Glossary
Find handy definitions of financial jargon quickly and easily.
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Bear/Bull-Market Mean Return
The average Bear return, or the average Bull return. The average is the arithmetic mean of the set of returns.
Back Testing
Back testing is a formal statistical framework that enables verification of the actual losses versus the projected losses by the VaR model. Dirty Back Testing consists of comparing the VaR estimates with the actual P&L values at the end of the time horizon. Clean...
Bear/Bull-Market Capture Ratio
The Bear/Bull-Market Capture Ratio is a ratio of Bull or Bear return of the portfolio to the Bull or Bear return of the benchmark.
Bear/Bull Statistics
Bear statistics are computed using only those returns occurring during negative market periods, i.e. those periods for which the benchmark return is less than or equal to zero. Conversely, bull statistics are based on returns occurring during positive benchmark periods.
CDS
A credit default swap (CDS) is an agreement that the seller of the CDS will compensate the buyer in the event of underlying bond default. The buyer of the CDS makes a series of payments (the CDS “fee” or “spread”) to the seller and, in exchange, receives a payoff if...
Custodian
A financial institution that has the legal responsibility for a customer's securities.
Classifications
Classification indicates what criteria the securities in the portfolio are broken down by. Classification reflects investment strategy or mandate. The most popular classifications are sector, region, country, asset class, long/short, currency etc.
Correlation
Correlation expresses the degree to which 2 instruments move in the same direction. The bounds of correlation coefficient are 1 (perfect positive correlation), meaning that the 2 instruments will always move in the same direction, and -1 (perfect negative...
Compounding
Compounding refers to generating earnings from previous earnings. Let's take a simple example of 2-year, 5% deposit compounded annually. If we invest US$100 at the beginning of year 1, at the end of year 1 we will have US$105, a gain of US$ 5. At the end of year 2 we...
Commodity
Commodity, unlike a financial asset, is a tangible asset, such as corn, sugar, oil, or coal. Most popular commodities are standardized and traded in the forms of futures contracts on commodity exchanges.
CSSF
The Commission de Surveillance du Secteur Financier (CSSF) is responsible for the prudential supervision of credit institutions, professionals of the financial sector (investment firms, specialized PFS, support PFS), undertakings for collective investment, pension...
CUSIP
CUSIP stands for Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds. The CUSIP system, owned by the American...
Covariance
Covariance measures the relationship between two funds. It measures the extent of mutual variation between them. - A positive covariance indicates that the fund's returns tend to move in the same direction. - A negative covariance indicates a tendency for the returns...
Cloud-Based Analytics
Analysis over a network (see cloud computing).
Calmar ratio
Calmar Ratio measures the excess return of the fund (defined, like in Sortino Ratio, as actual return minus target required return) over maximum drawdown. Where: rp – portfolio return rt – required target return Dmax – maximum drawdown Other UCITS related terms...
Custody Fee
The fees payable to the custodian for the safekeeping of portfolio assets. Custody fees are considered to be administrative fees and typically contain an asset-based portion and a transaction-based portion. The custody fee may also include charges for additional...
Closed-End Fund
A closed-end fund is a collective investment scheme with a fixed number of shares. It is called a closed-end fund because the fund will not issue new shares, even if there is demand in the market. Once the closed-end fund has been fully subscribed, shares can only be...
Commitment Approach
The UCITS IV regulation provides two approaches to regulatory risk management of a fund’s portfolio: the commitment approach and the Value at Risk (VaR) approach. In the commitment approach, the net exposure of derivatives cannot exceed 100% of the fund’s net asset...
Counterparty Risk
Counterparty risk is the risk to each party of a contract (e.g. bond, credit derivative) or any trade or transaction that the counterparty will not fulfill its contractual obligations. Other UCITS related terms [posts-by-tag tags="UCITS" order_by="title"...
Committed Capital
When used by an investor, the total of all current commitments to all funds by that investor. When used by a fund, the total amount of capital currently committed to that fund by all investors.
Carve-Out
A carve-out is defined by the GIPS® standard as a portion of a portfolio that is by itself representative of a distinct investment strategy. It is used to create a track record for a narrower mandate from a multiple-strategy portfolio managed to a broader mandate. For...
Cloud Computing
Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a metered service over a network (typically the Internet). Cloud computing means that...
Contribution to Expected Upside
The amount the segment contributes in percentage to the Expected Upside of the total portfolio.
Contribution to Potential Upside (or Component Potential Gain)
The amount the segment contributes in percentage to the Potential Upside of the total portfolio. Other UCITS related terms
Certificate in Investment Performance Measurement (CIPM)
Established by the CFA Institute, the CIPM program is a specialty credentialing program that develops and recognizes the performance evaluation and presentation expertise of investment professionals. CIPM consists of two exams: Principles and Expert. The Principles...
Chartered Financial Analyst (CFA)
The CFA® Program (Chartered Financial Analyst) is the professional qualification administered and awarded by the CFA Institute, based in the United States and recognized globally by employers, investment professionals, and investors. To earn the CFA charter, one must...
Contribution to Expected Shortfall
The amount the segment contributes in percentage to the Expected Shortfall of the total portfolio
Confluence Portfolio Compliance (CPC)
Confluence Portfolio Compliance (CPC) is a powerful rules engine and compliance workflow system that supports all regulatory requirements, client mandates, and house rules in a single consistent architecture. CPC provides a comprehensive repository of historical...
Contribution to VaR (or component VaR)
Percentage of VaR attributable to given segments or security. The sum of all portfolio constituents contribution to VaR will add to 100%, unlike individual cash VaR's, which, due to diversification effect, will never add up to overall portfolio cash VaR (except a...
Contribution to Tracking Error
The amount the segment contributes in percentage to the Tracking Error of the total portfolio.