Account operator A legal entity who is a participant of the central depository and intermediates securities account services to investors.
Activity based accounting Accounting method that accounts for revenues and expenses when they occurr even if they have not actually been paid or received.
ADR A negotiable certificate held in a U.S. bank representing a specific number of shares of a foreign stock traded on a U.S. stock exchange. ADRs make it easier for Americans to invest in foreign companies.
American-style option An option which can be exercised at any time between the purchase date and the expiration date. Opposite of European-style option.
Arbitrage Attempting to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Ideally, a pair of opposite transactions that take place simultaneously and generate profit with zero risk.
Asset allocation The process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash, to optimize the risk/reward tradeoff based on an individual's or institution's specific situation and goals.
At-the-money A condition in which the strike price of an option is equal to (or nearly equal to) the market price of the underlying security
Balance of payments An accounting record of all transactions made by a country with over a certain time period, comparing the amount of foreign currency taken in to the amount of domestic currency paid out.
Balance sheet A quantitative summary of a company's financial condition at a specific point in time, including assets, liabilities and net worth.
Banking day A day when banks are open to carry out banking operations.
Basis point One hundredth of a percent (0.01%). Used to measure changes in or differences between yields or interest rates.
Basis point value The change in the price of a bond, per 100 nominal, for a 1 basis point change in its yield to maturity
Beta A quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.
Black-Scholes model A model used to calculate the value of an option, by considering the stock price, strike price and expiration date, risk-free return, and the standard deviation of the stock's return.
Blue chip Stock of a large, national company with a solid record of stable earnings and / or dividend growth and a reputation for high quality management and / or products. More generally, anything of very high quality.
Bond A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.
Bond yield The annual rate of return on an investment, expressed as a percentage. For bonds and notes, it is the coupon rate divided by the market price.
Broker Any individual or firmwhich is in the business of buying and selling securities for itself and others.
Call An option contract that gives the holder the right to buy a certain quantity of an underlying security from the writer of the option, at a specified price (the strike price) up to a specified date (the expiration date).
Capital gain The amount by which an asset's selling price exceeds its initial purchase price. A realized capital gain is an investment that has been sold at a profit.
Cash flow A measure of a company's financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization.
CD (certificate of deposit) Short- or medium-term, interest-bearing debt instrument offered by banks and savings and loans. Low risk, low return.
Clean price The present value of a bond net of accrued interest - i.e. interest accrued since the last coupon date. Most markets quote bonds on a clean price basis, except when the bond is into its final coupon period, when it may be quoted dirty.
Clearing The process of calculating market participants' obligations towards each other and executing cash transfers as part of the settlement process.
Closed investment fund A fund with a fixed number of shares outstanding, and one which does not redeem shares the way a typical mutual fund does. Such funds are often listed on a major stock exchange and trade like other securities. Unlike a typical mutual fund, a closed-end fund's share price can trade above or below its net asset value.
Closing price The price of the last transaction for a given security at the end of a given trading session.
Collateral Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default.
Commission A fee charged by a broker or agent for his/her service in facilitating a transaction, such as the buying or selling of securities.
Common stock Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation.
Compounding A process whereby the value of an investment increases exponentially over time due to compound interest
Convertible bond A corporate bond that can be exchanged, at the option of the holder, for a specific number of shares of the company's preferred stock or common stock.
Corporate actions The term referring to any action involving a company's issued security other than market trading. Corporate actions can be intitatied by the company or by the holder of the securities.( Rights issues, takeovers, debt repayments, announcements of annual or extraordinary general meetings, dividends, etc.)
Corporate bond A bond issued by a corporation.
Counterpart One party of the transaction. A trade takes place between two counterparties.
Coupon The interest rate on a fixed income security, determined upon issuance, and expressed as a percentage of par. Also, the term for each interest payment made to the bondholder.
CP An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory
CPI An inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation.
Credit rating A published ranking, based on detailed financial analysis by a credit bureau, of one's financial history, specifically as it relates to one's ability to meet debt obligations.
Currency option The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of currency at a specified price (the strike price) during a specified period of time
Current assets A balance sheet item which equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year.
Current yield The annual rate of return on an investment, expressed as a percentage. For bonds, it is the coupon rate divided by the market price.
Custodian An entity, often a bank, that safekeeps and administers securities for its customers and that may provide various other services, including clearance and settlement, cash management, foreign exchange and securities lending.
Custody There are generally three types of custody arrangements: domestic custody, global custody and master custody.
Domestic custody involves holding assets held in a country on behalf of its clients, including assets held under sub-custodial arrangements.
Global custody is a range of services for the administration and safekeeping of cross border investments.
Master custody - the custody of domestic and foreign assets of a domestically domiciled, whose assets the master custodian has primary control over, providing a single point of reporting and integration of value added services.
Day order A buy or sell order which automatically expires if it is not executed during that trading session.
Deflation A decline in general price levels, often caused by a reduction in the supply of money or credit. opposite of inflation.
Delivery versus payment The simultaneous transfer of securities and cash that ensures that delivery of securities occurs only if delivery of funds occurs.
Dematerialised securities Electronically held securities for which the physical certificates of ownership have been replaced by book entry records.
Depreciation The allocation of the cost of an asset over a period of time for accounting and tax purposes. Also, a decline in the value of a property due to general wear and tear or obsolescence; opposite of appreciation.
Derivative A financial instrument whose characteristics and value depend upon the characteristics and value of an underlying instrument or asset, typically a commodity, bond, equity or currency. Examples are futures, options, and mortgage-backed securities.
Devaluation A substantial drop in the value of a currency, relative to the price of gold or the currencies of other countries.
Dirty price The present value of a bond including accrued interest - i.e. interest accrued since the last coupon payment date.
Discounted bond A bond which is sold at a price below its face value and returns its face value at maturity.
Diversification 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.
Dividend A declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings.
Dividend reinvestment Using the dividends from an investment to buy more of that investment.
Double Taxation Agreement Inter-governmental treaty developed to avoid the double taxation of income. If interest or dividend income is taxed at source, the investor will not be required to pay the tax in its country of residency.
Duration A measure of the average maturity of a series of cash flows, such as coupons and principal, on a bond. Duration can be used to calculate the market risk associated with a change in yield to maturity.
EPS Total earnings divided by the number of shares outstanding. Companies often use a weighted average of outstanding stock over the reporting term.
Eurobond A bond issued and traded outside the country whose currency it is denominated in, and outside the regulations of a single country; usually a bond issued by a non-European company for sale in Europe.
Eurocurrency Currency deposited by companies and federal governments in banks outside their own country, usually currency of a non-European country deposited in Europe.
European style option An option which can only be exercised for a short, specified period of time just prior to its expiration, usually a single day.
Ex-dividend day The first day of the ex-dividend period. also called reinvestment date.
Expiration date The date on which an option, right or warrant expires, and becomes worthless if not exercised.
Fill or kill An order given to a broker that must immediately be filled in its entirety or, if this is not possible, totally canceled.
Foreign bond A bond issued outside of the issuer_s domicile. Generally the nominal currency of the bond is the currency in circulation in the country the issue will be carried out.
Forward Cash market transaction in which a seller agrees to deliver a specific cash commodity to a buyer at some point in the future.
Free cash flow Operating cash flow (net income plus amortization and depreciation) minus capital expenditures and dividends.
Free of payment The movement of securities which is not dependent on the simultaneous movement of cash countervalue.
FRN (Floating Rate Notes) A bond on which the coupon is reset periodically in line with a money market reference rate such as LIBOR.
Fund manager The individual responsible for making portfolio decisions for a mutual fund, pension fund, or insurance fund.
Fundamental analysis A method of security valuation which involves examining the company's financials and operations, especially sales, earnings, growth potential, assets, debt, management, products, and competition.
Futures A standardised, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date.
GDP The total market value of all final goods and services produced in a country in a given year; equals total consumer, investment and government spending, plus the value of exports minus the value of imports.
GTC (good till cancelled) An order to buy or sell which remains in effect until it is either executed or cancelled
Index A benchmark against which financial or economic performance is measured
Indexing A passive investment strategy in which a portfolio is designed to mirror the performance of a stock index.
Insider An officer or director of a company whos has not publicly known information. Also, any individual who has inside information.
Institutional investor Entity with large amounts to invest, such as investment companies, mutual funds, brokerages, insurance companies, pension funds, investment banks.
Interest rate The interest rate on a fixed income security, determined upon issuance, and expressed as a percentage of par. Also, the term for each interest payment made to the bondholder.
Interest rate risk The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.
Interest swap An exchange of two debt obligations that have different payment streams.
In-the-money Situation in which an option's strike price is below the current market price of the underlier (for a call option) or above the current market price of the underlier (for a put option).
Investment fund Firm that invests the pooled funds of retail investors for a fee. There are two types: open-end (mutual funds) and closed-end (investment trusts).
IPO (initial public offering) The first sale of stock by a company to the public.
ISIN International Securities Identification Number. A coding system developed by ISO with the purpose of creating one unique number on a global basis for identifing securities.
Issue A stock or bond which has been offered for sale by a corporation or government entity, usually through an underwriter or in a private placement.
Issue prospectus A legal document offering securities or mutual fund shares for sale. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her.
Issuer A company or municipality offering (or having already offered) securities for sale to investors.
LIBOR The interest rate that the largest international banks charge each other for loans.
Limit order An order to a broker to buy a specified quantity of a security at or below a specified price or to sell it at or above a specified price (called the limit price).
Long-term bond
Macaulay duration Macaulay duration is a measure of the weighted average life of a bond, taking into account:
a. The size of each cash flow
b. It´s timing
Market A public place where buyers and sellers make transactions, directly or via intermediaries.
Market cap The sum of a corporation's long-term debt, stock and retained earnings. also called invested capital. Also, the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share.
Market maker A brokerage or bank that maintains a firm bid and ask price in a given security by standing ready, willing, and able to buy or sell at publicly quoted prices (called making a market).
Market order A buy or sell order in which the broker is to execute the order at the best price currently available.
Maturity date The date on which a debt becomes due for payment.
Modified duration A measure of the market risk on a bond. Defined as the percentage change in the market value of a bond investment for a 100 basis point change in yield
Money market fund An open-end mutual fund which invests only in money markets.
MTN MTN's are debt instruments predominantly of one to ten years maturity which are issued under one set of master documentation over a period of several years. For this reason they are also referred to as continuously-offered products.
Municipal bond Bond issued by a state, city, or local government to finance operations or special projects.
Mutual fund / open-ended fund An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Benefits include diversification and professional money management. Shares are issued and redeemed on demand, based on the fund's net asset value which is determined at the end of each trading session.
NAV The dollar value of a single mutual fund share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.
Option The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time.
OTC-market The computer and phone system through which over the counter (as well as listed) securities are traded.
Out-of-the-money A call option whose strike price is higher than the market price of the underlying security, or a put option whose strike price is lower than the market price of the underlying security.
P / B ratio A stock's capitalisation divided by its book value.
P / E ratio The most common measure of how expensive a stock is. Equal to a stock's capitalisation divided by its after-tax earnings over a 12-month period.
Payment date The date on which a dividend, mutual fund distribution, or bond interest payment is made or scheduled to be made.
Position The amount of a security either owned (a long position) or owed (a short position) by an investor or dealer.
PPI An inflationary indicator to evaluate wholesale price levels in the economy.
Preferred share Stock type which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. Usually does not carry voting rights.
Primary market The market for new securities issues
Principal The amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest).
Private placement The sale of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds. Does not normally require registration with a country´s Securities Board.
Prospectus A legal document offering securities or mutual fund shares for sale. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her.
Public offering The making available of a new securities issue to the public through an underwriting.
Put An option contract that gives the holder the right to sell a certain quantity of an underlying security to the writer of the option, at a specified price (strike price) up to a specified date (expiration date)
Qualitative analysis Determining the value of an investment, especially a stock, by examining its non-numeric characteristics, such as management, employee morale, customer loyalty, and brand value.
Quantitative analysis The process of determining the value of a security by examining its numerical, measurable characteristics such as revenues, earnings, margins, and market share.
Quoted security A security that is in accordance with a trading provisions of a licensed stock exchange and that can be traded on this exchange.
Record date Date on which an individual must own shares in order to be eligible to receive a declared dividend or capital gains distribution.
Repo A contract in which the seller of debt securities agrees to buy them back at a specified time and price.
Rights A privilege allowing existing shareholders to buy shares of an issue of common stock shortly before it is offered to the public, at a specified and usually discounted price, and usually in proportion to the number of shares already owned.
Risk capital Funds made available for start-up firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided.
Risk / reward trade-off The relation between risk and return that usually holds, in which one must be willing to accept greater risk if one wants to pursue greater returns.
ROA A measure of a company's profitability, equal to a fiscal year's earnings divided by its total assets, expressed as a percentage.
ROE A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage.
S.W.I.F.T. The Society for Worldwide Interbank Financial Telecommunication, established to service payments needs of banking industry through standardised, electronic messages. The securities markets became involved in 1987 with the acceptance of stock exchanges, brokers and depositories into the SWIFT network.
Secondary market A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market.
Security account Whenever a client enters into a custody agreement, Swedbank AS opens an account in its books in the name of client for depositing securities belonging to that client. A cash account is a precondition for opening a securities account.
Security type Different securities as stock, bond, fund share etc.
Settlement date Legal transfer of the title of ownership on securities or other assets. It is normally the completion of a transaction, by which the seller transfers securities or other financial instruments to the buyer and the buyer transfers money to the seller.
Short sale Borrowing a security from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker.
Short-term bond
Short-term liabilities Liabilities payable within 12 months like short-term debt, long-term debt interest etc.
Standard deviation A statistical measure of the historical volatility of a mutual fund or portfolio. More generally, a measure of the extent to which numbers are spread around their average.
Stock An instrument that signifies an ownership position, or equity, in a corporation, and represents a claim on its proportionate share in the corporation's assets and profits.
Stock exchange An exchange on which shares of stock and common stock equivalents are bought and sold.
Stock option An option in which the underlier is the common stock of a corporation, giving the holder the right to buy or sell its stock, at a specified price, by a specific date. Also called equity option.
Stop order A market order to buy or sell a certain quantity of a certain security if a specified price (the stop price) is reached or passed.
Strike price The specified price on an option contract at which the contract may be exercised, whereby a call option buyer can buy the underlier or a put option buyer can sell the underlier.
Sub-Custodian Institution that administers securities of a custodian and/or custodian clients in a local market.
Subscription To agree to purchase securities in a new issue.
Swap An exchange of streams of payments over time according to specified terms. The most common type is an interest rate swap, in which one party agrees to pay a fixed interest rate in return for receiving a adjustable rate from another party.
Symbol A system of letters used to uniquely identify a stock or mutual fund.
TALIBOR Tallinn Interbank Offered Rate and TALIBID (Tallinn Interbank Bid rate) are the average of the interest rates quoted by contributor banks on the loans and deposits for specific tenors, which are calculated and published by Bank of Estonia on daily basis. The list of contributor banks is approved by BOE and currently consists of the 5 banks most active on the Estonian money market.
Tax reclaim Reclaiming (if entitled to do so) excess tax withheld on an interest or dividend payment.
Technical analysis A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future (usually short-term) market trends.
Trade date The date on which the transaction occurs
Volatility The relative rate at which the price of a security moves up and down; found by calculating the annualised standard deviation of daily change in price.
Warrant A security usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price, for an extended period, anywhere from a few years to forever.
Yield to maturity (YTM) Yield that would be realized on a bond or other fixed income security if the bond was held until the maturity date. It is greater than the current yield if the bond is selling at a discount and less than the current yield if the bond is selling at a premium.