Category Archives: A – G

Terms that start with the letters A – G

Discounted Cash Flow

Discounted Cash Flow is a valuation technique or model that discounts the future cash flows of a business, entity, or asset for the purposes of determining its value. One aspect of investment decision-making entails discovering the fair value of investments.

Debt Snowball Method

The Debt-Snowball Method is a debt-management strategy aimed at reducing a borrower’s obligations. Borrowers can use this method to slowly eliminate their debt by focusing on their smallest debt balance, followed by larger ones until all obligations are paid off.

Covariance Analysis

Covariance is a statistical measure of the extent that 2 variables move in tandem relative to their respective mean (or average) values. In the investment world, it is important to be able to measure how different financial variables interact together.

Correlation Analysis

The use of correlation analysis extends to numerous important fields. For example, in finance, correlation analysis can be used to measure the degree of linear relationships between interest rates and stock returns, money supply and inflation, stock and bond returns, and exchange rates.

Collar Option Strategy

The options collar strategy is designed to limit the downside risk of a held underlying security. It can be performed by holding a long position in a security, while simultaneously going long a Put and shorting a Call.

Chicago Mercantile Exchange (CME Group)

The CME Group is an order-driven exchange that facilitates the trading of forward, futures, and options contracts on numerous products within key asset classes such as agriculture, energy, metals, equities, interest rates, and exchange rates.

Chicago Board of Trade (CBOT)

The CBOT is an exchange providing trading in derivatives contracts and clearinghouse functions. It allows traders to buy and sell contracts on several products in asset classes such as agriculture, energy, metals, equities, bonds, and exchange rates. The majority of its trades are conducted electronically.

Cash Conversion Cycle

Measuring the cash conversion cycle is important to liquidity, working capital, and the operating cycle of a company. Good management of the CCC can also enhance a company’s cash flows, allowing it to effectively make sound investing and financing decision. Managing the CCC entails efficient inventory, receivables, and payables functions, and should be part of a company’s overall operational strategy.

Capital Funding

Capital funding is the provision of monetary resources or capital for productive uses. Capital provided by investors or other parties is used by various entities such as governments, companies, organizations, and individuals in order to fund their functions and operations. In most cases, capital provided is compensated by some form of return to the provider. Two important types of capital are equity and debt. Equity capital represents an ownership stake, while debt capital is a form of lending.

Gross Domestic Product

Gross Domestic Product, or as it is most often simply referred to as ‘GDP’ is the combined value of ALL goods and services produced within a given country in a given time period.

Expected Return

The Expected Return is a weighted-average outcome used by portfolio managers and investors to calculate the value of an individual stock, or an entire stock portfolio.

Elasticity

Elasticity is one of the most important terms in economics, and has a plethora of uses. Economists define elasticity as the ratio of the percent change in one variable to the percent change in another valuable.

Duration

If you own a bond or manage a bond portfolio, chances are that will you be following daily interest rates. You know that bond prices increase when rates rise, and decrease when rates fall. But how do you measure the bond’s price sensitivity to such rate fluctuations? The answer is duration.

Dupont Analysis

Dupont Analysis breaks the Return on Equity into several different components in order to analyze where the returns are coming from.