Học: CFA Level 1 glossary 2020 | Quizlet

A priori probability

A probability based on logical analysis rather than on observation or personal judgment.

abnormal return

The amount by which a security's actual return differs from its expected return, given the security's risk and the market's return.

absolute advantage

A country's ability to produce a good or service at a lower absolute cost than its trading partner.

Absolute dispersion

The amount of variability present without comparison to any reference point or benchmark.

Absolute frequency

The number of observations in a given interval (for grouped data).

Accelerated book build

An offering of securities by an investment bank acting as principal that is accomplished in only one or two days.

Accelerated methods

Depreciation methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset's useful life.

Accounting costs

Monetary value of economic resources used in performing an activity. These can be explicit, out-of-pocket, current payments, or an allocation of historical payments (depreciation) for resources. They do not include implicit opportunity costs.

Accounting profit

Income as reported on the income statement, in accordance with prevailing accounting standards, before the provisions for income tax expense. Also called income before taxes or pretax income.

Accounts payable

Amounts that a business owes to its vendors for goods and services that were purchased from them but which have not yet been paid.

Accounts receivable turnover

Ratio of sales on credit to the average balance in accounts receivable.

Accrued expenses

Liabilities related to expenses that have been incurred but not yet paid as of the end of an accounting period—an example of an accrued expense is rent that has been incurred but not yet paid, resulting in a liability "rent payable." Also called accrued liabilities.

Accrued interest

Interest earned but not yet paid.

Acid-test ratio

A stringent measure of liquidity that indicates a company's ability to satisfy current liabilities with its most liquid assets, calculated as (cash + short-term marketable investments + receivables) divided by current liabilities.

Acquisition method

A method of accounting for a business combination where the acquirer is required to measure each identifiable asset and liability at fair value. This method was the result of a joint project of the IASB and FASB aiming at convergence in standards for the accounting of business combinations.

Action lag

Delay from policy decisions to implementation.

Active investment

An approach to investing in which the investor seeks to outperform a given benchmark.

Active return

The return on a portfolio minus the return on the portfolio's benchmark.

Active strategy

In reference to short-term cash management, an investment strategy characterized by monitoring and attempting to capitalize on market conditions to optimize the risk and return relationship of short-term investments.

Activity ratios

Ratios that measure how efficiently a company performs day-to-day tasks, such as the collection of receivables and management of inventory. Also called asset utilization ratios or operating efficiency ratios.

Add-on rates

Bank certificates of deposit, repos, and indexes such as Libor and Euribor are quoted on an add-on rate basis (bond equivalent yield basis).

Addition rule for probabilities

A principle stating that the probability that A or B occurs (both occur) equals the probability that A occurs, plus the probability that B occurs, minus the probability that both A and B occur.

Agency bonds

See quasi-government bond.

Agency RMBS

In the United States, securities backed by residential mortgage loans and guaranteed by a federal agency or guaranteed by either of the two GSEs (Fannie Mae and Freddie Mac).

Aggregate demand

The quantity of goods and services that households, businesses, government, and foreign customers want to buy at any given level of prices.

Aggregate demand curve

Inverse relationship between the price level and real output.

Aggregate income

The value of all the payments earned by the suppliers of factors used in the production of goods and services.

Aggregate output

The value of all the goods and services produced in a specified period of time.

Aggregate supply

The quantity of goods and services producers are willing to supply at any given level of price.

Aggregate supply curve

The level of domestic output that companies will produce at each price level.

Aging schedule

A breakdown of accounts into categories of days outstanding.

All-or-nothing (AON) orders

An order that includes the instruction to trade only if the trade fills the entire quantity (size) specified.

Allocationally efficient

A characteristic of a market, a financial system, or an economy that promotes the allocation of resources to their highest value uses.

Alternative data

Non-traditional data types generated by the use of electronic devices, social media, satellite and sensor networks, and company exhaust.

Alternative investment markets

Market for investments other than traditional securities investments (i.e., traditional common and preferred shares and traditional fixed income instruments). The term usually encompasses direct and indirect investment in real estate (including timberland and farmland) and commodities (including precious metals); hedge funds, private equity, and other investments requiring specialized due diligence.

Alternative trading systems

Trading venues that function like exchanges but that do not exercise regulatory authority over their subscribers except with respect to the conduct of the subscribers' trading in their trading systems. Also called electronic communications networks or multilateral trading facilities.

American depository receipt

A US dollar-denominated security that trades like a common share on US exchanges.

American depository share

The underlying shares on which American depository receipts are based. They trade in the issuing company's domestic market.

American-style

Type of option contract that can be exercised at any time up to the option's expiration date.

Amortisation

The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity.

Amortised cost

The historical cost (initially recognised cost) of an asset, adjusted for amortisation and impairment.

Amortizing bond

Bond with a payment schedule that calls for periodic payments of interest and repayments of principal.

Amortizing loan

Loan with a payment schedule that calls for periodic payments of interest and repayments of principal.

Annual percentage rate

The cost of borrowing expressed as a yearly rate.

Annuity

A finite set of level sequential cash flows.

Annuity due

An annuity having a first cash flow that is paid immediately.

Anticipation stock

Excess inventory that is held in anticipation of increased demand, often because of seasonal patterns of demand.

Antidilutive

With reference to a transaction or a security, one that would increase earnings per share (EPS) or result in EPS higher than the company's basic EPS—antidilutive securities are not included in the calculation of diluted EPS.

Arbitrage

1) The simultaneous purchase of an undervalued asset or portfolio and sale of an overvalued but equivalent asset or portfolio, in order to obtain a riskless profit on the price differential. Taking advantage of a market inefficiency in a risk-free manner. 2) The condition in a financial market in which equivalent assets or combinations of assets sell for two different prices, creating an opportunity to profit at no risk with no commitment of money. In a well-functioning financial market, few arbitrage opportunities are possible. 3) A risk-free operation that earns an expected positive net profit but requires no net investment of money.

Arbitrage-free pricing

The overall process of pricing derivatives by arbitrage and risk neutrality. Also called the principle of no arbitrage.

Arbitrageurs

Traders who engage in arbitrage. See arbitrage.

Arithmetic mean

The sum of the observations divided by the number of observations.

Arms index

A flow of funds indicator applied to a broad stock market index to measure the relative extent to which money is moving into or out of rising and declining stocks.

Artificial intelligence

Computer systems that exhibit cognitive and decision-making ability comparable (or superior) to that of humans.

Asian call option

A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option, or $0, whichever is greater.

Ask

The price at which a dealer or trader is willing to sell an asset, typically qualified by a maximum quantity (ask size). See offer.

Ask size

The maximum quantity of an asset that pertains to a specific ask price from a trader. For example, if the ask for a share issue is $30 for a size of 1,000 shares, the trader is offering to sell at $30 up to 1,000 shares.

Asset allocation

The process of determining how investment funds should be distributed among asset classes.

Asset-backed securities

A type of bond issued by a legal entity called a special purpose entity (SPE) on a collection of assets that the SPE owns. Also, securities backed by receivables and loans other than mortgages.

Asset-based loan

A loan that is secured with company assets.

Asset-based valuation models

Valuation based on estimates of the market value of a company's assets.

Asset beta

The unlevered beta; reflects the business risk of the assets; the asset's systematic risk.

Asset class

A group of assets that have similar characteristics, attributes, and risk/return relationships.

Asset swap

Converts the periodic fixed coupon of a specific bond to a Libor plus or minus a spread.

Asset utilization ratios

Ratios that measure how efficiently a company performs day-to-day tasks, such as the collection of receivables and management of inventory.

Assets Resources

controlled by an enterprise as a result of past events and from which future economic benefits to the enterprise are expected to flow.

Assignment of accounts receivable

The use of accounts receivable as collateral for a loan.

At the money

An option in which the underlying's price equals the exercise price.

Auction

A type of bond issuing mechanism often used for sovereign bonds that involves bidding.

Autarkic price

The price of a good or service in an autarkic economy.

Autarky

A state in which a country does not trade with other countries.

Automated Clearing House (ACH)

An electronic payment network available to businesses, individuals, and financial institutions in the United States, US Territories, and Canada.

Automatic stabilizer

A countercyclical factor that automatically comes into play as an economy slows and unemployment rises.

Available-for-sale

Under US GAAP, debt securities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general, available-for-sale debt securities are reported at fair value on the balance sheet, with unrealized gains included as a component of other comprehensive income.

Average accounting rate of return (ARR)

Over the life of a project, the AAR can be defined as the average net income divided by the average book value.

Average fixed cost

Total fixed cost divided by quantity produced.

Average life

See weighted average life.

Average product

Measures the productivity of inputs on average and is calculated by dividing total product by the total number of units for a given input that is used to generate that output.

Average revenue

Total revenue divided by quantity sold.

Average total cost

Total cost divided by quantity produced.

Average variable cost

Total variable cost divided by quantity produced.

Back simulation

Another term for the historical method of estimating VaR. This term is somewhat misleading in that the method involves not a simulation of the past but rather what actually happened in the past, sometimes adjusted to reflect the fact that a different portfolio may have existed in the past than is planned for the future.

Back-testing

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

Backup lines of credit

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

Balance of payments

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

Balance of trade deficit

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

Balance sheet

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

Balance sheet ratios

Financial ratios involving balance sheet items only.

Balanced

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

Balloon payment

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

Bar chart

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

Barter economy

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

Base rates

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

Basic EPS

Net earnings available to common shareholders (i.e., net income minus preferred dividends) divided by the weighted average number of common shares outstanding.

Basis point

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

Basket of listed depository receipts

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

Bearer bonds

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

Behavioral finance

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

Behind the market

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

Benchmark

A comparison portfolio; a point of reference or comparison.