Finance jargon buster for technology students | Technology on The Gateway

Finance jargon buster for technology students

Here's a quick guide to some of the most common terms you'll encounter in this sector

Asset A general term for anything with monetary value.

Blue chip Not a computing term, but used to denote a large, well-established company with a good earnings record. Blue-chip companies are considered a safe bet by investors.

Bond A piece of corporate debt, normally publicly traded on the financial markets.

Bulge-bracket The big, integrated investment banks that have a global presence and handle a large volume of business in a wide range of areas.

Buy-side In an M&A context, means from the perspective of a buyer or potential buyer. In a trading context, means investors in assets - for example, fund managers.

Capital Bills, bacon, dough...capital is a general term for cash.

Debt Any finance raised through borrowing, usually from banks. The borrower must repay the full amount plus interest.

Derivative A tradeable financial contract relating to an underlying asset - for example, a futures contract, which is an agreement to buy a particular asset for a certain price in the future. Derivatives can be used to take an investment position on a particular asset or type of asset without having to invest in it directly. They can also be used as protection against fluctuations in the price of a particular asset.

Equities Another term for shares. Equity finance, or sometimes just equity, is a term used for cash raised from investors in exchange for a share in the business. Investors can try to recoup their money and perhaps make a profit by selling their shares, which may increase or decrease in value over time, or even become worthless.

FTSE 100 The Financial Times Stock Exchange's index derived from the value of the 100 companies listed on the London Stock Exchange with the biggest market value. The list of companies is revised every three months.

Fund A pool of money made up of contributions from a number of investors that's usually invested by a fund manager according to particular criteria and with the intention of providing a higher return than an appropriate benchmark - for example, a general equities fund might aim to give investors better returns that they would have got from investing in FTSE 100 companies.

Going long Investing in an asset in the expectation that it will rise in value over time.

Going short Structuring investments in a way that means you'll benefit when an asset falls in value. Usually done by borrowing the asset, selling it, and then repurchasing it at a lower value when the time comes to return it, or through derivatives.

Hedge Not the greenery outside the bank, but the practice of balancing your investments in order to limit your exposure to risk.

Index A theoretical collection of financial assets chosen to represent a particular market or portion of a particular market. The level of the index is a figure usually derived from the total value of these assets.

Leverage Using debt to finance a transaction or deal. A highly-leveraged company is one that has taken on a large amount of debt.

Liquidity How easy it is to convert an asset into cash. For example, foreign currency is more liquid than property.

Overbought Used to describe an asset whose value has been driven up by demand to a level thought to be in excess of its true value.

Portfolio A collection of investments - for example, those chosen by a fund.

Security Don't worry, working in finance doesn't mean you'll have to empty your pockets before being frisked by a bouncer every day. Security is an umbrella term for all assets that are essentially agreements rather than tangible objects - for example, bonds and shares as opposed to property or manufactured goods.

Sell-side In an M&A context, means from the perspective of a seller or potential seller. From a trading perspective, means the sellers or marketers of investable assets - for example, stockbrokers or sales teams on banks' trading floors.

Sentiment The attitude of market participants towards a particular type of deal, type of asset or industry sector, or even the financial markets as a whole.

Stocks Equivalent to shares or equities - tradeable ownership stakes in a company.

Underbought Used to describe an asset whose value has been reduced by lack of demand to a level thought to be below its true value.

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