Glossary
Glossary of Terms
A - N
Absolute return
The return that an asset achieves over a period of time. This measure simply looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or a mutual fund - faces over a period of time. Absolute return differs from relative return because it is concerned with the return of the asset being looked at and does not compare it to any other measure.
Arbitrage
The simultaneous buying of securities on one exchange and selling them on another at a price advantage.
Asset class
A specific category of assets or investments, such as stocks, bonds, cash, international securities and real estate. Assets within the same class generally exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
BNP Paribas
Established in 1848, it is the sixth largest bank in the world, with assets totaling more that $1.7 trillion. BNP operates in over 85 countries and has approximately 100,000 employees worldwide.
Bear market
A market condition in which the prices of securities are falling or are expected to fall. Although figures can vary, a downturn of 15%-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market.
Blue chip
A security from a well-established and financially-sound company that has demonstrated its ability to pay dividends in both good and bad times.
Book value
The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
Bull market
A financial market of a certain group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used in respect to the stock market, but really can be applied to anything that is traded, such as bonds, currencies, commodities, etc.
CAC 40 Index
The main benchmark for Euronext Paris. Tracking a sample of 40 blue chip stocks, its performance is closely correlated with that of the French market as a whole.
Capital appreciation
A rise in the market price of an asset.
Capital gain or loss
An increase or decrease in the value of a capital asset that gives it a higher or lower worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term (more than one year), and must be claimed on income taxes.
Commodity
Any good exchanged during commerce, including goods traded on a commodity exchange. Some traditional examples of commodities include grains, gold, beef, oil and natural gas. More recently, the definition has expanded to include financial products such as foreign currencies and indexes.
Coupon
A reference to the interest payment to which a bondholder is entitled.
CPPI
The process of leveraging or de-leveraging an investment in relation to whether the underlying investment of the note is growing or declining.
Daily Profit Lock-In
In terms of the ONE Financial Profit Lock-In Notes, as the NAV of a Note rises above its initial level of $10, a higher level of principal protection is established. This level will never be reduced even if the value of the Note subsequently declines.
Dax 30 Index
DAX measures the performance of the Prime Standard's 30 largest German companies in terms of order book volume and market capitalization.
Derivative
A security, such as an option or futures contract, whose value depends on the performance of an underlying security or asset.
Distribution
A company's payment of cash, stock, or physical products to their shareholders.
Diversification
A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance.
Dividend
Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The amount of a dividend is quoted in the amount each share receives or in other words dividends per share.
Dynamic Asset Allocation
Also known as Constant-Proportion Portfolio Insurance (CPPI). The process of leveraging or de-leveraging an investment in relation to performance of the underlying investment of a Guaranteed Linked Note.
Equity
Stock or any other security representing an ownership interest.
Exchange rate
The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.
FTSE 100 Index
Tracks 100 of the UK's most highly capitalized blue chip companies, representing approximately 80% of the UK market. It is broadly recognized as the leading measure of the UK financial markets.
Fixed income security
An investment that provides a return in the form of fixed periodic payments and eventual return of principle at maturity. Unlike a variable-income security where payments change based on some underlying measure, such as short-term interest rates, fixed-income securities payments are known in advance.
Guaranteed investing
In terms of ONE Financial, all products are 100% principal guaranteed by either of two of the world's largest banks, BNP Paribas and Société Générale.
Guaranteed Linked Notes
A security that guarantees a minimum return equal to the investor's initial investment (the principal amount). See also Principal Protected Notes.
Hedging
A financial transaction whose goal is to reduce the risk of loss from price fluctuations.
Hedge funds
Alternative or 'nontraditional' investments that are a distinct asset class, different from buying stocks or mutual funds. Hedge funds help reduce overall portfolio risk, and are designed to perform in up, down or sideways market environments.
Index
A statistical indicator providing a representative of the value of the securities which constitute it. Indices often serve as barometers for a given market or industry and benchmarks against which financial or economic performance is measured.
Leveraging
See Dynamic Asset Allocation.
Liquidity
The ability of an asset to be converted into cash quickly and without any price discount.
MIB 30 Index
Follows 30 of Italy's most liquid and highly capitalized stocks. The Index represents more than 70% of the country's total market capitalization and approximately 75% of total trading volume.
Maturity date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. It is also the termination or due date on which an installment loan must be paid in full.
Mutual fund
An investment company that operates and professionally manages a portfolio of securities with money raised from unitholders. The portfolio may be invested in one or more asset categories such as stocks, bonds and cash. These funds offer investors the advantages of diversification and professional management, for a management fee.
Net asset value (NAV)
The total value of the fund's portfolio less liabilities. The NAV is usually calculated on a daily basis.
Nikkei 225 Index
The Nikkei Stock Average is Japan's most widely watched stock market index. The 225 components of the Average are among the most actively traded issues on the Tokyo stock exchange, and include a balanced representation of the various industrial sectors.
