Glossary

The yield spread in basis points over an actual or interpolated government bond. Interpolation is used to derive an implied benchmark if no benchmark exists for a specific bond’s tenor. Compare: Benchmark spread, I-spread

A price index that can be used to convert nominal GDP into real GDP. GDP Deflator = Nominal GDP / Real GDP x 100

Measures the aggregate changes in prices across the overall economy. A GDP deflator index can be used used to eliminate the price effect in nominal GDP data, so as to identify trends in real economic growth.

A type of municipal bonds which are unsecured bonds backed by the full faith credit of the issuing governmental entity, which is to say they are supported by its taxing power. Compare: Revenue bonds

In a limited partnership setup, the managing firm that runs the business/portfolio and ultimately bears unlimited liability for the business’s debts and obligations. For a hedge fund, the management firm typically receives both a management fee based on the value of the portfolio, and an incentive fee based on fund returns.

A general partnership is a type of business structure where two or more individuals own and operate the business together. The partners are personally responsible for all debts and obligations incurred by the business. One of the main advantages of a general partnership is that it is relatively easy and inexpensive to set up and operate. Partners can pool their ...

A financial reporting standard established by FASB. It is widely adopted by US firms. Compare: IFRS

A measure of central tendency computed by taking the nth root of the product of n non-negative values. [(1+r1)x(1+r2)x … x(1+rn)]1/n -1

Goods that are consumed less as the price of the good falls. This is because it is an inferior good for which the negative income effect outweighs the positive substitution effect when price falls.  Although a Giffen good is only in theory, there are some rare instances where this turned out to be true.   Compare: Veblen good

Global Depository Receipts (GDR) are issued outside the United States and the issuer’s home country. Most GDRs are traded on the London or Luxembourg exchanges. Although not listed on U.S. exchanges, they are usually denominated in U.S. dollars and can be sold to U.S. institutional investors. GDRs are not subject to the capital flow restrictions imposed by governments and thus ...

Common shares issued by the same company that is traded on different stock exchanges, in different currencies. The shares are identical, just that they are quoted and traded in different currencies. Such securities offer more flexibility than depository receipts because the shares represent an actual ownership interest in the company, and currency conversions are not needed to trade in them. 

Chart pattern where the short-term moving average crosses above the long-term moving average. This is usually a buy signal. Compare: Dead cross

Excess of purchase price over the fair value of the identifiable net assets acquired in a business acquisition. Goodwill = Purchase Price – Fair Value of Net Assets Acquired Goodwill cannot be amortised.

A form of Dividend Discount Model which allows us to simplify all future dividends to one value by making assuming a constant growth rate of dividends. See also: 2-stage Growth Model, Sustainable growth rate

A yield that restates a yield-to-maturity based on 30/360 convention to one based on actual/actual convention.

Investing in infrastructure that are to be constructed. Compare: Brownfield investments

Expenditures Approach The market value of all final goods and services produced within the economy in a given period of time. GDP = Consumption + Investment + Govt Spending + Net Exports Income Approach The aggregate income earned by all households, all companies, and the government within the economy in a given period of time. GDP = National Income + ...

Measures the total value of goods and services produced by the labor and capital of a country’s citizens.  The difference with GDP is due to incomes of foreigners and the income of foreign capital invested in the country, which are included in GDP but not in GNP, and the income of citizens who work in other countries and the income ...

Gross Profit Margin = Gross Profit / Revenue

A type of structured financial instrument (capital protected instrument) that provides investors capital protection. It combines a zero-coupon bond and a call option contract on some underlying asset.