Glossary of financial terms

The term ‘acre’ was historically used to refer to the amount of land that could be plowed in a day by a yoke of oxen. However, the exact size of an acre would vary depending on the type of land, weather conditions, and other factors. The term is now standardized to apply to any shape of land with a total area of 43,560 square feet.

Agribusiness refers to all activities involved in farming, including farming practices, agricultural services, and the entire supply chain from production and processing to marketing and distribution.

Agricultural commodities are goods that are cultivated or raised on farms, plantations, or ranches, and traded on global commodity exchanges. These goods can be consumed directly (e.g. wheat or milk), or used as inputs to produce other goods, such as textiles, biofuels, or animal feed.

Algorithmic trading has become more popular with the use of automated trading systems that, for the first time ever, allow you to set parameters and have computer programs automatically execute coded trades. Algorithmic trading can be used in any market, from stock trading to foreign exchange, making it a worthwhile tool for any professional trader. Of course, laying the groundwork for algorithmic trading to execute successfully takes a lot of work, and there are many pitfalls to avoid. Keep reading to learn just how algo trading works, various strategies to employ, and whether it's right for your own portfolio management.

Arbitrage is a trading strategy that involves taking advantage of price differences for the same asset in two or more markets. Traders, or arbitrageurs, buy the asset at a lower price in one market and sell it at a higher price in another, capitalizing on the price discrepancy.

Capital introduction, or cap intro, is an integral service in the alternative investment management industry and particularly in the hedge fund industry. At the highest level, cap intro is about connecting hedge funds, other alternative investment strategies, and managers with institutional investors like family offices, endowments, foundations, investment consultants, and pension funds.

In the ongoing battle against climate change, carbon credits have emerged as a crucial tool for reducing global carbon emissions. These credits represent a market-based approach to incentivize the reduction of greenhouse gases (GHGs) and promote sustainability across industries. This article explores what carbon credits are, how they function, and their significance in the broader context of environmental preservation.

Carbon neutrality refers to attaining net zero carbon dioxide emissions by offsetting carbon emissions through green investments. It's an initiative born from the understanding that it would be impossible to completely end all carbon emissions across the globe, but it is also imperative to reduce carbon emissions to a level wherein the natural world can maintain an atmospheric equilibrium.

Cash flow refers to the movement of money and cash equivalents into and out of a business over a specific period. It encompasses all the cash inflows and outflows associated with a company's operations, investing, and financing activities. Understanding cash flow is crucial for evaluating a business's financial health and gauging whether it has enough cash to meet its obligations. Public companies will release cash flow statements as one of three main financial statements, along with balance sheets and income statements. Cash flow analysis helps determine how much cash a company generates and uses, thereby providing insight into its liquidity and operational efficiency.

Cash management is the process of overseeing and optimizing a company’s cash flow to support operational stability and maintain financial efficiency. It involves tracking revenues, managing payments, and effectively utilizing surplus funds to maximize liquidity and support business objectives.

Much of the modern world depends on a set of materials that rarely make headlines. Lithium, cobalt, graphite, rare earth elements - these and other critical minerals form the backbone of technologies that power our lives, from smartphones and electric vehicles to renewable energy systems and advanced defense tools.

Currency fluctuations refer to the changes in the value of a particular currency compared to another. These fluctuations affect exchange rates are a fundamental aspect of the foreign exchange market and significantly influence global economics, trade, and investment. This article delves into why exchange rates fluctuate, the factors causing these changes, their impact on the economy, and strategies to mitigate currency fluctuation risk.

Currency hedging is a way for businesses or investors to minimize the risk of adverse currency movements that could impact the value of their international transactions or investments. This often involves using financial instruments like options, forwards, or swaps to lock in exchange rates for a future date.

Currency risk, or exchange rate risk, is a type of financial risk faced by companies or investors that operate in international markets. It refers to the potential for losses due to unpredictable changes in one currency’s value relative to another. Multinational companies and institutional investors mitigate this risk through currency hedging strategies such as FX forwards, options, and currency swaps, or by diversifying across markets.

Custodian services are usually provided by a large and reputable firm, such as a bank, trust company or similar financial institution empowered to safeguard individual and institutional securities from being lost or stolen. Cash, stocks, bonds, electronic or physical assets are all forms of securities owned by clients and entrusted to custodians to hold on their behalf. Investment advisers and asset managers frequently use custodian banks in order to protect their clients' holdings, collateral and other assets. A custodian may also serve the responsibility of managing the assets of the minor child or the incapacitated adult.

Financial consultants provide expert advice to help businesses manage their finances effectively. Their main goal is to increase shareholder value and improve capital efficiency. They typically work closely with the Chief Financial Officer (CFO) or within the corporate finance division of a business.

A financial institution (FI) is an entity that provides banking, lending, investment, and insurance services. These institutions play an essential role in the economy by facilitating the flow of money, supporting capital formation, and managing financial risk. They help individuals, businesses, and governments conduct financial and monetary transactions like deposits, loans, investments, and currency exchange.

Financial regulations refer to the laws, rules, and guidelines designed to oversee the operations of financial institutions, markets, and transactions. These regulations are essential for maintaining the stability, integrity, and efficiency of the financial system. They aim to protect consumers, ensure fair competition among financial firms, and mitigate risks that could lead to financial crises. By enforcing compliance with these regulations, authorities can prevent fraudulent practices, promote transparency, and maintain investor confidence in the financial markets.

Fixed income is an asset class favored for their low volatility and stable returns compared to other investments. Fixed income investments provide can return higher yields than standard interest-bearing savings accounts, making the asset class a nice middle ground for investors looking to safely boost income generated from capital.

A floating interest rate, sometimes also referred to as an adjustable or variable interest rate, is a type of interest rate that can change over time subject to a benchmark. Keep reading to learn more about what a floating interest rate is, how it differs from a fixed interest rate, and how it impact loans and investments.

The ISM manufacturing index is an economic indicator that measures the health of the manufacturing sector in the U.S. Based on a survey of purchasing managers across various industries, the monthly index tracks factors like new orders, production levels, and inventories.

ISO 20022 is a global financial messaging standard that simplifies the way financial information is communicated across the world. It’s designed to eliminate confusion and misunderstandings by creating a shared dictionary of common language that bridges gaps in financial communication. With ISO 20022, people and systems across the world can process and exchange financial information clearly and consistently. The internationally recognized standard helps streamline communications for payments, securities, funds, foreign exchange trading, and commodities.

Implied volatility (IV) is a measure of the market’s expectations for future price fluctuations in the price of an option’s underlying asset, typically a stock or an index. It provides investors with a general range of prices that an asset is expected to fluctuate between and can be used to identify entry and exit points.

Index funds are investment vehicles, available as mutual funds or exchange-traded funds (ETFs), that aim to mirror the performance of a particular market benchmark. These funds are structured to replicate the composition and returns of specific financial indicators, such as the Standard & Poor's 500 or the Dow Jones Industrial Average. By doing so, they provide investors with exposure to a broad range of securities that represent a specific segment of the financial market.

Investment or non-investment grade are terms that play a crucial role in the world of bonds and fixed-income securities. They signify the credit quality of bonds and debt securities, indicating their safety and reliability for investors.

Outsourced trading consists of services associated with the life cycle of a trade provided to various financial entities including investment managers, hedge funds, and family offices. The offering includes trade execution and associated services including reporting, analysis, middle and back office support, and compliance.

The Over-the-counter (OTC) market is a decentralized trading system where financial instruments are transacted through dealer networks and electronic platforms, rather than on centralized exchanges like the NYSE or NASDAQ. These markets include structured quotation systems like the OTC Markets Group and broker-dealer networks that facilitate trading.

Passivation improves the corrosion resistance of metals by promoting the formation of a protective oxide layer on their surface. This layer acts as a barrier that helps prevent oxidation and rust.

Pension funds work as employer-funded retirement income, which an employer contributes to during the employee's tenure. That money then grows over the employee's career. Once retired, employees often have the ability to acquire the pension as lump sum or receive regular payments throughout the rest of their lives.

A private bank is a financial institution that offers customized banking services to high-net-worth individuals. The services offered by private bankers are designed to meet the unique needs of wealthy clients, providing them with a comprehensive suite of private banking and, in some cases, wealth management solutions.

Soybean crush is when soybeans are processed into soybean meal and soybean oil. This process plays an important role in the agricultural and commodities markets by providing an indication of the profitability of processing soybeans.

Structured credit is a type of financial instrument that typically involves investments backed by assets. These investments often have a fixed interest rate, referred to as a “coupon rate,” and are grouped into different risk categories to cater to varying investor needs. Structured credit is becoming more popular among institutional investors who want to change their portfolios because of rising interest rates. By grouping different assets, like mortgages or loans, structured finance vehicles give investors a way to diversify their holdings and attain a steady cash flow.

In finance, a swap is a derivative contract by which two parties consent to exchange the cash flows or liabilities from two different financial instruments. Swaps usually involve cash flows based on a notional principal amount, like a debt or security instrument, but the underlying can vary widely. Swaps can be traded over-the-counter (OTC) - meaning they are negotiated and executed directly between two parties vs. being traded on an exchange. This allows for more flexibility and customization in terms of the swap contract, which allow parties to tailor the contract to their specific risk management strategies. These benefits may not be possible with standard exchange-traded derivatives. Back in 2010, the Dodd-Frank Wall Street Reform Act developed a new type of trading venue for standardized swaps called Swap Execution Facilities, or SEFs for short. An SEF, which is a trading platform, allows many market participants to execute or trade swaps in a transparent, regulated environment - a type of marketplace for trading swaps in the United States.

Swift (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network used by banks and financial institutions to securely exchange transaction details. It allows individuals and businesses around the world to make electronic payments, even if they use different banks. Swift is the most widely used system for international payments and helps make cross-border transactions quicker, more secure, and more accurate.

Synthetics in trading refers to financial instruments developed to mimic different assets with certain key characteristic adjustments, such as duration, exposure and cash flow.