The following outline 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 ...

– 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 a ...

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 environm ...

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 ...

and other

asset In 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 of ownership that can ...

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 ...

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 th ...

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, e ...

Capital asset pricing model In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into accou ...

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 coun ...

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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 ...

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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 debto ...

*** Debt diet *** Debt-snowball method *** Debt of developing countries **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 genera ...

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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 fo ...

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Commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

*** Futures ***

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-imme ...

Discounted cash flow The discounted cash flow (DCF) analysis is a method in finance of valuing a security, project, company, or asset using the concepts of the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate devel ...

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 provid ...

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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 ...

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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 ** 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 adjoini ...

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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 the ...

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 ...

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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 **

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 ***

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 ***

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 factor— ...

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 disti ...

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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 ...

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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 *** 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 is ...

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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 c ...

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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 ** Leverage **

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 In accounting, liquidity (or accounting liquidity) ...

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 ...

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 as ...

Microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropaym ...

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 ...

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Money creation Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money creation is controlled by the central b ...

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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 d ...

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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 promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued ...

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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 facili ...

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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 ...

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 *** Reset ** Return ***

Absolute return The absolute return or simply return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital. The adjective "absolute" is used to stress the distinction with the relative return measures often us ...

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Investment performance Investment performance is the return on an investment portfolio. The investment portfolio can contain a single asset or multiple assets. The investment performance is measured over a specific period of time and in a specific currency. Investors ...

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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 environm ...

***

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 listed ...

**** Uncompensated risk ***

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 ba ...

****

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 ...

**** Deviation risk measure **** Distortion risk measure ****

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 ...

****

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 ...

***** Entropic value at risk **

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 the ...

Speculation In finance, speculation is the purchase of an asset (a commodity, 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 in value.) Many ...

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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 and ...

** Position trader **

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, bu ...

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 ** Time horizon **

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 in ...

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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 ...

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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 ...

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Internal rate of return Internal rate of return (IRR) is a method of calculating an investment’s rate of return. The term ''internal'' refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or f ...

*** 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 cons ...

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 exch ...

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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 eco ...

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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 envir ...

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, distribution, and consumption of money, assets, goods and services (the discipline of f ...

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 a ...

History of insurance The history of insurance traces the development of the modern business of insurance against risks, especially regarding cargo, property, death, automobile accidents, and medical treatment. The insurance industry helps to eliminate risks (as ...

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 ''*sunþ ...

(UK) & Mississippi Company (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 bubble ...

* '' Vix pervenit'' 1745, on usury and other dishonest profit *

Panic of 1837 The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down, westward expansion was stalled, unemployment went up, and pessimism aboun ...

(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 ...

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 col ...

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 Financial contagion, ...

1930s * Bretton Woods Accord 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 s ...

* 1979 energy crisis * Savings and Loan Crisis 1980s * Black Monday 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 Comp ...

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 att ...

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 reach ...

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 ...

, 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 t ...

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 * FASB *

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, ...

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 busine ...

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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 t ...

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 enterpri ...

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 offse ...

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 A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financia ...

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 ***

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 ...

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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 stat ...

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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.Campb ...

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 "produc ...

** 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 investm ...

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 c ...

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 ne ...

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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 t ...

*** Modigliani–Miller theorem ***

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 policy is concerned with financial policies regarding paying cash dividend in the present or paying an increased dividend at a later stage. Whether to issue dividends, and what amount, is determined mainly on the basis of the company's un ...

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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-inv ...

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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 f ...

***

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 ...

*** Modigliani–Miller theorem *

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 Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the "ar ...

)

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 maximizi ...

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 ma ...

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 aspec ...

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 loa ...

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 ** Contingent value rights *

s * Working capital management **

*** Current assets *** Current liabilities **

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 capital (ROC), or return on invested capital (ROIC), is a ratio used in finance, valuation and accounting, as a measure of the profitability and value-creating potential of companies relative to the amount of capital invested by sharehol ...

***

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 dolla ...

***

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 '' ...

loan covenant A loan covenant is a condition in a commercial loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs ...

cash conversion cycle In management accounting, the Cash conversion cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growt ...

** 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 ...

***

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 sto ...

*** 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. ...

(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 deb ...

** Credit scoring **

Default risk A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased co ...

Discounts and allowances Discounts and allowances are reductions to a basic price of goods or services. They can occur anywhere in the distribution channel, modifying either the manufacturer's list price (determined by the manufacturer and often printed on the package) ...

** Factoring (trade) & Supply chain finance

Investment management

Active management Active management (also called ''active investing'') is an approach to investing. In an actively managed portfolio of investments, the investor selects the investments that make up the portfolio. Active management is often compared to passive man ...

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 ...

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 t ...

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 ...

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 mathem ...

Long-Term Capital Management Long-Term Capital Management L.P. (LTCM) was a highly-leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York. LTCM was founded in 1 ...

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 ...

* #Quantitative investing, below

Personal finance

529 plan 5 (five) is a number, numeral (linguistics), numeral and numerical digit, digit. It is the natural number, and cardinal number, following 4 and preceding 6, and is a prime number. It has attained significance throughout history in part because typ ...

(US college savings) * ABLE account (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 ti ...

** Asset location *

Budget A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, enviro ...

* Coverdell Education Savings Account (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 ...

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 ...

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' acc ...

Employment contract An employment contract or contract of employment is a kind of contract used in labour law to attribute rights and responsibilities between parties to a bargain. The contract is between an "employee" and an "employer". It has arisen out of the old ...

** 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 m ...

** Paycheck **

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 remun ...

* Financial literacy *

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 200 ...

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 payment ...

** 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 working ...

** 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 n ...

** Japan – Nippon individual savings account ** 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 exam ...

** United Kingdom *** Individual savings account *** Self-invested personal pension ** United States *** 401(a) ***

401(k) In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodical employee contributions come directly out of their ...

***

403(b) In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organiz ...

***

457 plan The 457 plan is a type of nonqualified, tax advantaged deferred-compensation retirement plan that is available for governmental and certain nongovernmental employers in the United States. The employer provides the plan and the employee defers c ...

*** Keogh plan ***

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 ...

****

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 pl ...

**** Traditional IRA ****

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 ...

****

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 mone ...

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 specifical ...

* Tax advantage *

Wealth Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an ...

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 * Investment club *

Collective investment scheme An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages in ...

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 ...

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, bonds, precious metals, real estate, and property. Not all countries impose ...

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 e ...

(and

inheritance 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 ...

) **

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. Ta ...

Inheritance 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 ...

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 inherit ...

(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 gover ...

(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 en ...

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 con ...

) **

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 anothe ...

(including

stamp duty Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). A physical reven ...

) ** Tax advantage ** Tax, tariff and trade ** Tax amortization benefit * Crowding out *

Industrial policy An industrial policy (IP) or industrial strategy of a country is its official strategic effort to encourage the development and growth of all or part of the economy, often focused on all or part of the manufacturing sector. The government takes m ...

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 states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union ...

Risk management

Constraint finance

* Environmental finance * Feminist economics *

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 Herma ...

* Value of Earth * Value of life

Insurance

* Actuarial science * Annuities *

Catastrophe modeling :''This article refers to the use of computers to estimate losses caused by disasters. For other meanings of the word catastrophe, including catastrophe theory in mathematics, see catastrophe (disambiguation).'' Catastrophe modeling (also known ...

* Earthquake loss * Extended coverage * Insurable interest * Insurable risk *

*** Disability insurance *** Accident insurance ***

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 ...

***

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 inc ...

*** 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 ***

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 ...

*** Universal life insurance ***

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 ...

*** Whole life insurance **

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 ...

*** Auto insurance *** Boiler insurance *** Business interruption insurance *** Condo insurance *** Earthquake insurance ***

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 insu ...

***

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 ...

*** Pet insurance *** Renters' insurance ** Casualty insurance *** Fidelity bond ***

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 ***

Surety bond In finance, a surety , surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Usually, a surety bond or surety is a promise by a surety or guarantor to pa ...

***

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 terrori ...

** Credit insurance *** Trade credit insurance *** Payment protection insurance ***

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 corp ...

** 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 **

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 policie ...

** 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"Financia ...

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 Mathematical economics is the application of mathematical methods to represent theories and analyze problems in economics. Often, these applied methods are beyond simple geometry, and may include differential and integral calculus, difference a ...

* Managerial economics *

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 applic ...

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 exp ...

/ 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

* Modigliani–Miller theorem *

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 ...

* The Theory of Investment Value * Agency theory *

** **

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 **

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 **

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 wa ...

** ** Walter model **

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 o ...

** Lintner model ** Residuals theory ** Clientele effect ** Dividend puzzle ** **

(valuation) ** ** Clean surplus accounting **

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 costs ...

** 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 *** 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 ...

***

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 determin ...

*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 p ...

** Risk-adjusted return on capital

Asset pricing theory

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

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 ...

** 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 th ...

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 ...

Opportunity cost In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effective it means if you chose one activity (for example ...

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 ...

** #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 s ...

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 st ...

rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency in ...

** Risk factor (finance) *

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 o ...

Supply and demand In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor ...

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 se ...

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 st ...

** Partial equilibrium * Arbitrage-free 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 us ...

*** § 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 ...

** Brownian model of financial markets **

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 s ...

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 transferr ...

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 philosop ...

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 ...

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 **

Marginal utility In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a good or service describes how much pleasure or satisfaction is gained by consumers as a result of the increase or decrease in consumpt ...

** Generalized expected utility *

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 add ...

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 o ...

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 **

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 aggregat ...

Stochastic discount factor The concept of the stochastic discount factor (SDF) is used in financial economics and mathematical finance. The name derives from the price of an asset being computable by "discounting" the future cash flow \tilde_i by the stochastic factor \tilde, ...

** 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 a ...

** Arbitrage-free **

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 ** 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. option ...

** Brownian model of financial markets ** 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 pr ...

***

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

Asset pricing models

*Equilibrium pricing **Equities; foreign exchange and commodities ***

*** Consumption-based CAPM *** Intertemporal CAPM ***

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 expr ...

*** Multiple factor models ****

Fama–French three-factor model In asset pricing and portfolio management the Fama–French three-factor model is a statistical model designed in 1992 by Eugene Fama and Kenneth French to describe stock returns. Fama and French were colleagues at the University of Chicago Booth ...

**** Carhart four-factor model ***

**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 *** 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 Y ...

**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

Mathematics and finance

Time value of money

Financial mathematics

Mathematical tools

Probability Probability is the branch of mathematics concerning numerical descriptions of how likely an 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 1, where, roughly speaking, ...

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 phenomeno ...

***

Binomial distribution In probability theory and statistics, the binomial distribution with parameters ''n'' and ''p'' is the discrete probability distribution of the number of successes in a sequence of ''n'' independent experiments, each asking a yes–no ques ...

***

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 c ...

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 a ...

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 ...

** Cameron–Martin theorem ** Feynman–Kac formula ** Girsanov's theorem **

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 serve ...

** Martingale representation theorem ** 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 pri ...

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 a ...

*** Jump process ***

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 ...

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 at ...

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 function. The function is often thought of as an "unknown" to be solved for, similarly to h ...

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 part ...

***

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

Derivatives pricing

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

***

*** Arbitrage-free pricing ** Brownian model of financial markets **

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 derivat ...

** Forward contract pricing * Futures ** Futures contract pricing *

Options Option or Options may refer to: Computing *Option key, a key on Apple computer keyboards *Option type, a polymorphic data type in programming languages *Command-line option, an optional parameter to a command *OPTIONS, an HTTP request method ...

(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 method for the valuation of options. Essentially, the model uses a "discrete-time" ( lattice based) model of the varying price over time of the underlying fin ...

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) 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 ...

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 di ...

***

Quasi-Monte Carlo methods in finance High-dimensional integrals in hundreds or thousands of variables occur commonly in finance. These integrals have to be computed numerically to within a threshold \epsilon. If the integral is of dimension d then in the worst case, where one has a gua ...

*** 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 In finance, volatility (usually denoted by ''σ'') is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market price ...

***

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, e ...

****

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 SAB ...

***

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–Scho ...

****

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 r ...

**** Johnson binomial tree * Swaps ** Swap valuation *** *** *** *** **** Multi-curve framework *** *

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 di ...

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 fut ...

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 Bin ...

***

*** Cox–Ingersoll–Ross model *** Black–Karasinski model ***

*** Kalotay–Williams–Fabozzi model *** Longstaff–Schwartz model *** Chen model **

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 ...

/ Forward curve -based models (Application as per short-rate models) *** LIBOR market model (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 *

modelling ** Multi-curve framework **

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 **

Portfolio mathematics

* #Mathematical techniques below * #Quantitative investing below * * Portfolio optimization ** § 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 ** Universal portfolio algorithm ** Markowitz model ** 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 mark ...

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 procee ...

* 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-fra ...

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-fra ...

* 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 ...

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 index ...

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 worl ...

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 * Value Line Composite Index

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, a ...

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

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 Co ...

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 inst ...

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 efficien ...

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 inves ...

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, avail ...

Private Equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a typ ...

* Financial reports and statements *

Stock split A stock split or stock divide increases the number of shares in a company. For example, after a 2-for-1 split, each investor will own double the number of shares, and each share will be worth half as much. A stock split causes a decrease of mar ...

Equity valuation

* Dow theory *

Elliott wave principle The Elliott Wave Principle, or Elliott wave theory, is a form of technical analysis that finance traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology and price levels, such as hi ...

* Economic value added * Fibonacci retracement *

* Growth stock ** PEG ratio ** PVGO *

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 loa ...

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 * PE ratio *

Market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by ...

* Income per share *

Technical analysis In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the sam ...

* Chart patterns * V-trend * Paper valuation

Investment theory

* Dead cat bounce *

Market microstructure Market microstructure is a branch of finance concerned with the details of how exchange occurs in markets. While the theory of market microstructure applies to the exchange of real or financial assets, more evidence is available on the microstruct ...

Stock market crash A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors. They often fo ...

* January effect * Mark Twain effect * Quantitative behavioral finance *

Quantitative analysis (finance) Quantitative analysis is the use of mathematical and statistical methods in finance and investment management. Those working in the field are quantitative analysts (quants). Quants tend to specialize in specific areas which may include derivative s ...

Statistical arbitrage In finance, statistical arbitrage (often abbreviated as ''Stat Arb'' or ''StatArb'') is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portfolios of securities (hundreds to thousan ...

Bond market

Bond (finance) In finance, a bond is a type of security under which the issuer ( debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as ...

Zero-coupon bond A zero coupon bond (also discount bond or deep discount bond) is a bond in which the face value is repaid at the time of maturity. Unlike regular bonds, it does not make periodic interest payments or have so-called coupons, hence the term zer ...

Junk bonds In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit eve ...

Convertible bond In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock i ...

* Accrual bond *

Municipal bond A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, ...

* Sovereign bond *

Bond valuation Bond valuation is the determination of the fair price of a bond. As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate. Hence, the value of a ...

Yield to maturity The yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is an estimate of the total rate of return anticipated to be earned by an investor who buys a bond at a given market price, h ...

Bond duration In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, d ...

** Bond convexity *

Fixed income Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the prin ...

Money market

Repurchase agreement A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two pa ...

* International Money Market *

Exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

* International currency codes * Table of historical exchange rates

Commodity market

Commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

Asset In 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 of ownership that can ...

Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options. The Commodity Exchange Ac ...

** Commodity trade ** Drawdowns **

Forfaiting In trade finance, forfaiting is a service providing medium-term financial support for export/import of capital goods. The third party providing the support is termed the forfaiter. The forfaiter provides medium-term finance to, and will commonl ...

Futures contract 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 asse ...

Fungibility In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for exam ...

** Hedging ** Jesse Lauriston Livermore **

List of traded commodities The following is a list of futures contracts on physically traded commodities. Agricultural Grains, food and fiber Symbol from "CME Group Website". cmegroup.com. CME Group. Retrieved 2010-10-20. Livestock and meat Energy Forest produc ...

Ownership equity In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $2 ...

** Position trader ** Risk (Futures) ** Seasonal traders ** Seasonal spread trading ** Slippage **

*** Breakout ***

***

Bottom (technical analysis) A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which n ...

***

*** MACD ***

Moving average In statistics, a moving average (rolling average or running average) is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is ...

***

Open Interest Open interest (also known as open contracts or open commitments) refers to the total number of outstanding derivative contracts that have not been settled (offset by delivery). For each buyer of a futures contract there must be a seller. From the t ...

*** Parabolic SAR *** Point and figure charts *** Resistance *** RSI *** Stochastic oscillator *** Stop loss *** Support ***

Top (technical analysis) A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which n ...

** Trend

Derivatives market

Derivative (finance) In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be us ...

Forward markets and contracts

Futures markets and contracts

* Backwardation *

Contango Contango is a situation where the futures price (or forward price) of a commodity is higher than the ''expected'' spot price of the contract at maturity. In a contango situation, arbitrageurs or speculators are "willing to pay more owfor a comm ...

** Financial future *** Currency future *** Interest rate future ***

Single-stock futures In finance, a single-stock future (SSF) is a type of futures contract between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified ...

***

Stock market index future In finance, a stock market index future is a cash-settled futures contract on the value of a particular stock market index. The turnover for the global market in exchange-traded equity index futures is notionally valued, for 2008, by the Bank fo ...

Futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or ...

Option markets and contracts

* Options **

Stock option In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified dat ...

*** Box spread ***

Call option In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call option to exchange a security at a set price. The buyer of the call option has the right, but not the obligation, to buy a ...

***

Put option In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the ''underlying''), at a specified price (the ''strike''), by (or at) a s ...

***

Strike price In finance, the strike price (or exercise price) of an option is a fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put), the underlying security or commodity. The strike price may be set ...

***

Put–call parity In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a portfolio of a long call option and a short put ...

*** The Greeks *** Black–Scholes formula ***

***

Option time value In finance, the time value (TV) (''extrinsic'' or ''instrumental'' value) of an option is the premium a rational investor would pay over its ''current'' exercise value ( intrinsic value), based on the probability it will increase in value before ex ...

***

Moneyness In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a thr ...

**** At-the-money ****

In-the-money In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a ...

**** Out-of-the-money ***

Straddle In finance, a straddle strategy involves two transactions in options on the same underlying, with opposite positions. One holds long risk, the other short. As a result, it involves the purchase or sale of particular option derivatives that all ...

***

Option style In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

****

Vanilla option In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified da ...

****

Exotic option In finance, an exotic option is an option which has features making it more complex than commonly traded vanilla options. Like the more general exotic derivatives they may have several triggers relating to determination of payoff. An exotic o ...

****

Binary option A binary option is a financial exotic option in which the payoff is either some fixed monetary amount or nothing at all.Breeden, D. T., & Litzenberger, R. H. (1978). "Prices of state-contingent claims implicit in option prices". ''Journal of Bus ...

****

European option In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

***** Interest rate floor *****

Interest rate cap An interest rate cap is a type of interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for ...

****

Bermudan option In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

****

American option In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

**** Quanto option ****

Asian option An Asian option (or ''average value'' option) is a special type of option contract. For Asian options the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European o ...

***

** Warrants **

Foreign exchange option In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the right but not the obligation to exchange money denominated in one currency into another currency at ...

Interest rate option An Interest rate option is a specific financial derivative contract whose value is based on interest rates. Its value is tied to an underlying interest rate, such as the yield on 10 year treasury notes. Similar to equity options, there are two ty ...

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 fut ...

s **

Options on futures 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 ...

Swap markets and contracts

Swap (finance) In finance, a swap is an agreement between two counterparties to exchange financial instruments, cashflows, or payments for a certain time. The instruments can be almost anything but most swaps involve cash based on a notional principal amoun ...

Interest rate swap 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 with ...

Basis swap A basis swap is an interest rate swap which involves the exchange of two floating rate financial instruments. A basis swap functions as a floating-floating interest rate swap under which the floating rate payments are referenced to different bases. ...

** Asset swap **

Forex swap In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) and may use foreign exchange derivatives. ...

Stock swap In corporate finance a stock swap is the exchange of one equity-based asset for another, where, during the merger or acquisition, the swap provides an opportunity to pay with stock rather than with cash; see . Overview The acquiring company e ...

Equity swap An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. The two cash flows are usually referred to as "legs" of the swap; one of ...

Currency swap In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It h ...

** Variance swap

Derivative markets by underlyings

= Equity derivatives

= * Contract for difference (CFD) *

Exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...

(ETF) **

Inverse exchange-traded fund An inverse exchange-traded fund is an exchange-traded fund (ETF), traded on a public stock market, which is designed to perform as the ''inverse'' of whatever index or benchmark it is designed to track. These funds work by using short selling, tra ...

* Equity options *

Real estate investment trust A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping ce ...

(REIT) * Warrants **

Covered warrant In finance a covered warrant (sometimes called naked warrant) is a type of warrant that has been issued without an accompanying bond or equity. Like a normal warrant, it allows the holder to buy or sell a specific amount of equities, currency, ...

= Interest rate derivatives

= *

LIBOR The London Inter-Bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. The resulting average rate is u ...

Forward rate agreement In finance, a forward rate agreement (FRA) is an interest rate derivative (IRD). In particular it is a linear IRD with strong associations with interest rate swaps (IRSs). General description A forward rate agreement's (FRA's) effective descript ...

* Exotic interest rate 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

= *

* Currency future *

*Binary option#Foreign exchange, Foreign exchange binary option *Foreign exchange market#Forward, Foreign exchange forward *

*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

= *

* 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 *" The Theory of Investment Value" * *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) **

***

** Arbitrage-free price *** ***

Context

* (Corporate bond, Corporate) Bond (finance), Bonds **

** ** * Stock, Equity valuation ** #Equity valuation above **

** ** **

and ** '' The Theory of Investment Value'' *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 ***

***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 ***

*** 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 ***

*** 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 **

** 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 ***

*** *** Contingent value rights *** ***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 **

** Clean surplus accounting **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 **

*** ***

***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 **

(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 /

*Risk return ratio **Risk–return spectrum * Risk factor (finance) * Portfolio optimization *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) * Uncompensated risk

Modern portfolio theory

* Portfolio optimization **Risk return ratio **Risk–return spectrum **

***

*** Random walk hypothesis ** Utility maximization problem ** Markowitz model ** Merton's portfolio problem **

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

**Systematic risk *** Risk factor (finance) **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 **

***

**Security market line **Roll's critique *Related measures **Alpha (finance) **Sharpe ratio **Treynor ratio **Jensen's alpha *Optimization models ** Markowitz model ** Treynor–Black model *Asset pricing#General Equilibrium Asset Pricing, Equilibrium pricing models (CAPM and extensions) **

(CAPM) **Consumption-based capital asset pricing model (CCAPM) ** Intertemporal CAPM (ICAPM) **

** Multiple factor models (see Risk factor (finance)) ***

*** Carhart four-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 ** Deviation risk measure ** Distortion risk measure **

*Optimization models ** Black–Litterman model ** 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 **

*Portfolio optimization: ** ** ** Black–Litterman model ** Universal portfolio algorithm ** Markowitz model ** 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 XVA *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 * Portfolio optimizationSee 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 **

** 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 *

** 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