tranche
/træntʃ/One portion of a larger sum of money, loan or investment, released in stages.
Example: The first tranche of funding arrived in January.
C222 words · Proficient
Finance & Accounting vocabulary — C2
Expert finance vocabulary for markets and risk, including arbitrage, derivatives, securitization and the yield curve that traders watch every day.
22 questions
Words in this set
22arbitrage
/ˈɑrbɪˌtrɑʒ/The practice of buying and selling the same asset in different markets to profit from a price difference.
Example:
Traders used arbitrage to profit from the price gap between markets.
hedge
/hɛdʒ/An investment made to reduce the risk of losing money on another investment.
Example:
The airline bought fuel contracts as a hedge against rising prices.
derivative
/dərˈɪvətɪv/A financial contract whose value depends on the price of another asset.
Example:
The fund used a derivative to bet on falling interest rates.
actuarial
/ˌækˌtʃuˈɛriəl/Relating to the calculation of financial risk, especially for insurance and pensions, using statistics.
Example:
The pension fund relies on actuarial calculations to set contributions.
forensic
/fərˈɛnsɪk/Describes financial analysis used to investigate fraud or a crime.
Example:
A forensic review uncovered years of hidden losses.
solvency
/ˈsɔlvənsi/A company's ability to pay all of its long-term debts.
Example:
Investors questioned the bank's solvency after the losses were revealed.
securitization
/sɪˌkjʊrətəˈzeɪʃən/Turning a group of loans or debts into tradable financial securities.
Example:
The bank used securitization to sell bundles of mortgage debt to investors.
impairment
/ˌɪmˈpɛrmənt/A formal recognition that an asset's value has permanently dropped below its recorded value.
Example:
The company recorded an impairment after the factory's value fell sharply.
novation
Legally replacing one party in a contract with a new party, who takes on the same rights and duties.
Example:
Through novation, a new supplier took over all the original contract's obligations.
mark to market
Valuing an asset at what it would fetch today.
Example:
Mark to market turned a paper profit into a paper disaster overnight.
off-balance-sheet
Held in a way that keeps it out of the main accounts.
Example:
The obligations were off-balance-sheet and entirely legal.
subordinated debt
Borrowing that is repaid only after other debts are settled.
Example:
Subordinated debt paid a good rate for an obvious reason.
covenant breach
Failing to meet a condition attached to a loan.
Example:
One covenant breach made the whole facility repayable on demand.
transfer pricing
The prices charged between parts of the same company.
Example:
Transfer pricing moved the profit to wherever the tax was lowest.
goodwill impairment
A write-down when an acquisition proves worth less than paid.
Example:
The goodwill impairment was larger than the original purchase price.
beta
/ˈbeɪtə/A measure of how much an investment moves with the market.
Example:
A beta above one means it amplifies whatever the market does.
yield curve
The relationship between interest rates and how long money is lent for.
Example:
An inverted yield curve is the signal everyone watches and nobody heeds.
basis point
One hundredth of one per cent.
Example:
Twenty-five basis point moves are what central banks live by.
going concern qualification
An auditor's warning that a company may not survive the year.
Example:
A going concern qualification closes more doors than the losses do.
window dressing
Arranging accounts to look better at the reporting date.
Example:
Some window dressing at the year end is normal and still dishonest.
creative accounting
Using accounting rules to present a misleading picture.
Example:
Creative accounting stayed just inside the standards for eleven years.
