Hypertextual Finance Glossary
Copyright © 2023. All Worldwide Rights Reserved. Do not reproduce without explicit permission.
Keep up to date on the latest finance lingo with the new iPad/iPhone app
Download from iTunes
Order Campbell Harvey's book on the future of finance
Order via Amazon
- Fifth letter of a Nasdaq stock symbol specifying that it is the third preferred bond of the company.
- IAS 39
- IAS 39 is fair value measurement accounting standard followed by IASB.
The objective of IAS 39 is to establish principles for recognizing and measuring the value of financial assets,
financial liabilities and contracts to buy or sell non-financial items.
- See: International Accounting Standards Board
- See: Institutional Brokers Estimate System
- See: International Banking Facility
- See: Institutional buyin
- See: International Bank for Reconstruction and Development
- See: Information Coefficient
- See: International Chamber of Commerce
- The two-character ISO 3166 country code for INDONESIA.
- See: International Development Association
- See: Interest During Construction
- The three-character ISO 3166 country code for INDONESIA.
- IDR (1)
- The ISO 4217 currency code for the Indonesian Rupiah.
- IDR (2)
- See: International Depository Receipt
- IDR (3)
- See Incremental Default Risk
- The two-character ISO 3166 country code for IRELAND.
- The ISO 4217 currency code for the Irish Punt.
- See: International Finance Corporation
- See: International Financial Reporting Standards
- See: Irish Financial Services Regulatory Authority.
- The two-character ISO 3166 country code for ISRAEL.
- The ISO 4217 currency code for the Israeli Shekel.
- The two-character ISO 3166 country code for ISLE OF MAN.
- See: International Monetary Fund
- See: International Monetary Market
- The three-character ISO 3166 country code for ISLE OF MAN.
- The two-character ISO 3166 country code for INDIA.
- The three-character ISO 3166 country code for INDIA.
- The ISO 4217 currency code for the Indian Rupee.
- IO (1)
- The two-character ISO 3166 country code for BRITISH INDIAN OCEAN TERRITORY .
- IO (2)
- See: Interest-only strip
- IOC order
- See: Immediate or canceled
- See: Interest on Excess Reserves
- See: Index and Option Market
- See: Interest on Reserves
- The three-character ISO 3166 country code for BRITISH INDIAN OCEAN TERRITORY .
- See: Investment Product Line
- See: Initial Public Offering
- The two-character ISO 3166 country code for IRAQ.
- The ISO 4217 currency code for the Iraqi Dinar.
- The two-character ISO 3166 country code for IRAN, ISLAMIC REPUBLIC OF.
- See: Industrial Revenue Bond
- The three-character ISO 3166 country code for IRELAND.
- The three-character ISO 3166 country code for IRAN, ISLAMIC REPUBLIC OF.
- The three-character ISO 3166 country code for IRAQ.
- IRR (1)
- The ISO 4217 currency code for the Iranian Rial.
- IRR (2)
- See: Internal rate of return
- The two-character ISO 3166 country code for ICELAND.
- See: International Swap Dealers Association
- The ISO 4217 currency code for the Icelandic Krona.
- The three-character ISO 3166 country code for ICELAND.
- See: International Security Market Association
- See: International Organization for Standardization.
- The three-character ISO 3166 country code for ISRAEL.
- The two-character ISO 3166 country code for ITALY.
- The three-character ISO 3166 country code for ITALY.
- The ISO 4217 currency code for the Italian Lira.
- See: In-the-money
- See: Intermarket Trading System
- IBC's money fund report average
- Report giving the average yield of all major money market funds.
- Treasury savings bonds with a 30-year maturity indexed to account for inflation.
- Identified shares
- Stock or mutual fund whose purchase date and price may be identified for capital gains and tax purposes when shares sold.
- Idiosyncratic Risk
- Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm-specific and can be diversified through holding a portfolio of stocks.
- I-I page
- In over-the-counter trading, same as H-H page, but exclusively for OTC stocks.
- Illegal dividend
- A corporation's dividend that is declared in violation of its charter and/or of state laws, typically because of the way it is calculated.
- In the context of corporate finance, the absence of cash flow needed to fulfill financial debts and meet obligations. In the context of investments, describes a thinly traded investment such as a stock or bond that is not easily converted into cash. Illiquid securities have high transactions costs. Often the bid-ask spread is very wide.
- Imbalance of orders
- Used for listed equity securities. Too many market orders of one kind - to buy or to sell or limit
orders to buy up or sell down, without matching orders of the opposite
kind. An imbalance usually follows a dramatic event such as a takeover,
research recommendation, or death of a key executive, or a government ruling
that will significantly affect the company's business. If it occurs before
the stock exchange opens, trading
in the stock is delayed. If it occurs during
the trading day, the specialist halts and then suspends trading (with
floor governor's approval) until enough matching orders can be found to make
an orderly market.
- Immediate or canceled order (IOC order)
- Market or limited
price order that is to be executed
in whole or in part as soon as such order is represented in the
trading crowd. The portion not executed is to be treated as canceled.
A stop is considered an execution in
this context. See: AON order,
- Immediate family
- Term used in the NASD rules of fair practice to refer to one's parents, brothers, sisters, children, relatives supported financially, father-in-law, mother-in-law, sister-in-law, and brother-in-law.
- Immediate payment annuity
- An annuity contract paid by a single payment and with a specified payment plan that starts immediately after the contract is purchased.
- Immediate settlement
- Delivery and settlement of securities immediately upon execution of the trade.
- The construction of an asset and a liability match that benefits from offsetting changes in value.
- Immunization strategy
- A bond portfolio strategy whose goal is to eliminate the portfolio's risk, in case of a general change in the rate of interest, through the use of duration.
- Impaired capital
- When a company's total capital is less than the par value of all its capital stock.
- Impaired credit
- Result of a borrower's reduced credit rating.
- Reduction in the value of an asset because the asset no longer generates the benefits expected earlier as determined by the company through periodic assessments. This could happen because of changes in market value of the asset, business environment, government regulations, etc.
- Imperfect market
- Economic environment in which the costs of labor and other resources used for production encourage firms to use substitute inputs that are less costly.
- Implicit Bankruptcy Costs
- Opportunity costs incurred prior to the bankruptcy process such as the loss of sales or financing.
- Implicit tax
- Lower or higher before-tax required returns on assets that are subject to lower or higher tax rates.
- Implied call
- The right of the homeowner to prepay, or call, a mortgage at any time.
- 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, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes.
- Import/export letters of credit
- Bank or financial institution issuance's of funds in a certain amount provided
to facilitate international trade.
- Import Quota
- Puts limits on the quantity of certain products that can be legally imported into a particular country during a particular time
frame. There is a Fixed quota, which is a maximum quantity not to be exceeded, and tariff rate surcharge, which permits additional quantities but at much higher duty.
- Import substitution development strategy
- A development strategy followed by many Latin American countries and other
LDCs that emphasize import
substitution-accomplished through protectionism-as the route to economic growth.
- Imputation tax system
- Arrangement by which investors who receive a dividend also receive a tax credit for corporate taxes that the firm has paid.
- Imputed interest
- Used in accounting to refer to interest that has effectively been paid to a bondholder, even though no money has actually been paid.
- Imputed value
- Refers to the value of an asset, service, or company that is not physically recorded in any accounts but is implicit in the product, e.g., the opportunity cost of cash remaining in a savings account and not invested.
- In between
- Used in the context of general equities. Priced higher than the bid price but lower than the offer price. See: In the middle
- In the box
- Means that a dealer has a wire receipt for securities, indicating that effective delivery on them has been made.
- In competition
- Indication that the customer has revealed trading interest to multiple brokers and that the trade will take place with the firm having the highest bid or lowest offer. Antithesis of exclusive.
- In hand
- Used in the context of general equities. Firm indicating control of a bid, offer, or order.
- In the hole
- Used in the context of general equities. Below the inside market when one is attempting to sell the stock; at a significant discount. Antithesis of premium.
- In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction within the firm. Although a listed trade must be taken to the floor of the stock exchange, matching supply with demand within the confines of the firm results in higher commissions for the firm.
- In-house processing float
- The time it takes the receiver of a check to process a payment and deposit it in a bank for collection.
- Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations.
- In the middle
- Used in the context of general equities. At a price exactly in between the bid and offer prices.
- A put option that has a strike price higher than the underlying security price, or a call option with a strike price lower than the underlying security 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. Antithesis of out-of-the-money.
- In play
- Often used in risk arbitrage. Company that has become the target of a takeover, and whose stock has now become a speculative issue.
- In-the-money option
- An option that has intrinsic value. For a call option, the underlying asset price exceeds the exercise price of the option (hence, if the option is immediately exercised, it has value).
- In & out
- Refers to over-the-counter trading. Trade in which the trader has both the buyers and sellers lined up for a clean trade. See: Cross
- In-and-out trader
- A daytrader, or a speculator who buys and sells the same security on the same day.
- In the tank
- Used in the context of general equities. Slang expression meaning market prices are dropping rapidly.
- In touch with
- Used in the context of general equities. Having a sell inquiry in a stock (not a firm customer sell order), often entailing a capital commitment. Antithesis of looking for.
- In-substance defeasance
- Process through which debt is removed from the balance
sheet but not canceled.
- Inactive asset
- Asset not used in a productive manner at all times.
- Inactive post
- Trading post on NYSE floor where inactive, lightly traded stocks are traded in 10-share lots as opposed to 100-share lots.
- Inactive stock/bond
- A security that trades in very small volume on a daily basis. See:Illiquid.
- Incentive fee
- Compensation paid to commodities trading advisers or to any practitioner who achieves above-average
returns. Sometimes called performance fee.
- Incentive Stock Option (ISO)
- An Option that has met certain tax requirements
entitling the optionee to favorable tax treatment. Such an option is free from regular tax at the date of grant and the date of exercise (when a non-qualified option would become taxable). If two holding period tests are met (two years between grant date and sale date and one year between the exercise date and sale date), the profit on the option qualifies as a long term capital gain rather than ordinary income. If the holding periods are not met, there has been a "disqualifying disposition".
- Incestuous share dealing
- Trading of shares between companies in order to create a tax or financial benefit for the companies involved.
- Incipient default
- Potential default.
- Income baskets
- Category to which certain income is allocated. Losses in one basket may not be used to offset gains in another basket. Specified in U.S. tax code.
- Income beneficiary
- One who receives income from a trust.
- Income bond
- A bond whose payment of interest is contingent on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business.
- Income dividend
- Any payout to mutual fund shareholders resulting from interest, dividends, or other income.
- Income exclusion rule
- The IRS rule that excludes certain types of income from taxation, e.g., welfare payments.
- Income fund
- A mutual fund that seeks to provide
current income from investments.
- Income immunization strategies
- Methodologies adopted to insure adequate future cash flow.
- Income investment company
- A management company focused on managing a mutual fund whose primary purpose is income generation, typically investing in bonds and high dividend yielding stocks.
- Income limited partnership
- A limited partnership whose main goal is income generation, e.g., real estate, oil equipment.
- Income property
- Real estate purchased for the reasons of income generation.
- Income risk
- The possibility that a portfolio's dividends will decline as a result of falling interest rates. Income risk is generally greatest for money market instruments and short-term bonds, and least for long-term bonds.
- Income statement (statement of operations)
- A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.
- Income stock
- Common stock with a high dividend yield and few profitable investment opportunities.
- Income tax
- A state or federal government's levy on individuals as personal income tax and on the earnings of corporations as corporate income tax.
- Incontestability clause
- Clause in a life insurance contract preventing the insurer from revoking the policy after it has been in force for a year or two. If the life insurance company discovers any important facts that the policyholder may have concealed, such as experiencing a stroke, within that period, the insurer could revoke the policy.
- A legal process through which a company receives a charter and the state in which it is based allows it to operate as a corporation.
- Trade terms used worldwide to specify seller and buyer obligations in shipments against international sales contracts. These terms are adopted by the International Chamber of Commerce (ICC) for international movement of merchandise. Since they in themselves are not law, they must be specified if desired in quotations, sales contracts, purchase orders and commercial invoices.
- The inability of a local currency to be exchanged for another currency. Often includes transfer risk.
- Incorporated joint venture
- A joint venture in which legal entities are established to divide the project's equity by shareholdings in a company.
- Incremental cash flows
- Difference between the firm's cash flows with and without a project.
- Incremental cost of capital
- Average cost applicable to the issue of each additional unit of debt and equity.
- Incremental costs and benefits
- Costs and benefits that would occur if a particular course of action is taken, compared to those that would have been obtained if that course of action had not been taken.
- Incremental default risk (IDR)
- Default risk incremental to what is calculated through the Value-at-risk model, which often does not adequately capture the risk associated with illiquid products.
- Incremental internal rate of return
- Internal rate of return (I.R.R.) on the incremental investment from choosing a larger instead of a smaller project.
- A company or facility designed to host start-up companies. Incubators provide networks of contacts and shared backoffice resources to help start-ups grow by controlling costs.
- Used in insurance policy agreements as to compensation for damage or loss. Hold harmless
- Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgments resulting from lawsuits pertaining to their conduct.
- A legal obligation to cover a liability, however arising.
- Agreement between lender and borrower that details specific terms of the bond issuance. Specifies legal obligations of bond issuer and rights of bondholders. An indenture spells out the specific terms of a bond, as well as the rights and responsibilities of both the issuer of the security and the holder.
- Independent auditor
- A certified public accountant operating outside the company who can provide an accountant's opinion.
- Independent broker
- NYSE member who executes orders for floor brokers and firms other than its own.
- Independent investments
- Investments available to a firm that may be selected individually or in groups because each investment is different in its nature and purpose.
- Independent project
- A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.
- Independent variable
- Term used in regression analysis to represent the element or condition that is expected to influence another (so-called dependent) variable.
- Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Indexes measure the ups and downs of stock, bond, and some commodities markets, in terms of market prices and weighting of companies in the index.
- Index arbitrage
- An investment trading strategy that exploits divergences between actual and theoretical futures prices. An example is the simultaneous buying (selling) of stock index futures (i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily inflated basis between these two baskets. Often, the point at which profitability exists is expressed at the block call as the number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. See: Program trading.
- Index fund
- Investment fund designed to match the returns on a stock market index. Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index.
- Index futures
- A futures contract on an index (such as a foreign stock index) in the futures market.
- Index method
- Technique to calculate rates of return that is based on initial and terminal values.
- Index model
- A model of stock returns using a market index such as the S&P 500 to represent common or systematic risk factors.
- Index number
- A way to standardize the price changes of goods that have much different prices. For example, a consumer price index might be represented by a shopping cart of goods. Suppose those goods cost $324. The index would begin by dividing by 3.24 and the initial value would be 100. One usually watches the percentage increases or decreases in the index. See: Consumer Price Index (CPI), Time series models
- Index option
- A call or put option based on a stock market index.
- Index and Option Market (IOM)
- A division of the CME established in 1982 for trading stock index products and options.
- Index swap
- A swap of a market index for some other asset, such as a stock-for-stock or debt-for-stock swap.
- Index warrant
- A stock index option issued by either a corporate or a sovereign entity as part of a security offering, and guaranteed by an option clearing corporation.
- Indexed bond
- Bond whose payments are linked to an index, e.g., the consumer price index.
- Indexed rate
- An interest rate linked to an index, usually the CPI.
- Indexed Stock Options
- Options that have an exercise price which may fluctuate above or below market value at performance options in that the exercise price of indexed options typically remains variable until the option is exercised.
- A passive instrument strategy calling for construction of a portfolio of stocks designed to track the total return performance of an index of stocks.
- Indexing plus
- See: Enhanced indexing
- 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 represented by the letter "e" in stock tables.
- Indicated yield
- The yield, based on the most recent quarterly dividend 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. See: Dividend yield.
- (1) Notice given by a dealer (through Autex) or customer of an interest in buying or selling stock, sometimes including specific volume and price; (2) approximation of where a specialist sees buy and sell interest to tighten the range to an opening price.
- Indication of interest
- A dealer's or investor's interest in purchasing (not commitment to buy) securities that are still in the underwriting stage and are being registered by the Securities and Exchange Commission.
- Indication pricing schedule
- A statement of rates for an interest rate or currency swap.
- Used in the context of general equities. Technical or fundamental measurement that securities analysts use to forecast the market's direction, such as investment advisory sentiment, volume of stock trading, direction of interest rates, and buying or selling by corporate insiders.
- Indifference curve
- The expression in a graph of a utility function, where the horizontal axis measures risk and the vertical axis measures expected return. The curve connects all portfolios with the same utility.
- Indirect Claim
- Claim of a financial intermediary; the intermediary relends funds to the deficit unit to enable it to acquire real assets.
- Indirect costs of financial distress
- Costs such as lost business as a result of bankruptcy or liquidation.
- Indirect diversification benefits
- Diversification benefits provided by the multinational corporation that are not available to investors through their portfolio investment.
- Indirect Exchange Rate
- The foreign currency price of one unit of the home currency.
- Indirect method
- Reporting in the statement of cash flow that adjusts or reconciles net income to cash from operations.
- Indirect quote
- For foreign exchange, the number
of units of a foreign currency needed to buy one US dollar.
- Indirect terms
- The price of a unit of domestic currency in foreign currency terms. See: Direct terms.
- Individual Retirement Account (IRA)
- A retirement account that may be established by an employed person. IRA contributions are tax deductible according to certain guidelines, and the gains in the account are tax-deferred.
- Individual Retirement Account (IRA) rollover
- A provision of the law governing IRA's that enables a retiree or anyone receiving a lump-sum payment from a pension, profit-sharing, or salary reduction plan to transfer the amount into an IRA.
- Individual tax return
- A tax return filed by an individual to account for their personal income and taxes payable.
- Inductive reasoning
- The attempt to use information about a specific situation to draw a conclusion.
- Industrial production
- A statistic determined by the Federal
Reserve Board focusing on the total output of all US factories and mines
on a monthly basis. Used as an economic
- Industrial revenue bond (IRB)
- A bond issued by local government agencies on behalf of corporations.
- General term used in the financial markets to refer to companies manufacturing, producing, or distributing goods and services.
- The category describing a company's primary business activity. This category is usually determined by the largest portion of revenue.
- Industry allocation
- Investment of certain proportions of a portfolio in certain industries. Sometimes called sector allocation.
- Inefficient portfolio
- Group of assets dominated by at least one other portfolio under the mean
variance rule. For example, if A has both lower return and higher volatility
than B, we say A is dominated by B.
- Infant industry argument
- Argument that industries in the developing and emerging sectors of the economy need protection against international competition in order to establish themselves.
- The rate at which the general level of prices for goods and services is rising.
- Inflation accounting
- Accounting practices allowing for the effects of inflation.
- Inflation-escalator clause
- A clause in a contract providing for increases or decreases in inflation depending on fluctuations in the cost of living, production costs, and so forth.
- Inflation hedge
- Investments designed to hedge against inflation and the loss of purchasing power associated with it.
- Inflation-indexed securities
- Securities such as bonds or notes that guarantee a return higher than the rate of inflation if the security is held to maturity.
- 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.
- Inflation uncertainty
- The fact that future inflation rates are not known. It is a possible contributing factor to the makeup of the term structure of interest rates.
- Inflexible expenses
- Expenses that cannot be adjusted or eliminated such as car payments or rental payments. Antithesis of flexible expenses.
- Information Agent
- Agent whose primary task is to disseminate and explain the details of capital transactions.
- Information asymmetry
- Condition that information is known to some, but not all, participants.
- Information Coefficient (IC)
- The correlation between predicted and actual stock returns, sometimes used to measure the contribution 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 content effect
- The rise in the stock price following a dividend signal, or publication of some other related news.
- Information costs
- Transactions costs that include the assessment of the investment merits of a financial asset. Related: Search costs.
- Information memorandum
- A document detailing the project and project financing, usually in
connection with a syndication.
- Information theory
- A mathematical theory first studied by Claude E. Shannon that presents a framework that measures among many things the amount of theoretical coding necessary to communicate information effectively.
- Infrastructure risk
- The risk associated with the impact on project cash flows from infrastructure problems. Also known as transportation risk.
- Information-motivated trades
- Trades in which an investor believes he or she possesses pertinent information not currently reflected in the stock's price.
- Information Ratio
- The ratio of annualized expected residual return to residual risk. A central measurement for active
management, value added is proportional to the square of the information ratio.
- Information services
- Organizations that furnish investment and other types of information, such as information that helps a firm monitor its cash position.
- Information Signaling
- Conveying intelligence through a firm's actions. A firm's dividend policy, for example, provides signals to investors concerning the value of the firm's stock.
- Informational efficiency
- The degree to which market prices correctly and quickly reflect information and thus the true value of an underlying asset.
- Informationless trades
- Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that acts only on existing information. That is, an investor might sell a large block of stock -- not because they have information that leads them to think the stock will fall in value -- but because they might need the cash for some other investment.
- A country's fundamental system of transportation, communications, and other aspects of its physical capabilities.
- A bar of metal such as the type that the Federal Reserve System uses to store gold reserves.
- Inheritance tax return
- Tax form required to determine the amount of state tax due on an inheritance.
- Initial filing
- Has various meanings. It could refer to a form that is filed with the Securities and Exchange Commission in advance of a major event, such as a public offering or a share repurchase. It could also refer to filings that occur before legal inside transactions.
- Initial margin
- (1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; (2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
- 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 considerable risks for the possibility of large gains. IPOs by investment companies (closed-end funds) usually include underwriting fees that represent a load to buyers.
- Initial Public Offering Spinning
- The practice of an investment bank setting aside portions of a corporation's Initial Public Offering for senior management of that corporation.
- Initiate coverage
- (1) Firm is now followed by analysts at a particular securities house; (2) Indication to cover short position by purchasing the underlying stock (this cancels out the short position).
- Inland Bill of Lading
- A document used as a receipt from the carrier to shipper that covers the transport of goods overland. It also acts as a contract of carriage.
- 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.
- Used in the context of general equities. In-line expression of interest in a particular stock, usually asking the firm to bid for or offer stock.
- In-service withdrawal
- A participant-initiated withdrawal from an employer-sponsored retirement plan while the participant is still employed by the company.
- Inside market
- Refers to over-the-counter trading. Best (highest) bid and best (lowest) offer, often used in the O.T.C. Market. See: In-line.
- Insider information
- Material 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.
- Insider trading
- Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock.
- Insider Trading Sanctions Act of 1984
- Act imposing civil and criminal penalties for insider trading violations.
- Insider Trading & Securities Fraud Enforcement Act of 1988 (ITSFEA)
- Federal legislation that greatly increased the penalties for trading on material
- Insider transaction reports
- A Form 4 report filed with the Securities and Exchange Commission upon purchases or divestitures of company stock by corporate insiders. See: Form 4, Insiders
- Traditionally referring to the directors, senior officers and holders of more than 10% of the voting shares of the company, insiders now include anyone who possesses or has access to material, non-public information (inside information), including tippees. This could include, for example, even a junior employee who makes photocopies for a board meeting, or someone who is ‘tipped’ by an insider..
- Insolvency risk
- The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
- A firm that is unable to pay debts (its liabilities exceed its assets).
- Inspector(s) of Election
- The person(s) appointed by the Corporation to act as a judge on voting matters
brought before a shareholder meeting. The inspector determines which proxies and ballots are in good form, and acceptable to be voted. They also count and record the votes, supervise and inspect the counting process and attest to the final results. They cannot be overruled on these matters, although they have no voice in the procedural aspects of the meeting itself.
- Inspector's or Judge's Certificate
- A form provided by the Corporation, and completed by the Inspectors of Election, attesting to the final voting results and percentages of a shareholder meeting.
- Installment payments
- Distribution of plan assets to beneficiaries based upon a regular schedule.
- Installment sale
- The sale of an asset in exchange for a specified series of payments (the installments).
- Instinet (Institutional Networks Corporation)
- Computerized subscriber service that serves as a vehicle for the fourth market. "Instinet" is registered with the SEC. As a stock exchange it numbers among its subscribers a large number of mutual funds and other institutional investors linked to each other by computer terminals. The system permits subscribers to display bids and offers (which are exposed system wide for whatever length of time the initiating party specifies) and to consummate trades electronically. Instinet is largely used by market makers, but, nonmarket makers and customers have equal access.
- Insurance companies, pension funds, trusts, foundations, mutual funds,
funds managers, bank investment departments.
- Institutional broker
- A broker who buys and sells securities for institutional investors such as banks, and mutual funds, pensions.
- Institutional Brokers' Estimate System (IBES)
- Service that assembles analysts' estimates of future earnings for thousands of publicly traded companies, detailing how many estimates are available for each company and the high, low, and average
estimates for each.
- Institutional buyin (IBO)
- A form of leveraged buyout in which an institutional investor or private equity house acquires a company. Incumbent management can be retained and may be rewarded with equity participation.
- Institutional investors
- Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds.
- The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.
- Notes issued
by a federal agency whose obligations are guaranteed by the full-faith-and-credit
of the government, even though the agency's responsibilities are not necessarily
those of the US government.
- Financial securities, such as money market instruments or capital market instruments.
- Insurable interest
- An insurance term referring to the relationship between a policy's insured person or property and the potential beneficiary. The beneficiary must have an insurable interest in the insured person or property to receive payment of the policy if the insured died while the policy was in force.
- Guarding against property loss or damage by making payments in the form of premiums to an insurance company, which pays an agreed-upon sum to the insured in the event of loss.
- Insurance agent
- The insurance company representative and adviser who sells insurance policies.
- Insurance broker
- A broker, independent of any insurance company, who represents the interests of the buyer in searching for insurance coverage at the lowest cost and providing the highest benefit to the buyer.
- Insurance claim
- A claim for reimbursement from the insurance company when the insured has suffered a loss that is covered under an insurance policy.
- Insurance dividend
- Money paid annually to policyholders participating in cash value life insurance policies.
- Insurance Linked Securities (ILS)
- Insurance Linked Securities transfer a specified set of risks (insurance risks) from a sponsor to investors.
ILS have payouts linked to insurance losses and it is an effective way for investors to diversify their portfolio since insurance loss has little correlation with the other financial markets (equity, fixed income).
See also Catastrophic Bonds
- Insurance policy
- A contract detailing an insurance policy and outlining what risks are insured, what insurance premiums are to be paid by the policyholder, what deductibles prevail, and all the details associated with a policy.
- Insurance premium
- Payments calculated by the insurance company based on risk factors that must be made by the insured to guarantee protection of property loss under an insurance policy.
- Insurance principle
- The law of averages. The average outcome for many independent trials of an experiment will approach the expected value of the experiment.
- Insurance settlement
- The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.
- The property or persons covered by an insurance policy.
- Insured account
- A bank or financial account that is insured for the benefit of the depositor, protecting against loss in the event that the savings institution becomes insolvent. See: FDIC.
- 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
- Insured Trade Acceptance
- A trade acceptance where the buyer's ability to pay is insured.
- Intangible asset
- A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual property, patents, copyrights, and trademarks are examples of intangible assets.
- Integer programming
- Variant of linear programming in which the solution values must be integers.
- Integrated financial market
- A market in which there are no barriers to financial flows, and the same risk asset commands the same expected return, irrespective of domicile.
- Intellectual property rights
- Patents, copyrights, and proprietary technologies
and processes that may be the basis of a company's competitive advantage.
- Indices traded on the AMEX weighted by certain criteria in an attempt to create excess returns. The stocks included in an intellidex are chosen using a system called the Intelligent Index Methodology that is designed to narrow a broad range of stocks that meet specified criteria down to those deemed most likely to create excess returns. There are extensive criteria options, but some of the more commonly used ones follow stocks that match a certain investment strategy, industry focus, or risk level.
- Interbank market
- Financial institutions exchange of currencies between and among themselves.
- Interbank rate
- See: LIBOR
- Interbank spread
- The difference between a bank's offer and bid rates for deposits in the Eurocurrency market.
- Intercommodity spread
- In the commodities market, a spread consisting of a long position and a short position in different but related commodities for example, speculating that the price relationship between the two commodities will change, e.g., platinum and gold.
- Intercompany loan
- Loan made by one unit of a corporation to another unit of the same corporation.
- Intercompany transaction
- Transaction carried out between two units of the same corporation.
- Interdelivery spread
- Used in futures or options market to refer the purchase of one month of a contract and selling another month in the same contract, in the hope that the price difference will widen or narrow, depending on the investment.
- Interfund transactions
- Financial arrangements effected by payments made from one fund group (either Federal funds or trust funds) to another group.
- The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.
- Interest coverage ratio
- The ratio of earnings before interest and taxes to annual interest expense. This ratio measures a firm's ability to pay interest.
- Interest coverage test
- A debt limitation that prohibits the issuance of additional long-term debt if the issuer's interest coverage would, as a result of the issue, fall below some specified minimum.
- Interest deduction
- An interest expense, such as interest on a margin account, that is allowed as a deduction for tax purposes.
- Interest during construction
- Interest accumulated during construction period, which usually equals capitalized interest.
- Interest equalization tax
- Tax on foreign investment by residents of the US which was abolished in
- Interest expense
- Interest expense is the money the corporation or individual pays out in interest on loans.
- Interest in Arrears
- Interest that is due only at the maturity date rather than periodically over the life of the loan.
- Interest on excess reserves
- Interest rate that a central bank pays to banks on funds that exceed the statuatory reserve requirements. Related: Excess Reserves.
- Interest on interest
- Interest earned on reinvestment of each interest payment on money invested. See: compound interest.
- Interest on reserves
- Interest rate that a central bank pays to banks on funds that are statuatory reserve requirements as well as the reserves that are in excess of the required reserves. Related: Excess Reserves.
- Interest-only loan
- A loan in which payment of principal is deferred and interest payments are the only current obligation.
- Interest-only strip (IO)
- A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero.
- Interest payments
- Contractual debt payments based on the coupon rate of interest and the principal amount.
- Interest rate
- The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.
- Interest rate agreement
- An over the counter agreement whereby one party, for an up-front 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.) Also called a FRA (pronounced like ‘draw’) or forward rate agreement.
- Interest rate cap
- An interest rate agreement in which payments are made when the reference rate exceeds the strike rate. Also called an interest rate ceiling. Related: Interest rate floor.
- Interest rate on debt
- The firm's cost of debt capital.
- Interest rate ceiling
- See: Interest rate cap
- Interest rate floor
- An interest rate agreement in which payments are made when the reference rate falls below the strike rate. Related: Interest rate cap.
- Interest rate futures contract
- A futures contract based on an interbank deposit rate or an underlying debt security. The value of the contract rises and falls inversely to changes in interest rates.
- Interest rate parity theorem
- Expression that the interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate.
- Interest rate parity line (IRP)
- Diagonal line on a graph that characterizes interest rate parity.
- Interest rate risk
- The chance that a security's value will change due to a change in interest rates. For example, a bond's price drops as interest rates rise. 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. For example, one party will pay fixed and receive variable.
- Interest-sensitive insurance policy
- A cash value life insurance policy whose insurance dividend rates vary with respect to inflation, enabling the policyholder to avoid the loss of purchasing power associated with inflation.
- Interest-sensitive stock
- Stocks whose earnings are dependent upon and change with the interest rate, e.g., bank stocks.
- Interest subsidy
- The value of a firm's deduction of the interest payments on its debt from its earnings before calculation of its tax bill under current tax law.
- Interest tax shield
- The reduction in income taxes that results from the tax-deductibility of interest payments.
- Interim dividend
- The declaration and payment of a dividend prior to annual earnings determination.
- Interim financing
- A short-term loan made to a company on the condition that a takeout will follow with long-term or intermediate financing.
- Interim rate of return
- The rate of return earned between cash flows.
- Interim statement
- A financial statement that reflects only a limited period of a company's financial statement, not the entire fiscal year.
- Interlocking directorate
- Describes cross-memberships of directors on each other's company Board of Directors.
- Intermarket sector spread
- The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity. For example, a spread between AA bonds and BBB bonds.
- 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.
- Intermarket Surveillance Information System (ISIS)
- A database that distributes information from all the major stock exchanges in the United States.
- Intermarket Trading System (ITS)
- Electronic communications network linking the trading floors of seven registered exchanges to permit trading among them in stocks listed on either the NYSE or AMEX and one or more regional exchanges. Through ITS, any broker or market maker on the floor of any participating exchange can reach other participants for an execution whenever the nationwide quote shows a better price available. A floor broker on the exchange can enter an ITS order to assure excecution of all of an offering or bid, instead of splitting it with competing brokers.
- See: Financial intermediary
- Intermediate targets
- An intermediate target is a variable (such as the money supply) that is not directly under the control of the central bank, but that does respond fairly quickly to policy actions, is observable frequently and bears a predictable relationship to the ultimate goals of policy.
- Typically one-ten years.
- Intermediate trend
- General movement in price data that lasts from three weeks to six months.
- Intermediated market
- A financial market in which some financial institution stands between counterparties to financial transactions.
- Investment through a financial institution. Related: Disintermediation.
- When a non-linear dynamical system alternates between
periodic and chaotic behavior. See: Chaos, Dynamical Systems.
- Internal auditor
- An employee of a company who analyzes the company's accounting records to ensure that the company is following and complying with all regulations.
- Internal expansion
- Growth of assets resulting from internal financing or internally generated cash flow.
- Internal finance
- Finance generated within a firm by retained earnings and depreciation.
- Internal growth rate
- Maximum rate a firm can expand without outside sources of funding. Growth generated by cash flows retained by company.
- Internal market
- The mechanisms for issuing and trading securities within a nation, including its domestic market and foreign market. Compare: External market.
- Internal measure
- The number of days that a firm can finance operations without additional cash income.
- Internal rate of return (IRR)
- Dollar-weighted rate of return. Discount rate at which net present value (NPV) of an investment is zero. The rate at which a bond's future cash flows, discounted back to today, equal its price.
- Internal Revenue Code
- The various statutes and regulations making up federal tax law.
- Internal Revenue Service (IRS)
- The federal agency responsible for the collection of federal taxes, including personal and corporate income taxes, Social Security taxes, and excise and gift taxes.
- Internal Revenue Service Restructuring and Reform Act of 1998
- The legislation targeted at IRS reform, particularly related to the time period required for capital gains and taxpayer protection and rights.
- Internally efficient market
- See: Operationally efficient market
- International Accounting Standards Board (IASB)
- The group that creates and issues the International Financial Reporting Standards (IFRS). It is the successor to the IASC (International Accounting Standards Committee,) which created the IAS (International Accounting Standards).
- International arbitrage
- Simultaneous buying and selling of foreign securities and ADRs
to capture the profit potential created by
time, currency, and settlement inconsistencies
that vary across international borders.
- International Asset Pricing Model (IAPM)
- The international version of the CAPM assuming that investors in each country share the same consumption basket and purchasing power parity holds.
- International Banking Facility (IBF)
- A branch that an American bank establishes in the United States to do Eurocurrency business.
- International Bank for Reconstruction and Development (IBRD)
- Also commonly called the World Bank. It is a United Nations affiliated institution that assists in the development of its poorer members by facilitating private investments, and by making and guaranteeing loans.
- International bonds
- A collective term that refers to global bonds, Eurobonds, and foreign bonds.
- International Chamber of Commerce (ICC)
- A business organization with membership from over 80 countries. They work to harmonize trade practices worldwide by establishing agreed upon rules such as Incoterms and Uniform Customs and Procedures for Documentary Credits.
- 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 issuing requirements of the foreign country
where the stock is to be traded. The US version
of the IDR is the American
Depository Receipt (ADR).
- International Development Association (IDA)
- Association established as part of the World Bank to stimulate country development; it was especially suited for the world's 80 poorest countries, providing loans with no or low interest rates.
- International diversification
- The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.
- International Energy Agency (IEA)
- The International Energy Agency, founded during the oil crisis of 1973-1974, is an intergovernmental organization which acts as energy policy advisor to 28 member countries.
- International Finance Corporation (IFC)
- A corporation owned by the World Bank that produces a number of well-known stock indexes for emerging markets. Its major role is to provide financing for projects in less developed countries.
- International finance subsidiary
- A subsidiary incorporated in the US,
usually in Delaware, whose sole purpose once was to issue
debentures overseas and invest the
proceeds in foreign operations, with the interest
paid to foreign bondholders not subject
to US withholding tax. Elimination of the corporate withholding
tax has ended the need for this type of subsidiary.
- International Financial Reporting Standards (IFRS)
- Accounting standards differ across countries making it difficult for investors to understand the financial health of corporations in different countries. Countries are gradually adapting the International Financial Reporting Standards proposed by the International Accounting Standards Board (IASB).
- International Fisher effect
- States that the interest rate differential between two countries should be an unbiased predictor of the future change in the spot rate.
- International Fisher relationship
- Theory that nominal interest rates and inflation rates in different countries are connected. The Fisher equation says the nominal interest rate is the product of one plus the real interest rate times one plus the expected rate of inflation.
- International fund
- A mutual fund that can invest only outside the United States.
- International market
- Related: External market
- International market index
- An index listed on the American Stock Exchange tracking the performance of 50 American Depository Receipts traded on the AMEX, NYSE, and NASDAQ.
- International Monetary Fund (IMF)
- An organization founded in 1944 to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems.
- International Monetary Market (IMM)
- A division of the CME established in 1972 for trading financial futures. Related: Chicago Mercantile Exchange (CME)
- International monetary system
- The global network of government and commercial institutions within which currency exchange rates are determined.
- International mutual fund
- A mutual fund that invests strictly in securities markets throughout the world, excluding the United States. A global fund, on the other hand, invests in both foreign and domestic securities.
- International Organization for Standardization (ISO)
- ISO is not an acronym but the name of a standards setting organization chartered by the United Nations. The name ISO is derived from Greek and connotes equality, i.e. each member country regardless of size or wealth gets only one vote. The ISO 4217 are the standard three letter currency codes. These codes are usually composed of the ISO 3166 two letter country code plus a third letter representing the name of the currency.
- International Petroleum Exchange (IPE)
- Energy futures and options exchange based in London.
- International Security Market Association (ISMA)
- Swiss law association located in Zurich that regroups all the participants on the Eurobond primary and secondary markets. Establishes uniform trading procedures in the international bond markets.
- International Stock Exchange of the U.K. and the Republic of Ireland (ISE)
- Organization that replaced the London Stock Exchange after its merger with the International Securities Regulatory Organization (ISRO).
- International Swap Dealers Association (ISDA)
- Formed in 1985 to promote uniform practices in the writing, trading, and settlement of swaps and other derivatives.
- Internet Banking
- Use of the Internet to obtain account status information or carry out transactions on an account with a financial institution.
- A method of approximating a price or yield that is unknown by using numbers that are known.
- The practice of using a second broker in a securities transaction, which is considered illegal it is if used to generate additional commission.
- Inter vivos trust
- A trust created between living persons. Antithesis of a testamentary trust.
- Intrabudgetary transactions
- Effected when payment and receipt both occur within the budget, or when payment is made from off-budget federal entities whose budget authority and outlays are excluded from the budget totals.
- Intracommodity spread
- Used in the context of futures trading to refer to a trader buying and selling contracts in the same commodity on the same exchange, but for different months. For example, buying Chicago August cattle futures and selling Chicago December cattle futures.
- Intracompany trade
- Transactions between or among subsidiaries that are part of the same parent company.
- Term meaning "within the day," often to refer to the high and the low price of a stock.
- 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.
- Intrastate offering
- A securities offering limited to just one state in the United States.
- Intrinsic value
- The value of an option if it were to expire immediately with the underlying stock at its current price; the amount by which an option is in-the-money. For call options, this is the difference between the stock price and the strike price, if that difference is a positive number, or zero otherwise. For put options it is the difference between the strike price and the stock price, if that difference is positive, and zero otherwise. See also: In-the-Money, Time Value Premium, Parity.
- Intrinsic value of an option
- The amount by which an option is in the money. An option that is not in the money has no intrinsic value.
- Intrinsic value of a firm
- The present value of a firm's expected future net cash flows discounted by the required rate of return.
- 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 (First in, first out), LIFO (Last in, first out) or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For securities firms: Securities bought and held by a broker or dealer for their own account.
- Inventory financing
- Used in the context of factoring and general finance to refer to loans to consumer product producers that use inventory as collateral. See also: Inventory loan.
- Inventory loan
- A secured short-term loan to purchase inventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing.
- Inventory turnover
- A measure of how often the company sells and replaces its inventory. It is
the ratio of annual cost of sales to the latest inventory. One can also interpret the ratio as the time to which inventory is held. For example a ratio of 26 implies that inventory is held, on average, for two weeks (365 days in a year divided by inventory turnover ratio of 26 equals 14 days pr 2 weeks average inventory holding period). It is best to use this ratio to compare companies within an industry (high turnover is a good sign) because there are huge differences in this ratio across industries.
- Inverse floater
- Refers to a debt security whose value increases as interest rates rise, i.e. there is a direct price-yield relationship rather than the usual inverse price-yield relationship. In this context, one example of an inverse floater is an IO, the interest-only component of an MBS strip. As interest rates rise, people are less likely to refinance their mortgages, meaning the existing principal in a mortgage pool is more likely to remain intact. In turn, the cash flows on the IOs are more likely to continue. Therefore, as interest rates rise, the IO becomes more valuable, and so its price rises..
- Inverse floating-rate note
- A variable-rate security whose coupon rate increases as a benchmark interest rate declines.
- Inverse order
- In the context of periodic repayment schedules, beginning from the end, expected maturity. Opposite of current order.
- Inverted market
- A futures market in which the nearer months are selling at price premiums to the more-distant months. Related: Premium.
- Inverted scale
- A serial bond offering whose bonds with earlier maturity dates have higher yields than bonds with later maturity dates.
- Inverted yield curve
- When short-term interest rates are higher than long-term rates. Antithesis of positive yield curve.
- Investible Indices
- Usually refers to the Standard and Poors/International Finance Corporation emerging market indices which are weighted by the amount of market capitalization that foreigners can obtain in each company. The IFCG (Global) index weights each stock by total capitalization. The IFCI (Investible) index weighs by investible capitalization.
- The creation of more money through the use of capital.
- Investment adviser
- A person or an organization that makes the day-to-day decisions regarding a portfolio's investments. Also called a portfolio manager.
- Investment Advisers Act
- Legislation passed in 1940 requiring financial advisers to register with the Securities and Exchange Commission. The measure was enacted to protect the public from fraud or misrepresentation by investment advisers.
- Investment advisory service
- A business that specializes in providing investment advice for a fee. All advisers of an advisory service must be registered with the Securities and Exchange Commission.
- Investment agreement
- A contract specifying the rights and responsibilities of a host government and a corporation in the structure and operation of an investment project.
- Investment analysts
- Related: Financial analysts
- Investment bank
- Financial intermediaries who perform a variety of services, including underwriting and sale of securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and institutional clients, and trading for their own accounts. See: Underwriters.
- Investment certificate
- A document that serves as proof that an individual has an investment in a savings and loan association.
- Investment climate
- Factors such as economic, monetary, and other conditions that affect the performance of investments.
- Investment club
- A group of people who combine their money into a larger pool, then invest collectively in stocks and bonds, making decisions as a group.
- Investment company
- A firm that that invests the funds of investors in securities appropriate for their stated investment objectives in return for a management fee. See also: Mutual fund.
- Investment Company Act of 1940
- Legislation that requires investment companies to register with the SEC and that outlines standards by which they must operate.
- Investment Company Institute (ICI)
- A national industry group of investment companies, including mutual funds, founded in 1940.
- Investment decisions
- Decisions concerning the asset side of a firm's balance sheet, such as the decision to offer a new product.
- Investment grade
- In the context of bond ratings, the rating level above which institutional investors have been authorized to invest.
- Investment-grade bonds
- A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or higher, and Moody's classifies investment grade bonds as BAA or higher. Related: High-yield bond.
- Investment history
- The history of a member firm that establishes certain norms in respect of its investment practice.
- Investment income
- The revenue from a portfolio of invested assets.
- Investment letter
- A letter of intent between the issuer of new securities and the buyer, in the private placement of these new securities. The letter of intent establishes that the securities are being bought for a minimum time period and are treated as an investment, not for resale. If no such letter exists, the securities must be registered with Securities and Exchange Commission.
- Investment management
- The process of managing money. Also called portfolio management and money management.
- Investment manager
- The individual who manages a portfolio of investments. Also called a portfolio manager or a money manager.
- Investment objective
- The financial objective of an investor. Whether the investor requires income or capital appreciation, for example. The investor's objective governs the investment strategy.
- Investment opportunity set
- The universe of choices as to investments available to an individual or corporation.
- Investment philosophy
- The style and general ideology of investment practiced by an investor. Certain investors favor small-capitalization stocks, while others prefer large blue-chip stocks, for example.
- Investment policy
- Statement of objectives and constraints for an individual's or organization's
- Investment product line (IPL)
- The line of required returns for investment projects as a function of beta (nondiversifiable risk).
- Investment Risk
- Uncertainty about the future benefits to be realized from an investment.
- Investment Valuation Model (IVM)
- The basic mathematical technique of finance that calculates the value of an investment as the present value of all future cash flows expected to be generated by the investment.
- As a discipline, the study of financial securities, such as stocks and bonds, from the investor's viewpoint.
- Investment software
- Computer software that helps investors make investment decisions by identifying situations that meet programmed parameters.
- Investment strategy
- A strategy, or plan of attack, an investor uses when deciding how to allocate capital among several options including stocks, bonds, cash equivalents, commodities, and real estate. The strategy should take into account the investor's tolerance for risk as well as future needs for capital.
- Investment strategy committee
- A committee within a brokerage firm that conducts research and makes recommendations on the firm's stated investment strategy.
- Investment Tax Credit
- Proportion of new capital investment that could be used to reduce a company's tax bill (abolished in 1986).
- Investment trust
- A closed-end fund regulated by
the Investment Company Act of 1940. These funds have a fixed number of shares
that are traded on the secondary markets,
like corporate stock. The market price may exceed the asset value per share, in which case shares are selling at a premium.
When the market price falls below the (NAV)/share,
shares are selling at a discount. Many
closed-end funds are of a specialized
nature; the portfolio represents a particular
industry or country. These funds are usually listed on US and foreign
- Investment value
- Applies mainly to dealer securities. Fixed income value of a convertible, the price at which the convert would have to sell as a straight debt instrument relative to the yield of other bonds of like maturity, size, and quality represents a presumed floor to the bond, assuming the continued creditworthiness of the issuer and the general level of interest rates. Bond value. See: conversion value.
- The owner of an asset.
- Investor fallout
- In the mortgage pipeline, risk that occurs when the originator commits loan terms to the borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing.
- Investor relations
- The process by which the corporation communicates with its investors.
- Investor's equity
- The balance of a margin account. Related: Buying on margin, initial margin requirement.
- Investors service bureau
- NYSE service that deals with all general inquiries concerning securities investments.
- Bill written by a seller of goods or services and submitted to a purchaser for payment.
- Invoice billing
- Billing system in which invoices are sent off at the time of customer orders and are all separate bills to be paid.
- Invoice date
- Usually the date when goods are shipped. Payment dates are set relative to the invoice date.
- Invoice price
- The price that the buyer of a futures contract must pay the seller when the underlying asset (such as Treasury bond) is delivered.
- Involuntary bankruptcy
- The process where creditors petition the court to begin bankruptcy proceedings on a debtor. Also see Voluntary bankruptcy.
- Involuntary liquidation preference
- A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation.
- IPO Spinning
- See Initial Public Offering Spinning.
- IRA/Keogh accounts
- Special accounts that allow income taxes on funds deposited into the plan to be 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.
- Irish Financial Services Regulatory Authority (IFSRA)
- Ireland's supervisory authority for the Irish financial markets. Irish financial regulator.
- Irredeemable bond
- A bond lacking a call feature or a right of redemption. Also refers to a perpetual bond.
- Irrational call option
- The implied call imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the money. Option exercise like this affects payments on the MBS.
- Irrelevance result
- The Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's value.
- Irrevocable letter of credit
- Assurance of funds issued by a bank that cannot be canceled
or amended without the beneficiary's approval.
- Irrevocable trust
- A trust that is unable to be amended, altered, or revoked.
- Islamic Loan
- A loan that interest cannot be charged on. Instead, the loan is
structured using discounts, sale or lease, profit participation, or repurchase agreements.
- A particular financial asset.
- Issued share capital
- Total amount of shares that have been issued. Related: Outstanding shares.
- An entity that puts a financial asset in the marketplace.
- Issuing bank
- Bank that issues a letter of credit.
- Issuer bid
- An offer by the issuer to buy back some of its own shares. Issuer bids are often undertaken when either the company feels that their stock price is undervalued or when there is extra cash to return to the shareholders.
- Istanbul Stock Exchange
- The sole securities exchange in Turkey.
- Italian Derivatives Market (IDEM)
- A derivatives market operated by the Italian Stock Exchange Council. It trades futures and options on the 30 index and individual stock options. See: Italian Stock Exchange.
- Italian Exchange (Borsa Italiana)
- Italy's major securities exchange.
- Italian Stock Exchange (ISE)
- The Milan-based stock exchange, which came into effect after the unification of Italy's ten national exchanges in 1991. All listed securities are traded electronically. The main indexes are the MIB and the MIBTEL, based on the prices of all listed shares, and the MIB 30, based on a sample of the 30 most liquid and highly capitalized shares.
- Itemized deduction
- Specific deductions allowed by the IRS outlined in the tax return.
- "It's us,"
- Used in the context of general equities. "The firm, and not a customer, is the party involved."
Back to the top
Copyright © 2023, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.
[Version 1 June 2023.]
Keep up to date on the latest finance lingo with my new iPad/iPhone app
Download from iTunes
Order Campbell Harvey's book on the future of finance
Order via Amazon