Term

Definition

0DTE

Zero Days to Expiration. Options that expire on the same day they are traded.

Algorithmic Trading

Automated trading using computer algorithms.

All or None (AON) Order

An order that instructs the broker to execute the order in its entirety or not at all.

Alpha Generation

The process of creating excess returns relative to a benchmark through active management strategies.

Alternative Credit Data

Non-traditional data sources (like utility bills, rent payments, etc.) used to assess an individual’s creditworthiness.

Amdahl's Law

In computer architecture, the formula that shows the potential speedup of a task's execution when only part of the task is improved.

Anchoring Bias

A cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered when making decisions.

Annualized Return (AR)

Annualized Returns represent an investment's average yearly returns over a given period. This metric converts cumulative returns or returns over a non-standard period into an average yearly figure, allowing for easier comparison across different investments or time periods.

Anti-Money Laundering (AML) Laws

Regulations are designed to prevent generating income through illegal actions and passing it off as legally obtained income.

API (Application Programming Interface)

A set of functions and procedures allowing the creation of applications that access the features or data of an operating system, application, or other service.

API Banking

A system that allows banks' systems to connect and share data with other financial institutions and third-party service providers through APIs.

APR

Annual Percentage Rate. The annual rate charged for borrowing or earned through an investment.

APY

Annual Percentage Yield. Reflects the amount of interest earned on an investment over a year, taking into account the effect of compounding interest.

Arbitrage

The practice of taking advantage of a price difference between two or more markets, striking a combination of matching deals that capitalize upon the imbalance.

Arbitrageurs

Traders who attempt to profit from price inefficiencies in the market by making simultaneous trades that offset each other and capture risk-free profits.

AUM

Assets Under Management. The total market value of the investments that an entity manages on behalf of clients.

Backtesting

Testing a trading strategy on historical data.

Bank of America

A multinational investment bank and financial services holding company.

Bank Secrecy Act (BSA)

A U.S. law requiring financial institutions to assist government agencies in detecting and preventing money laundering.

Barrier Option

A type of option where the payoff depends on whether the underlying asset's price reaches a certain level during a specified period.

Basel Accords

A set of international banking regulations developed by the Basel Committee on Banking Supervision, providing recommendations on banking regulations concerning capital risk, market risk, and operational risk.

Bear Hug

An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth.

Bear Raid

A strategy used by investors to push down the price of a stock by heavily selling off shares, often based on negative rumors about the company.

Bear Trap

A situation in financial markets where a declining stock or index appears to reverse and start increasing, prompting investors to sell or go short. However, the price quickly resumes its upward trend, trapping these investors in a losing position.

Behavioral Economics

A field of study that analyzes the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Behavioral Finance

Studying the influence of psychology on financial practitioners and market behavior.

Beta Measurement

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Big Data

Extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.

Big Data Analytics in Finance

The process of examining large and varied data sets to uncover hidden patterns, unknown correlations, market trends, customer preferences, and other useful business information.

Black Swan Event

An unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.

BlackRock

The world's largest asset manager, which provides guidance to individuals, financial professionals, and institutions.

Blockchain

A distributed ledger technology that stores information securely in a decentralized manner.

Blockchain Insurance

The application of blockchain technology to create decentralized and transparent insurance processes.

Blockchain Technology

A decentralized ledger of all transactions across a peer-to-peer network used for cryptocurrencies and other applications.

Bloomberg Terminal

A computer software system provided by the financial data vendor Bloomberg L.P. that enables professionals in the financial service sector and other industries to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data and place trades.

Blue Sky Laws

State laws in the United States that regulate the sale of securities to protect the public from fraud.

Bonds

Debt securities issued by entities (corporate or governmental) to raise capital, with a fixed interest rate and maturity date.

Bottom Fishing

Investing in assets that have declined in price due to inherent problems with the asset and are considered undervalued.

BPS

Basis Points. A common unit of measure for interest rates and other percentages in finance.

Bribery and Corruption

Offering, giving, receiving, or soliciting anything of value to influence the actions of an official or other person in charge of a public or legal duty.

Bridgewater Associates

The world's largest hedge fund, known for its global macro investment style.

Broker-Dealers

Individuals or firms in the business of buying and selling securities on behalf of its customers and/or for itself.

BSC

Black Swan Catcher. Typically refers to strategies or methods in finance that aim to identify and capitalize on extremely rare and unpredictable events (black swan events).

Bull Trap

A situation in financial markets when a stock or index that has been declining appears to begin recovering, leading investors to buy. However, the price soon continues its downward trend, trapping those who bought in at the higher price.

Burning the Candle at Both Ends

Taking on high risks in an attempt to earn a return while simultaneously sustaining heavy expenses.

CAGR

Compound Annual Growth Rate. The rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming profits were reinvested.

CAPEX

Capital Expenditure. Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Carry Trade

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate.

Cash Cow

A business, product, or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.

Catch a Falling Knife

The action of buying a stock that has had a rapid decline in price.

CDO

Collateralized Debt Obligation. A type of structured asset-backed security (ABS).

CDS

Credit Default Swap. A financial derivative that allows an investor to "swap" their credit risk with that of another investor.

Central Banks

National banks that provide financial and banking services for their country's government and commercial banking system, as well as implementing government monetary policy.

Challenger Bank

A small, recently created retail bank that competes directly with the longer-established banks in a country.

Charles Schwab

An American multinational financial services company offering banking, investing, and trading services.

Chasing Nickels Around Dollar Bills

Focusing on small details (nickels) while missing the bigger picture (dollar bills) in investment strategies.

Circuit Breaker

Mechanisms used in stock exchanges to temporarily halt trading on a security or an entire market during dramatic drops in stock prices.

Circular Trading

A fraudulent practice where sell orders are entered by a broker who knows that offsetting buy orders for the exact number of shares at the same or a slightly higher price have been or will be entered.

Citigroup

An American multinational investment bank and financial services corporation.

Class A and Class B Shares

Companies often issue different classes of shares to control voting power. For example, Class A shares may have more voting rights than Class B shares.

Cloud Computing

The delivery of different services through the Internet, including data storage, servers, databases, networking, and software.

Cointegration

A statistical property of time series variables that indicates if they share a common stochastic drift.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type.

Commodities Futures Trading Commission (CFTC)

An independent agency of the U.S. government that regulates the U.S. derivatives markets, including futures, swaps, and certain kinds of options.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

Composer

A financial technology company that enables investors to build, test, and invest in bespoke quantitative strategies.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Consumer Financial Protection Bureau (CFPB)

An agency of the United States government responsible for consumer protection in the financial sector.

Controlling Shares

Shares that give their holder a significant degree of control over the company, usually through a majority or a substantial portion of the voting rights.

Convertible Arbitrage

A strategy that involves taking a long position in a convertible security and a short position in the underlying common stock.

Cornering the Market

Acquiring enough shares in a particular company to gain control of the company’s stock supply, thereby manipulating its price.

Corporate Governance

The system of rules, practices, and processes by which a firm is directed and controlled, encompassing practically every sphere of management.

Corporate Structures

The organizational design of a corporation, which can vary in complexity.

Creative Destruction

A concept in economics which since the 1950s has become most readily identified with Joseph Schumpeter's theory of economic innovation and the business cycle.

Credit Scoring Models

Algorithms and analytical tools used to assess the creditworthiness of individuals and corporations.

Cross-Sectional Analysis

A type of quantitative analysis that compares different entities at a single point in time.

Cryptocurrencies

Digital or virtual currencies that use cryptography for security and operate independently of a central bank.

Cryptocurrency

A digital or virtual currency secured by cryptography.

Cryptocurrency Exchange

A platform where users can buy, sell, and trade cryptocurrencies.

Cybersecurity

The practice of protecting systems, networks, and programs from digital attacks.

Cybersecurity in Fintech

The practice of defending computers, servers, mobile devices, electronic systems, networks, and data from malicious attacks, specifically in the financial sector.

Dark Pools

Private financial forums or exchanges for trading securities not openly available to the public.

Data Aggregation

Technology that gathers data from multiple sources and presents it in a summarized, coherent form, often used in financial analysis.

Data Analytics

The process of examining data sets to draw conclusions about the information they contain, increasingly with the aid of specialized systems and software.

Data Mining

The process of discovering patterns in large data sets involving methods at the intersection of machine learning, statistics, and database systems.

Data Snooping Bias

Overfitting a strategy to historical data, causing poor performance in unseen markets.

Data-Mining Bias

The result of extensively searching through data for statistically significant patterns, leading to strategies that may perform well on historical data but poorly in real-world trading.

Day Order

An order to buy or sell that is automatically canceled if not executed on the day the order was placed.

DCA

Dollar-Cost Averaging. An investment strategy where a person invests a total sum of money in small increments over time, to reduce the impact of volatility.

DCF

Discounted Cash Flow. A valuation method used to estimate the value of an investment based on its expected future cash flows.

Dead Cat Bounce

A temporary recovery in stock prices after a substantial fall, caused by speculators buying in order to cover positions or by bargain hunters, but usually followed by a continuation of the downward trend.

Deadweight Loss

A loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable.

Death Spiral Financing

A type of financing used by publicly traded companies where investors can convert debt into stock at prices that are significantly lower than the market price.

Decentralized Finance (DeFi)

A financial system built on blockchain technology without central intermediaries.

Delta Hedging

An options strategy that aims to reduce, or hedge, the directional risk associated with price movements in the underlying asset.

Derivatives

Financial securities whose value is dependent upon or derived from an underlying asset or group of assets (e.g., options, futures).

Digital Currency

A form of currency that is available only in digital or electronic form, not in physical form.

Digital Identity Verification

Technologies that verify the identity of individuals through digital means, often used in online banking and online transactions.

Digital Transformation in Banking

The integration of digital technology into all areas of banking, fundamentally changing how banks operate and deliver value to customers.

Diversification

The strategy of reducing risk by investing in a variety of assets.

Dodd-Frank Wall Street Reform and Consumer Protection Act

A U.S. federal law that places regulation of the financial industry in the hands of the government.

Duration Matching

A method used in fixed-income portfolio management, where the durations of assets and liabilities are aligned to minimize interest rate risk.

DYOR

Do Your Own Research. Encourages investors to conduct thorough research before making investment decisions.

E-Wallet

An electronic device or online service that allows an individual to make electronic transactions.

E*TRADE

A pioneering company in the online brokerage industry, offering a full suite of easy-to-use online brokerage, investing, and banking solutions.

Eating Your Own Cooking

The act of a financial advisor or fund manager investing in the same securities that they recommend to their clients.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. An indicator of a company's financial performance.

Efficient Frontier

A concept in modern portfolio theory where an investor can achieve the highest expected return for a given level of risk.

Efficient Market Hypothesis (EMH)

The theory that all available information is already reflected in asset prices, implying it is impossible to consistently achieve returns above the average market returns.

Electronic Communication Network (ECN)

Automated systems matching buy and sell orders.

Elephant Hunting

When a trader or investor is looking for large investment opportunities or large trades.

Elliott's Wave Theory

In the stock market, a theory that stock prices move in predictable, repeating patterns which are driven by investor psychology and sentiment.

Embezzlement

Theft or misappropriation of funds placed in one's trust or belonging to one's employer.

Equities (Stocks)

Shares that represent an ownership interest in a company.

Exchange-Traded Note (ETN)

A type of unsecured debt security that tracks an underlying index of securities and trades like a stock on an exchange.

Event-Driven Trading

Exploiting stock mispricing during or after corporate events.

Ex-post Facto Analysis

Creating a strategy based on past events, which may not necessarily repeat in the future.

Exchange-Traded Funds (ETF)

Marketable securities that track an index, commodity, bonds, or a basket of assets like an index fund but trade like a stock on an exchange.

Exogenous and Endogenous Variables

In economic modeling, exogenous variables are those that come from outside the model and are not explained by it, while endogenous variables are explained by the model.

Factor Investing

Investing based on attributes associated with higher returns.

Fallen Angel

A bond that once had a high rating but has since been downgraded to junk bond status.

Fibonacci Retracement

A technical analysis tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction.

Fidelity Investments

An American multinational financial services corporation offering a wide range of brokerage services.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another. In finance, it refers to a trustee's responsibility to manage assets for the benefit of another person rather than for their own profit.

FIFO

First In, First Out. An asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first.

Fill or Kill (FOK) Order

An order that must be executed immediately in its entirety or not executed at all.

Financial Action Task Force (FATF)

An intergovernmental organization founded to develop policies to combat money laundering and terrorism financing.

Financial Inclusion

Efforts to make financial products and services accessible and affordable to all individuals and businesses, irrespective of their personal net worth or company size.

Financial Industry Regulatory Authority (FINRA)

A private, self-regulatory organization that regulates member brokerage firms and exchange markets in the U.S.

Financial Planning Software

Applications that assist individuals and corporations in managing their financial affairs and planning their financial future.

Financial Sanctions

Restrictions put in place to prohibit businesses or individuals from conducting certain transactions, often used as a tool of foreign policy or national security.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Flash Crash

A very rapid and deep drop in security prices occurring within a very short time period.

Flight to Quality

The action of investors moving their capital away from riskier investments to the safest possible investment vehicles.

FOMO

Fear of Missing Out. Anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media.

FOMO

Fear Of Missing Out. Refers to the anxiety of missing out on a potentially profitable investment or trend.

Foreign Exchange (Forex)

The market in which currencies are traded.

Front Running

The unethical practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers.

FUD

Fear, Uncertainty, and Doubt. A strategy to influence perception by spreading negative, misleading, or false information, often seen in the context of investing.

Fundamental Analysis

Analyzing a business's financials, management, competition, and markets.

Game Theory

The study of mathematical models of strategic interaction among rational decision-makers.

Gamma Scalping

An options trading strategy designed to manage risk in volatile markets by adjusting delta-hedged positions.

Glass-Steagall Act

A U.S. law passed during the Great Depression, which separated investment banking from retail banking.

Golden Parachute

Substantial benefits given to top executives if the company is taken over by another firm, and the executives are terminated as a result of the merger or takeover.

Goldman Sachs

A leading global investment banking, securities, and investment management firm.

Good Till Canceled (GTC) Order

An order to buy or sell a security at a set price that is active until the investor decides to cancel it or the trade is executed.

Green Fintech

Financial technology innovations that focus on supporting environmentally sustainable and climate-friendly projects, including green bonds and sustainable investment platforms.

Green Shoots

Early signs of economic recovery or positive data during an economic downturn.

Greenshoe Option

A provision in an IPO underwriting agreement that grants the underwriter the right to sell more shares than originally planned.

Gresham's Law

In economics, the principle that "bad money drives out good." For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will disappear from circulation.

Grey Market

An unofficial market where securities are traded before they are issued in an initial public offering (IPO).

Hedge Fund Regulation

Laws and guidelines governing the operation and investment strategies of hedge funds.

Hedge Funds

Limited partnerships that use high-risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

Hedonic Regression

A method of estimating demand or value by isolating the impact of one variable while holding other variables constant.

Herd Mentality

The tendency for investors' decisions to follow and mimic those of a larger group, often leading to market bubbles and crashes.

HFT

High-Frequency Trading. A program trading platform that uses powerful computers to transact a large number of orders at very fast speeds.

High-Frequency Traders (HFTs)

Professional traders who use advanced computer algorithms to move in and out of positions in fractions of a second.

HODL

Hold On for Dear Life. Originated as a misspelling of "hold," it refers to a strategy of holding onto a cryptocurrency or investment long-term, regardless of volatility.

Hostile Takeover

A type of acquisition where a company is purchased without the consent or cooperation of its management and board of directors.

Iceberg Order

A large order that has been divided into smaller, concealed lots to hide the actual order quantity.

Idiosyncratic Risk

Risk that is endemic to a particular asset and not attributable to the market's broader movements.

Impact Investing

Investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.

Initial Coin Offering (ICO)

A crowdfunding method for blockchain-based projects.

Insider Trading

The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.

Institutional Investors

Non-bank entities like pension funds, insurance companies, mutual funds, and hedge funds that invest on behalf of others.

InsurTech for Claims Processing

The use of technology to streamline and simplify the insurance claims process, often involving automation and AI.

Invisible Hand

A term coined by Adam Smith to describe the unintended social benefits of individual actions when guided by self-interest.

IPO

Initial Public Offering. The process of offering shares of a private corporation to the public in a new stock issuance.

IRR

Internal Rate of Return. A metric used in financial analysis to estimate the profitability of potential investments.

Jensen's Alpha

A performance metric that represents the average return on a portfolio or investment above or below that predicted by the capital asset pricing model (CAPM) given its beta and the average market return.

JPMorgan Chase & Co.

One of the largest and most well-known global financial services firms.

Jumping the Shark

A term for something that was once popular but has now reached its peak and is veering off into absurdity or irrelevance.

Kelly Criterion

A mathematical formula used to determine the optimal size of a series of bets in order to maximize wealth over time.

Keynesian Economics

An economic theory of total spending in the economy and its effects on output and inflation developed by John Maynard Keynes.

Kitchen Sink Quarter

A term used when a company reports all of its bad news and losses in one quarter to clean up its books and start fresh in the next quarter.

Know Your Customer (KYC)

A standard in the investment industry that ensures investment advisors know detailed information about their clients' risk tolerance, investment knowledge, and financial position.

KYC Technology

Solutions that automate aspects of the customer identification and verification process in financial services.

Lagged Historical Data

Past data used to analyze trends and patterns in trading.

Laissez-faire Economics

An economic system where transactions between private parties are free from government intervention such as regulation, privileges, tariffs, and subsidies.

Leverage Cliff

The point at which a small change in a firm's asset values causes a rapid change in its equity value due to high levels of leverage.

LIFO

Last In, First Out. An inventory valuation method opposite to FIFO, where the most recently produced or purchased items are recorded as sold first.

Limit Order

An order to buy or sell a security at a specific price or better.

Limit Order Book

A record of all outstanding limit orders in a market, which is maintained by the market maker or the stock exchange.

Lipstick on a Pig

A phrase used by investors to refer to the practice of making superficial or cosmetic changes in a futile effort to make a product or company look more attractive.

Liquidity Mining

Network participation strategy rewarding users for providing capital to a protocol.

Liquidity Risk

The risk of being unable to buy or sell an asset quickly at a reasonable price.

Liquidity Trap

A situation in which prevailing interest rates are low and savings rates are high, rendering monetary policy ineffective.

Look Ahead Bias

Using information not available at trade time, leading to unrealistic backtesting results.

Look-Alike Modeling Bias

Occurs when a model is overly tailored to replicate the performance of a specific set of data, making it less applicable to new data.

LTIP

Long-Term Incentive Plan. A reward system designed to improve employees' long-term performance by providing rewards that may not be tied to the company's share price.

LTV

Loan to Value. A ratio used in lending to express the ratio of a loan to the value of an asset purchased.

Machine Learning

A type of artificial intelligence (AI) that allows software applications to become more accurate at predicting outcomes without being explicitly programmed to do so.

Machine Learning in Finance

The use of AI and machine learning algorithms to predict market trends, risk management, and customer service automation.

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service.

Market Impact

The effect of a trade on the price of an asset.

Market Makers

Firms that stand ready to buy and sell securities on a regular and continuous basis at a publicly quoted price.

Market Manipulation

Actions designed to deceive investors by artificially inflating or deflating the price of a security or otherwise influencing the behavior of the market for personal gain.

Market Microstructure

Study of exchange processes and outcomes with explicit trading rules.

Market Order

An order to buy or sell a stock immediately at the best available current price.

Market Regime

the prevailing market conditions or trends at a given time, such as bull markets, bear markets, high volatility, or low volatility periods. Market Regimes characterize the general, macroeconomic behavior of the market, guiding investment and trading strategies.

Market Sentiment

The overall attitude of investors towards a particular security or financial market.

Market Sentiment Analysis

The process of assessing the mood of investors to predict future market behavior.

MBS

Mortgage-Backed Security. A type of asset-backed security secured by a collection of mortgages.

Mean Reversion

Theory suggesting price and returns revert to the average.

Melting Ice Cube

A situation or a company that is slowly diminishing in value over time.

Metcalfe's Law

States that the value of a telecommunications network is proportional to the square of the number of connected users of the system.

Minsky Moment

A sudden market collapse following a long period of bullish activity, named after economist Hyman Minsky.

Mobile Payment Security

The security measures employed to protect sensitive information in mobile payment transactions.

Mobile Wallet

An app that stores payment information on a mobile device, allowing users to make transactions digitally.

Momentum Trading

Strategies focused on assets moving significantly in one direction with high volume.

Monetary Policy

The process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Money Laundering

The illegal process of making large amounts of money generated by a criminal activity appear to have come from a legitimate source.

Monte Carlo Simulation

Computational algorithm using random sampling to determine risk and uncertainty.

Moore's Law

The observation that the number of transistors on a microchip doubles about every two years, though the cost of computers is halved.

Moral Hazard

A situation in which one party is willing to take risks because they do not bear the cost of those risks.

Mutual Funds

Investment vehicles made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and similar assets.

Naked Short Selling

Selling shares that have not been affirmatively determined to exist. Normally, traders must borrow a stock or determine that it can be borrowed before they sell it short.

NASDAQ

National Association of Securities Dealers Automated Quotations. A global electronic marketplace for buying and selling securities.

Natural Language Processing (NLP)

A branch of artificial intelligence that helps computers understand, interpret, and manipulate human language.

NAV

Net Asset Value. The value per share of a mutual fund or an exchange-traded fund (ETF).

NDA

Non-Disclosure Agreement. A legally binding contract establishing a confidential relationship.

Neobank

A type of digital bank that operates exclusively online without traditional physical branch networks.

Neural Networks

Algorithms inspired by the human brain to recognize patterns and interpret data.

Ninja Loan

Stands for "No Income, No Job, and no Assets." A type of high-risk loan that was common during the U.S. subprime mortgage crisis.

Non-Controlling (Minority) Shares

Shares that represent less than a majority of the voting power in a company, providing limited or no control over corporate decisions.

Non-Fungible Token (NFT)

A unique digital asset stored on a blockchain with verifiable ownership.

NYSE

New York Stock Exchange. The largest stock exchange in the world by market capitalization, located on Wall Street in New York City.

Old Lady of Threadneedle Street

A colloquial name for the Bank of England, located on Threadneedle Street in London.

Opportunity Cost

The cost of an alternative that must be forgone to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

Options Pricing Models

Mathematical models used to determine the fair value of options.

Order Book

List of buy and sell orders for a security organized by price level.

OTC

Over-The-Counter. Trading done directly between two parties without the supervision of an exchange.

OTC Market

Over-The-Counter Market. A decentralized market where securities not listed on major exchanges are traded directly between parties.

Overconfidence Effect

A bias where a person's subjective confidence in their judgments is reliably greater than their objective accuracy.

P/B Ratio

Price to Book Ratio. A ratio used to compare a stock's market value to its book value.

P/E Ratio

Price-to-Earnings Ratio. A valuation ratio of a company's current share price compared to its per-share earnings.

Painting the Tape

The illegal action of traders buying and selling securities among themselves to create artificial activity and manipulate the price.

Pairs Trading

Market-neutral strategy exploiting price discrepancies between correlated assets.

Pairs Trading

A market-neutral trading strategy that matches a long position with a short position in a pair of highly correlated instruments.

Pareto Principle (80/20 Rule)

The principle that for many outcomes, roughly 80% of consequences come from 20% of the causes.

Partnership

A business structure where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed. Partnerships are typically easy to form, with profits and losses flowing through to the individual partners.

Payment Gateway

A technology used by merchants to accept debit or credit card purchases from customers.

Peer-to-Peer Payments (P2P Payments)

Transactions that can be made from one person to another through a mobile app or website.

Phillips Curve

An economic concept developed by A.W. Phillips stating that inflation and unemployment have a stable and inverse relationship.

Piggybacking

The strategy of following the investments of well-known or historically successful investors.

Pink Market

Informal name for the OTC Pink marketplace, the lowest tier of the three marketplaces for trading over-the-counter stocks.

Point in Time Data

Refers to data captured at a specific moment, crucial for accurate backtesting to avoid look-ahead bias.

Poison Pill

A strategy used by companies to prevent or discourage hostile takeovers.

Ponzi Scheme

A form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.

Position File

Record of current holdings in a portfolio.

Principal-Agent Problem

The dilemma occurring when one person or entity (the agent), is able to make decisions on behalf of, or that impact, another person or entity (the principal).

Private Equity

Equity capital that is not quoted on a public exchange, invested in companies that are typically high risk/high return opportunities.

Probabilistic Sharpe Ratio (PSR)

A statistical measure used in finance, particularly in algorithmic trading, to assess reliability of the Sharpe Ratio. PSR calculates the probability that the true Sharpe Ratio of a trading strategy is above a certain threshold, considering the uncertainty and variability in the returns data. This helps in distinguishing whether a high Sharpe Ratio is due to genuine performance or just random chance.

Prospect Theory

A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.

Pump and Dump

A scheme that attempts to boost the price of a stock through recommendations based on false, misleading, or greatly exaggerated statements.

Pump and Dump Scheme

A scheme that attempts to boost the price of a stock or security through fake recommendations based on false, misleading, or greatly exaggerated statements.

QuantConnect

An open-source, cloud-based algorithmic trading platform for strategy development and backtesting.

Quantitative Analysis

Applying mathematical and statistical methods to evaluate financial instruments and markets.

Quantitative Easing (QE)

A monetary policy used by central banks to stimulate the economy by boosting the amount of overall money in the banking system.

Quantitative Momentum

A strategy that involves buying securities that have had high returns over a certain period and selling those that have had poor returns.

Quantitative Tightening (QT)

The reverse process of Quantitative Easing (QE) where central banks drain liquidity from the financial system by selling assets from their balance sheet.

Quantum Computing

A type of computing that uses quantum-mechanical phenomena, such as superposition and entanglement, to perform operations on data.

Quantum Computing in Finance

The use of quantum computers to perform financial calculations much faster than traditional computers, potentially revolutionizing risk analysis and portfolio optimization.

Rational Expectations Theory

The hypothesis that individuals base their decisions on the best available information and learn from past trends to predict future economic variables.

Real Estate

Property consisting of land or buildings, considered a long-term investment.

Regime Shift

Significant change in market conditions or behavior.

Regulation Fair Disclosure (Reg FD)

A U.S. SEC regulation that aims to promote full and fair disclosure of information by publicly traded companies.

Regulators

Government or independent authorities that supervise and regulate the financial markets to protect investors and ensure market integrity.

Regulatory Sandbox

A framework set up by a regulator that allows small scale, live testing of innovations by private firms in a controlled environment.

REIT

Real Estate Investment Trust. A company that owns, operates, or finances income-producing real estate.

Relative Value Arbitrage

An investment strategy that seeks to take advantage of price differences between related financial instruments.

Renaissance Technologies

An American hedge fund famous for its quantitative trading approach.

Retail Investors

Individual investors who buy and sell securities for their personal account, not for another company or organization.

Ringfencing

Separating a portion of a company's assets or profits without formally creating a separate legal entity, often for regulatory or taxation purposes.

Risk Aversion

The tendency to prefer a sure outcome over a gamble with higher or equal expected value.

Risk Management

Identifying, evaluating, and managing risks for controlled impact of unfortunate events.

Risk-On, Risk-Off

A market environment where price behavior responds to, and is driven by, changes in investor risk tolerance.

Robinhood

A financial services company known for offering commission-free trades of stocks and exchange-traded funds via a mobile app.

Rocket Scientist

A term used to describe financial professionals who use mathematical and statistical methods to create securities or trading strategies.

ROE

Return on Equity. A measure of the profitability of a business in relation to the equity.

ROI

Return on Investment. A measure used to evaluate the efficiency or profitability of an investment.

Sample Selection Bias

Occurs when the data for backtesting is selected non-randomly, leading to inaccurate results.

Santa Claus Rally

A surge in the stock market that often occurs in the last week of December through the first two trading days in January.

Sarbanes-Oxley Act (SOX)

A U.S. federal law that aims to protect investors from fraudulent financial reporting by corporations.

Securities and Exchange Commission (SEC)

A U.S. government agency responsible for enforcing federal securities laws and regulating the securities industry.

Securities Fraud

A type of serious white-collar crime that can be committed in many different forms but primarily involves misrepresenting information investors use to make decisions.

Security Token Offering (STO)

An ICO for selling digitized securities on a blockchain.

Shares

Units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Sharpe Ratio

A measure that indicates the average return minus the risk-free return, divided by the standard deviation of return on an investment.

Short Selling

The sale of a security that is not owned by the seller, or that the seller has borrowed, with the expectation that the price will fall.

SIV

Structured Investment Vehicle. A fund which borrows money by issuing short-term securities at low interest and then lends that money by purchasing long-term securities at higher interest.

Smart Contract

A self-executing contract stored on a blockchain that automatically triggers transactions based on preset conditions.

Smart Order Routing (SOR)

Automated process handling orders to optimize speed, price, and execution likelihood.

Social Trading

A process where online investors rely on user-generated financial content, drawn from various Web applications, to make financial trading decisions.

Speculators

Individuals or entities who trade securities with a higher-than-average risk in return for a potential higher-than-average profit.

Stablecoin

A cryptocurrency designed to maintain a stable price, often pegged to a fiat currency.

Stalking Horse

An initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company.

Statistical Arbitrage

Profiting from pricing inefficiencies between securities.

Stochastic Modeling

Financial modeling with random variables for more accurate uncertainty representation.

Stop Limit Order

A combination of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or sell at the limit price or better.

Stop Order (Stop-Loss Order)

An order to buy or sell a security once the price of the security reaches a specified price, known as the stop price.

Stop-Loss Order

An order to automatically sell a security when its price falls below a specified level.

Subscription Management Platforms

Systems that help businesses manage and automate their subscription billing and payments.

Sunset Industry

An industry in decline, one that has passed its peak or boom periods.

Supply and Demand

A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers, and the consumers' desire for that good or service.

Survivorship Bias

The use of current data to analyze past performance, excluding assets that are no longer available, potentially leading to overestimation of historical performance.

Swan Song

The final effort or appearance of a person or thing before death or retirement.

Tail Risk Hedging

Strategies designed to provide protection against extreme market movements.

Take-Profit Order

An order to automatically sell a security when its price reaches a specified level.

Taper Tantrum

Refers to the surge in U.S. Treasury yields, resulting from the Federal Reserve's announcement of future tapering of its policy of quantitative easing.

TARP

Troubled Asset Relief Program. A program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector (2008 crisis).

TD Ameritrade

A broker that offers an electronic trading platform for the trade of financial assets.

Technical Analysis

Forecasting price direction by studying past market data.

Time Period Bias

The risk of achieving misleading results from backtesting strategies over a specific period that may not be representative.

Time Series Analysis

Extracting meaningful statistics and characteristics from time series data.

Time Series Data Collection

Gathering financial data throughout the trading day for detailed backtesting.

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

TINA

There Is No Alternative. A market belief that there are no better alternatives for investment than equities, often leading to higher stock market valuations.

Trading Frequency

The average number of trades executed per unit of time.

TradingView

A cloud-based charting and social networking software suitable for all levels of active traders.

Tragedy of the Commons

An economic theory describing how individuals acting independently according to their self-interest behave contrary to the best interests of the whole group by depleting a common resource.

Trailing Stop Order

A stop order that sets the stop price at a fixed amount below the market price with an attached "trailing" amount.

Transaction Cost

The fees and commissions associated with buying and selling an asset.

Tulip Mania

Referring to the first major financial bubble, which occurred in Holland during the early 1600s when speculation drove the value of tulip bulbs to extremes.

Unicorn

In venture capital, a startup company with a value of over $1 billion.

Unsystematic Risk

The risk that is unique to a specific company or industry.

Vanguard Group

Known for its low-cost index funds, it is one of the world's largest investment companies.

Variance Swap

A derivative contract through which counterparties agree to exchange cash flows based on the variance of an underlying asset.

Velocity of Money

The rate at which money is exchanged in an economy.

VIX

Volatility Index. A real-time market index representing the market's expectations for volatility over the coming 30 days.

Volatility Clustering

Large price changes followed by large changes, and small changes followed by small changes.

Volatility Targeting

An investment strategy that aims to maintain a certain level of portfolio volatility.

Volcker Rule

A federal regulation that prohibits banks from conducting certain investment activities with their own accounts and limits their dealings with hedge funds and private equity funds.

Wall of Worry

The financial markets’ tendency to surmount a host of negative factors and keep ascending.

Wash Sale

A sale and purchase of the same security within 30 days. This practice is illegal under U.S. tax laws because it is seen as a way to avoid tax liabilities.

Wash Trading

A form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.

WealthTech

Technology-driven solutions in the field of wealth management, such as robo-advisors and personal finance management tools.

Whale Watching

Tracking the investment activities and strategies of exceptionally large and influential investors, often hedge fund managers.

Whipsaw

A condition where a security's price is headed in one direction, but then is quickly followed by a movement in the opposite direction.

Whistleblower Protection

Laws and regulations designed to protect individuals who report misconduct or illegal activities within an organization.

White Knight

A friendly investor or company that rescues a target company from a hostile takeover.

Window Dressing

The actions taken by fund managers near the end of a reporting period to improve the appearance of a fund's performance.

WTF

What The F***. A common expression of disbelief or confusion, can be used in response to surprising or unexpected market events.

X-Efficiency

The degree of efficiency maintained by firms under conditions of imperfect competition.

Yield Curve

Plot of interest rates for bonds with equal credit quality but different maturity dates.

Yield Curve Inversion

An unusual condition where short-term interest rates are higher than long-term interest rates, often seen as a predictor of economic recession.

Yield Hunting

The practice of investors searching for higher yields in riskier markets during periods of low interest rates.

Yield to Maturity (YTM)

The total return anticipated on a bond if the bond is held until it matures.

YOLO

You Only Live Once. Often used to express a philosophy of taking risks, sometimes applied in the context of making bold investment decisions.

Z-Score Analysis

A statistical method used for predicting the probability of bankruptcy in a business.

Zombie Company

A company that is generating just enough revenue to continue operating and service debt but is unable to pay off its debt.

Zombie Debt

Old debt that is past the statute of limitations or is otherwise uncollectible but resurrected by collection agencies.