The following

outline Outline or outlining may refer to: * Outline (list), a document summary, in hierarchical list format * Code folding, a method of hiding or collapsing code or text to see content in outline form * Outline drawing, a sketch depicting the outer edge ...

is provided as an overview of and topical guide to finance:

Finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

– addresses the ways in which individuals and organizations raise and allocate monetary

resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their av ...

over time, taking into account the

risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...

s entailed in their projects.

Overview

The term finance may incorporate any of the following: * The study of

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

and other

asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...

s * The

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities o ...

and control of those assets * Profiling and managing project risks

Fundamental financial concepts

Arbitrage In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...

Capital (economics) In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. At the macroeconomic level, "the nation's capital stock includes buildings, eq ...

** Capital asset pricing model **

Cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

** Cash flow matching **

Debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

*** Default ***

Consumer debt In economics, consumer debt is the amount owed by consumers (as opposed to amounts owed by businesses or governments). It includes debts incurred on purchase of goods that are consumable and/or do not appreciate. In macroeconomic terms, it is ...

***

Debt consolidation Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process of individuals addressing high consumer debt, but occasionally it can also refer to a cou ...

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Debt settlement Debt settlement (also called debt reduction, debt negotiation or debt resolution) is a settlement negotiated with a debtor's unsecured creditor. Commonly, creditors agree to forgive a large part of the debt: perhaps around half, though results c ...

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Credit counseling Credit counseling (known in the United Kingdom as Debt counseling) is commonly a process that is used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultima ...

***

Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

*** Debt diet ***

Debt-snowball method The debt snowball method is a debt-reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first, while paying the minimum payment on larger debts. Once the smallest debt is paid ...

***

Debt of developing countries The debt of developing countries usually refers to the external debt incurred by governments of developing countries. There have been several historical episodes of governments of developing countries borrowing in quantities beyond their abilit ...

**Asset types ***

Real Estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

***

Securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

*** Commodities ***

Futures Futures may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded * ''Futures'' (magazine), an American finance magazine Music * ''Futures'' (album), a ...

***

Cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-imm ...

** Discounted cash flow **

Financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide ...

***

Funding Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses ...

Entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values th ...

***

Entrepreneurship Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values th ...

Fixed income analysis Fixed income analysis is the process of determining the value of a debt security based on an assessment of its risk profile, which can include interest rate risk, risk of the issuer failing to repay the debt, market supply and demand for the secu ...

** Gap financing **

Global financial system The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade finan ...

Hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoin ...

***

Basis risk Basis risk in finance is the risk associated with imperfect hedging due to the variables or characteristics that affect the difference between the futures contract and the underlying "cash" position. It arises because of the difference between th ...

Interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...

***

Risk-free interest rate The risk-free rate of return, usually shortened to the risk-free rate, is the rate of return of a hypothetical investment with scheduled payments over a fixed period of time that is assumed to meet all payment obligations. Since the risk-free ra ...

***

Term structure of interest rates In finance, the yield curve is a graph which depicts how the yields on debt instruments - such as bonds - vary as a function of their years remaining to maturity. Typically, the graph's horizontal or x-axis is a time line of months or ye ...

Short-rate model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a sh ...

*** Vasicek model ***

Cox–Ingersoll–Ross model In mathematical finance, the Cox–Ingersoll–Ross (CIR) model describes the evolution of interest rates. It is a type of "one factor model" ( short-rate model) as it describes interest rate movements as driven by only one source of mark ...

***

Hull–White model In financial mathematics, the Hull–White model is a model of future interest rates. In its most generic formulation, it belongs to the class of no-arbitrage models that are able to fit today's term structure of interest rates. It is relatively str ...

***

Chen model In finance, the Chen model is a mathematical model describing the evolution of interest rates. It is a type of "three-factor model" ( short-rate model) as it describes interest rate movements as driven by three sources of market risk. It was the ...

***

Black–Derman–Toy model In mathematical finance, the Black–Derman–Toy model (BDT) is a popular short-rate model used in the pricing of bond options, swaptions and other interest rate derivatives; see . It is a one-factor model; that is, a single stochastic facto ...

Interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct ...

***

Effective interest rate The effective interest rate (EIR), effective annual interest rate, annual equivalent rate (AER) or simply effective rate is the percentage of interest on a loan or financial product if compound interest accumulates over a year during which no pa ...

***

Nominal interest rate In finance and economics, the nominal interest rate or nominal rate of interest is the rate of interest stated on a loan or investment, without any adjustments or fees. Examples of adjustments or fees # An adjustment for inflation(in contrast with ...

*** Interest rate basis *** Fisher equation *** Crowding out ***

Annual percentage rate The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mort ...

*** Interest coverage ratio **

Investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

***

Foreign direct investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct co ...

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Gold as an investment Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and ...

***

Over-investing Over-investing in finance, particularly personal finance, refers to the practice of investing more into an asset than what that asset is worth on the open market. It is cited most frequently in reference to expensive personal consumable investmen ...

Leverage Leverage or leveraged may refer to: *Leverage (mechanics), mechanical advantage achieved by using a lever * ''Leverage'' (album), a 2012 album by Lyriel *Leverage (dance), a type of dance connection *Leverage (finance), using given resources to ...

Long (finance) In finance, a long position in a financial instrument means the holder of the position owns a positive amount of the instrument. The holder of the position has the expectation that the financial instrument will increase in value. This is known as ...

Liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqui ...

Margin (finance) In finance, margin is the collateral that a holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty. This risk c ...

Mark to market Mark-to-market (MTM or M2M) or fair value accounting is accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" ...

Market impact In financial markets, market impact is the effect that a market participant has when it buys or sells an asset. It is the extent to which the buying or selling moves the price against the buyer or seller, i.e., upward when buying and downward when ...

Medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is ass ...

** Microcredit **

Money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

*** Money creation ***

Currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...

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Coin A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order t ...

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Banknote A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable instrument, negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes w ...

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Counterfeit To counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the original, for use in illegal transactions, or otherwise to deceive individuals into believing that the fake is of equal or greater value tha ...

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History of money The history of money concerns the development throughout time of systems that provide the functions of money. Such systems can be understood as means of trading wealth indirectly; not directly as with bartering. Money is a mechanism that facilit ...

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Monetary reform Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system. Monetary reformers may advocate any of the following, among other proposals: * A return t ...

Portfolio Portfolio may refer to: Objects * Portfolio (briefcase), a type of briefcase Collections * Portfolio (finance), a collection of assets held by an institution or a private individual * Artist's portfolio, a sample of an artist's work or a ...

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Modern portfolio theory Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversificati ...

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Mutual fund separation theorem In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be constructed by holding each of certain mutual funds in ap ...

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Post-modern portfolio theory Post-Modern Portfolio Theory (PMPT) is an extension of the traditional Modern Portfolio Theory (MPT), an application of mean-variance analysis (MVA). Both theories propose how rational investors can use diversification to optimize their portfolios. ...

Reference rate A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of LIBOR rate, but it can take many forms, such as a consumer price index, a house pri ...

*** Reset **

Return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or t ...

*** Absolute return *** Investment performance ***

Relative return Relative return is a measure of the return of an investment portfolio relative to a theoretical passive reference portfolio or benchmark. In active portfolio management, the aim is to maximize the relative return (often subject to a risk constrain ...

Risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...

***

Financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial ...

*** Risk management ****

Financial risk management Financial risk management is the practice of protecting economic value in a firm by using financial instruments to manage exposure to financial risk - principally operational risk, credit risk and market risk, with more specific variants as liste ...

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Uncompensated risk In investments, uncompensated risk is the level of additional risk for which no additional return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the f ...

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Risk measure In financial mathematics, a risk measure is used to determine the amount of an asset or set of assets (traditionally currency) to be kept in reserve. The purpose of this reserve is to make the risks taken by financial institutions, such as bank ...

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Coherent risk measure In the fields of actuarial science and financial economics there are a number of ways that risk can be defined; to clarify the concept theoreticians have described a number of properties that a risk measure might or might not have. A coherent ris ...

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Deviation risk measure In financial mathematics, a deviation risk measure is a function to quantify financial risk (and not necessarily downside risk) in a different method than a general risk measure. Deviation risk measures generalize the concept of standard deviation ...

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Distortion risk measure In financial mathematics and economics, a distortion risk measure is a type of risk measure which is related to the cumulative distribution function of the return of a financial portfolio. Mathematical definition The function \rho_g: L^p \to \m ...

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Spectral risk measure A Spectral risk measure is a risk measure given as a weighted average of outcomes where bad outcomes are, typically, included with larger weights. A spectral risk measure is a function of portfolio returns and outputs the amount of the numeraire (t ...

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Value at risk Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by ...

*****

Expected shortfall Expected shortfall (ES) is a risk measure—a concept used in the field of financial risk measurement to evaluate the market risk or credit risk of a portfolio. The "expected shortfall at q% level" is the expected return on the portfolio in the wor ...

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Entropic value at risk In financial mathematics and stochastic optimization, the concept of risk measure is used to quantify the risk involved in a random outcome or risk position. Many risk measures have hitherto been proposed, each having certain characteristics. The en ...

Scenario analysis Scenario planning, scenario thinking, scenario analysis, scenario prediction and the scenario method all describe a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and gener ...

Short (finance) In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional " long" position, where the investor will profit if the value of ...

Speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline i ...

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Day trading Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks an ...

Position trader In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

Spread trade In finance, a spread trade (also known as relative value trade) is the simultaneous purchase of one security and sale of a related security, called legs, as a unit. Spread trades are usually executed with options or futures contracts as the legs, b ...

Standard of deferred payment In economics, standard of deferred payment is a function of money. It is the function of being a widely accepted way to value a debt, thereby allowing goods and services to be acquired now and paid for in the future. The 19th-century economist W ...

Store of value A store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most ...

Time horizon Time is the continued sequence of existence and events that occurs in an apparently irreversible succession from the past, through the present, into the future. It is a component quantity of various measurements used to sequence events, to co ...

Time value of money The time value of money is the widely accepted conjecture that there is greater benefit to receiving a sum of money now rather than an identical sum later. It may be seen as an implication of the later-developed concept of time preference. The ...

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Discounting Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee.See "Time Value", "Discount", "Discount Yield", "Compound Interest", "Efficient ...

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Present value In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has inte ...

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Future value Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is ...

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Net present value The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount ...

*** Internal rate of return *** Modified internal rate of return ***

Annuity In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, ...

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Perpetuity A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For example, the United Kingdom (UK) government issued them in the past; these were known as conso ...

Trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...

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Free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...

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Free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any o ...

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Fair trade Fair trade is an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and enviro ...

Unit of account In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of rela ...

** Volatility ** Yield **

Yield curve In finance, the yield curve is a graph which depicts how the yields on debt instruments - such as bonds - vary as a function of their years remaining to maturity. Typically, the graph's horizontal or x-axis is a time line of months or ye ...

History

History of finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption (economics) ...

History of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BCE in Assyria, India and Sumeria. Later, in anci ...

* History of insurance *

Tulip mania Tulip mania ( nl, tulpenmanie) was a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. The major acceleration started in 1634 and then ...

(Dutch Republic), 1620s/1630s *

South Sea Bubble South is one of the cardinal directions or compass points. The direction is the opposite of north and is perpendicular to both east and west. Etymology The word ''south'' comes from Old English ''sūþ'', from earlier Proto-Germanic ''*sunþaz ...

(UK) &

Mississippi Company The Mississippi Company (french: Compagnie du Mississippi; founded 1684, named the Company of the West from 1717, and the Company of the Indies from 1719) was a corporation holding a business monopoly in French colonies in North America and th ...

(France), 1710s; see also

Stock market bubble A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bub ...

* ''

Vix pervenit ''Vix pervenit'' was an encyclical, promulgated by Pope Benedict XIV on November 1, 1745, which condemned the practice of charging interest on loans as usury. Because the encyclical was addressed to the bishops of Italy, it is generally not cons ...

'' 1745, on usury and other dishonest profit * Panic of 1837 (US) *

Railway Mania Railway Mania was an instance of a stock market bubble in the United Kingdom of Great Britain and Ireland in the 1840s. It followed a common pattern: as the price of railway shares increased, speculators invested more money, which further incre ...

(UK), 1840s *

Erie War The Erie War was a 19th-century conflict between American financiers for control of the Erie Railway Company, which owned and operated the Erie Railroad. Built with public funds raised by taxation and on land donated by public officials and priva ...

(US), 1860s *

Long Depression The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through March 1879, or 1896, depending on the metrics used. It was most severe in Europe and the United States, which had been experiencing st ...

, 1873–1896 (mainly US and Europe, though other parts of the world were affected) * Post-World War I hyperinflation; see

Hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...

and

Inflation in the Weimar Republic Hyperinflation affected the German Papiermark, the currency of the Weimar Republic, between 1921 and 1923, primarily in 1923. It caused considerable internal political instability in the country, the occupation of the Ruhr by France and Belgium, ...

Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange colla ...

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

1930s *

Bretton Woods Accord The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bret ...

1944 *

1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had supp ...

* 1979 energy crisis * Savings and Loan Crisis 1980s *

Black Monday Black Monday refers to specific Mondays when undesirable or turbulent events have occurred. It has been used to designate massacres, military battles, and stock market crashes. Historic events *1209, Dublin – when a group of 500 recently arriv ...

1987 *

Asian financial crisis The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998– ...

1990s *

Dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compo ...

1995-2001 *

Stock market downturn of 2002 In 2001, stock prices took a sharp downturn (some say "stock market crash" or " the Internet bubble bursting") in stock markets across the United States, Canada, Asia, and Europe. After recovering from lows reached following the September 11 attac ...

United States housing bubble The 2000s United States housing bubble was a real-estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reac ...

Financial crisis of 2007–08 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

, followed by the

Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...

Finance terms by field

Accounting (financial record keeping)

Auditing An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...

* Accounting software *

Book keeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. ...

FASB The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Secur ...

Financial accountancy Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use. Stockholders, s ...

Financial statements Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

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Balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

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Cash flow statement In financial accounting, a cash flow statement, also known as ''statement of cash flows'', is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to oper ...

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Income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...

Management accounting In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is th ...

Philosophy of Accounting The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts. The issues which arise include the difficulty of establishing a ''true and fair'' value of an enterpris ...

Working capital Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is consi ...

Hedge accounting Hedge accounting is an accountancy practice, the aim of which is to provide an offset to the mark-to-market movement of the derivative in the profit and loss account. There are two types of hedge recognized. For a fair value hedge, the offset ...

IFRS 9 IFRS 9 is an International Financial Reporting Standard (IFRS) published by the International Accounting Standards Board (IASB). It addresses the accounting for financial instruments. It contains three main topics: classification and measuremen ...

Fair value accounting Mark-to-market (MTM or M2M) or fair value accounting is accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" ...

Banking

*See articles listed under:

Corporate finance

* Balance sheet analysis ** Financial ratio *

Business plan A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on t ...

Capital budgeting Capital budgeting in corporate finance is the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects ...

Investment policy An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e.g. currency exchange limits. Explanation As globalization integrates the economies of neighboring and of trad ...

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Business valuation Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Here various valuation techniques are used by financial market participants to determine the price they are willing t ...

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Stock valuation In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...

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Fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets. It also considers the overall sta ...

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Real option Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbe ...

s *** Valuation topics ***

Fisher separation theorem In economics, the Fisher separation theorem asserts that the primary objective of a corporation will be the maximization of its present value, regardless of the preferences of its shareholders. The theorem therefore separates management's "product ...

** Sources of financing **

Initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...

Capital structure In corporate finance, capital structure refers to the mix of various forms of external funds, known as capital, used to finance a business. It consists of shareholders' equity, debt (borrowed funds), and preferred stock, and is detailed in the ...

Cost of capital In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". It is used to evaluate new ...

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Weighted average cost of capital The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Importantly, it is dictated by ...

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Modigliani–Miller theorem The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy c ...

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Hamada's equation In corporate finance, Hamada’s equation is an equation used as a way to separate the financial risk of a levered firm from its business risk. The equation combines the Modigliani–Miller theorem with the capital asset pricing model. It is used t ...

** Dividend policy ***

Dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...

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Dividend tax A dividend tax is a tax imposed by a jurisdiction on dividends paid by a corporation to its shareholders (stockholders). The primary tax liability is that of the shareholder, though a tax obligation may also be imposed on the corporation in the ...

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Dividend yield The dividend yield or dividend–price ratio of a share is the dividend per share, divided by the price per share. It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant ...

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Corporate action A corporate action is an event initiated by a public company that brings or could bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's board of directors ...

* ( Strategic)

Financial management Financial management is the business function concerned with profitability, expenses, cash and credit, so that the "organization may have the means to carry out its objective as satisfactorily as possible;" the latter often defined as maximizin ...

Managerial finance Managerial finance is the branch of finance that concerns itself with the managerial application of finance techniques and theory, emphasizing the financial aspects of managerial decisions. The techniques addressed are drawn in the main from man ...

Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loan ...

takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to t ...

corporate raid In business, a corporate raid is the process of buying a large stake in a corporation and then using shareholder voting rights to require the company to undertake novel measures designed to increase the share value, generally in opposition to t ...

Contingent value rights In corporate finance, Contingent Value Rights (CVR) are rights granted by an acquirer to a company’s shareholders, facilitating the transaction where some uncertainty is inherent. CVRs may be separately tradeable securities; they are occasiona ...

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Working capital management Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allo ...

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Current assets In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...

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Current liabilities In accounting, current liabilities are often understood as all liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle of a given firm, whichever period is longer. A more complete definition is t ...

Return on investment Return on investment (ROI) or return on costs (ROC) is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably ...

*** Return on capital ***

Return on assets The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue. ROA can be computed as below: :\mathrm = \frac This number tells you what the company can do with what it has, ''i.e.'' how many doll ...

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Return on equity The return on equity (ROE) is a measure of the profitability of a business in relation to the equity. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on ''a ...

loan covenant A loan covenant is a condition in a commercial loan or bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond ...

** cash conversion cycle ** Cash management *** **

Inventory optimization Inventory optimization is a method of balancing capital investment constraints or objectives and service-level goals over a large assortment of stock-keeping units (SKUs) while taking demand and supply volatility into account. Inventory managem ...

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Supply chain management In commerce, supply chain management (SCM) is the management of the flow of goods and services including all processes that transform raw materials into final products between businesses and locations. This can include the movement and stor ...

*** Just In Time (JIT) ***

Economic order quantity Economic Order Quantity (EOQ), also known as Economic Buying Quantity (EPQ), is the order quantity that minimizes the total holding costs and ordering costs in inventory management. It is one of the oldest classical production scheduling models. Th ...

(EOQ) ***

Economic production quantity The economic production quantity model (also known as the EPQ model) determines the quantity a company or retailer should order to minimize the total inventory costs by balancing the inventory holding cost and average fixed ordering cost. The EPQ m ...

(EPQ) *** Economic batch quantity **

Credit (finance) Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), ...

Credit scoring A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bu ...

** Default risk ** Discounts and allowances **

Factoring (trade) Factoring is a financial transaction and a type of debtor finance in which a business ''sells'' its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.O. Ray Whittington, CPA, PhD, "Financial Accounting and ...

& Supply chain finance

Investment management

* Active management *

Efficient market hypothesis The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...

** Capital asset pricing model *

Arbitrage pricing theory In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, it is widely beli ...

Passive management Passive management (also called passive investing) is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common on the equity market, where index funds track a stock market index, but it is becoming ...

Index fund An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, avail ...

Activist shareholder An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full ...

Mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...

Open-end fund Open-end fund (or open-ended fund) is a collective investment scheme that can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself, rather than from the existing shareholders. ...

Closed-end fund A closed-end fund (CEF) is a fund that raises capital by issuing a fixed number of shares which are not redeemable, and then invest that capital in financial assets such as stocks and bonds. Unlike open-end funds, new shares in a closed-end fund ...

List of mutual-fund families The following is a limited list of mutual-fund families in the United States. A family of mutual funds is a group of funds that are marketed under one or more brand names, usually having the same distributor (the company which handles selling and r ...

Financial engineering Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathema ...

** Long-Term Capital Management *

Hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...

* #Quantitative investing, below

Personal finance

* 529 plan (US college savings) *

ABLE account An ABLE account, also known as a 529 ABLE or 529A account, is a state-run savings program for eligible people with disabilities in the United States. Rules governing ABLE accounts are codified in Internal Revenue Code section 529A, which was enacted ...

(US plan for benefit of individuals with disabilities) *

Asset allocation Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment tim ...

** Asset location * Budget *

Coverdell Education Savings Account A Coverdell education savings account (also known as an education savings account, a Coverdell ESA, a Coverdell account, or just an ESA, and formerly known as an education individual retirement account), is a tax advantaged investment account in the ...

(Coverdell ESAs, formerly known as Education IRAs) * Credit and debt **

Credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

Mortgage loan A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...

*** Continuous-repayment mortgage *

Debit card A debit card, also known as a check card or bank card is a payment card that can be used in place of cash to make purchases. The term '' plastic card'' includes the above and as an identity document. These are similar to a credit card, but u ...

Direct deposit A direct deposit (or direct credit), in banking, is a deposit of money by a payer directly into a payee's bank account. Direct deposits are most commonly made by businesses in the payment of salaries and wages and for the payment of suppliers' acco ...

* Employment contract ** Commission **

Employee stock option Employee stock options (ESO) is a label that refers to compensation contracts between an employer and an employee that carries some characteristics of financial options. Employee stock options are commonly viewed as an internal agreement prov ...

** Employee or fringe benefit **

Health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...

Paycheck A paycheck, also spelled paycheque, pay check or pay cheque, is traditionally a paper document (a cheque) issued by an employer to pay an employee for services rendered. In recent times, the physical paycheck has been increasingly replaced by ...

Salary A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. ...

Wage A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', ''prevailing wage'', and ''yearly bonuses,'' and remuner ...

Financial literacy Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is now a focus of state-run prog ...

Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

Predatory lending Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 ...

Retirement plan A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...

** Australia –

Superannuation in Australia In Australia, superannuation, or just super, is the term for retirement pension benefit funds. Employers make compulsory contributions into these funds on behalf of their employees. Superannuation is compulsory for all employed people workin ...

** Canada *** Registered retirement savings plan ***

Tax-free savings account A tax-free savings account (TFSA, french: links=no, Compte d'épargne libre d'impôt, CELI) is an account available in Canada that provides tax benefits for saving. Investment income, including capital gains and dividends, earned in a TFSA is ...

** Japan –

Nippon individual savings account A Nippon individual savings account (NISA) is an account that is meant to help residents in Japan save money with tax-exempt benefits. It is modeled after the Individual Savings Account in the United Kingdom. History NISA was created in 2014 as ...

** New Zealand –

KiwiSaver The KiwiSaver scheme, a New Zealand savings scheme, came into operation from Monday, 2 July 2007. Participants can normally access their KiwiSaver funds only after the age of 65, but can withdraw them in certain limited circumstances, for exampl ...

** United Kingdom ***

Individual savings account An individual savings account (ISA; ) is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax i ...

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Self-invested personal pension A self-invested personal pension (SIPP) is the name given to the type of UK government-approved personal pension scheme which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and C ...

** United States *** 401(a) *** 401(k) *** 403(b) *** 457 plan ***

Keogh plan Keogh plans are a type of retirement plan for self-employed people and small businesses in the United States. History Named for U.S. Representative Eugene James Keogh of New York, they are sometimes called HR10 plans. IRS Publication 560 refer ...

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Individual retirement account An individual retirement account (IRA) in the United States is a form of pension provided by many financial institutions that provides tax advantages for retirement savings. It is a trust that holds investment assets purchased with a taxpayer's ear ...

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Roth IRA A Roth IRA is an individual retirement account (IRA) under United States law that is generally not taxed upon distribution, provided certain conditions are met. The principal difference between Roth IRAs and most other tax-advantaged retirement pla ...

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Traditional IRA A traditional IRA is an individual retirement arrangement (IRA), established in the United States by the Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ). Normal IRAs also existed before ERISA. Overview An author d ...

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SEP IRA A Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) is a variation of the Individual Retirement Account used in the United States. SEP IRAs are adopted by business owners to provide retirement benefits for themselves and their ...

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SIMPLE IRA A Savings Incentive Match Plan for Employees Individual Retirement Account, commonly known by the abbreviation "SIMPLE IRA", is a type of tax-deferred employer-provided retirement plan in the United States that allows employees to set aside money ...

Pension A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...

Simple living Simple living refers to practices that promote simplicity in one's lifestyle. Common practices of simple living include reducing the number of possessions one owns, depending less on technology and services, and spending less money. Not only is ...

Social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

Tax advantage Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. Examples of tax-advantaged accounts and investments include retirement plans, education savi ...

Wealth Wealth is the abundance of Value (economics), valuable financial assets or property, physical possessions which can be converted into a form that can be used for financial transaction, transactions. This includes the core meaning as held in the ...

Comparison of accounting software The following comparison of accounting software documents the various features and differences between different professional accounting software, personal and small enterprise software, medium-sized and large-sized enterprise software, and oth ...

Personal financial management Personal financial management (PFM) refers to software that helps users manage their money. PFM often lets users categorize transactions and add accounts from multiple institutions into a single view. PFM also typically includes data visualizations ...

Investment club An investment club is a group of individuals who meet for the purpose of pooling money and investing; members typically meet on a periodic basis to make investment decisions as a group through a voting process and recording of minutes, or gather i ...

* Collective investment scheme

Public finance

Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

Fractional-reserve banking Fractional-reserve banking is the system of banking operating in almost all countries worldwide, under which banks that take deposits from the public are required to hold a proportion of their deposit liabilities in liquid assets as a reserve, ...

** Deposit creation multiplier *

Tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

Capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property. Not all count ...

Estate tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...

(and inheritance tax) **

Gift tax In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must ...

Income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

** Inheritance tax **

Payroll tax Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the em ...

Property tax A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inheri ...

(including

land value tax A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...

) **

Sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a govern ...

(including

value added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end ...

excise tax file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...

, and

use tax A use tax is a type of tax levied in the United States by numerous state governments. It is essentially the same as a sales tax but is applied not where a product or service was sold but where a merchant bought a product or service and then conve ...

) **

Transfer tax A transfer tax is a tax on the passing of title to property from one person (or entity) to another. In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property from one entity to another. ...

(including stamp duty) **

Tax, tariff and trade A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

Tax amortization benefit In accounting, tax amortization benefit (or tax amortisation benefit) refers to the present value of income tax savings resulting from the tax deduction generated by the amortization of an intangible asset. Intangible asset valuation When the purc ...

* Crowding out * Industrial policy *

Agricultural policy Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultu ...

Currency union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more State (polity), states sharing the same currency. These states may not necessarily have any Economic integration#Stages, further integratio ...

Risk management

Constraint finance

Environmental finance Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impac ...

Feminist economics Feminist economics is the critical study of economics and economies, with a focus on gender-aware and inclusive economic inquiry and policy analysis. Feminist economic researchers include academics, activists, policy theorists, and practition ...

Green economics A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politi ...

Islamic economics Islamic economics ( ar, الاقتصاد الإسلامي) refers to the knowledge of economics or economic activities and processes in terms of Islamic principles and teachings. Islam has a set of special moral norms and values about individua ...

Uneconomic growth Uneconomic growth is economic growth that reflects or creates a decline in the quality of life. The concept is used in human development theory, welfare theory, and ecological economics. It is usually attributed to ecological economist Her ...

Value of Earth The value of Earth, i.e. the net worth of our planet, is a debated concept both in terms of the definition of value, as well as the scope of "Earth". Since most of the planet's substance is not available as a resource, "earth" has been equated wi ...

Value of life The value of life is an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, value of preventing a fatality (VPF), implied cost of averting a fatality (ICAF), and value of a statistical li ...

Insurance

* Actuarial science *

Annuities In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, m ...

* Catastrophe modeling * Earthquake loss *

Extended coverage Extended coverage is a term used in the property insurance business. All insurance policies have exclusions for specific causes of loss (also called "perils") that are not covered by the insurance company. An extended coverage endorsement (EC) wa ...

Insurable interest Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without repairment or damage, of the insured object (or in the case of a person, their continued survival). A person has an ...

Insurable risk Insurability can mean either whether a particular type of loss (risk) can be insured in theory, or whether a particular client is insurable for by a particular company because of particular circumstance and the quality assigned by an insurance p ...

*** Disability insurance ***

Accident insurance Accident insurance is a type of insurance where the policy holder is paid directly in the event of an accident resulting in injury of the insured. The insured can spend the benefit payment however they choose. Accident insurance is complementary to ...

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Flexible spending account In the United States, a flexible spending account (FSA), also known as a flexible spending arrangement, is one of a number of tax-advantaged financial accounts, resulting in payroll tax savings. One significant disadvantage to using an FSA is th ...

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Health savings account A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal inco ...

*** Long term care insurance ***

Medical savings account A medical savings account (MSA) is an account into which tax-deferred amounts from income can be deposited. The amounts are often called contributions and may be made by a worker, an employer, or both, depending on a country's laws. The money in ...

Life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...

*** Life insurance tax shelter ***

Permanent life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...

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Term life insurance Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guarant ...

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Universal life insurance Universal life insurance (often shortened to UL) is a type of cash value life insurance, sold primarily in the United States. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash ...

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Variable universal life insurance Variable universal life insurance (often shortened to VUL) is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of ...

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Whole life insurance Whole life insurance, or whole of life assurance (in the Commonwealth of Nations), sometimes called "straight life" or "ordinary life", is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided ...

Property insurance Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or bo ...

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Auto insurance Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injur ...

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Boiler insurance Boiler insurance (Boiler cover) is a type of insurance that covers repairs and in some instances, the replacement of a home boiler. It can also cover other parts of the central heating A central heating system provides warmth to a number of ...

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Business interruption insurance Business interruption insurance (also known as business income insurance) is a type of insurance that covers the loss of income that a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business ...

*** Condo insurance ***

Earthquake insurance Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insuranc ...

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Home insurance Home insurance, also commonly called homeowner's insurance (often abbreviated in the US real estate industry as HOI), is a type of property insurance that covers a private residence. It is an insurance policy that combines various personal insura ...

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Title insurance Title insurance is a form of indemnity insurance predominantly found in the United States and Canada which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Unlike ...

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Pet insurance Pet insurance is a form of insurance that pays, partly or in total, for veterinary treatment of the insured person's ill or injured pet. Some policies will pay out when the pet dies, or if the pet is lost or stolen. As veterinary medicine is in ...

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Renters' insurance Renters' insurance, often called tenants' insurance, is an insurance policy that provides some of the benefits of homeowners' insurance, but does not include coverage for the dwelling, or structure, with the exception of small alterations that a ten ...

Casualty insurance Casualty insurance is a defined term which broadly encompasses insurance not directly concerned with life insurance, health insurance, or property insurance. Casualty insurance is mainly liability coverage of an individual or organization for ne ...

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Fidelity bond A fidelity bond or fidelity guarantee is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest ...

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Liability insurance Liability insurance (also called third-party insurance) is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims and protects the i ...

***

Political risk insurance Political risk insurance is a type of insurance that can be taken out by businesses, of any size, against political risk—the risk that revolution or other political conditions will result in a loss. Political risk insurance is available for seve ...

*** Surety bond ***

Terrorism insurance Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities. It is considered to be a difficult product for insurance companies, as the odds of terroris ...

** Credit insurance *** Trade credit insurance ***

Payment protection insurance Payment protection insurance (PPI), also known as credit insurance, credit protection insurance, or loan repayment insurance, is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabl ...

***

Credit derivative In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the '' credit risk''"The Economist ''Passing on the risks'' 2 November 1996 or the risk of an event of default of a co ...

** Mid-term adjustment **

Reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own insu ...

Self insurance Self-insurance is a situation in which a person or business that is liable for some risk does not take out any third-party insurance, but rather chooses to bear the risk itself. In the United States the concept applies especially to self-funded hea ...

Travel insurance Travel insurance is an insurance product for covering unforeseen losses incurred while travelling, either internationally or domestically. Basic policies generally only cover emergency medical expenses while overseas, while comprehensive policies ...

** Niche insurance *

Insurance contract In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as ...

* Loss payee clause * Risk Retention Group

Economics and finance

Finance-related areas of economics

Financial economics Financial economics, also known as finance, is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade".William F. Sharpe"Financial ...

Monetary economics Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it ...

* Mathematical economics *

Managerial economics Managerial economics is a branch of economics involving the application of economic methods in the managerial decision-making process.• Trefor Jones (2004). ''Business Economics and Managerial Decision Making'', WileyDescriptionand chapter-pre ...

Economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...

theory *

Decision theory Decision theory (or the theory of choice; not to be confused with choice theory) is a branch of applied probability theory concerned with the theory of making decisions based on assigning probabilities to various factors and assigning numerical ...

Game theory Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...

Experimental economics Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic expe ...

/ Experimental finance *

Behavioral economics Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...

Behavioral finance Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...

Corporate finance theory

Theory of the firm The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in econ ...

The Theory of Investment Value John Burr Williams (November 27, 1900 – September 15, 1989) was an American economist, recognized as an important figure in the field of fundamental analysis, and for his analysis of stock prices as reflecting their " intrinsic value". He is ...

Agency theory Agency may refer to: Organizations * Institution, governmental or others ** Advertising agency or marketing agency, a service business dedicated to creating, planning and handling advertising for its clients ** Employment agency, a business that s ...

** **

Capital structure substitution theory In finance, the capital structure substitution theory (CSS) describes the relationship between earnings, stock price and capital structure of public companies. The CSS theory hypothesizes that managements of public companies manipulate capital stru ...

Pecking order theory In corporate finance, the pecking order theory (or pecking order model) postulates that the cost of financing increases with asymmetric information. Financing comes from three sources, internal funds, debt and new equity. Companies prioritize their ...

Market timing hypothesis The market timing hypothesis is a theory of how firms and corporations in the economy decide whether to finance their investment with equity or with debt instruments. It is one of many such corporate finance theories, and is often contrasted with t ...

Trade-off theory of capital structure The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger ...

Merton model The Merton model, developed by Robert C. Merton in 1974, is a widely used credit risk model. Analysts and investors utilize the Merton model to understand how capable a company is at meeting financial obligations, servicing its debt, and weighing ...

Tax shield A tax shield is the reduction in income taxes that results from taking an allowable deduction from taxable income. For example, because interest on debt is a tax-deductible expense, taking on debt creates a tax shield. Since a tax shield is a way ...

* Dividend policy ** **

Walter model Otto Moritz Walter Model (; 24 January 1891 – 21 April 1945) was a German field marshal during World War II. Although he was a hard-driving, aggressive panzer commander early in the war, Model became best known as a practitioner of defen ...

Gordon model In finance and investing, the dividend discount model (DDM) is a method of valuing the price of a company's stock based on the fact that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. In ...

** Lintner model ** Residuals theory **

Clientele effect The clientele effect is the idea that the set of investors attracted to a particular kind of security will affect the price A price is the (usually not negative) quantity of payment or compensation given by one party to another in retur ...

Dividend puzzle {{More footnotes, date=May 2021 The dividend puzzle is a concept in finance in which companies that pay dividends are rewarded by investors with higher valuations, even though, according to many economists, it should not matter to investors whether ...

** **

(valuation) ** **

Clean surplus accounting The clean surplus accounting method provides elements of a forecasting model that yields price as a function of earnings, expected returns, and change in book value. Ohlson, J. A. (1995)"Earnings, Book Values and Dividends in Equity Valuation" Con ...

Residual income valuation Residual income valuation (RIV; also, residual income ''model'' and residual income ''method'', RIM) is an approach to equity valuation that formally accounts for the cost of equity capital. Here, "residual" means in excess of any opportunity cos ...

** Economic value added /

Market value added Market value added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. If MVA is positive, the firm has added value. If it is negative, the firm has destroyed value. The amount of value add ...

** T-model **

Adjusted present value Adjusted present value (APV) is a valuation method introduced in 1974 by Stewart Myers. The idea is to value the project as if it were all equity financed ("unleveraged"), and to then add the present value of the tax shield of debt – and other ...

**uncertainty *** Penalized present value ***

Expected commercial value Expected commercial value (ECV), also known as estimated commercial value,Steven Bragg (2020)R&D funding decisions/ref> is a prospect-weighted value for a "project" with unclear conclusions; it is similar to expected net existing value (ENPV). In ...

*** Risk-adjusted net present value ***

Contingent claim valuation In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,Dale F. Gray, Robert C. Merton and Zvi Bodie. (2007). Contingent Claims Approach to Measuring and Managing Sovereign Credit Ri ...

***

Real options Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbe ...

***

Monte Carlo methods Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be determini ...

*Risk management ** ** Hedging irrelevance proposition **

Risk modeling Financial risk modeling is the use of formal mathematical and econometric techniques to measure, monitor and control the market risk, credit risk, and operational risk on a firm's balance sheet, on a bank's trading book, or re a fund manager's po ...

Risk-adjusted return on capital Risk-adjusted return on capital (RAROC) is a risk-based profitability measurement framework for analysing risk-adjusted financial performance and providing a consistent view of profitability across businesses. The concept was developed by Bankers ...

Asset pricing theory

Value (economics) In economics, economic value is a measure of the benefit provided by a goods, good or service (economics), service to an Agent (economics), economic agent. It is generally measured through units of currency, and the interpretation is therefore ...

Fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...

** Intrinsic value **

Market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

Expected value In probability theory, the expected value (also called expectation, expectancy, mathematical expectation, mean, average, or first moment) is a generalization of the weighted average. Informally, the expected value is the arithmetic mean of a l ...

** Opportunity cost **

Risk premium A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky return less t ...

** #Underlying theory below *

Equilibrium price In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the st ...

market efficiency The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...

economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the s ...

rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model A model is an informative representation of an object, person or system. The term originally denoted the plans of a building in late 16 ...

Risk factor (finance) In finance, risk factors are the building blocks of investing, that help explain the systematic returns in equity market, and the possibility of losing money in investments or business adventures.Roncalli, T. (2014). Strategy - Risk factor investing ...

General equilibrium theory In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an ov ...

Supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...

Competitive equilibrium Competitive equilibrium (also called: Walrasian equilibrium) is a concept of economic equilibrium introduced by Kenneth Arrow and Gérard Debreu in 1951 appropriate for the analysis of commodity markets with flexible prices and many traders, and s ...

Economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the s ...

Partial equilibrium In economics, partial equilibrium is a condition of economic equilibrium which analyzes only a single market, ''ceteris paribus'' (everything else remaining constant) except for the one change at a time being analyzed. In general equilibrium ana ...

Arbitrage-free In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...

price **

Rational pricing Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is use ...

*** § Arbitrage free pricing *** § Risk neutral valuation **

Contingent claim analysis In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,Dale F. Gray, Robert C. Merton and Zvi Bodie. (2007). Contingent Claims Approach to Measuring and Managing Sovereign Credit Ri ...

Brownian model of financial markets The Brownian motion models for financial markets are based on the work of Robert C. Merton and Paul A. Samuelson, as extensions to the one-period market models of Harold Markowitz and William F. Sharpe, and are concerned with defining the concept ...

Complete market In economics, a complete market (aka Arrow-Debreu market or complete system of markets) is a market with two conditions: # Negligible transaction costs and therefore also perfect information, # there is a price for every asset in every possible st ...

Incomplete markets In economics, incomplete markets are markets in which there does not exist an Arrow–Debreu security for every possible state of nature. In contrast with complete markets, this shortage of securities will likely restrict individuals from transfer ...

Utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosopher ...

Risk aversion In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...

Expected utility hypothesis The expected utility hypothesis is a popular concept in economics that serves as a reference guide for decisions when the payoff is uncertain. The theory recommends which option rational individuals should choose in a complex situation, based on the ...

Utility maximization problem Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stuart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my u ...

** Marginal utility **

Generalized expected utility Generalized expected utility is a decision-making metric based on any of a variety of theories that attempt to resolve some discrepancies between expected utility theory and empirical observations, concerning choice under risky (probabilistic) c ...

Economic efficiency In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: * Allocative or Pareto efficiency: any changes made to assist one person would harm another. * Productive efficiency: no addit ...

Efficient-market hypothesis The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...

efficient frontier In modern portfolio theory, the efficient frontier (or portfolio frontier) is an investment portfolio which occupies the "efficient" parts of the risk–return spectrum. Formally, it is the set of portfolios which satisfy the condition that no ...

Production–possibility frontier A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be ...

Allocative efficiency Allocative efficiency is a state of the economy in which production is aligned with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the mar ...

Pareto efficiency Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engine ...

Productive efficiency In microeconomic theory, productive efficiency (or production efficiency) is a situation in which the economy or an economic system (e.g., bank, hospital, industry, country) operating within the constraints of current industrial technology canno ...

State prices In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or ...

Arrow–Debreu model In mathematical economics, the Arrow–Debreu model suggests that under certain economic assumptions (convex preferences, perfect competition, and demand independence) there must be a set of prices such that aggregate supplies will equal aggreg ...

** Stochastic discount factor ** Pricing kernel **application: *** *** *

Fundamental theorem of asset pricing The fundamental theorems of asset pricing (also: of arbitrage, of finance), in both financial economics and mathematical finance, provide necessary and sufficient conditions for a market to be arbitrage-free, and for a market to be complete. An ...

No free lunch with vanishing risk No free lunch with vanishing risk (NFLVR) is a no- arbitrage argument. We have ''free lunch with vanishing risk'' if by utilizing a sequence of time self-financing portfolios, which converge to an arbitrage strategy, we can approximate a self-fin ...

Self-financing portfolio In financial mathematics, a self-financing portfolio is a portfolio having the feature that, if there is no exogenous infusion or withdrawal of money, the purchase of a new asset must be financed by the sale of an old one. Mathematical definitio ...

** Stochastic dominance *** Marginal conditional stochastic dominance *

Martingale pricing Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options ...

** Random walk hypothesis **

Risk-neutral measure In mathematical finance, a risk-neutral measure (also called an equilibrium measure, or '' equivalent martingale measure'') is a probability measure such that each share price is exactly equal to the discounted expectation of the share price u ...

Martingale (probability theory) In probability theory, a martingale is a sequence of random variables (i.e., a stochastic process) for which, at a particular time, the conditional expectation of the next value in the sequence is equal to the present value, regardless of all ...

***

Sigma-martingale In mathematics and information theory of probability, a sigma-martingale is a semimartingale with an integral representation. Sigma-martingales were introduced by C.S. Chou and M. Emery in 1977 and 1978. In financial mathematics, sigma-martingale ...

***

Semimartingale In probability theory, a real valued stochastic process ''X'' is called a semimartingale if it can be decomposed as the sum of a local martingale and a càdlàg adapted finite-variation process. Semimartingales are "good integrators", forming the ...

Quantum finance Quantum finance is an interdisciplinary research field, applying theories and methods developed by quantum physicists and economists in order to solve problems in finance. It is a branch of econophysics. Background on instrument pricing Financ ...

Asset pricing models

*Equilibrium pricing **Equities; foreign exchange and commodities *** Capital asset pricing model *** Consumption-based CAPM ***

Intertemporal CAPM Within mathematical finance, the Intertemporal Capital Asset Pricing Model, or ICAPM, is an alternative to the CAPM provided by Robert Merton. It is a linear factor model with wealth as state variable that forecast changes in the distribution of ...

***

Single-index model The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock. The model has been developed by William Sharpe in 1963 and is commonly used in the finance industry. Mathematically the SIM is exp ...

***

Multiple factor models In mathematical finance, multiple factor models are asset pricing models that can be used to estimate the discount rate for the valuation of financial assets. They are generally extensions of the single-factor capital asset pricing model (CAPM). M ...

**** Fama–French three-factor model ****

Carhart four-factor model In portfolio management, the Carhart four-factor model is an extra factor addition in the Fama–French three-factor model, proposed by Mark Carhart. The Fama-French model, developed in the 1990, argued most stock market returns are explained ...

***

**Bonds; other interest rate instruments *** Vasicek *** Rendleman–Bartter *** Cox–Ingersoll–Ross *Risk neutral pricing **Equities; foreign exchange and commodities; interest rates *** Black–Scholes ***

Black Black is a color which results from the absence or complete absorption of visible light. It is an achromatic color, without hue, like white and grey. It is often used symbolically or figuratively to represent darkness. Black and white ...

*** Garman–Kohlhagen ***

Heston Heston is a suburban area and part of the Hounslow district in the London Borough of Hounslow. The residential settlement covers a slightly smaller area than its predecessor farming village, 10.8 miles (17.4 km) west south-west of Charing ...

*** CEV ***

SABR The Society for American Baseball Research (SABR) is a membership organization dedicated to fostering the research and dissemination of the history and record of baseball primarily through the use of statistics. Established in Cooperstown, New ...

**Bonds; other interest rate instruments *** Ho–Lee *** Hull–White *** Black–Derman–Toy *** Black–Karasinski *** Kalotay–Williams–Fabozzi *** Longstaff–Schwartz *** Chen *** Rendleman–Bartter *** Heath–Jarrow–Morton **** Cheyette *** Brace–Gatarek–Musiela ****

LIBOR market model The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing interest rate derivatives, especially exotic deriva ...

Mathematics and finance

Time value of money

* Internal rate of return *

Financial mathematics

Mathematical tools

Probability Probability is the branch of mathematics concerning numerical descriptions of how likely an Event (probability theory), event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and ...

Probability distribution In probability theory and statistics, a probability distribution is the mathematical function that gives the probabilities of occurrence of different possible outcomes for an experiment. It is a mathematical description of a random phenomenon i ...

*** Binomial distribution ***

Log-normal distribution In probability theory, a log-normal (or lognormal) distribution is a continuous probability distribution of a random variable whose logarithm is normally distributed. Thus, if the random variable is log-normally distributed, then has a norma ...

***

Poisson distribution In probability theory and statistics, the Poisson distribution is a discrete probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known co ...

Stochastic calculus Stochastic calculus is a branch of mathematics that operates on stochastic processes. It allows a consistent theory of integration to be defined for integrals of stochastic processes with respect to stochastic processes. This field was created an ...

Brownian motion Brownian motion, or pedesis (from grc, πήδησις "leaping"), is the random motion of particles suspended in a medium (a liquid or a gas). This pattern of motion typically consists of random fluctuations in a particle's position insi ...

***

Geometric Brownian motion A geometric Brownian motion (GBM) (also known as exponential Brownian motion) is a continuous-time stochastic process in which the logarithm of the randomly varying quantity follows a Brownian motion (also called a Wiener process) with drift. It i ...

Cameron–Martin theorem In mathematics, the Cameron–Martin theorem or Cameron–Martin formula (named after Robert Horton Cameron and W. T. Martin) is a theorem of measure theory that describes how abstract Wiener measure changes under translation by certain element ...

** Feynman–Kac formula **

Girsanov's theorem In probability theory, the Girsanov theorem tells how stochastic processes change under changes in measure. The theorem is especially important in the theory of financial mathematics as it tells how to convert from the physical measure which des ...

Itô's lemma In mathematics, Itô's lemma or Itô's formula (also called the Itô-Doeblin formula, especially in French literature) is an identity used in Itô calculus to find the differential of a time-dependent function of a stochastic process. It serves a ...

Martingale representation theorem In probability theory, the martingale representation theorem states that a random variable that is measurable with respect to the filtration generated by a Brownian motion can be written in terms of an Itô integral with respect to this Brownian m ...

** Radon–Nikodym derivative **

Stochastic differential equations A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process, resulting in a solution which is also a stochastic process. SDEs are used to model various phenomena such as stock pr ...

Stochastic process In probability theory and related fields, a stochastic () or random process is a mathematical object usually defined as a family of random variables. Stochastic processes are widely used as mathematical models of systems and phenomena that appea ...

***

Jump process A jump process is a type of stochastic process that has discrete movements, called jumps, with random arrival times, rather than continuous movement, typically modelled as a simple or compound Poisson process. In finance, various stochastic mod ...

***

Lévy process In probability theory, a Lévy process, named after the French mathematician Paul Lévy, is a stochastic process with independent, stationary increments: it represents the motion of a point whose successive displacements are random, in which disp ...

***

Markov process A Markov chain or Markov process is a stochastic model describing a sequence of possible events in which the probability of each event depends only on the state attained in the previous event. Informally, this may be thought of as, "What happe ...

***

Ornstein–Uhlenbeck process In mathematics, the Ornstein–Uhlenbeck process is a stochastic process with applications in financial mathematics and the physical sciences. Its original application in physics was as a model for the velocity of a massive Brownian particle ...

***

Wiener process In mathematics, the Wiener process is a real-valued continuous-time stochastic process named in honor of American mathematician Norbert Wiener for his investigations on the mathematical properties of the one-dimensional Brownian motion. It is o ...

Monte Carlo method Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be determi ...

s **

Low-discrepancy sequence In mathematics, a low-discrepancy sequence is a sequence with the property that for all values of ''N'', its subsequence ''x''1, ..., ''x'N'' has a low discrepancy. Roughly speaking, the discrepancy of a sequence is low if the proportion of poi ...

Monte Carlo integration In mathematics, Monte Carlo integration is a technique for numerical integration using random numbers. It is a particular Monte Carlo method that numerically computes a definite integral. While other algorithms usually evaluate the integrand a ...

Quasi-Monte Carlo method In numerical analysis, the quasi-Monte Carlo method is a method for numerical integration and solving some other problems using low-discrepancy sequences (also called quasi-random sequences or sub-random sequences). This is in contrast to the regu ...

Random number generation Random number generation is a process by which, often by means of a random number generator (RNG), a sequence of numbers or symbols that cannot be reasonably predicted better than by random chance is generated. This means that the particular out ...

Partial differential equation In mathematics, a partial differential equation (PDE) is an equation which imposes relations between the various partial derivatives of a Multivariable calculus, multivariable function. The function is often thought of as an "unknown" to be sol ...

s **

Finite difference method In numerical analysis, finite-difference methods (FDM) are a class of numerical techniques for solving differential equations by approximating derivatives with finite differences. Both the spatial domain and time interval (if applicable) are ...

Heat equation In mathematics and physics, the heat equation is a certain partial differential equation. Solutions of the heat equation are sometimes known as caloric functions. The theory of the heat equation was first developed by Joseph Fourier in 1822 for t ...

Numerical partial differential equations Numerical methods for partial differential equations is the branch of numerical analysis that studies the numerical solution of partial differential equations (PDEs). In principle, specialized methods for hyperbolic, parabolic or elliptic parti ...

***

Crank–Nicolson method In numerical analysis, the Crank–Nicolson method is a finite difference method used for numerically solving the heat equation and similar partial differential equations. It is a second-order method in time. It is implicit in time, can be wri ...

*** Finite difference method: Numerical analysis * Volatility ** ARCH model ** GARCH model **

Stochastic volatility In statistics, stochastic volatility models are those in which the variance of a stochastic process is itself randomly distributed. They are used in the field of mathematical finance to evaluate derivative securities, such as options. The name d ...

Stochastic volatility jump In mathematical finance, the stochastic volatility jump (SVJ) model is suggested by Bates. This model fits the observed volatility surface, implied volatility surface well. The model is a Heston model, Heston process for stochastic volatility with ...

Derivatives pricing

*Underlying logic (see also #Economics and finance above) **

***

pricing **

Forward contract In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on at the time of conclusion of the contract, making it a type of deriva ...

** Forward contract pricing *

** Futures contract pricing * Options (incl.

and ESOs) **

Valuation of options In finance, a price (premium) is paid or received for purchasing or selling options. This article discusses the calculation of this premium in general. For further detail, see: for discussion of the mathematics; Financial engineering for the impl ...

** Black–Scholes formula *** Approximations for American options **** Barone-Adesi and Whaley **** Bjerksund and Stensland ****

Black's approximation In finance, Black's approximation is an approximate method for computing the value of an American call option on a stock paying a single dividend. It was described by Fischer Black in 1975.F. Black: Fact and fantasy in the use of options, FAJ, July ...

****

Optimal stopping In mathematics, the theory of optimal stopping or early stopping : (For French translation, secover storyin the July issue of ''Pour la Science'' (2009).) is concerned with the problem of choosing a time to take a particular action, in order to ...

**** Roll–Geske–Whaley **

Black model The Black model (sometimes known as the Black-76 model) is a variant of the Black–Scholes option pricing model. Its primary applications are for pricing options on future contracts, bond options, interest rate cap and floors, and swaptions. It ...

Binomial options model In finance, the binomial options pricing model (BOPM) provides a generalizable Numerical analysis, numerical method for the valuation of Option (finance), options. Essentially, the model uses a "discrete-time" (Lattice model (finance), lattice base ...

Finite difference methods for option pricing Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. In general, finite differ ...

** Garman–Kohlhagen model ** The Greeks ** Lattice model (finance) **

Margrabe's formula In mathematical finance, Margrabe's formula is an option pricing formula applicable to an option to exchange one risky asset for another risky asset at maturity. It was derived by William Margrabe (PhD Chicago) in 1978. Margrabe's paper has been ...

Monte Carlo methods for option pricing In mathematical finance, a Monte Carlo option model uses Monte Carlo methodsAlthough the term 'Monte Carlo method' was coined by Stanislaw Ulam in the 1940s, some trace such methods to the 18th century French naturalist Buffon, and a question he as ...

***

Monte Carlo methods in finance Monte Carlo methods are used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the dis ...

*** Quasi-Monte Carlo methods in finance *** Least Square Monte Carlo for American options **

Trinomial tree The trinomial tree is a lattice-based computational model used in financial mathematics to price options. It was developed by Phelim Boyle in 1986. It is an extension of the binomial options pricing model, and is conceptually similar. It can also ...

** Volatility ***

Implied volatility In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Scholes), will return a theoretical value equ ...

*** Historical volatility ***

Volatility smile Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter (implied volatility) that is needed to be modified for the Black–Scholes formula to fit market prices. In particular for a given expi ...

Volatility surface Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter (implied volatility) that is needed to be modified for the Black–Scholes formula to fit market prices. In particular for a given expi ...

) ***

****

Constant elasticity of variance model In mathematical finance, the CEV or constant elasticity of variance model is a stochastic volatility model that attempts to capture stochastic volatility and the leverage effect. The model is widely used by practitioners in the financial industry, ...

****

Heston model In finance, the Heston model, named after Steven L. Heston, is a mathematical model that describes the evolution of the volatility of an underlying asset. It is a stochastic volatility model: such a model assumes that the volatility of the asset ...

****

SABR volatility model In mathematical finance, the SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for "stochastic alpha, beta, rho", referring to the parameters of the model. The SABR ...

***

Local volatility A local volatility model, in mathematical finance and financial engineering, is an option pricing model that treats volatility as a function of both the current asset level S_t and of time t . As such, it is a generalisation of the Black–Sch ...

****

Implied binomial tree In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is r ...

****

Implied trinomial tree In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is r ...

****

Edgeworth binomial tree In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is ...

**** Johnson binomial tree * Swaps ** Swap valuation *** *** *** *** ****

Multi-curve framework In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations wi ...

*** *

Interest rate derivative In finance, an interest rate derivative (IRD) is a derivative whose payments are determined through calculation techniques where the underlying benchmark product is an interest rate, or set of different interest rates. There are a multitude of diff ...

s (

bond option In finance, a bond option is an option to buy or sell a bond at a certain price on or before the option expiry date. These instruments are typically traded OTC. *A European bond option is an option to buy or sell a bond at a certain date in futu ...

swaption A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap. Although options can be traded on a variety of swaps, the term "swaption" typically refers to options on interest rate swaps. Types of ...

s, caps and floors, and others) **

*** caps and floors *** swaptions *** Bond options **

s (generally applied via lattice based- and specialized simulation-models, although "Black like" formulae exist in some cases.) *** Rendleman–Bartter model *** Vasicek model ***

Ho–Lee model In financial mathematics, the Ho–Lee model is a short-rate model widely used in the pricing of bond options, swaptions and other interest rate derivatives, and in modeling future interest rates. It was developed in 1986 by Thomas Ho and Sang B ...

***

*** Black–Karasinski model ***

***

Kalotay–Williams–Fabozzi model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a sho ...

***

Longstaff–Schwartz model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a s ...

***

Forward rate The forward rate is the future yield on a bond. It is calculated using the yield curve. For example, the yield on a three-month Treasury bill six months from now is a ''forward rate''.. Forward rate calculation To extract the forward rate, we ne ...

Forward curve The forward curve is a function graph in finance that defines the prices at which a contract for future delivery or payment can be concluded today. For example, a futures contract forward curve is prices being plotted as a function of the amount o ...

-based models (Application as per short-rate models) ***

(also called: Brace–Gatarek–Musiela Model, BGM) *** Heath–Jarrow–Morton Model (HJM) *** Cheyette model *Valuation adjustments **

Credit valuation adjustment Credit valuation adjustments (CVAs) are accounting adjustments made to reserve a portion of profits on uncollateralized financial derivatives. They are charged by a bank to a risky (capable of default) counterparty to compensate the bank for taking ...

XVA An X-Value Adjustment (XVA, xVA) is an umbrella term referring to a number of different “valuation adjustments” that banks must make when assessing the value of derivative contracts that they have entered into. The purpose of these is twofold: ...

modelling **

Bootstrapping (finance) In finance, bootstrapping is a method for constructing a ( zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g. bonds and swaps. A ''bootstrapped curve'', correspondingly, is one where the prices of the ...

** ** **

Nelson-Siegel Fixed-income Performance attribution, attribution is the process of measuring returns generated by various sources of risk in a fixed income Portfolio (finance), portfolio, particularly when multiple sources of return are active at the same time. ...

Portfolio mathematics

* #Mathematical techniques below * #Quantitative investing below * *

Portfolio optimization Portfolio optimization is the process of selecting the best portfolio (asset distribution), out of the set of all portfolios being considered, according to some objective. The objective typically maximizes factors such as expected return, and minimi ...

** § Optimization methods ** § Mathematical tools * Merton's portfolio problem *

Kelly criterion In probability theory, the Kelly criterion (or Kelly strategy or Kelly bet), is a formula that determines the optimal theoretical size for a bet. It is valid when the expected returns are known. The Kelly bet size is found by maximizing the expec ...

Roy's safety-first criterion Roy's safety-first criterion is a risk management technique, devised by A. D. Roy, that allows an investor to select one portfolio rather than another based on the criterion that the probability of the portfolio's return falling below a minimum d ...

*Specific applications: **

Black–Litterman model In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors ha ...

** Universal portfolio algorithm **

Markowitz model In finance, the Markowitz model ─ put forward by Harry Markowitz in 1952 ─ is a portfolio optimization model; it assists in the selection of the most efficient portfolio by analyzing various possible portfolios of the given securities. Here ...

** Treynor–Black model

Financial markets

Market and instruments

Capital market A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers t ...

s *

Financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets ...

Primary market :''"Primary market" may also refer to a market in art valuation.'' The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the issuer, with the issuer being paid the proce ...

* Aftermarket *

Bull market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...

Bear market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...

* Bear market rally *

Market maker A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the ''bid–ask spread'', or ''turn.'' The benefit to the firm is that it ...

Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity inde ...

Nasdaq The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...

List of stock exchanges This is a list of major stock exchanges. Those futures exchanges that also offer trading in securities besides trading in futures contracts are listed both here and in the list of futures exchanges. There are sixteen stock exchanges in the world ...

List of stock market indices Commonly used stock market indices include: Global Large companies not ordered by any nation or type of business: * MSCI World (i.e. MSCI ACWI Index) * S&P Global 100 * S&P Global 1200 * The Global Dow – Global version of the Dow Jones In ...

List of corporations by market capitalization The following is a list of publicly traded companies having the greatest market capitalization. In media they are described as being the most valuable companies, a reference to their market value. Market capitalization is calculated from the shar ...

Value Line Composite Index The Value Line Composite Index was launched on the Kansas City Board of Trade (KCBT) in 1982, pioneering the first market index to trade futures market, ushering in a ground-breaking approach to risk management. KCBOT dropped the Value Line indi ...

Equity market

Stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

Stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...

Common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...

Preferred stock Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt ins ...

Treasury stock A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). Stock repurchases are used as a tax efficient ...

Equity investment A stock trader or equity trader or share trader, also called a stock investor, is a person or company involved in trading equity securities and attempting to profit from the purchase and sale of those securities. Stock traders may be an invest ...

Index investing An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, avai ...

* Private Equity * Financial reports and statements *

* Stock split

Equity valuation

* Dow theory * Elliott wave principle * Economic value added * Fibonacci retracement *

* Growth stock ** PEG ratio ** PVGO *

* Leveraged buyout * Takeover * Corporate raid * PE ratio * Market capitalization * Income per share *

* Technical analysis * Chart patterns * V-trend * Paper valuation

Investment theory

*Dead cat bounce *

*Market microstructure *Stock market crash *

*January effect *Mark Twain effect *Quantitative behavioral finance *Quantitative analysis (finance) *Statistical arbitrage

Bond market

* Bond (finance) * Zero-coupon bond * Junk bonds * Convertible bond * Accrual bond * Municipal bond * Sovereign bond * Bond valuation ** Yield to maturity ** Bond duration ** Bond convexity * Fixed income

Money market

* Repurchase agreement * International Money Market *

* Exchange rate * ISO 4217, International currency codes * Table of historical exchange rates

Commodity market

* Commodity ** Asset ** Commodity Futures Trading Commission ** Trade, Commodity trade ** Drawdown (economics), Drawdowns ** Forfaiting **

** Futures contract ** Fungibility **

** Hedge (finance), Hedging ** Jesse Lauriston Livermore ** List of traded commodities ** Ownership equity ** Position trader (futures), Position trader ** Risk (Futures) ** Seasonal traders ** Seasonal spread trading ** slippage (finance), Slippage **

** Technical analysis *** Breakout (technical analysis), Breakout ***

*** Bottom (technical analysis) ***

*** MACD *** moving average (finance), Moving average *** Open interest (futures), Open Interest *** Parabolic SAR *** Point and figure charts *** Resistance (technical analysis), Resistance *** Relative Strength Index, RSI *** Stochastic oscillator *** Stop loss order, Stop loss *** Support (technical analysis), Support *** Top (technical analysis) **

** Market trend, Trend

Derivatives market

*Derivative (finance) *(see also List of finance topics#Mathematics and finance, Financial mathematics topics; Financial mathematics#Derivatives pricing, Derivatives pricing) * Underlying instrument

Forward markets and contracts

Futures markets and contracts

* Backwardation * Contango * Futures contract ** Financial future ***Currency future ***Interest rate future ***Single-stock futures ***Stock market index future * Futures exchange

Option markets and contracts

* Option (finance), Options ** Stock option *** Box spread (options), Box spread *** Call option *** Put option *** Strike price *** Put–call parity *** The Greeks *** Black–Scholes formula ***

***

*** Option time value ***Moneyness ****At-the-money ****In-the-money ****Out-of-the-money *** Straddle *** Option style **** Vanilla option **** Exotic option **** Binary option **** European option ***** Interest rate floor ***** Interest rate cap **** Bermudan option **** American option **** Quanto option **** Asian option ***

** Warrant (finance), Warrants ** Foreign exchange option ** Interest rate options ** Bond options **

s ** Futures contract#Options on futures, Options on futures

Swap markets and contracts

* Swap (finance) ** Interest rate swap ** Basis swap ** Asset swap ** Forex swap ** Stock swap ** Equity swap ** Currency swap ** Variance swap

Derivative markets by underlyings

= Equity derivatives

= *Contract for difference (CFD) *Exchange-traded fund (ETF) **

**Inverse exchange-traded fund *Equity options *Equity swap *Real estate investment trust (REIT) *Warrant (finance), Warrants **Covered warrant

= Interest rate derivatives

= * LIBOR * Forward rate agreement * Interest rate swap * Interest rate cap * Exotic interest rate option * Bond option * Interest rate future * Money market instruments * Range accrual Swaps/Notes/Bonds * In-arrears Swap * Constant maturity swap (CMS) or Constant Treasury Swap (CTS) derivatives (swaps, caps, floors) * Interest rate Swaption * Bermudan swaptions * Cross currency swaptions * Power Reverse Dual Currency note (PRDC or Turbo) * Target redemption note (TARN) * CMS steepener * Snowball * Inverse floater * Strips of Collateralized mortgage obligation * Ratchet caps and floors

= Credit derivatives

= * Credit default swap * Collateralized debt obligation * Credit default option * Total return swap * Securitization ** Strip financing

= Foreign exchange derivative

= *Basis swap *Currency future *Currency swap *Binary option#Foreign exchange, Foreign exchange binary option *Foreign exchange market#Forward, Foreign exchange forward *Foreign exchange option *Forward exchange rate *Foreign exchange swap *Foreign exchange hedge *Non-deliverable forward *Power reverse dual-currency note

Financial regulation

* Corporate governance * Financial regulation ** Bank regulation *** Banking license * License

Designations and accreditation

* Certified Financial Planner * Chartered Financial Analyst ** CFA Institute * Chartered Alternative Investment Analyst * Professional risk manager * Chartered Financial Consultant * Canadian Securities Institute * Independent financial adviser ** Chartered Insurance Institute * Financial risk manager * Chartered Market Technician * Certified Financial Technician

Litigation

* Liabilities Subject to Compromise

Fraud

* Forex scam * Insider trading * Legal origins theory * Petition mill * Ponzi scheme

Industry bodies

* International Swaps and Derivatives Association * National Association of Securities Dealers

Regulatory bodies

International

* Bank for International Settlements * International Organization of Securities Commissions * Security Commission * Basel Committee on Banking Supervision * Basel Accords – Basel I, Basel II, Basel III * International Association of Insurance Supervisors * International Accounting Standards Board

European Union

* European Securities Committee (European Union, EU) * Committee of European Securities Regulators (European Union, EU)

Regulatory bodies by country

=United Kingdom

= * Financial Conduct Authority * Prudential Regulation Authority (United Kingdom)

=United States

= * Commodity Futures Trading Commission *

* Federal Trade Commission * Municipal Securities Rulemaking Board * Office of the Comptroller of the Currency * U.S. Securities and Exchange Commission, Securities and Exchange Commission

United States legislation

* Glass–Steagall Act (US) * Gramm–Leach–Bliley Act (US) * Sarbanes–Oxley Act (US) * Securities Act of 1933 (US) * Securities Exchange Act of 1934 (US) * Investment Advisers Act of 1940 (US) * USA PATRIOT Act

Actuarial topics

* Actuarial topics

Valuation

Underlying theory

*Valuation (finance) and specifically Valuation (finance)#Valuation overview, § Valuation overview *"

" * *Valuation risk *Real versus nominal value (economics) *Real prices and ideal prices *

* Intrinsic value *

*Value in use *Fairness opinion *Asset pricing (see also #Asset pricing theory above) **

***

price *** ***

Context

* (Corporate bond, Corporate) Bond (finance), Bonds ** Bond valuation ** ** * Stock, Equity valuation ** #Equity valuation above **

** ** **

and ** ''

'' *Real estate valuation **Real estate appraisal **Real estate economics

Considerations

*Bonds **Bond (finance)#Others, covenants and indentures **secured loan, secured / unsecured debt **senior debt, senior / subordinated debt **embedded options *Equity ** Minimum acceptable rate of return ** Margin of safety (financial) ** Enterprise value ** Sum-of-the-parts analysis ***Conglomerate discount ** Minority discount ** Control premium ** Accretion/dilution analysis ** Certainty equivalent ** Haircut (finance) ** Paper valuation

Discounted cash flow valuation

* Bond valuation **Modeling *** *** *** ***embedded options: ****Pull to par **** **Results ***Clean price ***Dirty price ***Yield to maturity ***Coupon yield ***Current yield ***Bond duration, Duration ***Bond convexity, Convexity ***embedded options: ****Option-adjusted spread ****effective duration ****effective convexity **Cash flows ***Principal (finance) ***Coupon (bond) ***Fixed rate bond ***Floating rate note ***Zero-coupon bond ***Accrual bond ***sinking fund provisions *Real estate valuation ** **Income approach ***Net Operating Income *** ***German income approach * Equity valuation **Results ***

***

*** Equivalent Annual Cost *** Payback period *** Discounted payback period *** Internal rate of return *** Modified Internal Rate of Return ***

*** Profitability index **Specific models and approaches *** Dividend discount model *** Gordon growth model ***

/ Economic value added ***

*** First Chicago Method *** rNPV *** Fed model *** Chepakovich valuation model *** Sum of perpetuities method *** Benjamin Graham formula *** LBO valuation model *** Goldman Sachs asset management factor model ** Cash flows *** Cash flow forecasting *** EBIDTA *** NOPAT *** Free cash flow **** Free cash flow to firm **** Free cash flow to equity *** Dividends ***

Relative valuation

*Bonds ** ** Yield spread *** I-spread *** Option-adjusted spread *** Z-spread *** Asset swap spread ** Credit spread (bond) ***Bond credit rating ***Altman Z-score ***Ohlson O-score ***Book value ***Debt-to-equity ratio ***Debt-to-capital ratio ***Current ratio ***Quick ratio ***Debt ratio *Real estate ** Capitalization rate ** Gross rent multiplier ** Sales comparison approach *** ** Cash on cash return *Equity ** Financial ratio ** Market-based valuation ** Comparable company analysis **

*** Yield gap **

*** DuPont analysis ** PE ratio ***PEG ratio ***Cyclically adjusted price-to-earnings ratio ***PVGO ** P/B ratio ** Valuation using multiples#Equity price based multiples, Price to cash based earnings ** Stock valuation#Price to Sales (P/S), Price to Sales ** EV/EBITDA ** Stock valuation#EV to Sales, EV/Sales ** Stock valuation#Market criteria (potential price), Stock image ** Valuation using the Market Penetration Model ** Graham number ** Tobin's q

Contingent claim valuation

*Valuation techniques **general ***

*** ***#Derivatives pricing above **as typically employed ***Real options valuation#Valuation, Real options valuation *** *** *** ***

*Applications **Corporate investments and Corporate finance#Investment and project valuation, projects ***

*** ***

*** ***structured finance investments (funding dependent) ***special purpose entities (funding dependent) **

assets and liabilities ***Warrant (finance), warrants and other convertible security, convertible securities ***securities with embedded options such as callable bonds ***employee stock options

Other approaches

*"Fundamentals"-based (relying on accounting information) ** T-model **

**Valuation (finance)#Net asset value method, Net asset value method **Valuation (finance)#Net asset value method, Excess earnings method **Mergers and acquisitions#Business valuation, Historical earnings valuation **Mergers and acquisitions#Business valuation, Future maintainable earnings valuation **Graham number

Financial modeling

** Cash flow forecasting **

** Operating cash flow ** EBIDTA *** ** NOPAT ** Free cash flow *** Free cash flow to firm *** Free cash flow to equity ** Dividends ** Cash is king ** Mid-year adjustment ** Owner earnings * Required rate of return, Required return (i.e. discount rate) ** **

**Cost of equity **Cost of debt ** Capital asset pricing model *** ***

***Pure play#Pure play method, Pure play method **

** ***Total Beta ** T-model ***T-model#The cash-flow T-model, cash-flow T-model * Terminal value (finance), Terminal value ** **Forecast period (finance) **long term growth rate *** *** *Forecasted financial statements **Financial forecast ** ** **Revenue ***Revenue model *** *** ***Net sales **Costs ***Profit margin ****Gross margin ****Net margin ****Cost of goods sold ***Operating expenses ****Operating ratio ***Cost driver ***Fixed cost ***Variable cost ***Overhead cost ***Value chain ***activity based costing ***Financial analysis#Method, common-size analysis ***Profit model **Capital ***

***Financial analysis#Method, common-size analysis ***Equity (finance) ****Equity (finance)#Shareholders' equity, Shareholders' equity ****Book value ****Retained earnings ***

****Long term asset / Fixed asset *****Fixed-asset turnover ****Long-term liabilities *****Debt-to-equity ratio *****Debt-to-capital ratio ***

****Current asset ****Current liability ****Inventory turnover / Days in inventory, Cost of goods sold ****Debtor days, Debtor & Creditor days ****Days sales outstanding / Days payable outstanding

Portfolio theory

General concepts

*Portfolio (finance) *Portfolio manager *Investment management ** Active management **

(Buy and hold) ***

**Core & Satellite **Smart beta **Expense ratio **Investment style *** Value investing *** Contrarian investing *** Growth investing **** CAN SLIM ***

*** Magic formula investing *** Momentum investing *** Quality investing *** Style investing *** Factor investing **Investment strategy ***Benchmark-driven investment strategy ***Liability-driven investment strategy ** *Investor profile *Rate of return on a portfolio / Investment performance *Risk return ratio **Risk–return spectrum *

*Diversification (finance) *Asset classes **Exter's Pyramid *

**Tactical asset allocation ***Global tactical asset allocation **Asset allocation#Strategic asset allocation, Strategic asset allocation **Dynamic asset allocation *Sector rotation *Correlation & covariance **Covariance matrix **Covariance matrix#Correlation matrix, Correlation matrix *

*Leverage (finance) *Utility function *Intertemporal portfolio choice *Portfolio insurance **Constant proportion portfolio insurance * *Quantitative investment / Quantitative fund (see #Quantitative investing, below) *

Modern portfolio theory

**Risk return ratio **Risk–return spectrum **

***

*** Random walk hypothesis **

** Merton's portfolio problem **

*Theory and results (derivation of the CAPM) **

**Systematic risk ***

**Idiosyncratic risk / Specific risk **Mean-variance analysis (Two-moment decision model) **Efficient frontier (Mean variance efficiency) **Feasible region, Feasible set **

***Separation property (finance) **Tangent portfolio **Market portfolio **Beta (finance) ***Fama–MacBeth regression ***

*** **Capital allocation line **Capital market line **Security characteristic line ** Capital asset pricing model ***

**Security market line **Roll's critique *Related measures **Alpha (finance) **Sharpe ratio **Treynor ratio **Jensen's alpha *Optimization models **

** Treynor–Black model *Asset pricing#General Equilibrium Asset Pricing, Equilibrium pricing models (CAPM and extensions) ** Capital asset pricing model (CAPM) **Consumption-based capital asset pricing model (CCAPM) **

(ICAPM) **

(see

) *** Fama–French three-factor model ***

***

(APT)

Post-modern portfolio theory

*Approaches **Behavioral portfolio theory **Stochastic portfolio theory **Maslowian portfolio theory **Dedicated portfolio theory (fixed income specific) **Risk parity **Tail risk parity *Optimization considerations **

**Bayesian efficiency **Multiple-criteria decision analysis **Multi-objective optimization ** Stochastic dominance ***Stochastic dominance#Second-order, Second-order Stochastic dominance *** Marginal conditional stochastic dominance **Downside risk **Post-modern portfolio theory#Volatility skewness, Volatility skewness **Variance#Semivariance, Semivariance **

(ES; also called conditional value at risk (CVaR), average value at risk (AVaR), expected tail loss (ETL)) **Tail value at risk **Statistical dispersion **Discounted maximum loss **Indifference price *Measures **Dual-beta ***Downside beta ***Upside beta **Upside potential ratio **Upside risk **Downside risk **Sortino ratio **Omega ratio **Bias ratio **Information ratio ***Active return ***Active risk **

*Optimization models **

** Universal portfolio algorithm

Performance measurement

*Performance attribution **Market timing **Stock selection criterion, Stock selection *Fixed-income attribution *Performance attribution#Validity of benchmarks, Benchmark *Lipper average *Returns-based style analysis *Rate of return on a portfolio *Holding period return *Tracking error *Alpha (finance) *Beta (finance) *Simple Dietz method *Modified Dietz method *Modigliani risk-adjusted performance *Upside potential ratio *Maximum Downside Exposure (MDE), Maximum Downside Exposure *Maximum drawdown **Sterling ratio *Sharpe ratio *Treynor ratio *Jensen's alpha *Bias ratio *V2 ratio *Calmar ratio (hedge fund specific)

Mathematical techniques

* *Quadratic programming **Critical line method *Nonlinear programming *Mixed integer programming *Stochastic programming (Stochastic programming#Multistage portfolio optimization, § Multistage portfolio optimization) *Copula (probability theory) (Copula (probability theory)#Quantitative finance, § Quantitative finance) *Principal component analysis (Principal component analysis#Quantitative finance, § Quantitative finance) *Deterministic global optimization *Genetic algorithm () *Machine learning (Machine learning#Applications, § Applications) *Artificial neural network *

Quantitative investing

*Quantitative investing *Quantitative fund * and Quantitative analysis (finance)#Algorithmic trading quantitative analyst, § Algorithmic trading quantitative analyst *Trading: **Automated trading **High-frequency trading **Algorithmic trading **Program trading **Systematic trading *** **Trading strategy **Mirror trading **Copy trading **Social trading **VWAP **TWAP **Electronic trading platform **Statistical arbitrage *Portfolio optimization: ** ** **

** Universal portfolio algorithm **

** Treynor–Black model **Portfolio optimization#Improving portfolio optimization, other models **Factor investing ***low-volatility investing ***value investing ***momentum investing **Alpha generation platform **

*Risks: **Best execution **Implementation shortfall **Trading curb **

**Market depth **Slippage (finance) **Transaction costs *Discussion: ** ** ** ** **2010 flash crash ** ** *Leading companies: **Prediction Company **Renaissance Technologies **D. E. Shaw & Co **AQR Capital **Barclays Investment Bank **Cantab Capital Partners **Robeco **Jane Street Capital

Financial software tools

* Straight Through Processing Software * Technical Analysis Software (Finance), Technical Analysis Software * Fundamental Analysis Software * Algorithmic trading * Electronic trading platform * List of numerical-analysis software * Comparison of numerical-analysis software

Financial modeling applications

Corporate Finance

/ stock valuation - especially via Valuation using discounted cash flows, discounted cash flow, but including Valuation (finance)#Valuation overview, other valuation approaches *Scenario planning and Management accounting#Role within a corporation, management decision making ("what is"; "what if"; "what has to be done" §39 "Corporate Planning Models". See also, §294 "Simulation Model".) *

, including cost of capital (i.e. Weighted average cost of capital, WACC) calculations *Financial statement analysis / Financial ratio, ratio analysis (including of Operating lease, operating- and finance leases, and Research and development, R&D) *Revenue related: Revenue management#Forecasting, forecasting, Revenue#Financial statement analysis, analysis *Project finance modeling *Cash flow forecasting *Credit decisioning: Credit analysis, Consumer credit risk; Impairment (financial reporting), impairment- and Provision (accounting), provision-modeling *working capital management, Working capital- and treasury management; asset and liability management *Management accounting: Activity-based costing, Profitability analysis, Cost analyst, Cost analysis, Whole-life cost

Quantitative finance

*Valuation of options, Option pricing and calculation of Greeks (finance), their "Greeks" *Other derivative (finance), derivatives, especially interest rate derivatives, credit derivatives and exotic derivatives *Modeling the term structure of interest rates (Bootstrapping (finance), bootstrapping / multi-curve framework, multi-curves, short-rate models, Heath–Jarrow–Morton framework, HJM framework) and credit spread (bond), credit spreads *

, CVA, as well as the various

*Credit risk, counterparty credit risk, and regulatory capital: exposure at default, EAD, probability of default, PD, loss given default, LGD, potential future exposure, PFE *Structured product#Product design and manufacture, Structured product design and manufacture *

See for example: ; and Quantitative investing more generally; see further re Portfolio optimization#Optimization methods, optimization methods employed. *Financial risk modeling: value at risk (Value at risk#Computation methods, parametric- and / or Historical simulation (finance), historical, conditional value at risk, CVaR, extreme value theory, EVT), stress test (financial), stress testing, PnL Explained#Sensitivities method, "sensitivities" analysis

Financial institutions

Financial institutions * Bank ** List of banks *** List of banks in the Arab World *** List of banks in Africa *** List of banks in the Americas *** List of banks in Asia *** List of banks in Europe *** List of banks in Oceania *** List of international banking institutions ** Advising bank **

*** List of central banks ** Commercial bank ** Community development bank ** Cooperative bank ** Custodian bank ** Depository bank ** Ethical bank ** Investment bank ** Islamic banking ** Merchant bank ** Microcredit ** Mutual savings bank ** National bank ** Offshore bank ** Private bank ** Savings bank ** Swiss bank ** Bank holding company * Building society * Broker ** Broker-dealer ** Brokerage firm ** Commodity broker ** Insurance broker ** Prime brokerage ** Retail broker ** Stockbroker * Clearing house (finance), Clearing house * Commercial Loan, Commercial lender * Community development financial institution * Credit rating agency * Credit union * Diversified financial * Edge Act Corporation * Export Credit Agencies * Financial adviser * Financial intermediary * Financial planner * Futures exchange ** List of futures exchanges * Government sponsored enterprise * Hard money lender * Independent financial adviser * Industrial loan company * Insurance company * Investment adviser * Investment company * Investment trust * Large and Complex Financial Institutions *

* Non-banking financial company * Savings and loan association * Stock exchange **

* Trust company

Education

*For the typical finance career path and corresponding education requirements see: **Financial analyst generally, and esp. Financial analyst#Qualification, § Qualification, discussing various investment, banking, and corporate roles (i.e. financial management, corporate finance, investment banking, securities analysis & valuation, portfolio & investment management, credit analysis, working capital & treasury management; see ) **Quantitative analyst, and , specifically re roles in quantitative finance (i.e. derivative pricing & hedging, interest rate modeling, financial risk management, financial engineering, computational finance; also, the mathematically intensive variant on the banking roles; see ) *Business education lists undergraduate degrees in business, commerce, accounting and economics; "finance" may be taken as a academic major, major in most of these, whereas "quantitative finance" is almost invariably postgraduate, following a Mathematics education#Content and age levels, math-focused Bachelors; the most common degrees for (entry level) investment, banking, and corporate roles are: **Bachelor of Business Administration (BBA) **Bachelor of Commerce (BCom) **Bachelor of Accountancy (B.Acc) **Bachelor of Economics (B.Econ) **The tagged degree, tagged Bachelor of Science, BS / Bachelor of Arts, BA "in Finance" - the undergraduate version of the MSF below - or less common, Investment management#Education or certification, "in Investment Management" or "in Personal Finance" *At Business education#Postgraduate education, the postgraduate level, the MBA, master of commerce, MCom and Master of Science in Management, MSM (and recently the Master of Applied Economics) similarly offer training in finance generally; at this level there are also the following specifically focused master's degrees, with MSF the broadest - see for their focus and inter-relation: **Master of Applied Finance (M.App.Fin) **Master of Computational Finance **Master's in Corporate Finance **Master of Finance (M.Fin, MIF) ** Master's in Financial Analysis **Master of Financial Economics **Master of Financial Engineering (MFE) **Master of Financial Planning **Master's in Financial Management **Master of Financial Mathematics **Master of Quantitative Finance, Master's in Financial Risk Management **Master's in Investment Management **Master of Mathematical Finance **Master of Quantitative Finance (MQF) **Master of Science in Finance (MSF, MSc Finance) **Master of Science in Global Finance *Business education#Doctoral, Doctoral-training in finance is usually a requirement for academia, but not relevant to industry **quants often ''enter'' the profession with Doctor of Philosophy, PhDs in disciplines such as physics, mathematics, engineering, and computer science, and learn finance "on the job” **as List of fields of doctoral studies in the United States#Business management/administration, an academic field, finance theory is studied and developed within the disciplines of management, (financial economics, financial) economics, accountancy, and applied mathematics, applied / financial mathematics. *For specialized roles, there are various Professional certification in financial services, Professional Certifications in financial services (see #Designations and accreditation above); th
best recognized
are arguably: **Association of Corporate Treasurers (MCT / FCT) **Certificate in Quantitative Finance (CQF) **Certified Financial Planner (CFP) **Certified International Investment Analyst (CIIA) **Certified Treasury Professional (CTP) **Chartered Alternative Investment Analyst (CAIA) **Chartered Financial Analyst (CFA) **Professional_certification_in_financial_services#Chartered_Wealth_Manager, Chartered Wealth Manager (CWM) **CISI Diploma, CISI Diploma in Capital Markets (MCSI) **Financial Risk Manager (FRM) **Professional Risk Manager (PRM) *Various organizations offer executive education, Continuing professional development, CPD, or other focused training programs, including: **Amsterdam Institute of Finance **Canadian Securities Institute **Chartered Institute for Securities & Investment **Global Association of Risk Professionals, GARP **ICMA Centre **The London Institute of Banking & Finance **New York Institute of Finance **PRMIA **South African Institute of Financial Markets **Swiss Finance Institute *See also qualifications in related fields: ** **Actuarial credentialing and exams **Business education ** **Economics education **

Related lists

* Index of accounting articles * Outline of business management * Outline of marketing * Outline of economics * Outline of production * List of international trade topics * List of business law topics * List of business theorists * Actuarial topics

References

External links

Wharton Finance Knowledge Project
– finance knowledge for students, teachers, and self-learners.
Prof. Aswath Damodaran
- financial theory, with a focus in Corporate Finance, Valuation and Investments. Updated Data, Excel Spreadsheets.

(Prof. John M. Wachowicz) -Links to finance web sites, grouped by topic
studyfinance.com
- introductory finance web site at the University of Arizona
SECLaw.com
- law of the financial markets

- stock market related definitions {{DEFAULTSORT:Finance Outlines of economics, Finance Wikipedia outlines, Finance Finance lists, Business terms, Finance topics