Dictionary of Financial Terms

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This web page will continually add new definitions.

Bonds

Bonds are known as fixed-income securities. These securities are debt obligations, meaning one party is borrowing money from another party who expects to be paid back the principal plus interest.

Call Option

An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. One option usually controls 100 shares and expires on the third Friday of the stated Expiry Month.

Central Bank

A central bank,  is an institution that manages a country’s, money supply, (especially base currency) and interest rates. Central banks normally oversee the commercial banking system of their operating countries. A central bank normally has a monopoly on increasing the monetary base (base currency), and usually also prints the national currency.

For further details click here.

Dead Cat Bounce

dead cat bounce is a small yet brief recovery in the price of a declining stock.  Derived from the idea that “even a dead cat will bounce if it falls from a great height”.  Here is a video that explains what it is by Michael Maloney https://youtu.be/0Wrrzsrb-wg

Negative Interest Rates

Negative interest rates are supposed to encourage lending and borrowing. It is an added incentive to get banks to do something with their money.

Banks would be required to pay the central bank to hold their deposits if rates were reduced below zero.

For example, if rates were negative 0.5 per cent, a bank would have to pay the central bank $5,000 on a $1-million deposit. Central banks will chopped rates below zero to slow the rise of its currency and discourage investors from parking their funds.

 The deposit costs are supposed to encourage the banks to lend or invest. Negative interest rates punish banks for parking their excess funds at a central bank by making it more expensive for banks to hoard cash. Thus, their hand is forced to try and lend the currency.

Put Option

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.  One option usually controls 100 shares and expires on the third Friday of the stated Expiry Month.

Securities-based Lending

Also known as non-purpose lending.  The financial practice of making loans using securities as collateral. Securities-based lending (SBL) provides access to capital that can be used for almost any purpose.

Stock Market Crash

 

A  sudden dramatic decline of a majority of stock prices  resulting in a significant loss of paper wealth.  Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles such as the Dot Com Bubble or Sub Prime Housing Bubble.

 

 

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About Author

Leslie Michael Jr. was born and raised on the Westcoast of British Columbia, Canada. He is a lecturer of Money Uncensored, a series of presentations designed for North Americans and people from around the globe to better understand the financial direction this world is headed and what they can do to protect themselves financially.

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