Glossary

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (interest arbitrage) deals, over the period of each deal.

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (interest arbitrage) deals, over the period of each deal.

An adjustment can be defined as the impact of a company paying out dividends on the ex-date. The share price takes a slight dip, because money flows out of the company and to the shareholders. The dividend adjustment occurs at the close of business before the ex-dividend date.

Appreciation is defined as the increase in an asset’s price over time. Capital appreciation refers to the price increase of financial assets such as property, pensions, commodities, etc.

The stock price and perceived value of a quoted company might appreciate due to the company’s improved financial performance, investor confidence, and speculation. Alternatively, the stock price could depreciate if performance worsens affecting investor sentiment.

Arbitrage describes the practice of buying and selling an asset in order to profit from a difference in the asset's price between markets. It is a trade that profits by exploiting the price differences of identical or similar financial instruments in different markets.

The ask price, ask, or offer price is the price a seller will accept for a security.. An ask quote often stipulates the amount of the asset available at the stated price. The ask price is the opposite of the bid price, which is what a buyer will pay for a security – the ask is always higher than the bid.

A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar.

The Bank for International Settlements (BIS) is a global financial institution owned by central banks. Based in Basel, Switzerland, there are representative offices in Hong Kong and Mexico City.

The BIS's original members were Switzerland, Germany, Belgium, France, Britain, Italy, the United States and Japan.

The Bank of China is one of China's four largest state-owned commercial banks. It is a subsidiary of the People’s Bank of China. However, it maintains close relations in management, administration, and cooperation in several areas with the subsidiary.

The Bank of England (BoE) is the central bank for the United Kingdom, acting as the government's bank and lender of last resort. With headquarters in the City of London, it issues currency and oversees monetary policy. It is the UK equivalent of the Federal Reserve in the United States.

A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar.

The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks. Adjusting the base rate helps a central bank regulate the economy by encouraging or discouraging spending as required.

Basis points, also known as bps (pronounced ‘bips’), describe the percentage change in the value of financial instruments or the rate change in an index or other benchmark. Basis points mostly refer to changes in interest rates and bond yields. One basis point is equivalent to 0.01%.

A bear market is any market that experiences a fall of around 20% or more from its recent high. Most commonly applied to stock markets, the term can also be used for anything that is traded, including currencies and commodities. A bear market is the opposite of a bull market.

Bid price, or simply bid, describes what a buyer is willing to pay for a security. It is contrasted with the ask price, the amount a seller is willing to sell a security for. The difference between the two is known as the ‘spread’, which is the cost traders pay to open and close positions.

A bond is a fixed-income investment that represents a loan made by an investor to a borrower (who is typically corporate or governmental). It can be illustrated as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

A financial broker is a third-party coordinating the sale of financial securities between parties selling securities and those purchasing them. Brokers are individuals or firms acting as intermediaries between investors and trading exchanges.

Exchanges only accept orders from their members, either individuals or firms. Therefore, traders and investors require exchange members' services to make financial transactions. Brokers get compensated for their services in several ways; commissions, fees or paid directly by the exchange.

The word buck is a slang term for one US dollar. The word’s use traces back to 1748, forty-four years before the first US dollar became minted.

A bull market describes any market in which prices are rising or are expected to rise imminently. Typically applied to stock markets, the term can also be used for anything that is traded, including currencies and commodities. A bull market is the opposite of a bear market.

The GBP/USD (Great British Pound/U.S. Dollar) pair. Cable earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid 1800s when the GBP was the currency of international trade.

Call options are financial contracts that give you the right, but not the obligation, to buy a market at a specified price within a specific time. The buyer of a call option can profit when the underlying market rises in price.

Capitulation is the act of surrendering or giving up. In financial market trading, the term indicates when investors and traders have decided to stop trying to recapture lost gains or maintain their positions, due to falling or rising prices.

A central bank is a financial institution with special authority to issue government-backed currency. It is often responsible for formulating monetary policy and regulating member banks. Examples of central banks include the Bank of England in the UK and the Federal Reserve in the US.

Collateral is something pledged as security for the repayment of a loan, which can become forfeited in the event of loan default. Examples of collateral include real estate, vehicles, cash, and investments.

In technical analysis, a consolidating market is a market that is neither continuing nor countering a long-term trend. Instead, its price is only experiencing rangebound price activity.

A contract for difference (CFD) is a financial contract in which you agree to exchange the difference in the settlement price between the open and closing trades on a particular asset. CFDs enable traders and investors to speculate on whether a market will go up or down, and profit from the price movement without owning the underlying asset.

CPI stands for Consumer Price Index. It is the most popular reference for day-to-day inflation. CPI gets calculated as a measurement of price change using a weighted average basket of consumer goods and services purchased by households.

Currency is the money underpinned by the legal tender system unique to a particular country or economic area. Currency gets used as a medium of exchange for goods and services.

Currency in the form of paper or coins gets issued by governments and central banks and is usually accepted at face value as a payment method.

A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets: known as the base currency and the quote currency. The exchange rate of a currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency.

Divergence occurs when a financial security’s price displays deviation  from the indicator you might see on your chart.

For example, a specific technical indicator might indicate bullish trading conditions, but the price is falling. Alternatively, the indicator might be showing bearish signals, but price is rising. Price is moving in the opposite direction to the trade direction the indicators are suggesting.

A dividend is a share of profits and retained earnings a company usually pays out annually to its shareholders – after it’s used a portion to reinvest in the business.

A dividend is often regarded as a measurement of a company’s health and good management. Mostly profitable or cash rich firms pay out dividends and some investors rely on these annual returns for investment income.

A dividend is a share of profits and retained earnings a company usually pays out annually to its shareholders – after it’s used a portion to reinvest in the business.

A dividend is often regarded as a measurement of a company’s health and good management. Mostly profitable or cash rich firms pay out dividends and some investors rely on these annual returns for investment income.

The Dow Jones Industrial Average is an equity index. It tracks the performance of thirty large publicly firms quoted on the NYSE and NASDAQ in the USA. The index also gets called the DJIA and DJIA 30. Many financial brokers refer to the index as the US30 on trading platforms.

ECB stands for the European Central Bank, which is the central bank for the euro and Euro Area. The headquarters are in Frankfurt, Germany.

It administers monetary policy within the Eurozone, which comprises 19 member states of the European Union, one of the world’s largest trading blocs.

EST stands for Eastern Standard Time. It is five hours behind Coordinated Universal Time (UTC) and Greenwich Mean Time (GMT). The EST time zone gets used during standard time in North America, Central America, and The Caribbean. EST is often called Eastern Time Zone.

The Euro Short-Term Rate (ESTR) is the interest rate benchmark for overnight borrowing costs throughout the euro area. It’s calculated and published by the European Central Bank (ECB) as a replacement for the Euro Overnight Index Average (EONIA) and the Euro Interbank Offered Rate (EURIBOR).

EURIBOR is an interest rate benchmark for the eurozone, standing for Euro Interbank Offered Rate. It is calculated using the average rates that eurozone banks offer each other on unsecured short-term loans of various maturities. EURIBOR represents the rate at which banks will lend capital to each other for short periods (short in this instance meaning less than one year). The rates quoted by various different banks are averaged together to make the benchmark, which is quoted daily. Like other IBORs, EURIBOR rates are used in various financial products – including OTC derivatives.

An exporter is a person, company, or country, that sends goods or services to a counterparty in another country. Exporting is a global trade function whereby goods produced in one country get moved to another country to trade or sell.

The Federal Reserve System, referred to as the Federal Reserve or the Fed, is the United States of America’s central banking system.

On December 23, 1913, the Federal Reserve Act created the system after a series of financial shocks caused the need for central control of monetary policy to prevent future crises.

A financial analyst conducts financial analysis for external or internal clients. Their primary duty is to examine data to identify opportunities or evaluate outcomes for investment recommendations or business decisions.

In the financial services industry, analysts provide regular reports on forex, equity, commodity, and cryptocurrency markets to assist traders’ decision making.

A financial contract is a legally binding document between at least two parties which defines and governs the parties’ rights and responsibilities under the agreement.

A financial contract is legally enforceable when it meets the law’s requirements and approval. It usually involves exchanging money, goods, services or promises to trade any of these products.

Forex, also known as foreign exchange or FX, is the conversion of one country's currency into another. It forms the basis of forex trading, one of the world’s most-traded asset classes.

A fund is an investment vehicle that enables people to pool their money together to invest in different securities like stocks, bonds, currencies, property, or commodities.

Funds might have different objectives; either to deliver a regular income or capital growth for the investor.

The Group of Seven is an international governmental organisation which includes France, Germany, Italy, Japan, the United Kingdom, Canada, and the United States.

During recent decades, the G7 claimed to have ‘strengthened security policy, mainstreamed climate change and supported disarmament programmes’.

The Group of Eight (G8) was an international governmental political forum which existed from 1997 until 2014.

The discussion forum originated in 1975 as the Group of Six (G6) after France held the first summit.

The gearing ratio is a financial ratio comparing a business owner’s equity (or capital) to the company’s overall debt and borrowed funds. It’s a measurement of financial leverage, illustrating how much of a firm’s operations get funded by equity capital instead of debt financing.

GMT stands for Greenwich Mean Time. Due to its maritime connection, back in 1884 the village of Greenwich, London England, was chosen as the reference point for all time on Earth.

The term gold bullion describes a large quantity of physical gold that is at least 99.5% pure metal,it can be cast in bars, ingots, or coins.

Investors often purchase gold bullion as an alternative physical investment to hedge their risk against other financial exposure to markets. Gold bullion is a tangible asset that is regarded as both an alternative and safe-haven asset

Gross domestic product (GDP) is a measure of the market value of all the final services and goods produced in a specific period by a country or economic area.

It’s a measurement of an economy’s size and health over a period, usually one quarter or one year. GDP is used to compare different economies’ size at various points in time.

A country's monetary policymakers are referred to as hawkish when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth or both.

Hedging is an investment technique to offset potential investment losses by purchasing correlated investments, expected to move in the opposite market direction.

Hedging techniques are popular methods for investors to protect themselves from risky positions; they hedge their bets. It’s like having investment insurance. If a sudden price reversal occurs, the damage gets limited due to the hedge position.

IBOR stands for Interbank Offered Rate – a type of interest rate benchmark that represents an average of the rates that banks will offer each other for loans of various maturities. The most well-known and widely used IBOR is LIBOR. However, you might also encounter EURIBOR, TIBOR and other rates. IBORs have been used in financial markets for a long time and feature in a huge variety of different products and transactions. Over-the-counter (OTC) derivatives in particular have long been associated with IBORs.

Inflation is the decline of a specific currency's purchasing power over time. It’s calculated by measuring the cost of a basket of widely consumed goods and services in an economy.

Inflation reduces each unit of currency's purchasing power and increases living costs; consumers must spend more to fill a shopping basket or get a haircut. As prices rise, money buys less so inflation can reduce living standards over time.

An interest rate is the percentage of money charged above the lender's principal – the amount of money loaned – for using its capital. Global central banks set base interest rates to manage their domestic economies. Base rates are the benchmark all banks use to decide their borrowing and investment rates.

An adjustment can be defined as the impact of a company paying out dividends on the ex-date. The share price takes a slight dip, because money flows out of the company and to the shareholders. The dividend adjustment occurs at the close of business before the ex-dividend date.

LIBOR is a leading interest rate benchmark, set each day according to estimates from up to 18 global banks. It stands for London Interbank Offered Rate. There are LIBOR rates for multiple different currencies: including GBP, USD, EUR and more. LIBOR is calculated by surveying banks to find out the rates they would charge each other on loans of various maturities, based on the current economic outlook. The LIBOR rate is an average of what the banks will charge each other, and is then used across the global financial system, particularly for pricing derivatives. Usage of LIBOR (and other IBORs) is being phased out, to be replaced with a near-risk-free rate (RFR).

The London session — also known as the European session — is one of three trading sessions responsible for keeping the forex market open 24 hours a day.

The NASDAQ Composite is an equity index which includes most stocks listed on the NASDAQ stock market.

Together with the DJIA (Dow Jones Industrial Average) and the SPX500 (Standard & Poor’s 500) indices, the NASDAQ Composite is one of three most popular equity indices traded in the United States.

Put options are financial contracts that give the owner the right, but not the obligation, to sell an underlying asset at a specified price within a specific time. A buyer of a put can profit when the underlying asset falls in price.

The Secured Overnight Financing Rate (SOFR) is the overnight interest rate used for US dollar-denominated loans and derivatives in the overnight market. It indicates how much a bank will have to pay to borrow cash from another institution. The rate is underpinned by US treasury securities, which a bank will offer as collateral to secure their overnight cash loans. These loans are a vital part of trading derivatives, as they allow parties to speculate on interest rates and borrowing costs.

The Sterling Overnight Index Average (SONIA) is the effective overnight interest rate that banks pay to borrow sterling overnight from other financial institutions. It’s used for overnight funding of trades that occur in off-hours and indicates the depth of business in the marketplace in these hours. SONIA is calculated using data from banks across the UK on any transactions completed in the previous trading day. The BoE filters out unusual patterns and calculates a weighted average of all transactions over £25 million. The top and bottom 25% are removed, and a mean is taken from the middle 50%. This is rounded to the nearest four decimal places, which is the SONIA rate.

The Tokyo Overnight Average Rate (TONAR) is the risk-free unsecured interbank overnight interest rate for the Japanese Yen – it’s also known as TONA. It was created in 2016 in the move to risk-free reference rates. TONAR is the replacement for LIBOR, which is expected to be completely phased out by June 2023. Learn more about the move away from LIBOR.

The US 30 index represents the value of the 30 largest US-registered corporations, also known as the Dow Jones index. It is one of the most-watched indices in the world because of the short list of companies it represents.

A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets: known as the base currency and the quote currency. The exchange rate of a currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency.

Symbol for Gold.