Part 1: General terms
What is balance of payments?
Balance of payments is the difference between a country’s inflows and outflows of all money over a set period. → International Monetary Fund (IMF)
What is bank rate?
Bank rate, also known as discount rate, base rate or official cash rate, is the interest rate charged on short-term loans to banks by a central bank that influences the overnight rate as part of monetary policy. → target interest rate
What is base rate?
Base rate is an alternative term for bank rate in the UK.
What are basis points (bps)?
Basis points (bps) are units of measurement for interest rate changes with each basis point (bp) representing one hundredth of one percentage point.
What is behavioral economics?
Behavioral economics is an extension and alternative to classic economic theory based on how and why people behave in certain ways.
What is a bond market?
A bond market is a financial market for over the counter (OTC) trading of bonds.
What is the capital market?
The capital market is a financial market consisting of a primary market for issuing securities and a secondary market for trading them. → money market
What is compound annual growth rate (CAGR)?
Compound annual growth rate (CAGR) is a measure of consistent growth in value over a span of years that smooths out any volatility across individual years.
What is a consumer packaged good (CPG)?
A consumer packaged good (CPG), also known as a fast-moving consumer good (FMCG), is a good typically sold through retail outlets and consumed frequently by the average household.
What is a consumer confidence index (CCI)?
The consumer confidence index (CCI) is a statistical indicator of an economy’s future performance based on surveys of representative households about expectations for the future, current financial situations and employment outlooks.
What is a consumer price index (CPI)?
A consumer price index (CPI), which may be supplemented by broader indexes such as the US personal consumption expenditures (PCE) price index, is a common measure for inflation that tracks the average change over time in the prices a typical household pays for a representative sample of goods and services.
What is a contractionary fiscal policy?
A contractionary fiscal policy, also known as tight fiscal policy, is a fiscal policy used by a government to cool an overheating economy and associated inflation to make borrowing more expensive and saving more profitable through methods like raising taxes and lowering government spending. → expansionary fiscal policy
What is a contractionary monetary policy?
A contractionary monetary policy, also known as tight monetary policy, is a monetary policy used by a central bank to cool an overheating economy and associated inflation to make borrowing more expensive and saving more profitable through measures such as selling securities, raising the bank rate, and raising the reserve requirements for banks. → expansionary monetary policy
What is core inflation?
Core inflation is a measure of inflation with food and energy prices removed because of their volatility. → headline inflation
What is cost-push inflation?
Cost-push inflation is when an increase in production costs, often triggered by a shock to energy prices, pushes up prices and causes inflation. → demand-pull inflation, wage-price spiral
What is a currency peg?
A currency peg is a fixed exchange rate that stabilizes the value of a currency by tying it to the value of another currency, a basket of currencies, or a commodity such as gold. → currency board, stablecoin
What is deflation?
Deflation is a decrease in prices in an economy over time when the supply of goods and services outpaces demand. → inflation, disinflation
What is demand-pull inflation?
Demand-pull inflation is when increases in demand pull up prices and cause inflation. → cost-push inflation
What is discount rate?
Discount rate is an alternative term for bank rate.
What is discretionary income?
Discretionary income is what remains of disposable income after paying for personal necessities such as food and housing.
What is disinflation?
Disinflation is a when prices are increasing with inflation but at a slower rate than before. → deflation
What is disposable income?
Disposable income is total personal income after income taxes have been deducted. → discretionary income
What is econometrics?
Econometrics is the application of statistical methods, typically regression analysis, to economic data.
What is elasticity of demand?
Elasticity of demand is a change in demand for a good or service in response to a change in another variable, such as price and its associated price elasticity of demand. → inelastic demand
What is an expansionary fiscal policy?
An expansionary fiscal policy, also known as loose fiscal policy, is a fiscal policy used by a government to increase the amount of money available by lowering taxes and raising government spending to stimulate a sluggish economy struggling with disinflation or deflation. → contractionary fiscal policy
What is an expansionary monetary policy?
An expansionary monetary policy, also known as loose monetary policy, is a monetary policy used by a central bank to increase the amount of money and credit available through measures such as buying securities, lowering the bank rate, and lowering the reserve requirements for banks to stimulate a sluggish economy struggling with disinflation or deflation. → contractionary monetary policy
What is a fast-moving consumer good (FMCG)?
A fast-moving consumer good (FMCG) is a consumer packaged good (CPG).
What is a financial market?
A financial market is either the place and systems for financial asset trading, such as a stock market or bond market, or the markets used to raise finances, such as the capital market or money market.
What is fiscal policy?
Fiscal policy is the way a government influences the economy through taxation and government spending. → contractionary fiscal policy, expansionary fiscal policy, monetary policy
What is a fixed exchange rate?
A fixed exchange rate is an exchange rate that is set by a currency peg maintained by a currency board. → floating exchange rate
What is a floating exchange rate?
A floating exchange rate is an exchange rate that varies based on trading in the forex (FX) market. → fixed exchange rate
What is the forex (FX) market?
The forex (FX), or foreign exchange, market is a financial market for over the counter (OTC) trading of currencies.
What is gross domestic product (GDP)?
Gross domestic product (GDP) is the market value of all final goods and services produced in a country, which represents the market value of all goods and services less the value of the goods and services used in their production.
What is GDP purchasing power parity (GDP PPP)?
GDP purchasing power parity (GDP PPP) is gross domestic product (GDP) that is adjusted for purchasing power parity (PPP) based on the price of a representative basket of goods to allow for comparisons between countries.
What is gross dollar volume (GDV) for payment cards?
Gross dollar volume (GDV) is the volume of purchases on cards plus the volume of cash disbursement via ATM withdrawals and cashback on cards.
What is headline inflation?
Headline inflation is the broadest measure of inflation, which includes volatile food and energy prices. → core inflation
What is inelastic demand?
Inelastic demand is a limited change in demand for a good or service relative to change in its price. → price elasticity of demand
What is an initial public offering (IPO)?
An initial public offering (IPO) is how a private company becomes a public company by listing its shares on a stock exchange.
What is inflation?
Inflation is an increase in the general price level of goods and services in an economy over time, which is typically due to cost-push inflation or demand-pull inflation. → core inflation, headline inflation, deflation.
What is inflation-adjusted value?
Inflation-adjusted value, also known as real value, is value that is adjusted for accumulated inflation over time.
What is an interest rate?
An interest rate is the amount a borrower pays to a lender over a period of time as a proportion of the amount borrowed and in excess of the principal amount borrowed.
What is an inverted yield curve?
An inverted yield curve is a yield curve showing an interest rate decrease as maturity increases, which is often a harbinger of an economic slowdown as bond buyers anticipate lower interest rates in the long term than in the short term.
What is leverage in finance?
Leverage is using borrowed funds to make an investment, such as buying securities.
What is liquidity?
Liquidity is the availability of money, or more specifically it is how easily a financial asset or any other asset may be converted into readily available money.
What is a liquidity trap?
A liquidity trap is the result of an expansionary monetary policy failing to stimulate the economy, so liquidity is favored over investing and lending.
What is a loose fiscal policy?
Loose fiscal policy is expansionary fiscal policy.
What is a loose monetary policy?
Loose monetary policy is expansionary monetary policy.
What is macroeconomics?
Macroeconomics is economics concerned with the overall health of a given nation’s economy across variables such as economic growth rate, inflation, unemployment, consumer spending and interest rates.
What is microeconomics?
Microeconomics is a collection of specialized branches of economics that cover decisions of individuals and firms and their interactions in fields such as labor, industrial organization and public finance.
What is monetary policy?
Monetary policy is the way a central bank influences the economy by controlling the supply of money through measures such as setting the bank rate, defining reserve requirements for banks, and buying or selling securities. → expansionary monetary policy, contractionary monetary policy, fiscal policy.
What is the money market?
The money market is the financial market representing over the counter trading of short-term securities. → capital market
What is nominal GDP?
Nominal GDP is gross domestic product (GDP) that is not inflation adjusted. → real GDP
What is nominal value?
A nominal value is a value that is not inflation adjusted, such as nominal GDP. → real value
What is official cash rate?
Official cash rate is an alternative term for bank rate.
What is an overheating economy?
An overheating economy is a rapidly growing economy with unsustainable levels of consumer demand, which is usually associated with a tight labor market and results in demand-pull inflation, that may be cooled by a contractionary monetary policy and a contractionary fiscal policy.
What is overnight rate?
Overnight rate is the interest rate, which in many countries represents the central bank’s target interest rate, that banks use for lending between themselves to meet reserve requirements at the end of each day. → bank rate
What is price elasticity of demand?
Price elasticity of demand is elasticity of demand with reference to price.
What is the primary market?
The primary market is the part of the capital market concerned with the issuing of securities, which are typically underwritten by an investment bank. → secondary market.
What is purchasing power parity (PPP)?
Purchasing power parity (PPP) is an equivalence in what can be purchased with different currencies in accordance with forex (FX) rates if no other economic factors, such as taxes or transport costs, intervene. → GDP purchasing power parity (GDP PPP)
What is quantitative easing (QE)?
Quantitative easing is a form of expansionary monetary policy when a low bank rate is failing to stimulate enough spending, so the central bank buys securities to inject money into the economy.
What is real GDP?
Real GDP is gross domestic product (GDP) that is inflation adjusted. → nominal GDP
What is real value?
Real value is an alternative term for inflation adjusted value. → nominal value
What is a remittance?
A remittance is broadly money sent to another person, but it usually refers to money sent by a foreign worker to a family member back home.
What is the secondary market?
The secondary market is the part of the capital market concerned with the trading of securities and is often used in reference to a stock market. → primary market.
What is a stock market?
A stock market is a secondary market where stocks are traded as part of the capital market.
What is a stock market index?
A stock market index is measure of the performance of a stock market or a portion of a stock market.
What is a target interest rate?
Target interest rate is the interest rate, reflected in many countries as the overnight rate, that a central bank targets by setting the bank rate as part of its monetary policy.
What is a tight fiscal policy?
A tight fiscal policy is a contractionary fiscal policy.
What is a tight monetary policy?
A tight monetary policy is a contractionary monetary policy.
What is a tight labor market?
A tight labor market is an economic condition when the demand for workers outnumbers the supply of available and willing workers, which may result in a wage-price spiral when too tight.
What is a wage-price spiral?
A wage-price spiral is when workers in a tight labor market demand higher wages that cause higher production costs and by extension prices, which then leads to further demands for higher wages based on expectations of continued cost-push inflation.
What is a yield curve?
A yield curve is a plotting of the yield of bonds of similar risk characteristics versus their maturity dates, which usually has an upward trajectory as investors demand a higher interest rate on a fixed-income investment with a longer maturity. → inverted yield curve.
Part 2: Financial instruments
What is a bond?
A bond is a debt security issued by a corporation or government as a fixed-income investment for a bondholder who lends money for a defined period and receives a coupon rate of interest until the principal is returned. → debenture, green bond, blue bond, sustainability-linked bond (SLB)
What is a certificate of deposit (CD)?
A certificate of deposit (CD) is a money market instrument that offers an alternative to a savings account through a fixed rate of interest and no access to the funds for a defined term to encourage longer investments. → money market account
What is common stock?
Common stock is stock that fluctuates in value based on the performance of the corporation, comes after preferred stock in terms of priority for dividend payouts, and grants voting rights to stockholders.
What is coupon rate?
Coupon rate is the interest rate associated with a bond.
What is a debenture?
A debenture is an unsecured bond.
What is a debt security?
A debt security is a security, such as a bond or money market instrument, where the owner of the security is a lender. → equity security
What is a demand deposit account (DDA)?
A demand deposit account (DDA), such as an everyday transaction account or a savings account, is an account from which deposits can be withdrawn on demand rather than at the end of a defined term.
What is a derivative contract?
A derivative contract is a financial instrument that exists as a security, derives value from financial market conditions, and comes in four varieties: forward contract, futures contract, options contract, swap contract.
What are derivatives?
Derivatives is a plural abbreviation of derivative contract.
What is a dividend?
A dividend is a payment of a portion of a corporation’s profit to each of its shareholders in accordance with the number of shares they each own.
What are equities?
Equities is a plural abbreviation of equity security.
What is equity?
Equity is ownership of a financial asset minus any associated financial liability, but it is often used broadly to mean equity security. → shareholder equity
What is an equity security?
Equity security is a collective term for stocks or shares, whether common stock or preferred stock, where the owner of the security has equity in a company. → debt security
What is an equity share?
An equity share is common stock.
What is a fixed-income investment?
A fixed-income investment is a security, such as a bond or preferred stock, that pays a fixed amount of interest to investors.
What is a financial asset?
A financial asset is an owned intangible store of value, such as a security, that results from a financial instrument. → financial liability
What is a financial instrument?
A financial instrument is a contract that exists as a financial asset for one party and a financial liability for another party, and it often serves as an umbrella term for both. → equity, shareholder equity
What is a financial liability?
A financial liability is an owed intangible store of value, such as a debt, that results from a financial instrument. → financial asset
What is a forward contract?
A forward contract is a derivative contract with a predetermined date and price for buying and selling that, unlike a futures contract, is traded over the counter (OTC). → options contract
What are futures?
Futures is a plural abbreviation of futures contract.
What is a futures contract?
A futures contract is a derivative contract with a predetermined date and price for buying and selling that, unlike a forward contract, is traded on a stock exchange. → options contract
What is a maturity date?
A maturity date is the expiration date of a debt security when final payment is due.
What is a money market account?
A money market account is a money market instrument that offers an alternative to a savings account through a fixed rate of interest and reduced access to the funds. → certificate of deposit (CD)
What is a money market instrument?
A money market instrument is a financial instrument in the money market.
What is a mutual fund?
A mutual fund is a pool of money from multiple investors to buy and sell stocks listed on a stock market only after it has closed for the day. → exchange traded fund (ETF), index fund, hedge fund.
What is negative equity?
Negative equity is the result of the value of a financial asset falling below the value of any associated financial liability.
What is net interest margin (NIM)?
Net interest margin (NIM) is the difference between interest paid by customers to financial institutions on loans versus the cost of funds to make loans. → net interest spread
What is net interest spread?
Net interest spread is the difference between interest paid by customers to financial institutions and interest paid by financial institutions to customers. → net interest margin (NIM).
What is net present value (NPV)?
Net present value (NPV) is the estimated current value of an investment based on its expected returns discounted by projected inflation, which is usually guided by the bank rate.
What is an option?
Option is an abbreviation of options contract.
What is an options contract?
An options contract is a type of derivative contract with the option to buy or sell on a stock exchange at a predetermined price at any time before the contract expires. → futures contract, forward contract
What is an ordinary share?
An ordinary share is an equity share.
What is over the counter (OTC) trading?
Over the counter (OTC) trading is securities or forex (FX) trading that is not conducted over a financial exchange. → money market
What is owner equity?
Owner equity is shareholder equity.
What are preference shares?
Preference shares is an alternative term for preferred stock.
What is preferred stock?
Preferred stock is stock that operates as a fixed-income investment with priority over common stock for dividend payouts, but it does not grant voting rights to stockholders.
What is principal?
Principal is an amount initially invested or borrowed.
What are securities?
Securities is a plural form of security.
What is a security?
A security is a tradeable financial asset, named after the financial instrument guaranteeing or “securing” the right to payment, that comes in three varieties: equity security, debt security and derivative contract.
What is shareholder equity?
Shareholder equity is the value of equity security issued by a company minus the rest of the company’s financial liability as a representation of the net worth of the company.
What are shares?
Shares are units of equity security, either as an equity share or a preference share, that make up stocks.
What is short selling?
Short selling is using borrowed funds to buy a security for immediate sale only to then rebuy the security once its value has dropped.
What are stocks?
Stocks are shares of ownership of a company, either as common stock or preferred stock.
What is a swap contract?
A swap contract is a type of derivative contract traded over the counter (OTC) where party A takes over the cash flow, such as a variable interest rate, of party B’s financial asset while party B takes over the cash flow, such as a fixed interest rate, of party A’s asset.
What is yield?
Yield is income from a financial asset over time, such as interest or dividend payouts, as a proportion of the value of the asset.
Part 3: Financial institutions
What is an agency bank?
Agency bank is an alternative term for banking agent.
What is an agent bank?
Agent bank is an alternative term for banking agent.
What is the Bank for International Settlements (BIS)?
The Bank for International Settlements (BIS) is a financial institution, which also hosts the functionally independent Basel Committee on Banking Supervision (BCBS), that promotes central bank cooperation and acts as a bank for central banks to help manage their forex (FX)reserves. → International Monetary Fund (IMF), World Bank
What is a banking agent?
A banking agent, also known as an agent bank or agency bank, is an intermediary, often a retailer or post office, between a customer and a bank that promotes financial inclusion by bringing financial services to less central locations. → correspondent bank, intermediary bank
What is a central bank?
A central bank, also known as a reserve bank, is a financial institution that handles monetary policy for a region and serves as a lender of last resort for struggling banks there. → bank for international settlements (BIS)
What is a challenger bank?
Challenger bank is an alternative term for neobank.
What is a commercial bank?
A commercial bank is either an alternative term for corporate bank or a general term for any bank that accepts deposits, which includes retail bank but excludes investment bank.
What is a consumer bank?
A consumer bank is a retail bank.
What is a corporate bank?
A corporate bank is a bank that accepts deposits from corporations. → commercial bank, retail bank
What is a correspondent bank?
A correspondent bank, also known as an intermediary bank, is a bank, or rather a role assumed by an existing bank, that connects foreign banks with domestic banks for cross-border transactions.
What is a currency board?
A currency board is a monetary authority, which is usually associated with small trading nations and cannot assume the role of a central bank, that maintains a currency peg for convenience and stability.
What is an electronic money institution (EMI)?
An electronic money institution (EMI) is a financial institution that enables the use of electronic money (e-money) and its storage in a mobile money account.
What is an exchange traded fund (ETF)?
An exchange traded fund (ETF) is a pool of money from multiple investors to buy and sell baskets of securities on a financial exchange. → mutual fund, index fund, hedge fund
What is fiat currency?
Fiat currency is currency issued by a central bank that is legal through government decree or “fiat” and has an agreed value as a medium of exchange.
What is a financial exchange?
A financial exchange is a formal place and system, such as a stock exchange, for financial asset trading that is not conducted over the counter (OTC). → financial market.
What is fintech?
Fintech is financial technology, but it is often used to refer to a fintech company rather than just the technology itself.
What is a hedge fund?
A hedge fund is a pool of money from high net-worth individuals and other institutional or accredited investors that is used for financial asset and non-financial asset investments and is often associated with riskier activities like short selling and associated leverage. → exchange traded fund (ETF), index fund, mutual fund
What is an index fund?
An index fund, also known as an index tracker, is a type of mutual fund or exchange traded fund (ETF) that invests in the stocks being tracked by a stock market index.
What is an index tracker?
Index tracker is an alternative term for index fund.
What is the International Bank for Reconstruction and Development (IBRD)?
The International Bank for Reconstruction and Development (IBRD) is the part of the World Bank that provides loans to creditworthy countries. → International Development Association (IDA)
What is the International Centre for Settlement of Investment Disputes (ICSID)?
The International Centre for Settlement of Investment Disputes (ICSID) is an institution in the World Bank Group that conducts investment arbitration between governments and international investors.
What is the International Development Association (IDA)?
The International Development Association is the part of the World Bank that provides grants and interest-free loans to the world’s poorest countries. → International Bank for Reconstruction and Development (IBRD)
What is the International Finance Corporation (IFC)?
The International Finance Corporation (IFC) is an institution in the World Bank Group that provides financial support to the private sector rather than to governments.
What is the International Monetary Fund (IMF)?
The International Monetary Fund (IMF) is a United Nations agency that oversees the monetary policy of member governments and operates as a lender of last resort to any member temporarily struggling to meet its balance of payments. → World Bank
What is an intermediary bank?
Intermediary bank is an alternative term for correspondent bank.
What is an investment bank?
An investment bank, also known as a merchant bank, is a non-depository bank that typically helps companies and governments raise capital by issuing and trading securities in the capital market or helps them with mergers and acquisitions.
What is a lender of last resort?
A lender of last resort provides liquidity to a struggling financial institution often as a central bank serving other banks but also as the International Monetary Fund (IMF) helping governments meet balance of payments obligations.
What is a merchant?
A merchant is a retailer or wholesaler and is not to be confused with merchant bank.
What is a merchant bank?
A merchant bank is an alternative term for investment bank.
What is a monetary authority?
A monetary authority is usually a central bank but may also be a currency board.
What is a multilateral development bank (MDB)?
A multilateral development bank (MDB) is an international bank focused on supporting economic development through loans or grants to national governments. → World Bank, regional development bank
What is the Multilateral Investment Guarantee Agency (MIGA)?
The Multilateral Investment Guarantee Agency (MIGA) is an institution in the World Bank Group that protects foreign investment from political risk.
What is a neobank?
A neobank, also known as a challenger bank, is a fintech company offering banking services either via BIN sponsorship or with its own banking license.
What is the Organization for Economic Co-operation and Development (OECD)?
The Organization for Economic Co-operation and Development (OECD) is an intergovernmental organization that aims to promote economic growth, prosperity, and sustainable development among its member countries.
What is a regional development bank?
A regional development bank is a multilateral development bank (MDB) focused on a particular region, such as the African Development Bank (AfDB), Asian Development Bank (ADB), Development Bank of Latin America and the Caribbean (CAF), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), Islamic Development Bank (IDB). → World Bank
What is a reserve bank?
A reserve bank is an alternative term for a central bank.
What is a retail bank?
A retail bank, also known as a consumer bank, is a bank that accepts deposits from consumers. → corporate bank, commercial bank
What is a sponsor bank?
A sponsor bank is a bank that provides BIN sponsorship or shares its capabilities, often via banking as a service (BaaS), with a third party.
What is a stock exchange?
A stock exchange is the place where stocks are traded on the stock market.
What is the World Bank?
The World Bank is a global multilateral development bank (MDB) in the World Bank Group that provides loans or grants through its International Bank for Reconstruction and Development (IBRD) and its International Development Association (IDA). → International Monetary Fund (IMF)
What is the World Bank Group?
The World Bank Group is five institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together constitute the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); the International Centre for Settlement of Investment Disputes (ICSID).
