The role of this glossary is to present brief definitions of most of the key concepts in economics and finance (in total 1064 names-definitions) as well as security markets (financial, capital, money) with aim the reader to be able to understand and become familiar with the terminology in the analyses that will present in the category economics.
Additionally, we hope that the reader by acquiring intimacy with the economic terminology, he will also love the science/art of economics, giving to it a significant part of his personal time.
In the following glossary we tried to include the most well-known definitions and terms in the field of Economics & Finance. If you still find that a term or definition is missing and you know that it can be included in this glossary, please do not hesitate to contact us via the contact form of our web-site (Contact Us) and the Liberal Globe will edit it and will include it.
Glossary Economics & Finance
There are currently 58 names in this directory beginning with the letter F.
Face value or par value
is named a stated final amount which is paid to the bond-coupon owner at the maturity date.
Factor
is called an aspect of the investment environment which has effect on the returns of financial assets. If a factor effects a substantial number of financial assets is named common factor or pervasive factor.
Factor beta
is called a relative measure of a common factor with the return on the market portfolio. In mathematical terms, a factor beta is calculated by the covariance of the common factor with the market portfolio, divided by the variance of the market portfolio.
Factor loading (factor attribute or factor sensitivity)
is named a value that depicts the measure of the responsiveness of a security's returns to a common factor.
Factor model (index model)
is named a return generating procedure which attributes the return on a financial instrument to the financial instrument sensitivity to the movements of various common factors.
Factor risk
is called the specific part of the security's total risk which is associated to changes in various common factors and, hence, cannot be diversified away.
Factors of production
are named all those inputs which are used in the production process like labour, land or capital creating value added products (this definition does not apply to the intermediary inputs).
Fail to deliver
is named a situation in which a seller's broker is not in position to send the traded security to the buyer's broker on or before the required settlement date.
Feasible set (or opportunity set)
is named the total number of all portfolios that can be shaped from the group of securities being considered by an investor.
Federal funds rate
is named the interest rate which is quoted on overnight loans of deposits at the Federal Reserve.
Federal Open Market Committee (FOMC)
is called that committee which has the task to take decisions as concern the conduct of open market operations; it is consisted by the seven members of the Board of Governors and the Federal Reserve System, the President of the Federal Reserve Bank of New York as well as the Presidents of four other Federal Reserve Banks.
Federal Reserve System (FED)
is named the authority of central bank which is in charge for monetary policy in the United States.
Federally Sponsored Agency
is called a privately-owned federal agency that has the task to issue securities and to use the proceeds in order to back up the granting of various types of special purpose loans.
Fill or kill order
is named a trading order which is cancelled if the broker is not able to execute it immediately.
Final and intermediate sales
Final sales get their definition by the fact that the final sales are the sales of goods and services which refer to both the consumer and/or firm that will ultimately use them; On the other hand, intermediate sales are those sales of products which the producers buy in order to transform and use these goods and services with aim to use them in their own production of goods and services.
Financial Analyst (or security analyst or investment analyst)
is a professional title of a person who has the job task to analyze financial assets with aim to determine the investment characteristics of those assets and to identify mispricing among those assets.
Financial crisis
is named a major disturbance in financial markets that is characterized by sharp declines in asset prices with the simultaneous failures of many financial and non-financial firms to take place.
Financial intermediaries
are named those institutions that borrow funds from those who have saved and then, next, make loans to others like i.e. banks, insurance companies, mutual funds, pension funds, and finance companies.
Financial intermediation
is called that type of activity which brings together borrowers and lenders, usually this activity is conducted by banks and other financial intermediaries, with aim to collect savings and then lend them out to those willing to pay for their use.
Financial leverage
is called that financial strategy which uses debt to fund a portion of an investment.
Financial market (security market)
is called the mechanism that is designed to smooth the exchange of financial assets by bringing buyers and sellers of securities together.
Firm commitment
is named an arrangement which takes place between underwriters and a security issuer. According to this agreement the underwriters agree to purchase, at the offering price, all the issue not bought by the public.
First-In First-Out method (FIFO)
is named a method which is used to value inventories that assumes that the company's inventory is sold in direct order to accumulation. Those products that first-in the inventory are those products which first-out to sell them.
Fiscal policy
is called that policy which is been used in the government budget with aim to influence the volume of national spending or more generally to provide public goods and services and to redistribute income in the society.
Fischer effect
is named after the economist Irving Fischer and it is the outcome that when expected inflation occurs, interest rates will rise.
Fischer principle
is the breakdown of the nominal interest rate (ι) which is equated with the sum of the real interest rate (r) and the expected inflation rate E(r) = π, (ι = r + π).
Fischer's z-hypothesis
the population correlation coefficient p can be tested by using the fact that z = 1/2 * ln[(r+1)/(r-1)], where r is the sample correlation coefficient, is approximately normally distributed (around the value of z calculated with r = p) with standard error 1/(N-3)^(1/2).
Fixed exchange rate regime
is named the condition where the central banks bought and sold their own currencies with aim to keep their exchange rates fixed at a predetermined level. This condition established by the international financial environment after the end of World War II until 1971.
Fixed investment spending
is named the spending which take place by business firms on equipment (computers, cars, airplanes) and structures (factories, office buildings) and planned spending on residential houses.
Fixed payment loans
is called a credit market instrument that provides a borrower with an amount of money that is repaid by making a fixed payment periodically (usually monthly) for a set number of years.
Floating rate (variable rate)
is the rate of interest on a financial asset that may vary over the life of the asset, depending on charges in a specified indicator of current market interest rates.
Floor broker
is called that member of an organized security exchange who has task to assist commission brokers when there are too many orders flowing into the market for the commission brokers to handle alone.
Floor trader (competitive trader or registered competitive market maker or registered trader)
is called that member of an organized security exchange who trades solely for his or her account and is prohibited by exchange rules from handling public orders.
Flows and stocks
a flow is named an economic variable measured between two periods of time; a stock is a magnitude measured at a given time.
Foreign bonds
are bonds that are sold in a foreign country which are denominated in that country's currency.
Foreign exchange interrventions
are named the purchases and sales of foreign money in exchange for domestic money and is a task that is fulfilled by monetary authorities.
Foreign exchange reserves
are foreign currencies held by the monetary authority for the purpose of intervening in the exchange markets.
Foreign return
is called the return which arise on an investment in a foreign financial asset and includes the impact of exchange rate changes.
Forward exchange rate
is called the market for foreign exchange delivered and paid for at some point in the future but at a price agreed upon today.
Forward rate
is that interest rate which links the current spot interest rate over one holding period to the current spot interest rate over a longer holding period.
Forward transaction
is an exchange rate transaction that involves the exchange of bank deposits denominated in different currencies at some specified future date.
Fourth market
is a secondary security market in which investors (i.e. financial institutions) trade securities directly with each other, bypassing the brokers and dealers on organized security exchanges and the over-the-counter market.
Free cash-flow
is named that amount of cash flow that exceeds the amount of profitable investment opportunities open to the firm.
Free reserves
are named the excess reserves in the banking system which are calculated as bank reserves>the volume of discount loans.
Free rider problem
is the problem that occurs when people who do not pay for information can take advantage of the information that other people have paid for.
Frictional unemployment
is the unemployment resulting from individuals' changing jobs or entering the labour force.
Fully funded
is called that pension plan or private insurance pension scheme which is fully funded if the contributions to the plan and their earnings over the years are enough to pay out the defined benefits when they come due.
Fundamental analysis
is called a form of security analysis which seeks to determine the intrinsic value of securities based on.
Fundamentals
are called the factors which drive the exchange rate; the net external position and determinants of the primary current account as well as monetary conditions and the degree of price rigidity: in general fundamental are the underlying real factors that determine the value of an asset.
Futures contract
is named an agreement between two transaction parties for future delivery of goods or financial assets including foreign exchange on a specific future date to the buyer for a predetermined price to be paid on the delivery date.
