Glossary

A

ABS:
Asset-backed securities. These are financial securities such as bonds, which are collateralised by a pool of assets, possibly including loans, leases, credit card debt, royalties or receivables.

ADR: 
ADR is a security that represents shares of non-US companies that are held by a US depositary bank outside the US. They allow US investors to invest in non-US companies and give non-US companies access to US financial markets.

Agency mortgage-backed security: 
Agency MBS are created by one of three agencies: Government National Mortgage Association (known as GNMA or Ginnie Mae), Federal National Mortgage (FNMA or Fannie Mae), and Federal Home Loan Mortgage Corp. (Freddie Mac). Securities issued by any of these three agencies are referred to as agency MBS.

ALM: 
Asset and liability management. It is the practice of managing financial risks that arise due to mismatches between the assets and liabilities as part of an investment strategy in financial accounting.

Alpha: 
The additional return above the expected return of the beta-adjusted market return; a positive alpha suggests risk-adjusted value is added by the money manager compared with the index.

Asset purchase programme: 
A type of monetary policy wherein central banks purchase securities from the market to increase money supply and encourage lending and investment.

AT1: 
Additional Tier 1 capital instruments are continuous/perpetual, in that there is no fixed maturity including, preferred shares and high contingent convertible securities. Contingent convertible securities (often referred to as CoCos) are a major component of AT1 and their structure is shaped by their primary purpose as a readily available source of capital for a firm in times of crisis.

B

Balance of payments (BoP): 
A statement/record that summarises all transactions that a country's individuals, companies, and government bodies complete with individuals, companies, and government bodies outside the country.

Barbell: 
The barbell strategy is an investment concept that suggests that the best way to strike a balance between reward and risk is to invest in the two extremes of high risk and no risk assets while avoiding middle-of-the-road choices.

Basis points: 
One basis point is a unit of measure equal to one one-hundredth of one percentage point (0.01%).

Beta: 
Beta is a risk measure related to market volatility, with 1 being equal to market volatility and less than 1 being less volatile than the market.

Bear steepening: 
Widening of the yield curve caused by long-term rates increasing at a faster rate than short-term rates.

Bid-ask spread: 
The difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept.

Bond ratings: 
If the ratings provided by Moody’s and S&P for a security differ, the higher of the two ratings is used. Bond ratings are ordered highest to lowest in a portfolio. Based on S&P measures: AAA (highest possible rating) through BBB are considered investment grade; BB or lower ratings are considered non-investment grade. Cash equivalents and some bonds may not be rated.

Breakeven inflation: 
Breakeven inflation is the difference between the nominal yield on a fixed-rate investment and the real yield on an inflation-linked investment of similar maturity and credit quality.

Bretton Woods system: 
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods agreement. The system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states. The chief features of the system were an obligation for each country to tie its currency to gold and the ability of the IMF to bridge temporary imbalances of payments.

Bull steepening of the yield curve: 
A change in the curve due to short-term rates falling faster than the long-term rates. This leads to a higher spread between the short and long term rates.

C

CAPE: 
Cyclically adjusted price-to-earnings ratio, also known as Shiller PE (named after the economist Robert Shiller). It is a ratio used in stock market analysis, generally applied to the S&P 500 market. The CAPE ratio is computed by dividing the market capitalisation by the average net income over ten years, adjusted for inflation.

Capital structure: 
Is the combination of debt and equity used by a company to finance its operations. The higher up a debt in the structure, the higher quality it is because holders of this debt have a first claim to a company’s assets as compared to holders of lower ranked debt.        

CARES act: 
The Coronavirus Aid, Relief, and Economic Security Act is an US law intended to address the economic fallout of the Covid-19 pandemic.

Carry: 
The carry of an asset is the return obtained from holding it.

Capital fungibility: 
It means that an asset of the group is readily available for meeting any commitment of the group, regardless of the entity within which asset is held or commitment arises.

CEEMEA: 
Central and Eastern Europe, Middle East and Africa.

Closed-ended fund: 
In these funds, there is no internal mechanism for investors to redeem their subscriptions. Investors’ subscriptions are tied-up for the lifetime of the fund unless investors can find a buyer for their shares on the secondary market.

CoCo bond: 
A contingent convertible bond is a fixed-income instrument that is convertible into equity if a pre-specified trigger event occurs.

CLO: 
Collateralised loan obligation. It is a single security backed by a pool of debt. CLOs are often backed by corporate loans with low credit ratings or loans taken out by private equity firms to conduct leveraged buyouts.

Commercial paper: 
Commercial paper is a money-market security issued by large corporations to obtain funds to meet short-term debt obligations and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note.

Common equity tier 1 (CET1) ratio: 
CET1 comprises a bank’s core capital and includes common shares, stock surpluses resulting from the issue of common shares, retained earnings, common shares issued by subsidiaries and held by third parties, and accumulated other comprehensive income (AOCI).

Conduit issuer: 
A conduit issuer is an organisation, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects where the funds generated are used by a third party (known as the conduit borrower) to invest in some project or activity that has a public benefit. The conduit financing is typically backed by either the conduit borrower's credit or funds pledged towards the project by outside investors.

Convertible bonds: 
Convertible bonds are corporate bonds that can be converted by the holder into the common stock of the issuing company.

Core plus real estate investment strategy: 
‘Core plus’ is synonymous with ‘growth and income’ in the stock market and is associated with a low to moderate risk profile. Core plus property owners typically have the ability to increase cash flows through light property improvements, management efficiencies or by increasing the quality of the tenants. Similar to core properties, these properties tend to be of high quality and well occupied.

Core real estate investment strategy: 
‘Core’ is synonymous with ‘income’ in the stock market. Core property investors are conservative investors looking to generate stable income with very low risk. Core properties require very little hand-holding by their owners and are typically acquired and held as an alternative to bonds.

Corporate hybrid: 
A hybrid security is a single financial security that combines two or more different financial instruments. Hybrid securities generally combine both debt and equity characteristics.

Correlation: 
The degree of association between two or more variables; in finance, it is the degree to which assets or asset class prices have moved in relation to each other. Correlation is expressed by a correlation coefficient that ranges from -1 (always move in opposite direction) through 0 (absolutely independent) to 1 (always move in the same direction).

Cost take-out: 
To redesign the elements of a business to the lowest cost structure that can support a company’s strategic objectives.

Covenant: 
It is a promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out or that certain thresholds will be met. Often they relate to terms in a financial contract – such as a loan document or bond issue – stating the limits at which the borrower can lend further.

Covenant-lite: 
A covenant-lite loan is a type of financing that is issued with fewer restrictions on the borrower and fewer protections for the lender. By contrast, traditional loans generally have protective covenants built into the contract for the safety of the lender. On the other hand, covenant-lite loans are more flexible with regard to the borrower's collateral, level of income, and the loan's payment terms.

Crystallisation of loan losses: 
The process of realising losses (related to bad debt/loans/non-performing loans) in the financial statements.

Credit Default Swap (CDS): 
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event.

Credit spread: 
Differential between the yield on a credit bond and the Treasury yield. The option-adjusted spread is a measure of the spread adjusted to take into consideration possible embedded options.

CSPP: 
Corporate sector purchase programme, part of the ECB’s asset purchase programme.

Curve flattening: 
A flattening yield curve may be a result of long-term interest rates falling more than short-term interest rates or short-term rates increasing more than long-term rates.

Curve inversion: 
When long-term interest rates drop below short-term rates, indicating that investors are moving money away from short-term bonds.

Curve steepening: 
A steepening yield curve may be a result of long-term interest rates rising more than short-term interest rates or short-term rates dropping more than long-term rates.

CVaR: 
Conditional Value at Risk. Also known as the expected shortfall, it is a risk-assessment measure that quantifies the amount of tail risk an investment portfolio has. CVaR is derived by taking a weighted average of the extreme losses in the tail of the distribution of possible returns, beyond the VaR cut-off point. Conditional value at risk is used in portfolio optimisation for effective risk management.

Cyclical vs. defensive sectors: 
Cyclical companies are companies whose profit and stock prices are highly correlated with economic fluctuations. Defensive stocks are less correlated to economic cycles. Cyclicals sectors are consumer discretionary, financial, real estate, industrials, information technology, and materials, while defensive sectors are consumer staples, energy, healthcare, telecommunications services, and utilities.

D

Default rate: 
The share of issuers that failed to make interest or principal payments in the prior twelve months. Default rate based on BofA indices. Universe consists of issuers in the corresponding index twelve months prior to the date of default. Indices considered for corporate market are ICE BofA.

Debt brake rule: 
Rule which limits the annual federal borrowing as a share of GDP.

Directional strategies (Long-short equity, CTA and futures trading, global macro): 
These strategies take long and short positions on markets according to fundamental or statistical analysis. Directional positions may be taken in various markets based on systematic or discretionary trading models.

Diversification: 
Diversification is a strategy that mixes a variety of investments within a portfolio, in an attempt at limiting exposure to any single asset or risk.

Drawdown: 
The peak-to-trough decline during a specific record period of an investment, fund or commodity, usually quoted as the percentage between the peak and the trough.

Dry powder: 
It refers to cash reserves kept on hand by a company, venture capital firm or individual to cover future obligations, purchase assets or make acquisitions. Securities considered dry powder could be Treasuries or other short-term fixed income investment that can be liquidated on short notice in order to provide emergency funding or allow an investor to purchase assets.

Duration: 
A measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates, expressed as a number of years.

Duration times spread (DTS): 
It is the standard method for measuring the credit volatility of a corporate bond and is calculated by multiplying the spread-durations and credit spread.

E

EBITDA: 
Earnings before interest, taxes, depreciation, and amortisation.

EPS (Earnings per share): 
This is a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability.

ESMA: 
European Securities and Markets Authority.

Esoteric ABS: 
A subset of the ABS market, esoterics are securitised ABS backed by revenue streams from niche segments such as loans and leases on aircraft, railcars, timeshares and containers, as well as small business loans, whole businesses single family rentals and solar generation etc. This is opposed to more traditional ABS backed by securitizations of credit card receivables and auto loans.

Event-driven strategies (distressed securities, special situations, merger arbitrage): 
Buy or sell securities considered to be under/over-valued with regard to existing or potential events.

Exchange-traded commodity (ETC): 
It is a security that can offer traders and investors without direct access to spot or derivatives commodities markets exposure to commodities such as metals, energy, and livestock. An ETC can track individual commodities or a basket of several commodities and can provide an interesting alternative to trading commodities in thefutures market.

Exchange-traded fund (ETF): 
It is a type of pooled investment security that operates like a mutual fund. ETFs track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.

External vulnerability index: 
This index is built aggregating five different indicators that can monitor a country’s dependence on overseas economies and capital flows.

F
Fallen angel: 
A fallen angel is a bond that was given an investment-grade rating but has since been reduced to junk-bond status due to the weakening financial condition of the issuer.

FDI: 
Foreign direct investments.

Front-book assets: 
Loans/assets provided to new customers of the bank.

Front loading: 
Issuing as many bonds as possible at the start of the year, when there is ample liquidity in the market.

FX: 
FX markets refer to the foreign exchange markets where participants are able to buy and sell currencies.

G

Gold standard: 
Gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s and from the late 1920s to 1932, as well as from 1944 until 1971, when the United States terminated the convertibility of the US dollar to gold.

GOP: 
Grand Old Party, the US Republican political party.

Goodwill depreciation: 
Goodwill depreciation refers to the gradual and systematic reduction in the amount of the goodwill asset by recording a periodic amortization charge.

GP: 
General partner, a fund manager that raises capital from institutional investors through open-ended or closed-ended fund structures or non-fund vehicles with fund-like economics.

Green bonds: 
A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects.

Growth style: 
It aims at investing in the growth potential of a company. It is defined by five variables: 1. long-term forward EPS growth rate; 2. short-term forward EPS growth rate; 3. current internal growth rate; 4. long-term historical EPS growth trend; and 5. long-term historical sales per share growth trend. Sectors with a dominance of growth style: consumer staples, healthcare, IT.

H

Hit ratio: 
The hit ratio is the ratio between winning and losing investment ideas.

I

Inflation swap: 
An inflation swap is an over-the-counter and exchange-traded derivative that is used to transfer inflation risk from one counterparty to another.

Information ratio: 
A measure of portfolio management’s performance against risk and return relative to a benchmark or alternative measure.

ILS or insurance-linked security: 
ILS are financial instruments whose values are driven by insurance loss events. Those such instruments that are linked to property losses due to natural catastrophes represent a unique asset class, the return from which is uncorrelated with that of the general financial market.

IRR: 
Internal rate of return. This is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.

IRS: 
Internal revenue service.

L

LBO: 
Leveraged buyout. It is the acquisition of another company using borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.

LIBOR rate: 
The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

LIBOR-OIS spread: 
It is the difference between LIBOR and the OIS rates. The spread between the two rates is considered to be a measure of health of the banking system. It is an important measure of risk and liquidity in the money market.

Lower Tier II: 
It is the secondary component of a bank’s capital, in addition to Tier I capital, which makes up a bank's required reserves. Tier II capital is designated as supplementary capital and is composed of items such as revaluation reserves, undisclosed reserves, hybrid instruments, and subordinated debt.

LP: 
Limited partner, an institutional investor that commits capital to private funds through limited partnerships.

L-shaped recovery: 
An L-shaped recovery is a type of economic recession and recovery characterised by a steep decline in economic growth followed by slow recovery.

M

Market depth: 
It is the market's ability to sustain relatively large market orders without impacting the price of the security.

Market makers: 
Financial intermediaries that enter buy/sell quotes to give liquidity to a financial instrument. Market makers buy and sells for their own account (and as such, this activity can be capital intensive) with the goal to profit from the bid-ask spread differential.

MBS, CMBS, ABS: 
Mortgage-backed security (MBS), commercial mortgage-backed security (CMBS), asset-backed security (ABS).

Mezzanine: 
Mezzanine debt occurs when a hybrid debt issue is subordinated to another debt issue from the same issuer. Mezzanine debt has embedded equity instruments, often known as warrants, which increase the value of the subordinated debt and allow greater flexibility when dealing with bondholders.

Monetary policy reaction function: 
A function that gives the value of a monetary policy tool that a CB chooses, or is recommended to choose, in response to some indicator of economic conditions.

Moore’s Law: 
Moore's law is the observation that the number of transistors in a dense integrated circuit doubles approximately every two years.

MOVE: 
MOVE Index is the Merrill Lynch Option Volatility Estimate for the US Treasury.

N

Net Interest Margin (NIM): 
It is a measure that compares a bank’s interest income from lending with its interest expense on its liabilities (such as bank deposits), expressed as a percentage of its assets.

Net present value (NPV): 
Difference between the present value of cash inflows and the present value of cash outflows over a period of time.

NGO: 
Non-governmental organisation.

O

OER: 
Owner’s equivalent rent. This is the amount of rent that would have to be paid in order to substitute a currently owned house as a rental property. OER figures the amount of monthly rent that would be equivalent to the monthly expenses of owning a property (e.g. mortgage, taxes, etc.).

Office vacancy rate: 
Share of unoccupied office space immediately available relative to all existing office space.

Open-ended funds: 
In these funds, investors have the choice of whether to partially or completely redeem their subscription on each redemption day, subject to the redemption terms specified in the fund’s offering document.

Operating leverage: 
The degree to which a bank can increase its profits by increasing its revenues.

Opportunistic real estate investments: 
Opportunistic is the riskiest of all real estate investment strategies. It is synonymous with ‘growth’ in the stock market. Opportunistic investors take on the most complicated projects and may not see a return on their investment for three or more years. Opportunistic properties often have little to no cash flow at acquisition but have the potential to produce a large amount of cash flow once the value has been added.

Option-adjusted spread (OAS): 
It is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option.

P

PE ratio: 
The price-to-earnings ratio (PE ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).

PEPP: 
Pandemic emergency purchase programme.

Prime rent: 
Rent of the most sought-after assets relative to available supply. This is the highest rent for a given asset class and geographical area.

Prime yield: 
Yield provided by leasing under the market conditions of the assets - sometimes few in number – most sought-after by investors relative to available supply. This was the lowest yield for a given asset class and geographic area.

Probability density: 
It explains the relationship between observations and their probability. Some outcomes of a random variable will have low probability density and other outcomes will have a high probability density. The overall shape of the probability density is referred to as a probability distribution, and the calculation of probabilities for specific outcomes of a random variable is performed by a probability density function.

Provision write backs: 
This is the process of restoring to profit a provision for bad or doubtful debts previously made against profits and no longer required.

PSPP: 
Public sector corporate programme.

Purchasing Managers' Indices (PMI): 
Purchasing Managers' Indices (PMI) are economic indicators derived from monthly surveys of private sector companies. A reading above 50 indicates an improvement, while a reading below 50 indicates a decline.

Q

Quality investing: 
It aims at capturing the performance of quality growth stocks by identifying stocks with high return on equity (ROE), stable year-over- year earnings growth, and low financial leverage.

Quantitative easing (QE): 
QE is a monetary policy instrument used by central banks to stimulate the economy by buying financial assets from commercial banks and other financial institutions.

Quantitative tightening (QT): 
QT is a contractionary monetary policy aimed to decrease the liquidity in the economy. It means that a CB reduces the pace of reinvestment of proceeds from maturing government bonds. It also means that the CB may increase interest rates as a tool to curb money supply.

Quasi sovereign: 
Companies wholly or partially owned by the government.

R

REIT: 
A real estate investment trust is a company owning and operating real estate which generates income. Most REITs specialise in a specific real estate sector, focusing their time, energy, and funding on that particular segment of the entire real estate horizon.

Relative-value strategies (convertible arbitrage, fixed-income arbitrage, market neutral, long-short credit):
These strategies exploit pricing anomalies on various markets.

Restructuring charges: 
A restructuring charge is a one-time cost that companies must pay when reorganizing their operations.

Return on tangible book value: 
Net profit (after interest and tax) as a percentage of tangible book value. The latter is calculated by subtracting total liabilities, intangible assets and goodwill from a company’s total assets.

Rising star: 
A rising star company has a low credit rating, but only because they are new to the bond market and still establishing a track record. It does not yet have the track record and/or the size to earn an investment-grade rating from a credit rating agency.

RMBS: 
Residential mortgage-backed securities (RMBS) are a debt-based security backed by the interest paid on loans for residences. The risk is mitigated by pooling many such loans to minimise the risk of an individual default.

ROIC: 
Return on invested capital (ROIC) is a calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments.

R squared or R2: 
R-squared (R2) is a statistical measure that represents the proportion of the variance for a dependent variable that is explained by an independent variable or variables in a regression model. Whereas correlation explains the strength of the relationship between an independent and dependent variable, R-squared explains to what extent the variance of one variable explains the variance of the second variable.

Russell 1000 growth index: 
It measures the performance of large cap US growth stocks.

Russell 1000 value Index: 
It measures the performance of large cap US value stocks.

S

Semi-core Europe: 
Countries with higher government bond yields when compared to Germany (but lower than peripheral countries); they include nations such as Belgium and France.

Senior and subordinated debt: 
Subordinated debt is any type of loan that is paid after all other corporate debts and loans are repaid (senior debt), in the case of borrower default. The senior debt takes priority; it is more secure than any other debt.

S&P 500 index: 
It is a commonly used measure of the broad US stock market.

Sharpe ratio: 
A measure of excess return per unit of risk, as defined by standard deviation. A higher Sharpe ratio suggests better risk-adjusted performance.

Small and medium-sized enterprises (SMEs): 
They are businesses whose personnel numbers fall below certain limits.

Social bonds: 
Social bonds are use-of-proceeds bonds that raise funds for new and existing projects with positive social outcomes.

Solvency: 
Solvency is the ability of a company to meet its long-term debts and financial obligations.

Solvency capital requirement (SCR): 
A solvency capital requirement (SCR) is the total amount of funds that insurance and reinsurance companies in the EU are required to hold. SCR is a formula-based figure calibrated to ensure that all quantifiable risks are considered. The SCR covers existing business as well as new business expected over the course of twelve months.

SPACs: 
A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

Spread: 
The difference between two prices or interest rates.

Spread duration: 
Spread duration is the sensitivity of the price of a security to changes in its credit spread.

Standard deviation: 
A measure of return variability (risk) above and below an average rate of return. A higher standard deviation suggests more variability in return over the period.

Stress testing: 
Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations/shocks.

Super high-growth stocks: 
A high-growth stock is anticipated to grow at a rate significantly above the average growth for the market.

Sustainability bonds: 
Bonds where the proceeds will be applied exclusively to finance or re-finance a combination of both green and social projects.

Sustainability-linked bonds: 
General-purpose corporate bonds with a pledge to achieve a quantitative sustainability target at the issuer level.

Swap spread: 
A swap spread is the difference between the fixed component of a given swap and the yield on a sovereign debt security with a similar maturity.

SWIFT payment system: 
The Society for Worldwide Interbank Financial Telecommunication is a cooperative society that serves as an intermediary and executor of financial transactions between banks worldwide.

T

Take-up: 
Spaces leased or acquired for own use. It does not include lease renewals.

TED spread: 
The TED spread is the difference between the three-month Treasury bill and the three-month LIBOR based in US dollars.

Term premium: 
The term premium is the amount by which the yield on a long-term bond is greater than the yield on shorter-term bonds. This premium reflects the amount investors expect to be compensated for lending for longer periods. Because one collects coupons on a long-term bond for a longer period of time, its yield-to-maturity will be more. The amount of a term premium depends on the interest rates of the individual bonds.

Terminal rate: 
The terminal rate is defined as the peak spot where the benchmark interest rate — the federal funds rate — will come to rest before the central bank begins trimming it back.

Tier 1 ratio: 
The tier 1 capital ratio measures a bank’s core equity capital against its total risk-weighted assets.

TIPS: 
Treasury Inflation-Protected Security (TIPS) is a Treasury bond that is indexed to an inflationary gauge to protect investors from the decline in the purchasing power of their money.

TLTRO: 
The targeted longer-term refinancing operations (TLTROs) are Eurosystem operations that provide financing to credit institutions for a predefined period. They offer long-term funding at attractive conditions to banks to further ease private sector credit conditions and stimulate bank lending to the real economy.

Toss up: 
50-50 chance.

Tracking error: 
A measure of how closely a portfolio follows the index to which it is benchmarked.

Trade-weighted dollar: 
It is a measurement of the foreign exchange value of the dollar vs certain foreign currencies. It weights to currencies most widely used in international trade, rather than comparing the value of the dollar to all foreign currencies.

Trailing 12 month dividend yield: 
Trailing dividend yield shows a company's actual dividend payments relative to its share price (as a percentage) over the previous 12 months.

Two-tier/tiering system of the ECB: 
A mechanism that allows banks to park their excess funds with the ECB. Under this, a portion of banks’ deposits are exempted from negative rates.

U

Unitranche debt: 
Unitranche debt is a hybrid loan structure that combines senior debt and subordinated debt into one loan, allowing banks to compete better against private debt funds.

U6 Unemployment rate: 
U6 unemployment rate – also known as underemployment -- is a broad definition of unemployment rate including people who work part-time because full-time work is not available for economic reasons.

U-shaped recovery: 
A U-Shaped Recovery is a type of economic recession and recovery that resembles a U shape when charted.

US Treasury Auction: 
A public auction conducted by the US Department of Treasury to sell US government bonds.

V

Value-add real estate investments: 
‘Value-add’ is synonymous with ‘growth’ in the stock market and is associated with moderate to high risk. Value-add properties often have little to no cash flow at acquisition but have the potential to produce a large cash flow once the value has been added.

Value style: 
It refers to purchasing stocks at relatively low prices, as indicated by low price-to- earnings, price-to-book, and price-to-sales ratios, and high dividend yields. Sectors with dominance of value style: energy, financials, telecom, utilities, real estate.

VaR shock: 
Sharp increase in volatility that could cause panic selling with an aim to reduce overall risk in the portfolio.

Volatility: 
A statistical measure of the dispersion of returns for a given security or market index. Usually, the higher the volatility, the riskier the security/market.

VIX: 
VIX is the CBOE volatility index. The VIX index is a measure of market expectations of near-term volatility on the S&P 500 (US equity).

VSTOXX: 
VSTOXX is the Euro Stoxx 50 volatility index. It measures implied volatility of near-term Euro Stoxx 50 options, which are traded on the Eurex exchange.

W

Waiver: 
It is a legally binding provision where either party in a contract agrees to forfeit voluntarily a claim without the other party being liable.

WACC: 
The weighted average cost of capital (WACC) represents a firm's average cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. It is a common way to determine required rate of return because it expresses, in a single number, the return that both bondholders and shareholders demand in order to provide the company with capital.

Y

Yankee bond: 
A Yankee bond is a debt obligation issued by a foreign entity, such as a government or company, which is traded in the United States and denominated in US dollars.

Yield curve control: 
YCC involves targeting a longer-term interest rate by a central bank, then buying or selling as many bonds as necessary to hit that rate target. This approach is dramatically different from any central bank’s typical way of managing a country’s economic growth and inflation, which is by setting a key short-term interest rate.

Yield curve flattening: 
An environment in which the difference (spreads) between yields/rates of short-term and long-term bonds of the same credit quality reduces.

Yield curve normalisation: 
An environment in which yields on short-term debt instruments is lower than yields on long-term debt instruments of the same credit quality. A flattening yield curve may be a result of long-term interest rates falling more than short-term interest rates or short-term rates increasing more than long-term rates.

Yield to worst (YTW): 
It is the lowest potential yield that can be received on a bond without the issuer actually defaulting.

Yield to maturity (YTM): 
The annualized return that a bond investor would receive from holding the bond until maturity.

Z

Z-spread: 
The Zero-volatility spread (Z-spread) is the constant spread that makes the price of a security equal to the present value of its cash flows when added to the yield at each point on the spot rate Treasury curve where cash flow is received.