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 68 names in this directory beginning with the letter I.
Idiosyncratic risk (non-factor risk or security specific risk)
is called that specific part of the security's risk that can be diversified away because it is not related to moves in various common factors.
IMF conditionality
is named the procedure which is followed by the OMF in order to lend money to its members and beyond a given percentage in which lending and expenditures are linked to formal agreements on specific policy steps and results.
Immunization
is called a bond portfolio management technique which allows the portfolio manager or investor to use it in order to match a promised stream of each outflows with a high degree of certainty.
Implicit return (internal rate of return or implied return)
is called the discount rate that equates the present value of future cash flows which are expected to be received from a particular investment with the cost of that investment.
Implicit volatility
is named the volatility-risk of an asset which derives from the use of an option valuation model which assumes that the option on the asset is priced fairly by the market.
In the money option
in the case of a call (put) option, is the option whose exercise price is less than (greater than) the market price of its underlying asset.
Incentive compatibility
is called the term when a contract aligns the incentives of both parties to the contract.
Income bond
is called that bond which the size of the interest payments varies and it is based on the income of the issuer.
Income effect
is called the portion of change in quantity demanded which is attributed to the change in real income that arise from the price alteration.
Indenture
is called a legal document which mention in formal manner the terms of the legal relationship between a bond issuer and bondholders.
Index arbitrage
is called that investment strategy which contains the purchase of a stock index futures contract and the sale of individual stocks in the index or the sale of a stock index futures contract and the purchase of the individual stocks in the index. This strategy is used in order to take advantage of a mispricing between the stock index futures contract and the underlying stocks.
Index fund
is named a passive portfolio management strategy that applies in a diversified portfolio of financial assets which are selected in such a way in order to mimic the investment performance of a specific market index.
Index model (see factor model)
is called the procedure that generates return. The return is attributed on a security's sensitivity to the movements of various common factors.
Index number
is called a unitless measure of the development of a variable over time, usually takes prices between 1 or 100 in some base period.
Indexation
is called the provision procedure in which the wage or other contracts which reflect nominal values have to adjust frequently and always following the changes in some predetermined price index in order to maintain the real value of the wage or other contract provisions constant.
Indifference curve
is called the graphic representation of all possible combinations of two items that will produce equivalent utility (satisfaction).
Industrial development bond
is named that form of bond which through its issue arise revenue and is used to finance the purchase or construction of industrial facilities that are leased by the issuing municipality to firms on favourable terms.
Inefficient portfolio
is called the portfolio that does not satisfy the criteria of an efficient portfolio and hence does not lie on the efficient set.
Inflation
is named the term that describes a situation of continually increasing price level in the economy.
Inflation hedge
is the term that describes an asset which preserves the value of its purchasing power over time despite changes in the price level.
Inflation rate
is named the rate of change of the price level, measured by some price index or deflator and as a percentage change per year.
Inflation tax
is named the real revenue that the government obtains by inflation. Inflation erodes the real value of nominal assets and therefore may improve the financial situation of the government, reducing the value of its nominal liabilities.
Information asymmetry
is called the situation in which one party has better information than the other(s) about the probability of an outcome.
Information content of dividend hypothesis
is called the proposition in which the dividend announcements include inside information about a corporation's prospects.
Initial margin requirement
is called the minimum percentage of a margin purchase (or short sale) price that must come from the investor's own funds.
Initial Public Offering (IPO) (or unseasoned offering)
is called the first offering of the shares of a company to the public.
Insider
is called any person who has access in valuable information which is related to the value of a corporation's securities and on the other hand, this valuable information is not available to the general public.
Insolvent
is named a situation in which the value of a firm's or bank's assets fall below its liabilities so that it is bankrupt.
Interest rate
is called the cost of borrowing or the price paid for the rental of funds (usually expressed as a percentage per year).
Interest rate parity condition
is called the condition in which the domestic interest rates are equated with the foreign interest rate plus the expected appreciation in the foreign currency.
Interest rate risk
is named the riskiness of returns that is associated with changes in interest rates.
Intermarket spread swap
is named a type of bond swap where an investor moves out of one market segment and into another because the investor believes that one segment is significantly underpriced relative to the other.
Intermarket trading system
is called the electronic communications network which links the national and regional organized security exchanges and certain over-the-counter dealers. The network provides market-maker price quotes and allows participating brokers and dealers to route orders to market-makers offering the best prices.
Intermediate target
is called any of several variables, such as monetary aggregates or interest rates, that have a direct impact on employment and the price level, and that the FED seeks to influence.
Internal Banking Facilities (IBFs)
are called these banking facilities within the United States that can accept time deposits from foreigners but are not subject to either reserve requirements or any restrictions on interest payments.
Internal rate of return (implied return)
is named the discount rate that equates the present value of future cash flows expected to be received from a particular investment to the cost of that investment.
International Finance Corporation
is called the institution which established by the World Bank and behaves much like a private bank, lending on a project-by-project basis.
International Monetary Fund (IMF)
is called the institution which was set up at the Bretton Woods conference in 1944 with aim to promote international monetary cooperation and exchange rate stability as well as to establish a multilateral system of payments for current transactions assisting parallel its members facing balance of payments difficulties.
International policy coordination
is called the agreements that take place among countries to enact cooperative policies among them.
International reserves
are called the central bank holdings of assets dominated in foreign currencies.
Intertempolar budget constraint
is named the relationship that summarizes resources and opportunities available in the present and the future to a household for consumption; in other words, the present value of spending must be less than or equal to, wealth.
Intrinsic value of an option
is named the value of the option if it is exercised immediately. Specifically, in the case of a call option it is the market price of the asset upon which a call option is written less the exercise price of the option. On the other hand, in the case of a put option it is the exercise price less the market price of the asset.
Inventory investment spending
is named the spending which take place by business firms on additional holding of raw materials, parts, and finished goods.
Inventory valuation adjustment
is called the measure of the portion of corporate earnings which is attributable to changes in the value of inventories due to inflation (inflation as estimated by the US department of Commerce).
Investment advisor
is called the individual or the organization that provides investment advice to investors.
Investment banker (underwritter)
is called the organization which acts as an intermediary between issuers and the ultimate purchases of securities in the primary security market.
Investment banking
is called the process of analyzing and selecting a means of procuring financing on behalf of an issuer of securities.
Investment banks
are called the process of analyzing and selecting a means of procuring financing on behalf of an issuer of securities.
Investment committe
is named a group of senior management of a traditional investment organization who have the responsibility to establish the organization's broad investment strategy.
Investment company
is called a type of financial intermediary which obtains money from investors and uses that money to purchase financial assets. As an exchange, the investors receive shares in the investment company, and thus indirectly own a proportion of the financial assets that the company itself owes.
Investment environment
is called the financial structure in which investors operate and it is consisting by all the kinds of marketable securities which are available for purchase or sale and in this term is included also the process by which these securities are bought and sold.
Investment function
is named the relationship between investment and its fundamental determinants; aggregate investment depends positively upon Tobin's (q) and GDP growth, and negatively upon the real interest rate.
Investment grade bonds
are called the bonds which possess bond rating that permits them to be purchased by most institutional investors, particularly regulated financial institutions. Usually, investment grade bonds have a BBB (S&P) or Baa (Moody's) or higher bond rating.
Investment policy
is called the component of the investment process that involves the determination of an investor's objective as well as the amount of the funds available to invest.
Investment process
is called the set of actions by which an investor decides what marketable securities to invest in, how extensive those investments should be, and when the investments should be made.
Investment style
is called the method which an investor uses to take active positions in certain types of securities.
Investment value
is named the present value of a security's future prospects as estimated by well-informed market participants.
Investment, gross and net
is called the acquisition of new productive equipment. Gross investment is consisting by the total expenditure on new capital goods which includes replacement of worn-out equipment; On the other hand, net investment represents addition to the capital stock.
Involuntary unemployment
is named the unemployment that occurs when individuals are willing and able to work at the going wage but cannot find a job.
