Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Monthly Financial Term Picks:

Commercial risk

The risk that a foreign debtor will be unable to pay its debts because of business events,
such as bankruptcy.

Forward Fed funds

Fed funds traded for future delivery.

Gilts

British and Irish government securities.

Hedge ratio (delta)

The ratio of volatility of the portfolio to be hedged and the return of the volatility of the
hedging instrument.

Lock-up CDs

CDs that are issued with the tacit understanding that the buyer will not trade the certificate.
Quite often, the issuing bank will insist that the certificate be safekept by it to ensure that the understanding is
honored by the buyer.

Open contracts

Contracts which have been bought or sold without the transaction having been completed by
subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical
commodity.

Rate risk

In banking, the risk that profits may decline or losses occur because a rise in interest rates forces up
the cost of funding fixed-rate loans or other fixed-rate assets.

Single factor model

A model of security returns that acknowledges only one common factor.
See: factor model.

Trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.

Wi wi

Treasury bills trade on a wi basis between the day they are auctioned and the day settlement is made.
Bills traded before they are auctioned are said to be traded wi wi.

cost allocation

the assignment, using some reasonable basis,
of any indirect cost to one or more cost objects

standard quantity allowed

the quantity of input (in hours or some other cost driver measurement) required at standard for the output actually achieved for the period

Constant dollars

See real dollars.

Income Smoothing

A form of earnings management designed to remove peaks and valleys
from a normal earnings series. The practice includes taking steps to reduce and “store” profits
during good years for use during slower years.

Goodwill

Intangible assets of a firm established by the excess of the price paid for the going concern over the value of its assets.