Markets & Instruments

80 Markets & Instruments terms, defined in plain English — part of the 1345-term Finicade finance glossary. Each one has its own page, and links to the free game that teaches it.

Accrued Interest: Accrued interest is coupon that has built up since the last payment date but hasn't been paid yet.
American Depositary Receipt (ADR): An ADR is a US-listed certificate representing shares of a foreign company, letting Americans buy overseas equities in dollars through an ordinary broker.
Basis Point: One hundredth of a percentage point — so 25 basis points is 0.25%.
Bid-Ask Spread: The gap between the highest price buyers will pay (bid) and the lowest sellers will accept (ask).
Blue-Chip Stock: Shares in a large, established, financially solid company with a long track record.
Bond Auction: A bond auction is how governments actually sell new debt, usually to primary dealers who bid competitively.
Bond Ladder: A bond ladder holds bonds maturing in consecutive years, so a portion matures every year and is reinvested at whatever rate then prevails.
Bull and Bear Market: A bull market is a sustained rise in prices and optimism; a bear market a sustained fall, conventionally 20%+ off the peak.
Callable Bond: A callable bond lets the issuer repay early, typically when rates have fallen and it can refinance more cheaply.
Carry Trade: A carry trade borrows in a low-interest currency and invests in a high-interest one, pocketing the rate difference as long as the exchange rate cooperates.
Clean Price vs Dirty Price: The clean price is a bond's price excluding accrued interest; the dirty price is what you actually pay.
Clearing House: A clearing house steps between buyer and seller and becomes the counterparty to both, so neither has to assess the other's creditworthiness.
Commercial Paper: Commercial paper is unsecured short-term corporate borrowing, usually under 270 days, used to fund payroll, inventory and receivables.
Commodities: Raw physical goods traded in bulk — oil, gold, wheat, copper.
Common Stock: Common stock is ordinary ownership in a company: a vote, a claim on profits after everyone else is paid, and unlimited upside.
Convertible Bond: A convertible bond is corporate debt that the holder can swap for a fixed number of shares, making it a bond with an embedded call option on the equity.
Convexity: The curvature that duration alone misses: as rates move a lot, a bond's price responds in a curved, not straight-line, way.
Corporate Bond: A corporate bond is a loan to a company, repaid with interest on a fixed schedule.
Coupon: The fixed interest a bond pays its holder, usually twice a year, set as a percentage of face value.
Credit Default Swap (CDS): Insurance against a borrower defaulting: the buyer pays a regular premium and gets paid out if the borrower fails.
Credit Rating: A grade — from AAA down to junk — that agencies assign to a borrower's likelihood of repaying.
Credit Spread: The extra yield a risky borrower must pay over a safe government bond, compensation for the chance of default.
Crude Oil Benchmarks (WTI & Brent): WTI and Brent are the two reference grades that price most of the world's crude oil.
Currency Pair: A currency pair quotes how much of the quote currency one unit of the base currency buys — in EUR/USD at 1.10, one euro costs $1.10.
Current Yield: A bond's annual coupon divided by its current market price — a quick snapshot of the income it throws off right now.
Custodian: A custodian is the bank that holds securities safely on behalf of their owner, handling settlement, dividends, corporate actions and record-keeping.
Delisting: Delisting is a security removal from an exchange — voluntarily after a take-private, or involuntarily for breaching listing rules on price or filings.
Direct Listing: A direct listing puts existing shares onto an exchange without issuing new ones or hiring underwriters to place them.
Dow Jones Industrial Average: The Dow Jones Industrial Average tracks 30 large US companies and is the oldest widely quoted index — and the most methodologically odd.
Duration: How sensitive a bond's price is to interest-rate moves, quoted in years.
DV01: The dollar change in a bond or portfolio's value for a one-basis-point move in yield — 'dollar value of an 01'.
Exchange-Traded Note (ETN): An ETN is an unsecured debt obligation of a bank that promises the return of an index, rather than a fund that owns assets.
Face Value (Par): The amount a bond promises to repay at maturity — its par value, the base the coupon is calculated on.
Fallen Angel: A fallen angel is a bond downgraded from investment grade to high yield.
Floating Rate Note: A floating rate note pays a coupon that resets periodically against a reference rate plus a fixed spread — say SOFR + 90bp, reset quarterly.
Foreign Exchange Market (Forex): The foreign exchange market is where currencies are traded — the largest market in the world by volume, trading around the clock five days a week.
Forward Rate Agreement (FRA): A contract to lock in an interest rate on a future loan or deposit.
Free Float: Free float is the portion of a company's shares actually available to trade, excluding stakes held by founders, governments and strategic holders.
High-Yield Bond: A bond from a riskier issuer, paying more to compensate for a real chance of default — bluntly, a 'junk' bond.
Inverted Yield Curve: An inverted yield curve occurs when short-term government yields exceed long-term ones — the market saying rates are high now and will have to fall.
Investment Grade: Investment grade means a credit rating of BBB−/Baa3 or better — the threshold at which most institutional mandates are allowed to buy.
IPO (Initial Public Offering): The first time a private company sells shares to the public and lists on an exchange.
Limit Order: An order to trade only at a set price or better, rather than immediately at whatever's available (a market order).
Lock-Up Period: A lock-up period bars insiders and early investors from selling for a set time after an IPO — commonly 90 to 180 days.
Macaulay Duration: The weighted-average time until a bond's cash flows arrive, in years — the original meaning of 'duration'.
Margin: Collateral you post to back a leveraged or derivative position, covering potential losses.
Margin Call: A demand to top up your collateral when a leveraged position has lost value.
Mark to Market: Revaluing a position at today's market price rather than what you paid, so gains and losses show up daily.
Market Capitalization: A company's total stock-market value — share price times shares outstanding.
Market Maker: A firm that quotes both a buy and a sell price and stands ready to trade either side, earning the spread between them.
Maturity: The date a bond or loan comes due and the principal is repaid.
Modified Duration: The percentage a bond's price falls for a one-point rise in yield — duration turned into a direct price-sensitivity number.
Money Market Fund: A money market fund is a mutual fund holding very short-term, high-quality debt, designed to keep a stable value while paying prevailing short-term rates.
Municipal Bond: A municipal bond is debt issued by a state, city or local authority, and in the US its interest is generally exempt from federal income tax.
Nasdaq: Nasdaq is both a US stock exchange and the indexes named after it.
Notional: The face amount a derivative is based on, used to scale its payments — even though that sum usually never changes hands.
Option-Adjusted Spread (OAS): Option-adjusted spread is the Z-spread after removing the value of any embedded option, so bonds with and without call features can be compared on credit alone.
Preferred Stock: Preferred stock is a hybrid: it pays a fixed dividend like a bond and ranks ahead of common stock in a liquidation, but usually carries no vote.
Primary vs Secondary Market: The primary market is where securities are first sold and the issuer raises money; the secondary market is where investors trade them among themselves.
Repo (Repurchase Agreement): A short-term loan dressed as a sale: you sell a security and agree to buy it back tomorrow at a slightly higher price, the difference being the interest.
Rights Issue: A rights issue offers existing shareholders the chance to buy new shares at a discount, in proportion to their holding, so they can avoid dilution.
Secondary Offering: A secondary offering is a sale of shares after the IPO.
Securitization: Bundling many loans — mortgages, car loans, card debt — into a single security that's sold to investors, who receive the borrowers' repayments.
Settlement (T+1): Settlement is the moment cash and securities actually change hands, some time after the trade is agreed.
Short Selling: Betting a price will fall: borrow the asset, sell it now, and buy it back later — hopefully cheaper — to return it.
Short Squeeze: When a rising price forces short sellers to buy back to cut losses, and their buying drives the price higher still — a self-feeding spiral.
Sovereign Bond: A sovereign bond is debt issued by a national government, and it anchors the pricing of everything else in that currency.
Spot Price: The price to buy or sell something for immediate delivery, right now — as opposed to a forward or futures price for later.
Stock Exchange: A stock exchange is a regulated venue that matches buy and sell orders and publishes the resulting prices.
Stop-Loss Order: A standing instruction to sell if the price falls to a set level, capping your loss automatically.
Ticker Symbol: A ticker symbol is the short code identifying a security on an exchange.
TIPS (Treasury Inflation-Protected Securities): TIPS are government bonds whose principal rises with inflation, so the coupon and redemption both keep pace with prices.
Tranche: One slice of a securitized deal, ranked by who gets paid first and who absorbs losses first.
Treasury Bill: A Treasury bill is short-term government debt of one year or less, sold at a discount and redeemed at face value, with no coupon in between.
Treasury Bond: Debt issued by a national government, seen as the safest borrower in its own currency.
VIX: The market's 'fear gauge' — an index of the volatility investors expect in US stocks over the next month, read out of option prices.
Yield Curve: A plot of interest rates against how long you lend, from months to decades.
Yield to Maturity (YTM): The single rate that makes a bond's future coupons and repayment worth exactly its current price — its true annualised return if held to the end.
Z-Spread: The Z-spread is the constant amount added to every point on the risk-free curve that makes a bond's discounted cash flows equal its market price.
Zero-Coupon Bond: A bond that pays no interest along the way — you buy it below face value and it repays the full amount at maturity, with the gap being your return.

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