Asset Backed Securities are a type of bond or note issue that is backed by a pool of (usually) private underlying assets. The pooling of these cash flows and their division into tranches make them accessible to investors.

Asset and Liability Management. A risk management technique designed to help a bank maintain a comfortable surplus of revenues from its investments beyond its financing needs. ALM usually focuses on a bank’s interest rate risk. For a more comprehensive explanation, see this article in the Risk Glossary site.

Coefficient used to gauge the performance of an investment in relation to the risk assumed, measured by its beta.

A trading approach which strives to take advantage of price gaps between different stock-market exchanges or between assets that are similar or of the same type.

The management of one or more clients’ investments by a financial services professional.

A financial contract in which the interest on a fixed-rate investment (like a bond) is exchanged for that of a floating-rate investment (e.g. an index).

The totality of a company’s possessions of value. Financial assets include: securities, receivables and positive cash balances.

A statement of a company’s, assets, liabilities and owner’s equity at a given point in time.

Sum of total credits and total debits of an account.

Equivalent to interest. The premium or percentage added on a financial transaction. (Source: edubourse.com)

A coefficient measuring the volatility, or systematic risk, of a security relating to the market. It is determined by measuring the performance of the security over a period of five years, and calculating the percentage change for every percentage change in the market.

Bank Identifier Code. Eleven-character code provided to a participant in the SWIFT network. See BIC directory in the SWIFT site.

Tradable debt security issued by a private company or public entity.

Refers to the accounting system in which accounts were previously recorded in books.

Firm acting as a market intermediary.

Buy or buy-back option.

Contract that protects the buyer by putting a cap on a rate rise.

The person managing the bank’s cash position in the trading room. For each currency in which the entity has positions, the cash manager must find a way to fund those showing a loss and invest the gains of others.

A market in which the transactions are said to be settled instantaneously (as opposed to futures or forward markets). In practice, settlement generally occurs two days after the deal is reached.

Key to financial markets, a country's central bank regulates banks, acts as a lender of last resort to the banking system and as the required transfer point for interbank payments.

An agency or corporation of an exchange that takes responsibility for settlement and delivery, the collection and maintenance of margin monies and, possibly, the implementation of netting operations.

A generic term used that covers both mutual funds (open-ended with legal personality) and European common funds (no legal personality). Collective investment schemes are free to operate throughout the EU in the form of UCITS on the basis of a single authorisation from a member state.

Sending a message in free text (fax, telex) or in standardised text (SWIFT) to the counterparty summarising the characteristics of the transaction that has just been negotiated.

Corporate actions (or corporate events) Actions initiated by the issuer or another player affecting the issuer’s securities (e.g. bond redemption, dividend payment or split, etc.).

The coupon, which was detachable from the bond in the past, represents the bearer’s interest. Today, the bearer no longer receives a physical bond certificate, but the term “coupon” continues to designate the interest amount paid on a periodic basis by the bond issuer.

A company that evaluates the viability of certain types of debt issuers, and assigns them a credit rating, which the market then uses to set credit terms.

The monetary unit of a country. The term is also used in contrast to the euro: payment in currency = payment in a currency other than the euro.

A financial instrument that offers a return based on the behaviour of a given underlying asset.

The portion of net profit distributed in cash to shareholders. Those holding shares are paid dividends on a prorata basis, according to the number of shares they own.

Euro Banking Association. A Consortium of banks which have pooled their resources to establish a private cross-border payments system in euro, now called STEP1 for retail payments and STEP2 (previously ECS) for large payments.

Euro Medium Term Note

Exchange Traded Fund: A fund that tracks an index, and is traded on organised markets.

Any operation to raise cash: borrowings, issuances of bonds or shares, etc.

Foreign exchange market and its transactions.

Transfer of securities without charge.

Protection against the risk generated by a position. Two methods are possible: sell back this position, which amounts to cancelling it by negotiating a contract in the opposite direction, or use an appropriate financial instrument, generally speaking, a derivative.

Message sent by a client to a trustee bank asking it to execute a given transaction: payment receipt, delivery of shares, etc. Unlike a stock-market order, an instruction proceeds from a previously negotiated transaction and does not entail any uncertainty, although its final execution may be subject to unforeseen events.

Foreign exchange market for banks.

Any transaction entailing the purchase of assets: loans, purchases of securities, etc.

An entity seeking to raise funds via the issuance of debt (bonds, money market instruments) or equity (shares).

The call requiring the deposit of cash to offset the adverse price movement of a security to bring the amount of a guarantee deposit into line with the value of a debt with which it is associated.

Valuation (of an asset, contract, position) at market price based on any changes in price of underlying asset.

A dealer, who supplies prices and is prepared to buy or sell securities at those stated bid and ask prices. Their role is to maintain a continuous supply of the financial instrument while acting as counterparty to any interested buyer or seller.

Medium-term note

"Obligation Assimilable du Trésor": an important French treasury issue

Amounts representing separate legal entities to which the company may have commitments that do not appear on its balance sheet (source: US GAAP)

A financial instrument that gives its holder the right, but not the obligation, to buy or sell an underlying asset at a fixed price in exchange for a premium to be paid to the option’s seller.

Instruction to buy or sell (usually securities) on the market. Elements of the final transaction (price, date, quantity, etc.) are undetermined at the time of the order.

Over The Counter: off-exchange transactions.

Trading system in which orders are communicated to brokers in a trading pit, by hand signals or voice. Although losing ground to electronic trading, outcry (also called open-outcry) quotation remains popular in the United States.

Situation resulting from commitments made on the market: i.e. taking a buy position (going long) or sell (shorting).

Refers to all dealings or exchanges occurring after the conclusion of a transaction from which they flow.

Establishment of an asset's price

To publish the price at which someone is willing to bid or sell a given product.

Price of the money for a given period on a given market.

At a bond's maturity date, the issuer returns the amount of borrowed capital: the repayment of principal. Each bondholder receives the balance of the bond principal based on the number of bonds held.

Repurchase agreement a contract in which the seller of securities agrees to buy them back at a specified time and price.

Individual in trading room responsible for dealing with bank's clients.

Exchange of securities in return for payment.

Equivalent to French TCN: negotiable short- and medium-term debt instruments, generally under seven years, traded on OTC markets

"Système Interbancaire de Télécompensation": French settlement system for processing high-volume payments.

In France, these firms act as intermediaries in the market trading of securities.

Designates the volume of share held.

A contract in which the counterparties agree to exchange one asset for another: e.g. currency or interest rate swaps.

The Society for Worldwide Interbank Financial Telecommunication operates a worldwide electronic messaging network for the major financial market players.

Any player outside the entity and with which it has a relationship: e.g. clients, correspondents, counterparties, etc.

The price at which a security is traded on a given market (e.g. currency exchange rate: the exchange rate between different currencies). - Share price: price at which share is trading.

Buying and/or selling securities on the market.

Addition of information needed (e.g. payment instructions) for the transaction’s execution.

An intermediary mandated by the issuer (usually, a fund) to keep a record of investor orders (subscription or buy-back in the case of a fund), transmit them to the issuer and deal with any problems. In France, they are collective investment scheme coordinators, the intermediary responsible for managing the debt.

The balance of very short-term (under one year) cash credits/debits.

To buy back a short position or sell a long position

Important step in any management system: a transaction only takes effect after it has been validated.

Value At Risk

Measure of the rate at which the price of an asset moves up and down over time.

A derivative instrument giving its holder the option to buy or sell a security; it is listed and traded like a security.