Glossary

Alternatives

• An alternative investment is a financial asset that does not fall into one of the conventional investment categories
• Conventional categories include stocks, bonds. and cash. Alternative investments can include private equity or venture capital, hedge funds, managed futures, commodities and derivatives contracts

Autocall Trigger Event

• Event which occurs if the index/indices close at or above the pre-defined Autocall Trigger Level, at which point the defined return is paid out and the product automatically matures

Autocall Trigger Level

• Index level required to be met, or exceeded, to trigger an Auto-call Trigger event, at which point the defined return is paid out and the product automatically matures

Bear market

• A bear market is a financial market experiencing prolonged price declines, generally of 20% or more
• A bear market usually occurs along with widespread investor pessimism, large-scale liquidation of securities and other assets, and a weakening economy
• Bear markets are often associated with declines in an overall market or index like the S&P 500. Bear markets also may accompany general economic downturns such as a recession

Bonds

• A bond is a fixed-income instrument and investment product where individuals lend money to a government or company at a certain interest rate for an amount of time
• The entity repays individuals with interest in addition to the original face value of the bond
• Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations

Bull market

• "Bull market" is the term used to describe a financial market in which prices are rising or are expected to rise
• It is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities

Call option

• Call options are financial contracts that give the buyer the right - but not the obligation - to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific period
• A call seller must sell the asset if the buyer exercises the call

Collateralized

• Collateralization is the use of a valuable asset as collateral to secure a loan
• If the borrower defaults on the loan, the lender may seize and sell the asset to offset the loss
• For lenders, the collateralization of assets provides a level of reassurance against default risk
• For borrowers with poor credit histories, it can help them obtain loans
• Collateralized loans are considered secured loans, so they generally have substantially lower interest rates than unsecured loans

Derivative

• A "derivative" refers to a type of financial contract whose value is dependent on an underlying asset, a group of assets, or a benchmark
• Derivatives are agreements set between two or more parties
• These contracts can be used to trade any number of assets and come with their own risks
• Prices for derivatives derive from fluctuations in the prices of underlying assets
• These financial securities are commonly used to access certain markets and may be traded to hedge against risk

Equity Autocallable

• A structured derivative that pays a defined return if the equity index/indices passes an upside Auto-call Trigger Level, at which point the defined return is paid out and the product automatically matures
• The position is funded by selling a downside, which places their capital at risk should the index fall below a second defensive barrier (the Cover to Capital Loss barrier)

Equity index

• A financial index produces a numeric score based on inputs such as a variety of asset prices. It can be used to track the performance of a group of assets in a standardized way
• Indexes typically measure the performance of a basket of securities intended to replicate a certain area of the market

Equity index

• A financial index produces a numeric score based on inputs such as a variety of asset prices. It can be used to track the performance of a group of assets in a standardized way
• Indexes typically measure the performance of a basket of securities intended to replicate a certain area of the market

Equity Index Option

• Contract that conveys to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying Index (or Indices) at a specified price (the strike price) on or before a given date (expiration day)

Equity market

• Companies use the equity market to raise capital for growth and expansion by offering shares to investors
• In return, investors have partial ownership of these companies with the potential to profit from their future performance through dividends or stock price appreciation

Equity Swap

• Allows the fund to gain exposure to an equity asset (Defined return payoff) without having to own the asset directly
• The fund exchanges a stream of variable interest rate payments’ for a defined equity return linked to a defined equity index/indices

European vs American style Options

• American style options are options that can be exercised at any time
• European style options can only be exercised (and observed) at maturity (the final observation date)

Fixed income

• Fixed income refers to those types of investment securities that pay investors fixed interest or dividend payments until they mature
• At maturity, investors are repaid the principal amount that they originally invested. Government and corporate bonds are the most common types of fixed-income products
• Unlike equities, that may pay no income to investors, the payments of a fixed-income security are known in advance and remain fixed throughout its term

Fixed rate

• A fixed interest rate is an unchanging rate charged on liability, such as a loan or a mortgage
• A fixed interest rate avoids the risk that a mortgage or loan payment can significantly increase over time
• Fixed interest rates can be higher than variable rates

Floating rate

• A floating interest rate changes periodically, as opposed to a fixed (or unchanging) interest rate
• Floating rates are used by credit card companies and are commonly seen with mortgages
• These rates reflect the market, follow an index, or track another benchmark interest rate
• Floating rates are also called variable rates

Gilts

• Gilts are government bonds issued in the U.K., India, and Commonwealth countries and are similar to U.S. Treasury securities
• The term gilts is derived from the certificates with gilded edges that were historically issued by the British government and is still used as an indication of the integrity of the investment
• Like U.S. Treasury securities, gilts pay a relatively low but virtually risk-free rate of return. They are sensitive to interest rate changes but provide diversification because of their low or negative correlation with stock markets

Gilt repo

• A repurchase agreement is a contract to sell securities, usually government bonds, and repurchase them back shortly after at a slightly higher price

Investment grade corporate debt

• Credit ratings provide a useful measure for comparing fixed-income securities, such as bonds, bills, and notes
• Most companies receive ratings according to their financial strengths, prospects, and past history
• Investment grade refers to the quality of a company's credit. To be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or 'Baa' or higher by Moody's

OEIC/UCITS

• An open-ended investment company (OEIC) is a type of investment fund domiciled in the United Kingdom that is structured as a company in its own right to invest in stocks and other securities

Put option

• A put option is a contract giving the option buyer the right, but not the obligation, to sell - or sell short - a specified amount of an underlying security at a predetermined price within a specified time frame
• This predetermined price at which the buyer of the put option can sell the underlying security is called the strike price
• A put seller must buy the asset if the buyer exercises the put

Securities lending

• Securities lending happens when one investor lends a security, such as a stock or commodity, to another, usually through a broker

Straddles

• A straddle is an options strategy that involves the purchase of both a put and a call option
• Both options are purchased at the same expiration date and strike price on the same underlying securities
• A straddle implies what the expected volatility and trading range of a security may be by the expiration date
• This strategy is most effective when considering heavily volatile investments.
• The premiums paid on multiple options may easily outweigh any potential profit without strong price movement

Volatility

• Volatility is a statistical measure of the dispersion of returns for a given security or market index
• It is often measured from either the standard deviation or variance between those returns. In most cases, the higher the volatility, the riskier the security
• An asset’s volatility is a key factor when pricing options contracts

Important notice:

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