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The following outline is provided as an overview of and topical guide to finance: Finance – addresses the ways in which individuals and organizations raise and allocate monetary
resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their av ...
over time, taking into account the
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the 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 as ...
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 agency, government body. It is the art and science of managing resources of the business. Management includ ...
and control of those assets * Profiling and managing project risks


Fundamental financial concepts

* Finance ** Arbitrage **
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 ** Cash flow ** Cash flow matching **
Debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
*** Default ***
Consumer debt In economics, consumer debt is the amount owed by consumers (as opposed to amounts owed by businesses or governments). It includes debts incurred on purchase of goods that are consumable and/or do not appreciate. In macroeconomic terms, it is ...
***
Debt consolidation Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process of individuals addressing high consumer debt, but occasionally it can also refer to a cou ...
***
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 ...
***
Credit counseling Credit counseling (known in the United Kingdom as Debt counseling) is commonly a process that is used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultima ...
*** Bankruptcy *** 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 general ...
***
Securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
*** Commodities ***
Futures Futures may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded * ''Futures'' (magazine), an American finance magazine Music * ''Futures'' (album), a ...
***
Cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...
** Discounted cash flow **
Financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provi ...
***
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 use ...
**
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 t ...
***
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 t ...
** 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 *** Basis risk **
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, ...
***
Risk-free interest rate The risk-free rate of return, usually shortened to the risk-free rate, is the rate of return of a hypothetical investment with scheduled payments over a fixed period of time that is assumed to meet all payment obligations. Since the risk-free ra ...
***
Term structure of interest rates In finance, the yield curve is a graph which depicts how the yields on debt instruments - such as bonds - vary as a function of their years remaining to maturity. Typically, the graph's horizontal or x-axis is a time line of months or ye ...
** Short-rate model *** 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 **
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 distin ...
*** Effective interest rate *** Nominal interest rate *** Interest rate basis *** Fisher equation *** Crowding out *** Annual percentage rate *** Interest coverage ratio ** Investment *** Foreign direct investment ***
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 Leverage or leveraged may refer to: *Leverage (mechanics), mechanical advantage achieved by using a lever * ''Leverage'' (album), a 2012 album by Lyriel *Leverage (dance), a type of dance connection *Leverage (finance), using given resources to ...
**
Long (finance) In finance, a long position in a financial instrument means the holder of the position owns a positive amount of the instrument. The holder of the position has the expectation that the financial instrument will increase in value. This is known a ...
**
Liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...
**
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 **
Market impact In financial markets, market impact is the effect that a market participant has when it buys or sells an asset. It is the extent to which the buying or selling moves the price against the buyer or seller, i.e., upward when buying and downward when ...
**
Medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is ass ...
** Microcredit **
Money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
*** Money creation ***
Currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
***
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 ...
***
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 ...
*** Counterfeit *** History of money *** Monetary reform **
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 c ...
***
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 ...
*** Mutual fund separation theorem *** Post-modern portfolio theory ** Reference rate *** Reset ** Return *** Absolute return *** Investment performance ***
Relative return Relative return is a measure of the return of an investment portfolio relative to a theoretical passive reference portfolio or benchmark. In active portfolio management, the aim is to maximize the relative return (often subject to a risk constrain ...
**
Risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
*** Financial risk *** Risk management **** Financial risk management **** 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 bank ...
****
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 In financial mathematics and stochastic optimization, the concept of risk measure is used to quantify the risk involved in a random outcome or risk position. Many risk measures have hitherto been proposed, each having certain characteristics. The en ...
**
Scenario analysis Scenario planning, scenario thinking, scenario analysis, scenario prediction and the scenario method all describe a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and gener ...
**
Short (finance) In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional " long" position, where the investor will profit if the value of ...
** Speculation *** Day trading ** 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, b ...
**
Standard of deferred payment In economics, standard of deferred payment is a function of money. It is the function of being a widely accepted way to value a debt, thereby allowing goods and services to be acquired now and paid for in the future. The 19th-century economist W ...
**
Store of value A store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The mos ...
** 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 ...
***
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 ...
***
Present value In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has inte ...
***
Future value Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is ...
***
Net present value The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount ...
*** Internal rate of return *** Modified internal rate of return ***
Annuity In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, ...
*** Perpetuity **
Trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...
***
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 econ ...
***
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 ot ...
*** Fair trade **
Unit of account In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of rela ...
** Volatility ** Yield **
Yield curve In finance, the yield curve is a graph which depicts how the yields on debt instruments - such as bonds - vary as a function of their years remaining to maturity. Typically, the graph's horizontal or x-axis is a time line of months or ye ...


History

*
History of finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption (economics) ...
*
History of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BCE in Assyria, India and Sumeria. Later, in an ...
* History of insurance *
Tulip mania Tulip mania ( nl, tulpenmanie) was a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. The major acceleration started in 1634 and then d ...
(Dutch Republic), 1620s/1630s * South Sea Bubble (UK) & Mississippi Company (France), 1710s; see also Stock market bubble * ''
Vix pervenit ''Vix pervenit'' was an encyclical, promulgated by Pope Benedict XIV on November 1, 1745, which condemned the practice of charging interest on loans as usury. Because the encyclical was addressed to the bishops of Italy, it is generally not cons ...
'' 1745, on usury and other dishonest profit * Panic of 1837 (US) * Railway Mania (UK), 1840s *
Erie War The Erie War was a 19th-century conflict between American financiers for control of the Erie Railway Company, which owned and operated the Erie Railroad. Built with public funds raised by taxation and on land donated by public officials and priva ...
(US), 1860s *
Long Depression The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through March 1879, or 1896, depending on the metrics used. It was most severe in Europe and the United States, which had been experiencing st ...
, 1873–1896 (mainly US and Europe, though other parts of the world were affected) * Post-World War I hyperinflation; see
Hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...
and
Inflation in the Weimar Republic Hyperinflation affected the German Papiermark, the currency of the Weimar Republic, between 1921 and 1923, primarily in 1923. It caused considerable internal political instability in the country, the occupation of the Ruhr by France and Belgium, ...
*
Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange coll ...
* Great Depression 1930s * Bretton Woods Accord 1944 * 1973 oil crisis * 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 Compo ...
1995-2001 *
Stock market downturn of 2002 In 2001, stock prices took a sharp downturn (some say "stock market crash" or " the Internet bubble bursting") in stock markets across the United States, Canada, Asia, and Europe. After recovering from lows reached following the September 11 ...
*
United States housing bubble The 2000s United States housing bubble was a real-estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reac ...
* Financial crisis of 2007–08, followed by the
Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...


Finance terms by field


Accounting (financial record keeping)

* Auditing * 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, s ...
**
Financial statements Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...
*** Balance sheet ***
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 ope ...
***
Income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...
*
Management accounting In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is th ...
*
Philosophy of Accounting The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts. The issues which arise include the difficulty of establishing a ''true and fair'' value of an enterpris ...
* Working capital *
Hedge accounting Hedge accounting is an accountancy practice, the aim of which is to provide an offset to the mark-to-market movement of the derivative in the profit and loss account. There are two types of hedge recognized. For a fair value hedge, the offset ...
**
IFRS 9 IFRS 9 is an International Financial Reporting Standard (IFRS) published by the International Accounting Standards Board (IASB). It addresses the accounting for financial instruments. It contains three main topics: classification and measuremen ...
** Fair value accounting


Banking

*See articles listed under:


Corporate finance

* Balance sheet analysis ** Financial ratio * Business plan *
Capital budgeting Capital budgeting in corporate finance is the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects ...
**
Investment policy An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e.g. currency exchange limits. Explanation As globalization integrates the economies of neighboring and of trad ...
***
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 ...
***
Stock valuation In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
***
Fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets. It also considers the overall sta ...
***
Real option Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbe ...
s *** Valuation topics ***
Fisher separation theorem In economics, the Fisher separation theorem asserts that the primary objective of a corporation will be the maximization of its present value, regardless of the preferences of its shareholders. The theorem therefore separates management's "product ...
** Sources of financing **
Securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
**
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 ...
**
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 investme ...
** Capital structure ** Cost of capital ***
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 ** Dividend policy ***
Dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
*** Dividend tax *** Dividend yield *** 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)
Financial management Financial management is the business function concerned with profitability, expenses, cash and credit, so that the "organization may have the means to carry out its objective as satisfactorily as possible;" the latter often defined as maximizin ...
**
Managerial finance Managerial finance is the branch of finance that concerns itself with the managerial application of finance techniques and theory, emphasizing the financial aspects of managerial decisions. The techniques addressed are drawn in the main from ma ...
**
Management accounting In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is th ...
*
Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
**
leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
** takeover **
corporate raid In business, a corporate raid is the process of buying a large stake in a corporation and then using shareholder voting rights to require the company to undertake novel measures designed to increase the share value, generally in opposition to th ...
** Contingent value rights *
Real option Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbe ...
s *
Working capital management Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allo ...
** Working capital ***
Current assets In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...
*** Current liabilities ** Return on investment *** Return on capital ***
Return on assets The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue. ROA can be computed as below: :\mathrm = \frac This number tells you what the company can do with what it has, ''i.e.'' how many doll ...
***
Return on equity The return on equity (ROE) is a measure of the profitability of a business in relation to the equity. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on ''a ...
**
loan covenant A loan covenant is a condition in a commercial loan or bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond ...
** cash conversion cycle ** Cash management *** ** Inventory optimization *** Supply chain management *** 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 debt ...
**
Credit scoring A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bu ...
** Default risk ** Discounts and allowances **
Factoring (trade) Factoring is a financial transaction and a type of debtor finance in which a business ''sells'' its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.O. Ray Whittington, CPA, PhD, "Financial Accounting and ...
& Supply chain finance


Investment management

* Active management *
Efficient market hypothesis The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...
*
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 c ...
*
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 ...
** Capital asset pricing model *
Arbitrage pricing theory In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, it is widely beli ...
*
Passive management Passive management (also called passive investing) is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common on the equity market, where index funds track a stock market index, but it is becoming ...
** Index fund *
Activist shareholder An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full ...
*
Mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV ...
**
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 **
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 *
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 s ...
* Hedge * #Quantitative investing, below


Personal finance

*
529 plan 5 (five) is a number, numeral and 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 typical humans have five digits on eac ...
(US college savings) *
ABLE account An ABLE account, also known as a 529 ABLE or 529A account, is a state-run savings program for eligible people with disabilities in the United States. Rules governing ABLE accounts are codified in Internal Revenue Code section 529A, which was enacted ...
(US plan for benefit of individuals with disabilities) *
Asset allocation Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment t ...
** Asset location * Budget * 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 o ...
**
Debt consolidation Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process of individuals addressing high consumer debt, but occasionally it can also refer to a cou ...
**
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 ...
*** Continuous-repayment mortgage * Debit card * Direct deposit * Employment contract ** Commission ** Employee stock option ** Employee or fringe benefit ** Health insurance **
Paycheck A paycheck, also spelled paycheque, pay check or pay cheque, is traditionally a paper document (a cheque) issued by an employer to pay an employee for services rendered. In recent times, the physical paycheck has been increasingly replaced by ...
**
Salary A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. F ...
**
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 remune ...
*
Financial literacy Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is now a focus of state-run progr ...
*
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 *
Retirement plan A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
** Australia – Superannuation in Australia ** Canada *** Registered retirement savings plan *** Tax-free savings account ** Japan – Nippon individual savings account ** New Zealand – KiwiSaver ** United Kingdom *** Individual savings account *** Self-invested personal pension ** United States ***
401(a) In the United States, a 401(a) plan is a tax-deferred retirement savings plan defined by subsection 401(a) of the Internal Revenue Code. The 401(a) plan is established by an employer, and allows for contributions by the employer or both employer an ...
*** 401(k) ***
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 co ...
*** 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 e ...
**** Roth IRA **** 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 money ...
** Pension * Simple living *
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 I ...
* Comparison of accounting software *
Personal financial management Personal financial management (PFM) refers to software that helps users manage their money. PFM often lets users categorize transactions and add accounts from multiple institutions into a single view. PFM also typically includes data visualizations ...
* Investment club * Collective investment scheme


Public finance

*
Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
*
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 ** Deposit creation multiplier *
Tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
**
Capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property. Not all countries impose a c ...
** Estate tax (and inheritance tax) ** Gift tax **
Income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
** Inheritance tax **
Payroll tax Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the em ...
**
Property tax A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inhe ...
(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 (including value added tax, excise tax, 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 conv ...
) **
Transfer tax A transfer tax is a tax on the passing of title to property from one person (or entity) to another. In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property from one entity to another. ...
(including stamp duty) ** Tax advantage **
Tax, tariff and trade A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
** Tax amortization benefit * Crowding out * Industrial policy *
Agricultural policy Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultu ...
*
Currency union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, ...
* Monetary reform


Risk management

*


Constraint finance

*
Environmental finance Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impac ...
* Feminist economics *
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 *
Value of Earth The value of Earth, i.e. the net worth of our planet, is a debated concept both in terms of the definition of value, as well as the scope of "Earth". Since most of the planet's substance is not available as a resource, "earth" has been equated wi ...
*
Value of life The value of life is an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, value of preventing a fatality (VPF), implied cost of averting a fatality (ICAF), and value of a statistical li ...


Insurance

* Actuarial science * Annuities * Catastrophe modeling * Earthquake loss *
Extended coverage Extended coverage is a term used in the property insurance business. All insurance policies have exclusions for specific causes of loss (also called "perils") that are not covered by the insurance company. An extended coverage endorsement (EC) wa ...
*
Insurable interest Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without repairment or damage, of the insured object (or in the case of a person, their continued survival). A person has an ...
*
Insurable risk Insurability can mean either whether a particular type of loss (risk) can be insured in theory, or whether a particular client is insurable for by a particular company because of particular circumstance and the quality assigned by an insurance p ...
*
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 ...
** Health insurance *** Disability insurance ***
Accident insurance Accident insurance is a type of insurance where the policy holder is paid directly in the event of an accident resulting in injury of the insured. The insured can spend the benefit payment however they choose. Accident insurance is complementary to ...
***
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 *** 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 tax shelter *** Permanent life insurance *** Term life insurance *** 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 Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injur ...
***
Boiler insurance Boiler insurance (Boiler cover) is a type of insurance that covers repairs and in some instances, the replacement of a home boiler. It can also cover other parts of the central heating A central heating system provides warmth to a number of ...
*** Business interruption insurance *** Condo insurance ***
Earthquake insurance Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insuranc ...
*** Home insurance ***
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 Pet insurance is a form of insurance that pays, partly or in total, for veterinary treatment of the insured person's ill or injured pet. Some policies will pay out when the pet dies, or if the pet is lost or stolen. As veterinary medicine is in ...
***
Renters' insurance Renters' insurance, often called tenants' insurance, is an insurance policy that provides some of the benefits of homeowners' insurance, but does not include coverage for the dwelling, or structure, with the exception of small alterations that a ten ...
** Casualty insurance ***
Fidelity bond A fidelity bond or fidelity guarantee is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest ...
***
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 in ...
***
Political risk insurance Political risk insurance is a type of insurance that can be taken out by businesses, of any size, against political risk—the risk that revolution or other political conditions will result in a loss. Political risk insurance is available for seve ...
*** Surety bond ***
Terrorism insurance Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities. It is considered to be a difficult product for insurance companies, as the odds of terroris ...
** Credit insurance *** Trade credit insurance *** Payment protection insurance ***
Credit derivative In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the '' credit risk''"The Economist ''Passing on the risks'' 2 November 1996 or the risk of an event of default of a co ...
** Mid-term adjustment ** Reinsurance ** Self insurance ** Travel insurance ** Niche insurance * Insurance contract * Loss payee clause * Risk Retention Group


Economics and finance


Finance-related areas of economics

* Financial economics * Monetary economics * Mathematical economics *
Managerial economics Managerial economics is a branch of economics involving the application of economic methods in the managerial decision-making process.• Trefor Jones (2004). ''Business Economics and Managerial Decision Making'', WileyDescriptionand chapter-pre ...
* Economic growth 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 *
Experimental economics Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic expe ...
/ Experimental finance * Behavioral economics /
Behavioral 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

*
Fisher separation theorem In economics, the Fisher separation theorem asserts that the primary objective of a corporation will be the maximization of its present value, regardless of the preferences of its shareholders. The theorem therefore separates management's "product ...
* 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 ec ...
* The Theory of Investment Value * Agency theory * Capital structure ** **
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 **
Market timing hypothesis The market timing hypothesis is a theory of how firms and corporations in the economy decide whether to finance their investment with equity or with debt instruments. It is one of many such corporate finance theories, and is often contrasted with t ...
**
Trade-off theory of capital structure The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger ...
** Merton model **
Tax shield A tax shield is the reduction in income taxes that results from taking an allowable deduction from taxable income. For example, because interest on debt is a tax-deductible expense, taking on debt creates a tax shield. Since a tax shield is a way ...
* Dividend policy ** ** Walter model ** Gordon model ** Lintner model ** Residuals theory ** Clientele effect **
Dividend puzzle {{More footnotes, date=May 2021 The dividend puzzle is a concept in finance in which companies that pay dividends are rewarded by investors with higher valuations, even though, according to many economists, it should not matter to investors whether ...
** ** Dividend tax *
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 ...
(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 cos ...
** Economic value added / Market value added ** 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 Ri ...
*** Real options *** Monte Carlo methods *Risk management ** ** Hedging irrelevance proposition ** Risk modeling ** Risk-adjusted return on capital


Asset pricing theory

* Value (economics) **
Fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...
** Intrinsic value **
Market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
** Expected value ** Opportunity cost **
Risk premium A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky return less t ...
** #Underlying theory below * Equilibrium price **
market efficiency The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...
**
economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the s ...
**
rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency i ...
** Risk factor (finance) * General equilibrium theory ** Supply and demand **
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 s ...
**
Partial equilibrium In economics, partial equilibrium is a condition of economic equilibrium which analyzes only a single market, ''ceteris paribus'' (everything else remaining constant) except for the one change at a time being analyzed. In general equilibrium ana ...
*
Arbitrage-free In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...
price **
Rational pricing Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is use ...
*** § Arbitrage free pricing *** § Risk neutral valuation ** Contingent claim analysis ** 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 st ...
&
Incomplete markets In economics, incomplete markets are markets in which there does not exist an Arrow–Debreu security for every possible state of nature. In contrast with complete markets, this shortage of securities will likely restrict individuals from 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 philosoph ...
**
Risk aversion In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...
**
Expected utility hypothesis The expected utility hypothesis is a popular concept in economics that serves as a reference guide for decisions when the payoff is uncertain. The theory recommends which option rational individuals should choose in a complex situation, based on the ...
** Utility maximization problem ** Marginal utility **
Generalized expected utility Generalized expected utility is a decision-making metric based on any of a variety of theories that attempt to resolve some discrepancies between expected utility theory and empirical observations, concerning choice under risky (probabilistic) c ...
* Economic efficiency **
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 ** Production–possibility frontier **
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 engi ...
**
Productive efficiency In microeconomic theory, productive efficiency (or production efficiency) is a situation in which the economy or an economic system (e.g., bank, hospital, industry, country) operating within the constraints of current industrial technology canno ...
*
State prices In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or ...
**
Arrow–Debreu model In mathematical economics, the Arrow–Debreu model suggests that under certain economic assumptions (convex preferences, perfect competition, and demand independence) there must be a set of prices such that aggregate supplies will equal aggregat ...
** Stochastic discount factor ** Pricing kernel **application: *** *** * Fundamental theorem of asset pricing **
Rational pricing Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is use ...
**
Arbitrage-free In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...
** No free lunch with vanishing risk **
Self-financing portfolio In financial mathematics, a self-financing portfolio is a portfolio having the feature that, if there is no exogenous infusion or withdrawal of money, the purchase of a new asset must be financed by the sale of an old one. Mathematical definitio ...
** Stochastic dominance *** Marginal conditional stochastic dominance *
Martingale pricing Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options ...
** 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) ***
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 *** Capital asset pricing model *** Consumption-based CAPM *** Intertemporal CAPM *** Single-index model ***
Multiple factor models In mathematical finance, multiple factor models are asset pricing models that can be used to estimate the discount rate for the valuation of financial assets. They are generally extensions of the single-factor capital asset pricing model (CAPM). M ...
**** Fama–French three-factor model **** Carhart four-factor model ***
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 ...
**Bonds; other interest rate instruments *** Vasicek *** Rendleman–Bartter *** Cox–Ingersoll–Ross *Risk neutral pricing **Equities; foreign exchange and commodities; interest rates *** Black–Scholes ***
Black Black is a color which results from the absence or complete absorption of visible light. It is an achromatic color, without hue, like white and grey. It is often used symbolically or figuratively to represent darkness. Black and white ...
*** Garman–Kohlhagen ***
Heston Heston is a suburban area and part of the Hounslow district in the London Borough of Hounslow. The residential settlement covers a slightly smaller area than its predecessor farming village, 10.8 miles (17.4 km) west south-west of Charing ...
*** CEV *** SABR **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

*
Present value In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has inte ...
*
Future value Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is ...
*
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 ...
*
Net present value The net present value (NPV) or net present worth (NPW) applies to a series of cash flows occurring at different times. The present value of a cash flow depends on the interval of time between now and the cash flow. It also depends on the discount ...
* Internal rate of return *
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, ...
* Perpetuity


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 speakin ...
** Probability distribution *** Binomial distribution *** Log-normal distribution ***
Poisson distribution In probability theory and statistics, the Poisson distribution is a discrete probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known co ...
*
Stochastic calculus Stochastic calculus is a branch of mathematics that operates on stochastic processes. It allows a consistent theory of integration to be defined for integrals of stochastic processes with respect to stochastic processes. This field was created an ...
**
Brownian motion Brownian motion, or pedesis (from grc, πήδησις "leaping"), is the random motion of particles suspended in a medium (a liquid or a gas). This pattern of motion typically consists of random fluctuations in a particle's position insi ...
***
Geometric Brownian motion A geometric Brownian motion (GBM) (also known as exponential Brownian motion) is a continuous-time stochastic process in which the logarithm of the randomly varying quantity follows a Brownian motion (also called a Wiener process) with drift. It i ...
**
Cameron–Martin theorem In mathematics, the Cameron–Martin theorem or Cameron–Martin formula (named after Robert Horton Cameron and W. T. Martin) is a theorem of measure theory that describes how abstract Wiener measure changes under translation by certain element ...
** Feynman–Kac formula ** Girsanov's theorem ** Itô's lemma ** 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 pr ...
** Stochastic process ***
Jump process A jump process is a type of stochastic process that has discrete movements, called jumps, with random arrival times, rather than continuous movement, typically modelled as a simple or compound Poisson process. In finance, various stochastic mod ...
***
Lévy process In probability theory, a Lévy process, named after the French mathematician Paul Lévy, is a stochastic process with independent, stationary increments: it represents the motion of a point whose successive displacements are random, in which disp ...
*** Markov process ***
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 * Monte Carlo methods **
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 **
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 equations **
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 **
Numerical partial differential equations Numerical methods for partial differential equations is the branch of numerical analysis that studies the numerical solution of partial differential equations (PDEs). In principle, specialized methods for hyperbolic, parabolic or elliptic parti ...
*** Crank–Nicolson method *** 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) **
Rational pricing Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is use ...
***
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 ...
***
Arbitrage-free In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...
pricing ** Brownian model of financial markets **
Martingale pricing Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options ...
*
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 may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded * ''Futures'' (magazine), an American finance magazine Music * ''Futures'' (album), a ...
** Futures contract pricing * Options (incl. Real options 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 ****
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 **
Finite difference methods for option pricing Finite difference methods for option pricing are numerical methods used in mathematical finance for the valuation of options. Finite difference methods were first applied to option pricing by Eduardo Schwartz in 1977. In general, finite differ ...
** Garman–Kohlhagen model ** The Greeks ** Lattice model (finance) **
Margrabe's formula In mathematical finance, Margrabe's formula is an option pricing formula applicable to an option to exchange one risky asset for another risky asset at maturity. It was derived by William Margrabe (PhD Chicago) in 1978. Margrabe's paper has been ...
** Monte Carlo methods for option pricing ***
Monte Carlo methods in finance Monte Carlo methods are used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the dis ...
*** Quasi-Monte Carlo methods in finance *** Least Square Monte Carlo for American options **
Trinomial tree The trinomial tree is a lattice-based computational model used in financial mathematics to price options. It was developed by Phelim Boyle in 1986. It is an extension of the binomial options pricing model, and is conceptually similar. It can also ...
** Volatility ***
Implied volatility In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Scholes), will return a theoretical value equ ...
*** Historical volatility ***
Volatility smile Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter (implied volatility) that is needed to be modified for the Black–Scholes formula to fit market prices. In particular for a given expi ...
(&
Volatility surface Volatility smiles are implied volatility patterns that arise in pricing financial options. It is a parameter (implied volatility) that is needed to be modified for the Black–Scholes formula to fit market prices. In particular for a given expi ...
) ***
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 ...
**** Constant elasticity of variance model **** Heston model **** SABR volatility model ***
Local volatility A local volatility model, in mathematical finance and financial engineering, is an option pricing model that treats volatility as a function of both the current asset level S_t and of time t . As such, it is a generalisation of the Black–Sch ...
****
Implied binomial tree In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is r ...
****
Implied trinomial tree In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is r ...
**** Edgeworth binomial tree **** 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 diff ...
s ( bond options,
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) **
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 ...
*** caps and floors *** swaptions *** Bond options ** Short-rate models (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 ***
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 ...
*** Cox–Ingersoll–Ross model *** Black–Karasinski model *** Black–Derman–Toy model ***
Kalotay–Williams–Fabozzi model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a sho ...
*** Longstaff–Schwartz model *** Chen model ** Forward rate / 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 ** XVA *
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 ...
modelling ** Multi-curve framework ** Bootstrapping (finance) ** ** ** Nelson-Siegel **


Portfolio mathematics

* #Mathematical techniques below * #Quantitative investing below * * Portfolio optimization ** § Optimization methods ** § Mathematical tools * Merton's portfolio problem * Kelly criterion * Roy's safety-first criterion *Specific applications: **
Black–Litterman model In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors ha ...
** Universal portfolio algorithm ** Markowitz model ** Treynor–Black model


Financial markets


Market and instruments

* Capital markets *
Securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
* Financial markets * Primary market *
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 investme ...
* Aftermarket *
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 ot ...
*
Bull market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
*
Bear market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
* Bear market rally *
Market maker A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the ''bid–ask spread'', or ''turn.'' The benefit to the firm is that i ...
*
Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity inde ...
* Nasdaq * List of stock exchanges *
List of stock market indices Commonly used stock market indices include: Global Large companies not ordered by any nation or type of business: * MSCI World (i.e. MSCI ACWI Index) * S&P Global 100 * S&P Global 1200 * The Global Dow – Global version of the Dow Jones In ...
*
List of corporations by market capitalization The following is a list of publicly traded companies having the greatest market capitalization. In media they are described as being the most valuable companies, a reference to their market value. Market capitalization is calculated from the shar ...
* Value Line Composite Index


Equity market

* Stock market * Stock *
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 Comm ...
*
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 efficie ...
*
Equity investment A stock trader or equity trader or share trader, also called a stock investor, is a person or company involved in trading equity securities and attempting to profit from the purchase and sale of those securities. Stock traders may be an invest ...
* Index investing *
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 t ...
* Financial reports and statements *
Fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets. It also considers the overall sta ...
*
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-i ...
* Dividend yield *
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 mark ...


Equity valuation

*
Dow theory The Dow theory on stock price movement is a form of technical analysis that includes some aspects of sector rotation. The theory was derived from 255 editorials in '' The Wall Street Journal'' written by Charles H. Dow (1851–1902), journalist ...
* Elliott wave principle * Economic value added * Fibonacci retracement * Gordon model * Growth stock ** PEG ratio ** PVGO *
Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
*
Leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
* Takeover *
Corporate raid In business, a corporate raid is the process of buying a large stake in a corporation and then using shareholder voting rights to require the company to undertake novel measures designed to increase the share value, generally in opposition to th ...
* PE ratio * Market capitalization * Income per share *
Stock valuation In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
*
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

*
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. ...
*
Dead cat bounce In finance, a dead cat bounce is a small, brief recovery in the price of a declining stock. Derived from the idea that "even a dead cat will bounce if it falls from a great height", the phrase, which originated on Wall Street, is also popularly ap ...
*
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 ...
*
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 foll ...
* Stock market bubble * January effect * Mark Twain effect * Quantitative behavioral finance * Quantitative analysis (finance) *
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 a ...
* Zero-coupon bond *
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 events ...
* Convertible bond * Accrual bond * Municipal bond * 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 ** Bond convexity * Fixed income


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 *
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 ...
* Exchange rate * International currency codes * Table of historical exchange rates


Commodity market

* Commodity **
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 **
Commodity trade A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing ...
** 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 ...
**
Fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets. It also considers the overall sta ...
**
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 asset ...
** Fungibility **
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 ...
** 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 product ...
**
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 ** Speculation **
Spread trade In finance, a spread trade (also known as relative value trade) is the simultaneous purchase of one security and sale of a related security, called legs, as a unit. Spread trades are usually executed with options or futures contracts as the legs, b ...
**
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 ...
*** Breakout ***
Bear market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
*** Bottom (technical analysis) ***
Bull market A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
*** 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 *** Parabolic SAR *** Point and figure charts *** Resistance *** RSI *** Stochastic oscillator *** Stop loss *** Support *** Top (technical analysis) **
Trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...
**
Trend A fad or trend is any form of collective behavior that develops within a culture, a generation or social group in which a group of people enthusiastically follow an impulse for a short period. Fads are objects or behaviors that achieve shor ...


Derivatives market

* Derivative (finance) *(see also Financial mathematics topics; Derivatives pricing) * Underlying instrument


Forward markets and contracts

*
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 ...


Futures markets and contracts

* Backwardation * Contango *
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 asset ...
** 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 for ...
* Futures exchange


Option markets and contracts

* Options ** Stock option *** Box spread *** Call option *** Put option ***
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 pu ...
*** The Greeks *** Black–Scholes formula ***
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 ***
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 ...
***
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 thr ...
**** 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 ****
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 dat ...
****
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 op ...
****
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 Busin ...
**** European option ***** Interest rate floor ***** Interest rate cap **** Bermudan option ****
American option In finance, the style or family of an option (finance), option is the class into which the option falls, usually defined by the dates on which the option may be Exercise (options), exercised. The vast majority of options are either European or Amer ...
**** Quanto option **** Asian option *** Employee stock option ** 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 options ** Bond options **
Real option Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbe ...
s ** Options on futures


Swap markets and contracts

* Swap (finance) **
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 ** Stock swap **
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 ** Variance swap


Derivative markets by underlyings


= Equity derivatives

= * Contract for difference (CFD) * Exchange-traded fund (ETF) ** Closed-end fund ** Inverse exchange-traded fund * Equity options *
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 ...
*
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 cente ...
(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, or ...


= Interest rate derivatives

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


= Credit derivatives

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


= Foreign exchange derivative

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


Financial regulation

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


Designations and accreditation

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


Litigation

* Liabilities Subject to Compromise


Fraud

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


Industry bodies

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


Regulatory bodies


International

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


European Union

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


Regulatory bodies by country


=United Kingdom

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


=United States

= * Commodity Futures Trading Commission *
Federal 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 ...
* 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

* Value (economics) *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 *
Fair value In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...
** Fair value accounting * Intrinsic value *
Market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
*Value in use *Fairness opinion *Asset pricing (see also #Asset pricing theory above) ** Equilibrium price ***
market efficiency The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...
***
economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the s ...
***
rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency i ...
**
Arbitrage-free In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...
price *** ***


Context

* (Corporate bond, Corporate) Bond (finance), Bonds **
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 ...
** ** * Stock, Equity valuation ** #Equity valuation above **
Fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets. It also considers the overall sta ...
**
Stock valuation In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
**
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 ...
** ** **
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 ...
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 ***
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 ...
***Coupon yield ***Current yield ***Bond duration, Duration ***Bond convexity, Convexity ***embedded options: ****Option-adjusted spread ****effective duration ****effective convexity **Cash flows ***Principal (finance) ***Coupon (bond) ***Fixed rate bond ***Floating rate note *** Zero-coupon bond *** Accrual bond ***sinking fund provisions *Real estate valuation ** **Income approach ***Net Operating Income *** ***German income approach * Equity valuation **Results ***
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 ...
***
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 ...
*** Equivalent Annual Cost *** Payback period *** Discounted payback period *** Internal rate of return *** Modified Internal Rate of Return *** Return on investment *** Profitability index **Specific models and approaches *** Dividend discount model *** Gordon growth model *** Market value added / Economic value added ***
Residual income valuation Residual income valuation (RIV; also, residual income ''model'' and residual income ''method'', RIM) is an approach to equity valuation that formally accounts for the cost of equity capital. Here, "residual" means in excess of any opportunity cos ...
*** First Chicago Method *** rNPV *** Fed model *** Chepakovich valuation model *** Sum of perpetuities method *** Benjamin Graham formula *** LBO valuation model *** Goldman Sachs asset management factor model ** Cash flows *** Cash flow forecasting *** EBIDTA *** NOPAT *** Free cash flow **** Free cash flow to firm **** Free cash flow to equity *** Dividends ***


Relative valuation

*Bonds ** ** Yield spread *** I-spread *** Option-adjusted spread *** Z-spread *** Asset swap spread ** Credit spread (bond) ***Bond credit rating ***Altman Z-score ***Ohlson O-score ***Book value ***Debt-to-equity ratio ***Debt-to-capital ratio ***Current ratio ***Quick ratio ***Debt ratio *Real estate ** Capitalization rate ** Gross rent multiplier ** Sales comparison approach *** ** Cash on cash return *Equity ** Financial ratio ** Market-based valuation ** Comparable company analysis ** Dividend yield *** Yield gap **
Return on equity The return on equity (ROE) is a measure of the profitability of a business in relation to the equity. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on ''a ...
*** 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 ***
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 ...
*** ***#Derivatives pricing above **as typically employed ***Real options valuation#Valuation, Real options valuation *** *** *** ***
Monte Carlo methods in finance Monte Carlo methods are used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the dis ...
*Applications **Corporate investments and Corporate finance#Investment and project valuation, projects *** Real options *** *** Contingent value rights *** ***structured finance investments (funding dependent) ***special purpose entities (funding dependent) ** Balance sheet 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 **
Residual income valuation Residual income valuation (RIV; also, residual income ''model'' and residual income ''method'', RIM) is an approach to equity valuation that formally accounts for the cost of equity capital. Here, "residual" means in excess of any opportunity cos ...
** 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 ** Cash flow forecasting **
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 ope ...
** 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 capital **
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 ...
**Cost of equity **Cost of debt ** Capital asset pricing model *** *** Hamada's equation ***Pure play#Pure play method, Pure play method **
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 ...
** ***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 *** Capital structure ***Financial analysis#Method, common-size analysis ***Equity (finance) ****Equity (finance)#Shareholders' equity, Shareholders' equity ****Book value ****Retained earnings ***
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 provi ...
****Long term asset / Fixed asset *****Fixed-asset turnover ****Long-term liabilities *****Debt-to-equity ratio *****Debt-to-capital ratio *** Working capital ****Current asset ****Current liability ****Inventory turnover / Days in inventory, Cost of goods sold ****Debtor days, Debtor & Creditor days ****Days sales outstanding / Days payable outstanding


Portfolio theory


General concepts

*Portfolio (finance) *Portfolio manager *Investment management ** Active management **
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 ...
(Buy and hold) *** Index fund **Core & Satellite **Smart beta **Expense ratio **Investment style *** Value investing *** Contrarian investing *** Growth investing **** CAN SLIM *** Index investing *** Magic formula investing *** Momentum investing *** Quality investing *** Style investing *** Factor investing **Investment strategy ***Benchmark-driven investment strategy ***Liability-driven investment strategy ** *Investor profile *Rate of return on a portfolio / Investment performance *Risk return ratio **Risk–return spectrum * Risk factor (finance) * Portfolio optimization *Diversification (finance) *Asset classes **Exter's Pyramid *
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 t ...
**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 *
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 ...
*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 ** Economic efficiency ***
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 ...
*** Random walk hypothesis ** Utility maximization problem ** Markowitz model ** Merton's portfolio problem ** Kelly criterion ** Roy's safety-first criterion *Theory and results (derivation of the CAPM) ** Equilibrium price **
Market price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
**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 ** Mutual fund separation theorem ***Separation property (finance) **Tangent portfolio **Market portfolio **Beta (finance) ***Fama–MacBeth regression *** Hamada's equation *** **Capital allocation line **Capital market line **Security characteristic line ** Capital asset pricing model *** Single-index model **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) ** Capital asset pricing model (CAPM) **Consumption-based capital asset pricing model (CCAPM) ** Intertemporal CAPM (ICAPM) ** Single-index model **
Multiple factor models In mathematical finance, multiple factor models are asset pricing models that can be used to estimate the discount rate for the valuation of financial assets. They are generally extensions of the single-factor capital asset pricing model (CAPM). M ...
(see Risk factor (finance)) *** Fama–French three-factor model *** Carhart four-factor model ***
Arbitrage pricing theory In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, it is widely beli ...
(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 **
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 engi ...
**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 **
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 ...
(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 **
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 ...
*Optimization models **
Black–Litterman model In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors ha ...
** Universal portfolio algorithm


Performance measurement

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


Mathematical techniques

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


Quantitative investing

*Quantitative investing *Quantitative fund * and Quantitative analysis (finance)#Algorithmic trading quantitative analyst, § Algorithmic trading quantitative analyst *Trading: **Automated trading **High-frequency trading **Algorithmic trading **Program trading **Systematic trading *** **Trading strategy **Mirror trading **Copy trading **Social trading **VWAP **TWAP **Electronic trading platform **
Statistical arbitrage 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 ...
*Portfolio optimization: ** ** **
Black–Litterman model In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman, and published in 1992. It seeks to overcome problems that institutional investors ha ...
** Universal portfolio algorithm ** Markowitz model ** Treynor–Black model **Portfolio optimization#Improving portfolio optimization, other models **Factor investing ***low-volatility investing ***value investing ***momentum investing **Alpha generation platform ** Kelly criterion ** Roy's safety-first criterion *Risks: **Best execution **Implementation shortfall **Trading curb **
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 ...
**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

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