BANKING TERMINOLOGY

•  Accrued interest: Interest due from issue date or from the last coupon payment date to the settlement date. Accrued interest on bonds must be added to their purchase price.

• Arbitrage: Buying a financial instrument in one market in order to sell the same instrument at a higher price in another market.

• Ask Price: The lowest price at which a dealer is willing to sell a given security.

• Asset-Backed Securities (ABS): A type of security that is backed by a pool of bank loans, leases, and other assets. Most ABS are backed by auto loans and credit cards – these issues are very similar to mortgage-backed securities.

• At-the-money: The exercise price of a derivative that is closest to the market price of the underlying instrument.

• Basis Point: One hundredth of 1%. A measure normally used in the statement of interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points.

• Bear Markets: Unfavorable markets associated with falling prices and investor pessimism.

• Bid-ask Spread: The difference between a dealer's bid and ask price.

• Bid Price: The highest price offered by a dealer to purchase a given security.

• Blue Chips: Blue chips are unsurpassed in quality and have a long and stable record of earnings and dividends. They are issued by large and well-established firms that have impeccable financial credentials.

• Bond: Publicly traded long-term debt securities, issued by corporations and governments, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity.

• Book Value: The amount of stockholders' equity in a firm equals the amount of the firm's assets minus the firm's liabilities a [...]
  
  
  

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