Investment Banking Jargon Buster
Bear market – Picture the way a bear attacks…The way it strikes down is an image and therefore phrase used to represent a prolonged trend in declining prices on the markets.
Bond – Bonds are a type of asset, and a bit like the IOUs of the financial world! An issuer (borrower or debtor) of a bond owes an amount, called the principle, which is to be paid to the buyer (lender) at the maturity (the agreed date on which the principle must be paid back). Often there is an also an interest rate, called the coupon payment, which is specified in the terms of the bond, and can be paid at different time periods, normally semi-annually or annually. Bonds are a common method companies and governments use to raise capital.
Bull market – When share prices on a market are on the rise, it can be described as a bull market. (Picture a bull driving upwards to attack with its horns…that’s the image! And explains that bull statue on Wall Street too…)
Candles – On a trader’s computer screen there will be lots of markings on a graph of different lengths. These candlestick patterns show the trader the movement in prices on a particular market.
Clearing – In a finance context this term refers to the post-trade processes of checking and confirming a transaction’s details and ensuring the rights of ownership documentation and payments are exchanged correctly and by the correct deadline.
Equities – If you’ve ever watched Dragon’s Den, you may have heard to term ‘equities’ on more than one occasion! Equities are a share an individual, group of people or company can hold in a company. With equities, the person or company has rights to an agreed proportion of what it earns and owns.
FTSE 100 – This term refers to the index of 100 biggest trading companies on the London Stock Exchange. It measures the share performance of these companies. It’s sometimes referred to as ‘The Footsie’.
‘Go short’ – a phrase which means to sell on the financial markets.
‘Go long’ – This means to buy on the financial markets.
Hedgies – This is a little nickname for Hedge Fund Managers, the big guns who call the shots in hedge funds.
Index – In Banking and Finance an index is a list displaying the average price of commodities or services. They fluctuate constantly according to what’s going on in the market in a specific place or time. Shares indexes represent the price of shares of the world’s biggest companies. The FTSE 100, for example, lists the 100 largest on the London Stock Exchange: Dow Jones gives price of shares for the 30 largest on the US market.
Maturity – This refers to the agreed date on which a payment, for a bond for example, must be made.
‘Plain vanilla’ – Plain vanilla may sound like an exceptionally dull ice cream flavour, but in investment banking it’s a term for traditional, standard financial instruments like bonds or futures. They are the ‘default’ flavour for trading!
Shares – Shares represent an owner’s stake in the assets of a company. They are also known as stocks.