E57 20 New Words

E57 20 New Words by LB

Beta

A measure of volatility or systematic risk of a security or portfolio in comparison to the overall market. A beta of 1 indicates market

Alpha

A performance metric that measures the excess return of an investment relative to a benchmark index. A positive alpha indicates outperformance, while a negative alpha shows underperformance. It reflects an investment manager’s skill in generating returns above the market average. 📈🏆🎯 | excess return, outperformance, investment edge

Correction (Market Correction)

A temporary decline of 10% or more in the price of a security, asset, or market index from its recent peak, often viewed as a healthy adjustment in an overvalued market. It can signal buying opportunities or a market reset. 📉🛠️🔧 | price adjustment, market reset, pullback

Preferred Stock

A type of equity security that offers fixed dividends and has priority over common stock in dividend payments and liquidation but usually lacks voting rights. It combines features of bonds and stocks. 💵🏦💎 | preference shares, hybrid security, fixed

Clearinghouse

An intermediary between buyers and sellers in financial markets that ensures smooth, secure, and timely settlement of trades by reducing counterparty risk and guaranteeing transactions. 🏦🔗✅ | settlement agency, market intermediary, transaction guarantor

Recession

A significant, prolonged downturn in economic activity marked by decreased GDP, rising unemployment, and reduced consumer spending. Typically defined as two consecutive quarters of GDP decline. 📉🌧️💼 | economic downturn, contraction, slump

Treasury Bill (T-Bill)

• - A short-term debt instrument issued by the government with a maturity of one year or less. Sold at a discount and redeemed at face value upon maturity, generating a risk-free return. 💵📜🟢 | short-term bond, government debt, zero-coupon bond

• Treasury Note (T-Note)

• - A medium-term debt security issued by the government with maturities from 2 to 10 years. Offers semi-annual interest payments and is considered low-risk with fixed interest rates. 💰📜🔒 | government bond, fixed-income security, mid-term bond

• Treasury Bond (T-Bond)

• A long-term debt security issued by the government with maturities of 20 to 30 years. Pays fixed interest every six months and is considered virtually risk-free. 💵🏛💳 | long-term bond, government security, fixed-income investment

Loan

A financial arrangement where a lender provides money to a borrower with an agreement to repay the principal amount plus interest over a specified period. Used for personal, business, or investment purposes. 💰🤝📜 | credit facility, debt obligation, financing

Deficit

A financial state where expenses exceed revenues over a specific period, often leading to borrowing to cover the shortfall. In government finance, it can result in national debt accumulation. 💸📉🚨 | shortfall, negative balance, budget gap

Surplus

A financial state where revenues exceed expenses over a specific period, resulting in extra funds available for investment, savings, or debt reduction. 💵📈✅ | positive balance, excess funds, profit

Hedge Fund

A private investment fund that employs diverse, high

Private Equity

A form of investment where capital is invested in private companies or public companies to take them private. Involves buying, restructuring, and selling companies for profit. 🚀🏢💼 | buyout fund, investment capital, growth equity

Venture Capital

A type of private equity focused on early

Derivative

A financial contract deriving its value from an underlying asset such as stocks, bonds, commodities, or currencies. Used for hedging, speculation, or arbitrage. ⚖️📜🔧 | financial instrument, contract, hedging tool

Commodity

A raw material or primary agricultural product that can be bought and sold in standardized contracts on exchanges. Examples include oil, gold, wheat, and coffee. 🌾💰⛽ | raw material, traded good, natural resource

Forex (Foreign Exchange)

The global marketplace for trading currencies, where participants buy, sell, exchange, and speculate on currency pairs. The largest financial market in the world, operating 24/5. 💱🌍💵 | currency trading, FX market, foreign currency exchange

Index Fund

A type of mutual fund or ETF designed to track the performance of a specific index (e.g., S&P 500), offering broad market exposure, low costs, and passive management. 📊🏦🌍 | passive fund, market tracker, index tracker

Budget

A financial plan that outlines expected income and expenditures over a specific period. Used by individuals, businesses, and governments to manage finances, allocate resources, and control spending. 💵📊📅 | financial plan, spending plan, expense forecast