Category: Finance Terms

The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo on…

The 1979 Energy Crisis refers to the sudden increase in oil prices that occurred after the Iranian Revolution. This event led to an oil embargo by sever…

The 2010 Flash Crash was a sudden stock market crash that occurred on May 6, 2010. The Dow Jones Industrial Average (DJIA) fell by over 1,000 points, or…

A 401(a) is a retirement savings plan offered by many public and private employers. Employees can choose to have a certain percentage of their paycheck …

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a portion of their paycheck before taxes are taken out. …

A 403(b) is a retirement savings plan offered by certain public schools and nonprofit organizations to their employees. It’s similar to a 401(k), but th…

A 457 plan is a retirement savings plan that is sponsored by an employer. Employees can contribute pretax dollars to the plan, and the funds can be used…

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, named after Section 529 of the Internal …

An Able Account is a tax-advantaged savings account for persons with disabilities that was created by the Achieving a Better Life Experience (ABLE) Act …

Most investors are familiar with the concept of relative return, which is simply the performance of an investment in comparison to another investment. A…

Accident insurance is a type of insurance that covers medical expenses and other costs incurred as a result of an accident. It can be purchased as a sta…

Accretion/Dilution analysis is a tool used in finance to measure the impact of a proposed merger or acquisition on a company’s earnings per share (EPS)….

An accrual bond is a type of debt instrument that pays periodic interest payments to investors based on the amount of time that has elapsed since the bo…

Active management is a type of investment strategy where portfolio managers attempt to generate alpha through active buying and selling of securities. A…

Active return is the return on an investment after taking into account the effects of inflation. It is used to measure the real rate of return on an inv…

Active risk is the chance that an investment will lose money, or underperform compared to its benchmark. Also known as “volatility” or “beta.” Many inve…

An activist shareholder is an individual or group that buys large numbers of a public company’s shares and/or tries to obtain seats on the board with th…

Activity-based costing (ABC) is a costing method that assigns indirect costs to products and services based on the activities that are associated with t…

An actuarial credential is a professional designation earned by completing a series of examinations administered by one of the following organizations: …

Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in finance, insurance, and other industries and pro…

An actuarial topic is a technique that uses mathematical and statistical methods to assess risk in finance, insurance, and other industries. It is an im…

The Adjusted Present Value (APV) is the net present value of a project when both debt and equity financing are considered. The APV method is used to fin…

The advising bank is the financial institution that provides assurances to the exporter that payment will be received. The advising bank may also be kno…

The aftermarket is the market where securities are traded after their initial public offering (IPO). The aftermarket is important because it provides li…

Agricultural policy is the government’s strategy for developing and maintaining the agricultural sector of the economy. The policy has several objective…

Algorithmic trading is a type of trading that uses computer algorithms to automatically make trades. This type of trading has become increasingly popula…

The Altman Z-Score is a statistical model used to predict the probability of bankruptcy within two years. The score is based on five financial ratios: w…

An American option is a type of financial contract that gives the holder the right to either buy or sell an underlying asset at a specified price on or …

The Annual Percentage Rate (APR) is the cost of borrowing money, expressed as a percentage of the total loan amount. APR includes the interest rate, any…

An annuity is an insurance product that allows you to receive a stream of payments in exchange for an upfront investment. The payments can be made on a …

An annuity is a financial product that pays out a fixed stream of payments over a period of time. Annuities can be used for a variety of purposes, inclu…

Arbitrage is the process of taking advantage of a price difference between two or more markets. In finance, arbitrage is often used to refer to the prac…

Arbitrage pricing theory is a finance theory that deals with how asset prices are determined. It is based on the idea that asset prices are determined b…

Arbitrage-free is a term used in finance to describe a situation where there is no potential for making an arbitrage profit. An arbitrage profit is made…

An “Arch model” is a finance model that is used to describe the relationship between two variables. The model is based on the assumption that there is a…

An Artificial Neural Network (ANN) is a computational model that is inspired by the way biological nervous systems, such as the brain, process informati…

The 1997 Asian financial crisis was a period of financial instability in East Asia that began with the collapse of the Thai baht in July 1997. The crisi…

An Asian option is a type of exotic finance option where the payoff is based on the average price of the underlying asset during the life of the option….

An asset is anything that can be used to produce value or wealth. It may be a physical object, such as a factory, piece of land, or natural resource; it…

Asset allocation is an investment strategy that involves dividing an investment portfolio among different asset categories, such as stocks, bonds and ca…