Hedge (finance)A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, many types of over-the-counter and derivative products, and futures contracts.
Law firmA law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients (individuals or corporations) about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other matters in which legal advice and other assistance are sought. Law firms are organized in a variety of ways, depending on the jurisdiction in which the firm practices.
Consumer debtIn economics, consumer debt is the amount owed by consumers (as opposed to amounts owed by businesses or governments). It includes debts incurred on purchase of goods that are consumable and/or do not appreciate. In macroeconomic terms, it is debt which is used to fund consumption rather than investment. The most common forms of consumer debt are credit card debt, payday loans, student loans and other consumer finance, which are often at higher interest rates than long-term secured loans, such as mortgages.
Structured financeStructured finance is a sector of finance — specifically financial law — that manages leverage and risk. Strategies may involve legal and corporate restructuring, off balance sheet accounting, or the use of financial instruments. Securitization provides $15.6 trillion in financing and funded more than 50% of U.S. household debt last year. Through securitization and structured finance, more families, individuals, and businesses have access to essential credit, seamlessly and at a lower price.
Insider tradingInsider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information are illegal. This is because it is seen as unfair to other investors who do not have access to the information, as the investor with insider information could potentially make larger profits than a typical investor could make.
Capital structure substitution theoryIn finance, the capital structure substitution theory (CSS) describes the relationship between earnings, stock price and capital structure of public companies. The CSS theory hypothesizes that managements of public companies manipulate capital structure such that earnings per share (EPS) are maximized. Managements have an incentive to do so because shareholders and analysts value EPS growth.
RestructuringRestructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring.
Financial analystA financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job. The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, or ratings analyst. The job title is a broad one: in banking, and industry more generally, various other analyst-roles cover financial management and (credit) risk management, as opposed to focusing on investments and valuation; these are also discussed in this article.
Hybrid securityHybrid securities are a broad group of securities that combine the characteristics of the two broader groups of securities, debt and equity. Hybrid securities pay a predictable (either fixed or floating) rate of return or dividend until a certain date, at which point the holder has a number of options, including converting the securities into the underlying share. Therefore, unlike with a share of stock (equity), the holder enjoys a predetermined (rather than residual) cash flow, and, unlike with a fixed interest security (debt), the holder enjoys an option to convert the security to the underlying equity.
Probability of defaultProbability of default (PD) is a financial term describing the likelihood of a default over a particular time horizon. It provides an estimate of the likelihood that a borrower will be unable to meet its debt obligations. PD is used in a variety of credit analyses and risk management frameworks. Under Basel II, it is a key parameter used in the calculation of economic capital or regulatory capital for a banking institution. PD is closely linked to the expected loss, which is defined as the product of the PD, the loss given default (LGD) and the exposure at default (EAD).
