Glossary
Annualized Rate of Return
A projection of the equivalent return an investor would receive over a one-year period for a given return received for a period greater than or less than one year.
Agency Debt
A security issued by a United States government-sponsored agency or by a department of the federal government other than the U.S. Treasury.
Basis Point
An amount equal to 1/100 of 1%.
Beta
A measure of the sensitivity of an investment relative to a benchmark.
A price quote indicating the best potential price a security can be sold for and the best potential price the same security can be bought for.
Bid-Ask
Bloomberg US Aggregate Bond Index
An index designed to represent the broad US investment grade fixed rate bond market.
Bloomberg US Corporate Bond Index
An index designed to represent the US investment grade fixed rate corporate bond market.
Bloomberg US Corporate High Yield Bond Index
An index designed to represent the US high yield fixed rate corporate bond market.
Bloomberg US Corporate 1-5 Year Bond Index
An index comprised of US investment grade corporate bonds with maturities between one to five years.
Bloomberg US High Yield 0-5 Year Bond Index
An index comprised of US high yield corporate bonds with maturities of less than five years.
Capital Structure Arbitrage
A trading strategy that attempts to take advantage of valuation differentials across different security classes issued from the same company’s capital structure.
CBOE Volatility Index (“VIX”)
An index that is commonly used as a measure of domestic equity market volatility.
Convertible Arbitrage
A trading strategy that typically involves taking a long position in a convertible bond and a short position in the underlying common stock, in order to capitalize on pricing inefficiencies between the two securities.
Convertible Bond
A type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value.
Correlation is a measure of how two securities move in relation to each other, ranging from +1 (perfect positive relationship) to -1 (perfect negative relationship).
correlation
A coupon is the annual interest rate paid on a bond, expressed as a percentage of the bond’s face value.
coupon
Credit Spread
The difference in yield between a US Treasury bond and a debt security with the same maturity but of lesser quality.
Deal Spread (“Spread”)
Also known as a merger arbitrage spread, the difference between the price at which a target company’s shares currently trade, and the price an acquiring company has agreed to pay.
Delevering
A company’s attempt to decrease its financial leverage, typically by paying down existing debt.
Dovish
A monetary policy that generally promotes lower interest rates.
Cash or cash alternatives held in reserve by a company for the purpose of future investments.
Dry Powder
Duration Risk
The risk associated with the sensitivity of a bond's price to changes in interest rates.
Euro Stoxx 50 Index
An equity index of 50 large, blue-chip European companies operating within Eurozone nations.
Factor Model
A financial model that employs multiple macroeconomic, fundamental, or statistical factors to attempt to explain market phenomena or asset prices.
Federal Funds Target Rate (“Fed Funds”)
The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight.
A trading strategy that bases its holdings primarily on the overall economic and political views of various countries or their macroeconomic principles, in an attempt to profit from broad market swings caused by political or economic events.
Global Macro
Hard catalysts are situations with more defined potential outcomes and higher probabilities of reaching a successful conclusion, such as mergers, acquisitions, and tender offers.
Hard Catalyst
A sudden economic slowdown following a period of rapid growth that often results in an economic recession.
Hard Landing
High Yield
A credit rating lower than investment grade.
ICE BofA US High Yield Index
A measure of the broad high yield market, commonly used as a benchmark for high yield corporate bonds.
Leverage
Refers to the ratio of a company's debt to the value of its equity or to the use of borrowed money.
Long Investment
A position that has been purchased with the expectation that it will increase in value.
Long/Short Credit
A trading strategy that involves buying bonds that are expected to increase in value and selling short bonds that are expected to decrease in value.
Long/Short Equity
A trading strategy that involves buying equities that are expected to increase in value and selling short equities that are expected to decrease in value.
Managed Futures
A trading strategy that consists of an actively managed portfolio of futures contracts.
Material Adverse Change (MAC)
A change in circumstances that significantly reduces the value of a company (also known as a Material Adverse Effect or MAE).
MSCI Emerging Markets Index
An index designed to measure equity market performance in global emerging markets.
NAV
Net asset value, which represents the price per share of a mutual fund.
Nikkei 225 Index
An index composed of Japan's top 225 blue-chip companies traded on the Tokyo Stock Exchange.
Par (Bonds)
Par refers to the value at which a bond will be redeemed at maturity.
Preferred Stock
A form of equity that is senior to common stock but subordinate to bonds in the capital structure, typically paying fixed dividends but lacking voting rights.
Quantitative Easing
A monetary policy whereby a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
Risk Parity
An approach to investing that focuses on allocation of risk rather than allocation of capital.
S&P 500 Index
An index of US equities meant to reflect the risk/return characteristics of the large cap universe, one of the most commonly used benchmarks for the overall US stock market.
Sharpe Ratio
A measure of risk-adjusted performance, calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.
Short Investment
A position that has been sold with the expectation that it will decrease in value, the intention being to repurchase it later at a lower price.
Short Term Bonds
Also known as short duration, refers to bonds that are investment grade US fixed income issues and have durations of one to 3.5 years.
Soft catalysts are situations with less defined potential outcomes and relatively lower probabilities of reaching a successful conclusion, such as asset sales, management changes, and speculative mergers and acquisitions.
Soft Catalyst
A gradual slowdown in economic growth following a period of rapid growth.
Soft Landing
Sortino Ratio
A measure of risk-adjusted returns, calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the downside deviation, or volatility of negative returns, of the portfolio returns.
Special Purpose Acquisition company (SPAC)
Companies which are specifically designed to engage in an acquisition as a means to take public the target company.
Special Situation
A type of investment based on a particular circumstance or catalyst rather than underlying fundamentals.
Spin-Off
The creation of an independent company through the sale or distribution of new shares of an existing unit of a parent company.
Swap
A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.
Taper Tantrum
Taper Tantrum refers to a period during the summer of 2013 when investor fear caused market volatility and Treasury yields to spike in response to the Federal Reserve publicly discussing plans to potentially taper its quantitative easing program, a bond buying program designed to stimulate the economy.
Treasury Inflation-Protected Securities (TIPS)
Treasury securities that pay fixed interest rates and have adjustable par values indexed to inflation.
Volatility
Liability to change rapidly and unpredictably, especially for the worse – commonly represented by standard deviation, a statistical measure of the dispersion of returns for a given security or market index around the mean.
Yield
The income return on an investment, such as the interest or dividends received from holding a particular security.
Yield to Worst
Yield to worst is a measure of the lowest possible yield that can be received on a bond that fully operates within the terms of its contract without defaulting.