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Immunization strategy
A bond
portfolio
strategy whose goal is to immunize a portfolio against a general change in the rate of interest
.
Implied repo rate
The rate that a seller of a futures contract
can earn by buying an issue
and then delivering it at the settlement date
. Related:
cheapest to deliver issue
Implied volatility
The expected volatility
in a stock's return
derived from its option
price, using an option-pricing model.
Income statement
A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index products and options. Related:
Chicago Mercantile Exchange
(CME)
Index warrant
A stock index option
issued by either a corporate or sovereign entity as part of a security
offering, and guaranteed by an option clearing corporation.
Indexing
A passive instrument strategy consisting of the construction of a portfolio
of stocks designed to track the total return
performance of an index of stocks.
Indicated dividend
Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend
were the same amount as the most recent dividend. Usually represent by the letter e in stock tables
Indicated yield
The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend
by the price of the stock. The resulting number is represented as a percentage.
Indifference curve
The graphical expression of a utility function, where the horizontal axis measures risk and the vertical axis measures expected re-turn.
Industry
The category describing a company's primary business activity. This usually is determined by the largest portion of revenue.
Inflation risk
Also called purchasing-power risk, the risk that changes in the real return
the investor
will realize after adjusting for inflation will be negative.
Information Coefficient (IC)
The correlation between predicted and actual stock returns, sometimes used to measure the value of a financial analyst
. An IC of 1.0 indicates a perfect linear relationship between predicted and actual returns, while an IC of 0.0 indicates no linear relationship.
Information costs
Transaction costs that include the assessment of the investment merits of a financial asset
. Related:
search costs
Informationless trades
Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that only utilizes existing information.
Information-motivated trades
Trades in which an investor
believes he or she possesses pertinent information not currently reflected in the stock's price.
Initial margin requirement
When buying securities on margin, the proportion of the total market value of the securities that the investor
must pay for in cash. The Security Exchange Act of 1934 gives the board of governors of the Federal Reserve the responsibility to set initial margin
requirements, but individual brokerage firms are free to set higher requirements. In futures
contracts, initial margin
requirements are set by the exchange.
Initial Public Offering (IPO)
A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity
capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. IPO's by investment companies (closed end funds) usually contain underwriting fees which represent a load to buyers.
Input-output tables
Tables that indicate how much each industry
requires of the production of each other industry in order to produce each dollar of its own output.
Insider information
Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received.
Insiders
These are directors and senior officers of a corporation -- in effect those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares
of a company.
Institutional investors
Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, and endowment funds
.
Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.
Insured bond
A municipal bond
backed both by the credit of the municipal issuer
and by commercial insurance policies.
Insured plans
Defined benefit pension plans that are guaranteed by life insurance products. Related:
non-insured plans
Intangible asset
A legal claim to some future benefit, typically a claim to future cash. Financial assets, also called financial instruments or securities, are intangible assets.
Interest
The fee charged for using another's money or credit. It is expressed as a percentage rate over a period of time. Also, a share or title in property
Interest coverage ratio
The ratio of the earnings
available for paying the interest
for a given year to the annual interest expense.
Interest rate agreement
An agreement whereby one party, for an upfront premium, agrees to compensate the other at specific time periods if a designated interest
rate (the reference rate) is different from a predetermined level (the strike rate).
Interest rate cap
Also called an interest
rate ceiling, an interest rate agreement
in which payments are made when the reference rate
exceeds the strike rate.
Interest rate ceiling
Related:
interest rate cap
Interest rate floor
An interest rate agreement
in which payments are made when the reference rate
falls below the strike rate.
Interest rate risk
For a bond, the risk that a rise in interest
rates will decrease the bond's price. For a depository institution, also called funding risk, the risk that spread
income will suffer because of a change in interest rates.
Interest rate swap
A binding agreement between counterparties
to exchange periodic interest
payments on some predetermined dollar principal, which is called the notional principal amount
.
Intermarket sector spread
The spread
between the interest
rate offered in two sectors of the bond
market for issues of the same maturity.
Intermarket spread swaps
An exchange of one bond
for another based on the manager's projection of a realignment of spreads between sectors of the bond market.
Internal market
The mechanisms for issuing and trading securities within a nation, including its domestic market
and foreign market
. Compare external market
.
Internal rate of return
Dollar-weighted rate of return
Internally efficient market
Operationally efficient market
International Depository Receipt (IDR)
A receipt issued by a bank as evidence of ownership of one or more shares
of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR structure is that the corporation does not have to comply with all the regulatory issuing requirements of the foreign country where the stock is to be traded. The U.S.version of the IDR is the American Depository Receipt (ADR).
International market
Related:
See external market
.
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial futures
. Related:
Chicago Mercantile Exchange
(CME)
In-the-money
A put option
that has a strike price
higher than the underlying futures
price, or a call option
with a strike price
lower than the underlying futures price. For example, if the March COMEX silver futures contract
is trading at $6 an ounce, a March call
with a strike price of $5. 50 would be considered in-the-money by $0. 50 an ounce. Related:
put
Intramarket sector spread
The spread
between two issues of the same maturity within a market sector. For instance, the difference in interest
rates offered for five-year industrial corporate bonds
and five-year utility corporate bonds
.
Intrinsic value
The amount by which an option
is in-the-money
. An option
which is not in-the-money has no intrinsic value. Related:
in-the-money
Inventory
For companies: Raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude overstating earnings
and assets. For security
firms: securities bought and held by a broker
or dealer
for resale.
Inventory turnover
The ratio of annual sales to inventory
. Low turnover
is an unhealthy sign, indicating excess stocks and/or poor sales.
Inverted market
A futures
market in which the nearer months are selling at price premiums to the more distant months. Related:
Premium
Investment analysts
Related:
financial analysts
Investment grade
A bond
that is assigned a rating in the top four categories by commercial credit rating companies. Related:
High-yield bond
Investment income
The revenue from a portfolio
of invested assets.
Investment management
Also called portfolio
management and money management, the process of managing money.
Investment manager
Also called a portfolio
manager and money manager, the individual who manages a portfolio of investments.
Investment trust
A closed-end fund
regulated by the Investment Company Act of 1940. These funds have a fixed number of shares
which are traded on the secondary markets similarly to corporate stocks. The market price may exceed the net asset
value per share, in which case it is considered at a "premium. " When the market price falls below the NAV/share, it is at a "discount. " Many closed end funds are of a specialized nature, with the portfolio
representing a particular industry, country, etc. These funds are usually listed on US and foreign exchanges.
Investment value
Related:
straight value
Investor
The owner of a financial asset
.
Investor's equity
The balance of a margin
account. Related:
Buying on margin, initial margin requirement
.
Invoice price
The price that the buyer of a futures contract
must pay the seller when a Treasury Bond
is delivered.
IRA/Keogh accounts
Special accounts where you can save and invest, and the taxes are deferred until money is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from such accounts.
Issue
A particular financial asset
.
Issuer
An entity that issues a financial asset
.
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