The tendency of investors to behave in the same way in response to rumoured market changes.

A German bank whose 1974 failure highlighted the dangers of settlement risk.

Settlement risk.

In calculus, a matrix of second partial derivatives.

A condition where a stochastic process has non-constant second moments.

Is a Gift.

(US) Assets owned by a company but undervalued on the balance sheet.

A fund which aims to pay a high dividend to its shareholders by investing in bonds or other companies which themselves produce good income, either through high rates of interest or high dividend yields.

(US) A bond issued by a highly regarded company or municipal authority with a rating of AAA or AA.

A one-off insurance premium charged by lenders to cover themselves in high risk lending situations, usually where lending is over 90% of the property's value.

A high yield bond (non-investment grade bond, speculative grade bond or junk bond) is a bond that is rated below investment grade at the time of purchase.

The shares of companies operating in technology fields such as computers, semiconductors and electronics.

A provision that an incentive fee will not be payable until any prior losses have first been made up.

Stocks whose dividend payouts are high as a proportion of their share price.

An income tax coding allocated to people who pay tax at the higher rate.

(UK) The highest rate of income tax in the UK which in the 2007-2008 tax year is 40%.

System of purchase by paying in instalments.

A measure of the price changes of a security over a specific period of time.

For a VaR measure, a transformation procedure that employs the Monte Carlo method with realizations constructed from historical market data.

A category of VaR measures that employ an historical transformation.

Volatility estimated from historical data.

The practice of deferring capital gains tax liability on a gift by transferring the liability to the recipient.

An option that grants the holder the right to extend the expiration date.

The owner of securities whose name is registered by the issuing company or its transfer agent as from a particular date.

A company which holds the majority of shares in its subsidiaries.

(US) The length of time an individual retains an investment.

The rate of return over a given period.

A row vector listing the number of units of specific assets held by a portfolio.

A type of portfolio remapping.

A policy which covers the insured for the duration of their holiday and covers for travel delays, cancellation, baggage loss and damage, loss of personal items including cash and credit cards, personal accident and medical expenses abroad.

(US) A plan which enables elderly owner or owners of a property to use the capital locked in the property to provide a regular income.

A type of property insurance which provides cover against such items as damage to the building, personal property, theft, personal liability etc.

(UK) A plan which offers elderly people the opportunity of raising cash on their property. A financial institution such as an insurance company makes a purchase at a price well below market value with the original owners being entitled to live in the property until their death.

An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services.

A credit line offered by banks and mortgage lenders which grants the homeowner the opportunity of borrowing against the equity in the property.

A multiple peril insurance policy available to owners of private dwellings. It usually covers buildings and contents in the case of fire or wind damage, theft, liability for property damage, and personal liability.

A condition where a stochastic process has constant second moments.

An options strategy involving the simultaneous purchase and sale of two options of the same type, having the same strike price, but different expiration dates..

(UK) An insurance policy which pays a specified amount to the insured in the event that he/she is admitted into hospital.

A takeover bid opposed by the target company's directors.

A clause used in catastrophe excess of loss reinsurance contracts to overcome the difficulties of applying the terms "event" or "occurrence" to multiple losses or losses occurring over a period of time all associated with the same phenomenon such as the operation of a natural peril.

(US) The notification to a client by a brokerage house that more funds are required to bring a margin account balance up to the required level.

(UK) Insurance covering the structure or contents of a house. This type of insurance now tends to include the option of cover for additional items such as legal expenses.

A home owner's monthly housing expense in comparison to his/her monthly income.

A number assigned to the vessel by the manufacturer. Each number is unique and appears on the vessel’s registration and title.

A provision that incentive fees will be paid only for returns exceeding some specified level.

A financial instrument that blend characteristics of debt and equity markets.

(US) The pledging of securities or assets as collateral to secure a loan.

(UK) The trade association which represents IFAs.

(UK) An organisation established in 1989 to improve the image of Independent Financial Advisers (IFAs) and their work and to encourage consumers to seek independent financial advice.

International Financial Center

A rogue trader whose speculative activities during the 1980s and 1990s cost Daiwa Bank Corp. USD 1.1 billion.

Offer, in a contract.

A contract where the bank or financier buys and leases equipment or other assets to the business owner for a fee. The duration of the lease as well as the fee are set in advance. The bank remains the owner of the assets. This type of contract is a classical Islamic financial product. Leasing is also a lawful method of earning income, according to Islamic law. In this method, tangible assets such as machinery, a car, a ship, a house, can be leased by one person (lessor) to the other (lessee) for a specific period against a specific price. The benefit and cost of the each party are to be clearly spelled out in the contract so that any ambiguity (Gharar) may be avoided.

Letting on lease. Sale of a definite usufruct of any asset in exchange of definite reward. It refers to a contract of land leased at a fixed rent payable in cash and also to a mode of financing adopted by Islamic banks. It is an arrangement under which the Islamic banks lease equipments, buildings or other facilities to a client, against an agreed rental.

Mode of financing adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, a building or other facility for the client against an agreed rental together with an undertaking from the client to purchase the equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit which is usually determined in advance.

A mode of financing, by way of Hire-purchase, adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rental as well as the purchase price are fixed in such a manner that the bank gets back its principal sum along with some profit, which is usually determined in advance.

Consensus of all or majority of the leading qualified jurists on a certain Shariah matter in a certain age

Effort, exertion, industry, diligence (Lit.). Technically, endeavor of a jurist to derive or formulate a rule of law on the basis of evidence found in the sources.

Endeavor of a qualified jurist to derive or formulate a rule of law to determine the true ruling of the divine law in a matter on which the revelation is not explicit or certain, on the basis of Nass or evidence found in the Holy Qur’an and the Sunnah. Express injunctions have no room for Ijtihad. Implied injunctions can be interpreted in different ways by way of inference from the accepted principles of the Shariah.

A complex number of the form bi, where b is real, and i is the imaginary number.

An international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements as well as to provide temporary financial assistance to countries to help ease balance of payments adjustment.

A type of futures or option order which gives the trading crowd one opportunity to take the other side of the trade. After being announced, the order will be either be partially or totally filled with any remaining balance immediately cancelled.

Transaction costs that arise for trades which are so large that they cannot be transacted at the best bid or ask price.

The day on which the availability of a prospectus is advertised, and a flotation is officially announced.

A metric of total transaction costs—usually Perold's implementation shortfall.

Alternative name for a local volatility model.

The volatility of the underlying instrument implied by the market value option's price.

A technique of variance reduction for the Monte Carlo method.

A term used in banking which refers to settlement of payments between accounts both held at the same branch.

An option that would generate profits if exercised now. A call is in-the-money if the underlier value is above the strike price.

A condition where an option has a positive intrinsic value.

A method for settling physical commodity trades.

(UK) A state benefit payable after the expiry of state sickness benefit if a person is still unfit to work.

(US) A stock option that specifies a set number of shares at a specific option price extending over a given period, which is free of tax when granted and when exercised.

Money received by an individual as a salary or from investments.

A corporate bond that only has to pay coupons if the issuer has sufficient income to do so.

(US) The distribution of interest or dividends to the shareholders of a mutual fund.

A facility which allows a delay in buying an annuity if rates should be low when retirement age is reached.

(UK) An endowment plan which carries an option at maturity for the proceeds to be paid in the form of a regular income.

Income received from property letting is subject to income tax. The amount taxable is the amount receivable in the tax year. If an owner occupier or tenant rents out a room he may receive up to a certain annual income without incurring a tax liability.

A fund that aims to pay a high dividend to its shareholders by investing in bonds or shares which themselves produce good income, either through high rates of interest or high dividend yields.The focus of such a fund is resolutely on income and it does not seek capital appreciation.

(UK) People aged 65 to 74 are entitled to an additional personal tax allowance provided total earnings do not exceed a given amount.

An insurance policy which pays out regular sums of money, up to retirement date, to the insured person in the event that they are no longer able to work.

An endowment plan which carries an option at maturity for the proceeds to be paid in the form of a regular income.

Shares bought in anticipation of an above average income being produced. Also referred to as high yield shares.

A financial statement that shows a company's revenues and expenses (or profit/loss position) over a period of time.

Common stock that pays dividends at a higher-than-average rate, resulting in a higher yield for stockholders.

A compulsory tax on employment and investment income.

See: 'tax allowances'

A 19th century legal innovation that streamlined the formation of corporations.

When the cover and premiums increase every year.

Another expression for escalating annuity.

An increasing term assurance policy provides either an automatically escalating sum assured, or includes an option to increase cover during the term of the policy. Unlike a level term assurance where, with inflation, the real value of the sum policy reduces over time.

See Incurred But Not Reported

The liability for future payments on losses that have already occurred, but have not yet been reported, either to the reinsured or to the reinsurer.

A square matrix that is neither positive semidefinite nor negative semidefinite.

An indemnity is a sum paid by one person to another by way of compensation for a particular loss suffered by the second person.

Where a life company pays commission to an agent, the company does so on the proviso it will be entitled to take back some or all of the commission if the policy is cancelled within a given period. Also known as 'clawback'.

A policy which covers the insured against the loss of an asset.

A bond's loan agreement.

In the context of financial risk management, the segregation of risk management and risk taking functions.

A person qualified to give financial advice to clients on life assurance, pensions, funds, and other financial products, who is not tied to any one financial institution.

A white noise with independent terms.

It reflects movements in financial markets, indicating market prices and shares of companies. Examples are: the Down Jones Industrial Index, the Russell 2000 Index, Standard & Poor's 500 Composite Stock Index, and the EAFE Index.

An investment strategy that exploits divergences between actual futures prices and their theoretically correct prices to make a profit.

An index fund or index tracker is a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions.

Scaled proportional to the change in the retail price index or other measure of the cost of living.

(UK) Family income assurance in which the assured may, if he or she chooses, increase premiums in line with the retail price index.

(UK) Term assurance in which premiums are increased in line with the retail price index.

Call or put options on an index such as the Standard and Poor's 500 Index or the FTSE 100 Index. Index options are exercisable into cash rather than the underlying shares in the index. This differentiates them from equity options which are exercisable into the shares to which the option relates.

Indexation is an allowance which reduces the taxable gain on an investment by increasing its base cost. It does this by applying a percentage uplift to the acquisition cost which increases according to the length of time that you have held the investment.

A procedure that adjusts the reinsured's retention and limit under excess of loss reinsurance contracts in accordance with the fluctuations of a published economic index, such as wage, price and cost-of-living.

Taxation which is levied in an indirect way rather than being charged directly on an individual's income or estate, such as value added tax (VAT) charged on goods and services in the UK.

(US) A service for individual investors which puts their orders at the head of any Tandem Systems Queue.

(US) A tax-deferred retirement savings account which may be set up by employed people.

Established specifically for taxable funds distributing from a tax-qualified retirement plan.

A method of planning for retirement that enables individuals to save up to $2,000 annually.

(UK) A tax-free saving scheme which allows investors to chose two components: equities and cash. There are strict limits on how much they can put in each component. ISA plans are sold by stockbrokers, IFAs, fund managers, banks and other authorised financial institutions.

The London Stock Exchange's report provides historic turnover data for individual equity and fixed interest securities, in a report format, on a daily, monthly or yearly basis.

(UK) An assurance policy on the life of an individual where weekly or monthly premiums are regularly paid to the assurance company by way of their agent who collects directly from the policyholder's home. This type of assurance is now virtually extinct.

Certain catastrophe reinsurance contracts may have a clause requiring that the industry loss must be of a certain size for the cover to trigger.

The procedure within a VaR measure that characterizes a joint probability distribution for key factors.

Prices increase over a period of time, usually annualised for comparative purposes.

Tax payable to the government based on the value of assets inherited.

A charge imposed by a fund management company to cover administrative costs and any commission that has to be paid to an intermediary (also known as front end load).

(US) The payment which investors have to make to a broker to trade on margin, commonly used in trading futures and contracts for difference. Initial margin is usually set at a percentage of the value of the contracts being traded.

A deposit the client gives to a broker before he/she can invest in a future position.

Stock issued to the public for the first time by a privately owned company or a privatised government enterprise.

(UK) The government department responsible to the Treasury for the collection of direct taxes including income tax, capital gains tax and inheritance tax.

When a company registered for value added tax (VAT) buys goods or services from another supplier, VAT is charged. This is known as input tax.

Illegal share dealings by employees of a company where they have used confidential information for their own gain or the gain of their associates.

Price-sensitive information about a company that has not yet been made public.

An illegal activity that involves trading by management, major shareholders or employees of a firm using information that is not yet publicly available to the markets.

The inability of a person or company to settle debts when they become payable.

A clause in a reinsurance contract which may be required by state insurance law or regulation, under which the reinsurer agrees that reinsurance proceeds will be paid directly to the liquidator of an insolvent insurer on claims allowed in the insolvency proceedings.

A property inspector evaluates the condition of the property.

An electronic 'stock market' service owned by Reuters which enables members to display bid and offer quotes for stocks and to transact between themselves without using brokers.

UK professional body which promotes the development of financial planning. The Institute was set up in 1986 and draws its members from accountancy, insurance, taxation, stock broking, education and legal professions.

A financial institution which invests large amounts of money in the stock, bond and other financial markets.

A contract in which payment of premiums covers the insured against something which may, or may not occur. In the UK insurance is differentiated from assurance (life assurance) which is protection against something which will inevitably occur.

A person specialising in insurance matters and who gives advice to and arrange cover on behalf of his/her clients.

See: 'ombudsman'

The amount payable by the insured in return for indemnification against specified risks.

A tax imposed on certain insurance premiums where the risk is located in the UK.

A person or company acquiring insurance.

Assets which are non-physical in form, such as patents, goodwill, trademarks and copyrights.

The set of numbers {…, –2, –1, 0, 1, 2, …}.

An insurance product that includes a combined lines policy with a financial product cover.

A type of default model.

The process of payment clearance between two banks.

The process of payment clearance between two branches of the same bank.

A futures spread where the contracts are for different underliers.

Earnings paid by a security such as a bond, a certificate of deposit or an annuity, or money paid for the use of money, for example in a loan.

Interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.

A measure of a company's leverage. It equals earnings before interest and tax (EBIT) divided by interest expense, and provides an indication of a company's ability to meet interest payments.

The legal right to receive income from, or occupy, trust property.

The total amount of interest charges paid in the previous year.

The total amount of interest charges paid so far in the current year.

An accounting term which refers to the amount a company pays in the form of interest on cash borrowings.

The percentage rate that is charged by the creditor for the money borrowed. This may be different from the APR.

A derivative instrument which is linked to interest rates.

A derivative instrument which is linked to interest rates.

An imbalance in the assets and liabilities being repriced during a given period.

An arbitrage condition that must hold between the spot interest rates of different currencies.

The risk associated with holding a debt security such as a bond when interest rates are volatile.

Spreads between interest rates.

Where two parties trade the cashflows corresponding to different securities without actually exchanging ownership on those securities.

An accounting term which refers to the amount of income a company receives in the form of interest payments on its cash.

A mortgage where regular payments only meet the interest requirements. The capital amount outstanding remains the same and the borrower will need to make additional provision for repaying the loan.

A term which means in the meantime. See 'interim bonus', 'interim dividend' and 'interim results'.

(UK) A bonus declared by life companies when maturity of a with profits policy or death of the assured occurs between normal bonus declaration dates.

The dividend declared before annual earnings are established.

The results reported by a company for the first six months of its financial year. In general, interim results are made public within three months of the end of the interim period.

(US) It allows regulatory staffs of the US securities exchanges and the NASD to co-ordinate industry-wide efforts to exchange market data.

An electronic communications network that links nine US markets: the New York (NYSE), American (AMEX), Boston (BSE), Chicago (MSE), Cincinnati (CSE), Pacific (PSE) and Philadelphia (PHLX) stock exchanges, the Chicago Board Options Exchange (CBOE), and the NASD. The system enables market professionals to interact with their counterparts in other markets whenever the nationwide Consolidated Quote System (CQS) shows a better price.

An agent, broker or financial institution who can give advice and act as a middle person between a company and a client.

The interest rate which, when used as the discount rate for a series of cash flows, gives a net present value of zero.

The US agency responsible for the collection of federal taxes including personal and corporate income taxes, excise and gift taxes.

(UK) A fund whose portfolio comprises a range of securities from markets around the world.

A fund formed in the mid 1940s by industrialised countries to stabilise exchange rates, promote international trading and provide short term loans to member countries with balance of payments problems.

The international standard setter for securities markets. The Organization's wide membership regulates more than 90% of the world's securities markets.

An international organization representing securities regulators.

Europe's leading energy futures and options exchange and the second largest in the world.

International code for a listed security.

A facility provided by banks which enables customers to conduct banking transactions online.

In the mathematical subfield of numerical analysis, interpolation is a method of constructing new data points from a discrete set of known data points.

A global remapping implemented using interpolation.

The condition of the estate of a person who dies owning property greater than the sum of his/her enforceable debts and funeral expenses without having made a valid will or other binding declaration.

A person who did not have a will when he/she died.

A futures spread where both futures are on the same underlier but have different maturities.

The component of an option's market value that could be realized by exercising the option immediately.

(UK) An individual or firm who can perform all the functions of a broker except to accept money, securities, or property from a customer.

Distribution of assets made from the principal of a trust.

A floater whose coupon varies inversely to its reference rate.

A CMO tranch structured as an inverse floater.

The act of investing; using money or capital in an enterprise to make profits.

A firm, acting as underwriter or agent, that serves as an intermediary between an issuer of securities and investing institutions, and which advises corporate, institutional and sovereign clients on their acquisitions, disposals, capital raising, structuring and risk management.

(UK) A unit-linked single premium whole life assurance policy. Part of the premium gives life cover whilst the balance is invested in unitised funds.

The Financial Services Act 1986 defines investment business to include dealing, arranging deals in, managing and advising on investments in addition to the setting up and operation of collective investment schemes.

A group of individuals who invest their capital collectively.

A company which invests the funds of small private investors in a range of securities. This enables fund shareholders to partake in ownership of a diversified portfolio of shares.

US legislation authorizing the SEC to regulate investment companies.

An open-ended collective investment vehicle, similar to a unit trust. As with unit trusts, the money invested by savers is pooled, and then invested in the markets by professional fund managers appointed by the ICVC.

It refers to bonds issued by companies or institutions with a higher level of financial standing (rated AAA to BBB).

A bond whose credit rating is BBB or better.

Income, paid from an investment, such as dividends and interest.

An account whereby a financial institution is given discretionary power with regard to investment decisions on behalf of the investor.

A set of financial assets chosen by an investor.

A Directive produced by the European Commission in 1993 regarding the provision of investment services within the member states of the European Union. The Directive has been described as the ‘passport to Europe’ for securities houses.

A closed-end fund with a fixed number of shares which are traded on the secondary markets similarly to corporate stocks.

See: 'Financial Services Compensation Scheme'.

(UK) A compensation scheme for investors with operating rules set by the Financial Services Authority (FSA). This scheme was replaced by the Financial Services Compensation Scheme (FSCS) in December 2001.

A document, issued by a person or company, indicating to the recipient the amount of money owed to that person or company for goods and/or services supplied.

A mortgage-backed security whose payments derive exclusively from the interest payments on the underlying mortgages. Unexpected prepayments or defaults impair the value of IOs, curtailing payments of interest on the mortgages.

An international organisation representing securities regulators designed to promote high standards of regulation, exchange information, establish standards and carry out an effective surveillance of international securities transactions by the means of a rigorous application of the standards and by effective enforcement against offenses.

An option strategy with limited risk and limited profit potential that involves both a long (or short) straddle, and a short (or long) combination.

(UK) Securities, such as some debentures and certain government loan stock which do not have a redemption date.

A type of trust that cannot be revoked or changed in any way.

Refers to immoderateness, exaggeration and waste and covers spending on lawful objects but exceeding moderation in quantity or quality; spending on superfluous objects while necessities are unmet; spending on objects which are incompatible with the economic standard of the majority of the population.

The number of shares of a company on sale to the public at a given time.

The price at which a company's shares are offered to the market for the first time.

That part of a company's authorized capital that has already been issued to shareholders.

The amount of authorised share capital that shareholders have subscribed to a company for share ownership.

A company or public sector entity which has shares, bonds or other security listed on a stock exchange.

A financial institution which launches the shares of new companies on a stock exchange.

Doctrine of Islamic law that allows exception to strict legal reasoning, or guiding choice among possible legal outcomes, when considerations of human welfare so demand

A contract of acquisition of goods by specification or order where the price is paid progressively in accordance with the progress of a job. An example would be for the purchase of a house to be constructed, payments are made to the developer or builder according to the stage of work completed. This type of financing along with bai salam are used as purchasing mechanisms, and murabaha and bai muajjal are for financing sales.

Contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. A manufacturer or builder agrees to produce or build a well described good or building at a given price on a given date in the future. Price can be paid in installments, step by step as agreed between the parties. Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, and building of bridges, roads and highways.

In calculus, a matrix of partial derivatives.

Ignorance, lack of knowledge; indefiniteness in a contract, sometime leading to Gharar.

A charting technique that indicates the range of a day's prices, the opening and closing prices and whether the market moved up or down during the trading session.

(UK) A dealer in shares prior to the event known as Big Bang in October 1986. Jobbers dealt with investors only via stockbrokers who advised their clients on share transactions. After Big Bang, jobbers were replaced by market makers.

A family of curves used to model probability density functions.

Typically a bank or brokerage account in the names of two (or more) people.

The legal liability of two or more people for claims against or debts incurred by them jointly.

Income usually relevant to two people which continues until the death of the second person.

Income usually relevant to two people which continues until the death of the first person only.

An assurance policy usually taken out on two lives, typically husband and wife. Under this type of policy, the sum assured is payable at the event of the first death.

Ownership of property by two or more persons.

A tax return completed and signed by two people, usually a husband and wife.

Pioneer hedge fund manager.

Stipulated price for performing any service (Lit.). Technically applied in the model of Islamic banking by some. Bank charges and commission have been interpreted to be ju'ala by the jurists and thus considered lawful.

Joalah constitutes wages, pay, stipend or reward (Lit.). Legally, it is a contract for performing a given task against a prescribed fee in a given period. A similar contract is ‘Ujrah’ in which any work is done against stipulated wage or fee.

A ruling by a court of law.

(US) A certificate of deposit with a denomination of $100,000 and above. They are usually purchased by large institutions such as banks and insurance companies.

A stochastic process that combines random jumps with a geometric Brownian motion.

A bond whose credit rating is below BBB-.

(UK) A London Stock Exchange term for South African shares.

Refers to something that is delayed; appears in a maxim forbidding the sale of al-Kali bil-Kali i.e. the

A term for Australian shares with emphasis on mining, tobacco and land companies.

Alternative name for the Greek factor sensitivity vega.

(US) A tax deferred retirement savings plan for the self-employed. Contributions are based on a percentage of earned income and are tax deductible.

A risk factor whose conditional probability distribution is directly modelled by a VaR measure.

The vector of key factors.

An insurance policy taken out on the life of a company executive or senior employee whose death would cause significant loss to the company.

Gain accompanies liability for loss; a Hadith forming a legal maxim and a basic principle.

Option or a power to annul or cancel a contract.

Option of the contracting session; the power to annul a contract possessed by both contracting parties as long as they do not separate.

A right, stipulated by one or both of the parties to a contract, to cancel the contract for any reason for a fixed period of time.

(US) A tax imposed on the investment income of children under the age of 14 where such income exceeds a certain level.

A commercial implementation of the asset value model of credit risk.

Although it currently rarely applies, this is a motor insurance term describing an agreement between insurance companies where each pays the claims of its own clients following an accident.

A type of barrier option that is latent and only begins to function as a normal option once a certain price level is reached before expiration. A knock-in option might not knock in at all. A knock-in option is typically a currency or commodity option.

A type of barrier option that expires worthless if a specific price threshold is crossed by the option’s underlying security. A knock-out option is typically a currency or commodity option.

(US) The ethical principle which ensures that investment advisors know detailed information about their clients' risk tolerance, investment knowledge and financial position.

Manager of the Eifuku Master Fund, a Japanese hedge fund that failed in 2002.

A coin minted in South Africa containing one ounce of pure gold and originally intended as an investment item.

A parameter describing the peakedness and tails of a probability distribution.

A hedge fund that defrauded investors during the early 2000s.

A property owner who rents it to another party called a tenant.

A policy is deemed to have lapsed when the policyholder fails to pay the renewal premiums.

(US) The expiry of an option without being exercised by the holder. In the UK this is known as abandonment.

The term refers to the very largest companies with the highest market capitalisations. So companies in the FTSE 100 would certainly be large caps and those in the FTSE MID 250 would be large caps or mid caps.

The final day on which notices of intent to deliver on futures contracts may be issued.

The total amount of money on most recent payment.

The date that the most recent payment was received.

It refers to the last day for trading in a contract for a particular delivery or expiry month.

The will last executed by an individual, which revokes any former existing wills.

A charge imposed by a lender to a borrower when the borrower fails to make payment on the due date.

A term used by the London Stock Exchange to denote that a trade was not reported in accordance with the Exchange's rules on trade reporting.

Manager of the Lancer Offshore Fund, a hedge fund that defrauded investors during the early 2000s.

The process of cleaning illicitly gained money so that it appears to others to have come from a legitimate source.

The notion that, if two assets have identical cash flows, they should have the same market value.

(UK) The professional body for solicitors in England and Wales.

Chairman of energy trading firm Enron, which failed spectacularly in 2001.

Term used to denote a stratum of cover, e.g. for the part of a loss between 10,000 and 50,000, or between 50,000 and 250,000.

Insurance policy arranged in layers.

This term is used when two or more reinsurers participate in a reinsurance contract. The leading reinsurer usually has the largest participation and sets the terms.

A contract in which the legal owner of property or other asset agrees to another person using that property or asset in return for a regular specified payment over a set term.

A situation whereby a property is sold by its owner to another person or company on condition that the purchaser leases the property back to the original owner for an agreed rent over a set term.

Land which is rented from the owner for a specified term under a lease.

A book in which the accounts of a business are kept. In the UK the main ledgers operating within a business are the nominal ledger, the sales ledger and the purchase ledger.

The rogue trader who brought down Barings Bank in February 1995.

A term describing one side of a position with two or more sides. When a trader legs into a spread, they establish one side first, hoping for a favourable price movement so the other side can be executed at a better price.

The making of a gift by will.

Insurance that covers the cost of legal proceedings.

(US) A list of approved securities in which institutions such as banks, life insurance companies and pension funds may invest.

A legal concept under which corporations are treated as artificial people, with a similar capacity for legal rights and obligations.

Risk from uncertainty due to legal actions or uncertainty regarding the interpretation of contracts, laws or regulations.

A person or company that offers to lend money to a borrower for a given period of time.

An institution, usually a central bank, that can step in and lend funds to a bank facing a panic (sudden withdrawal of funds by depositors). In the US the lender of last resort is the Federal Reserve Bank whilst in the UK the Bank of England has this role.

Leptokurtosis describes a probability function which is similar to the bell curve. People studying the volatility of stocks usually find that the variance of a stock is leptokurtic. This means that most of the time the stock moves around somewhat randomly.

A person to whom a lease is granted, known as a tenant.

A person who grants a lease, known as a landlord.

A financial instrument obtained from a bank that guarantees the availability of funds to be collected in the future under a reinsurance contract. In the non-commercial setting, these are known as standby credits in the event of non-performance by the obligor.

In a rights issue of shares, a letter of renunciation is the form attached to an allotment letter which the holder completes should he wish to transfer entitlement to another person or to renounce his rights absolutely.

See: 'memorandum of wishes'.

An order made by the court empowering the administrator to settle the affairs of a deceased person in accordance with his/her will.

Fixed premiums for a fixed number of years, and a full payout on a claim at any point.

Leverage is used to amplify investment gains and losses on money invested. Financial leverage is created by using other people's money to increase the earning power of the person's investment.

A measure of 'true gearing' which measures how much more a warrant will move in percentage terms against the underlying asset. Calculated by multiplying the delta by gearing.

A ratio of a company's debt to that same company's shareholders' equity.

The takeover of a company by investors who use the company's own assets as collateral to raise the money to finance the bid.

An inverse floater with coupon leverage greater than one.

Investment banker who formed an insider trading ring during the 1980s.

The debts of a person or company.

Having liabilities that reprice earlier than assets.

A non-vanilla swap customized to change the character of a specific liability.

London interbank bid rate.

London Interbank Offered Rate.

A legal security interest, held by a lender, on an asset taken as collateral.

A lien-free vehicle/vessel is owned outright by an individual(s), listing that individual(s) on the title as the registered owner. There is no outstanding loan obligation on a lien-free vehicle/vessel.

A liened vehicle/vessel is a vehicle/vessel that has an outstanding loan obligation. The Certificate of Title for the vehicle/vessel lists the individual(s) as the registered owner with the lender listed as the lienholder.

An insurance policy which pays a lump sum on the death of the insured.

A tax relief of 15% on the premiums paid into long-term insurance policies. It applies only to policies lasting for more than 10 years and issued before 13 March 1984.

A life assurance policy taken out on the life of another person rather than the policyholder.

See 'individual savings account'.

The average of Libor and Libid

Risk limit.

1. The limit of indemnity to be the maximum sum that an excess of loss reinsurer will pay for any event, occurrence, accident or in the aggregate any one year; 2. The capacity made available to the cedant by a surplus treaty; 3. The maximum gross sum insured, after facultative reinsurance, the cedant may write on a policy to be ceded to a quota share.

A price that has advanced or declined the permissible amount during one trading session, as fixed by the rules of a contract market.

An order to buy shares up to a maximum price or sell down to a minimum price.

The maximum buying price or minimum selling price a client is prepared to pay or accept for shares or commodities.

Given a risk limit, the amount of risk being taken as a fraction of the limit.