Financial Terms Dictionary - Letter I

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IBEX 35 index

The IBEX 35 index is a benchmark stock market index that tracks the performance of the 35 most liquid Spanish stocks traded in the Madrid Stock Exchange General Index.Learn more

IBITDA

IBITDA stands for 'net income before interest, taxes, depreciation, and amortisation'. It's more commonly known as EBITDA, where the E stands for earnings.

Ibovespa

The Ibovespa is the benchmark stock index of São Paulo Stock Exchange in Brazil and tracks the performance of the most traded stocks on the exchange.

ICE Clear Credit

ICE Clear Credit is a subsidiary of the Intercontinental Exchange (ICE) that acts as a central counterparty for credit default swaps, managing the risk of counterparties and ensuring the smooth functioning of the credit derivatives market.

Ice futures Europe

ICE Futures Europe is part of the Intercontinental Exchange, serving as the central marketplace for trading a variety of commodity futures, including energy, interest rates and derivatives.

ICO (Initial Coin Offering)

An initial coin offering (ICO) is a fundraising mechanism in the cryptocurrency and blockchain environment, somewhat akin to an IPO in the traditional investment environment. Companies raise money by issuing a new cryptocurrency in exchange for investment.

IDX Composite index

The IDX Composite or Indonesia Stock Exchange (IDX) Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange.

IFund

iFund is a venture capital fund initiated by Apple Inc. that supports the development of applications for Apple's devices such as the iPhone, iPod touch, and iPad.

IGBC

The IGBC, or Índice General de la Bolsa de Valores de Colombia, was the primary market index of the Colombia Stock Exchange, tracking the performance of the most liquid stocks listed on the exchange. It has been replaced by the COLCAP index.

Illiquid assets

Illiquid assets are assets that cannot be sold quickly without potentially suffering a loss in value. Examples include real estate, some types of stocks, and collectibles, where a quick sale might not yield fair market value.

Illiquidity

Illiquidity refers to the state of a security or other asset that cannot be quickly converted into cash without a substantial loss in value, often due to a lack of buyers or an inefficient market.Learn more

Immediacy

Immediacy in finance refers to the ability to quickly execute a trade of securities without causing a significant change in the asset's price and without a substantial delay.

Immediate or cancel

An immediate or cancel order is an instruction to execute a trade as quickly as possible at the limit price or better. Any portion of the order that cannot be filled immediately is cancelled.

Immediate Order

Immediate order typically refers to a trading order that needs to be executed immediately at the current market price, also known as a market order.

Immunization

In finance, immunisation is a strategy aimed at shielding a portfolio from interest rate fluctuations by matching the durations of assets and liabilities, thereby ensuring a certain return regardless of rate changes.

Implementation shortfall

Implementation shortfall is the difference between the decision price and the final execution price (including all commissions and fees) of a trading strategy. It measures the cost of not executing a trade perfectly.

Implicit contract theory

Implicit contract theory suggests that employment contracts include unwritten economic and social rules (implicit contracts) that govern employer-employee relationships, affecting job stability and wage dynamics.

Implied repo rate

The implied repo rate is the calculated rate of return that results from buying a bond and financing that purchase through its sale in the repo market; it’s a key figure in cost of carry calculations in bond futures trading.

Implied Volatility

Implied volatility is a metric used in the options market to gauge the market's view of the likelihood of changes in a given security's price. Higher implied volatility means the market expects significant price movement.

Import ratio

The import ratio compares the volume of imports in relation to the total market consumption of the same goods within a country, providing insight into the country’s reliance on foreign goods.

Imports and exports

Imports and exports represent the value of goods and services received by a country from (imports) or sent to (exports) other countries, crucial components of a country’s balance of trade.Learn more

Income

Income refers to the money received, especially on a regular basis, for work or through investments. It is a key economic indicator used to assess the economic health of an individual or entity.

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Income fund

An income fund is a type of mutual fund or collective investment scheme that primarily invests in income-generating assets like bonds, dividend-paying stocks, and other interest-yielding securities.Learn more

Incremental capital-output ratio

Incremental capital refers to additional capital invested into a company or project expected to yield an incremental return in terms of additional output or profits.

Index

An index is a statistical measure or indicator that represents the performance of a group of assets from a specific segment of the stock market or sector.Learn more

Index arbitrage

Index arbitrage is a trading strategy that attempts to profit from the price differences between a stock index and a futures contract on that same index by simultaneously buying and selling them.

Index divisor

An index divisor is a number used to maintain the continuity of an index when its underlying components are adjusted due to corporate actions such as stock splits, ensuring that such events do not alter the numerical value of the index.

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Index Funds

Index funds are mutual funds or exchange-traded funds designed to replicate and match the performance of a specific index, allowing investors to invest in a broad segment of the market in a single transaction.Learn more

Index-linked bond

An index-linked bond is a bond for which payment of income on the principal is related to a specific price index, typically to protect against inflation.

Indian Trading League

The Indian Trading League (ITL) was a competitive stock trading league in India where traders competed against each other to achieve the highest returns within specified periods.Learn more

Indirect Bidder

An indirect bidder in government debt auctions, such as for US Treasury securities, refers to an entity that buys through an intermediary, such as a primary dealer, rather than directly from the auction.

Indirect Cost

Indirect costs are expenses not directly attributable to a specific business activity or product, such as administration, personnel, and security costs. These costs are necessary for overall operations but are not directly tied to any specific department or project.

Indirect finance

Indirect finance occurs when borrowers and lenders interact through financial intermediaries, such as banks, rather than directly with each other. These intermediaries collect funds from savers and lend them to those in need of funds.Learn more

Industrial and Commercial Bank of China

The Industrial and Commercial Bank of China (ICBC) is one of the largest banks in the world by total assets and market capitalisation, offering a comprehensive range of financial products and services.

Inet

The INET trading platform is known for its robustness and low latency. It supports multiple asset classes and is used by exchanges around the world for order matching and trade execution.

Infection ratio

The infection ratio, typically used in the context of loans, measures the proportion of loans that have become problematic compared to total loans given out, indicating the health of a loan portfolio.

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, subsequently eroding purchasing power.Learn more

Inflation Accounting

Inflation accounting is a method of financial reporting that gives consideration to the impact of inflation on the reported earnings and assets of a company, which can be significant in high-inflation environments.

Inflation rate

The inflation rate is the percentage increase in the price level of goods and services in an economy over a period of time, usually one year.

Inflation risk

Inflation risk, or purchasing power risk, refers to the danger that the cash flows from an investment will not be worth as much in the future because of changes in purchasing power due to inflation.

Information ratio

The information ratio measures the active return of an investment manager relative to the return of a benchmark index or expected return, adjusted for risk, indicating the manager's ability to generate excess returns.

Information technology (IT)

Information technology (IT) involves the use of any computers, storage, networking, and other physical devices, infrastructure, and processes to create, process, store, secure, and exchange all forms of electronic data.

Initial Public Offering (IPO)

IPO stands for 'initial public offering', which is the process by which a private company can go public by sale of its stocks to the general public. It could be a new, young company or an older company which decides to be listed on an exchange and hence goes public.Learn more

INSEAD

INSEAD is a prominent graduate business school, with campuses in Europe (Fontainebleau, France), Asia (Singapore), and the Middle East (Abu Dhabi).

Insolvency

Insolvency is a financial state in which an individual or an organisation cannot meet any outstanding financial obligations when they come due because their assets are insufficient to cover their debts.Learn more

Instinet

Instinet is an electronic trading platform that provides financial securities services, including global securities agency execution, research, and trading in equities, funds, fixed-income products, and derivatives.

Institutional investor

An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Examples include banks, insurance companies, pensions, hedge funds, REITs, and investment advisors.

Intangible Asset

An intangible asset is an asset that lacks physical substance but is identifiable and provides economic benefits. Examples include intellectual property such as patents, trademarks, copyrights, and brand recognition.Learn more

Inter-dealer broker

An inter dealer broker acts as an intermediary in the financial markets, facilitating transactions between dealers and traders in the OTC markets where direct trading between parties is not possible.

Interbank lending market

Interbank lending occurs when banks extend loans to one another for liquidity management purposes. This lending is essential for maintaining liquidity and stability in the financial system.

Intercontinental Exchange (ICE)

The Intercontinental Exchange is an American company that operates global exchanges, clearing houses, and provides mortgage technology, data and listing services.

Interest rate risk

Interest rate risk is the potential for investment losses that result from a change in interest rates, affecting the value of fixed-income securities.Learn more

Interest rate swap

The swap rate is the fixed rate that a swap's payer agrees to pay in exchange for the uncertainty of having to pay a short-term (floating) rate, such as LIBOR, during the life of the swap.

Interest Rates

An interest rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.Learn more

Interest-Crediting Methods

Interest crediting methods are the methods used by financial institutions to apply credit interest to depositors' accounts, which can vary in terms of compounding frequency and rates.

Intermarket sweep order

An intermarket sweep order is an order that sweeps multiple markets to execute immediately at the best available prices, bypassing standard order protection rules to fulfil trade obligations.Learn more

Internal contradictions of capital accumulation

The concept of internal contradictions of capital accumulation, rooted in Marxian economics, argues that the process of capital accumulation inherent in capitalism leads to internal conflicts and crises due to contradictions like overproduction, underconsumption, and disproportionate wealth distribution.

Internal Financing

Internal financing refers to the process of funding business activities without raising capital from external sources. This can include profits retained by the company, depreciation reserves, or reductions in working capital.Learn more

Internal models approach for market risk

The internal model approach is a method used by banks to gauge risk and determine the minimum capital they must hold against potential losses. It allows banks to use their own empirical models to calculate required capital instead of relying on standardised external models.

International exposure indices

These indices measure and track the performance of investment assets from various international markets. They help investors gauge the exposure and performance of their investments in global markets.

International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an organisation of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.Learn more

International Petroleum Exchange (IPE)

The International Petroleum Exchange (IPE), now known as ICE Futures Europe, is a London-based exchange where various energy futures and options are traded primarily involving oil and natural gas.

International Securities Exchange

The International Securities Exchange (ISE) is an electronic options exchange in the United States, known for its innovative approach to the trading of equity options.

International Securities Identification Number (ISIN)

ISIN, or international securities identification number, is a code that uniquely identifies a specific securities issue, facilitating trade and settlement by making every security unique and distinguishable.Learn more

Internet service provider (ISP)

An Internet Service Provider is a company that provides customers with Internet access, potentially offering services such as web hosting, email, and domain name registration.

Interpositioning

Interpositioning refers to the practice of using a third party to execute trades unnecessarily, often adding extra cost without any benefit to the client, typically discouraged in regulated markets.

Intrinsic value

In financial analysis, intrinsic value is the calculation of an asset’s worth based on various data points, which will include both technical and fundamental considerations. An example of such data might be information about a company's debt-to-income ratio, revenue growth, and assets and liabilities.

Investment climate

The investment environment encompasses the economic, regulatory, and financial conditions that affect the ability of individuals or institutions to purchase, hold, and sell investments.

Investment control

Investment control involves the processes and guidelines used to monitor and manage investments to ensure they meet the expected performance goals without exceeding acceptable levels of risk.

Investment Fund

An investment fund is a pool of capital collected from multiple investors used to collectively purchase securities, where each investor retains ownership and profits or losses relative to their share.Learn more

Investment Management

Investment management is the professional asset management of various securities (shares, bonds, and other securities) and other assets (like real estate), aiming to meet specified investment goals for the benefit of investors.

Investment outsourcing

Investment outsourcing refers to the practice of delegating the management of investment portfolios or certain aspects of the investment process to specialised external firms.

Investment policy statement

An investment policy statement is a document drafted between a portfolio manager and a client that outlines the client’s investment goals and strategies, including risk tolerance and liquidity requirements.

Investment Strategy

An investment strategy is an investor's plan of distributing resources across various assets intended to achieve specific financial goals, taking into consideration the investor's risk tolerance, time horizon, and investment objectives.Learn more

Investment thesis

An investment thesis is a foundational theory or approach that guides an investor's choices about adding assets to a portfolio, based on research and analysis of financial data, market trends, and economic conditions.

Investor

An investor is an individual or institution that allocates capital with the expectation of receiving financial returns, encompassing a range of investment vehicles including stocks, bonds, real estate, and mutual funds.

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Investor Sentiment

Investor sentiment is the overall attitude of investors toward a particular security or financial market, which can drive market trends and influence trading behaviour.Learn more

IPC index

The Índice de Precios y Cotizaciones (IPC) is the main benchmark stock index of the Mexican Stock Exchange, representing the major companies traded on the exchange.

IPO ETF

An initial public offering, or IPO ETF is an exchange-traded fund that invests in newly public companies shortly after their IPOs. This type of ETF tracks the performance of these companies, typically for their first few years in the market.

IPO spinning

IPO spinning involves investment banks allocating shares of new initial public offerings (IPOs) to corporate executives who can influence which banks the corporation uses, potentially in exchange for future business.

Irrational Exuberance

Coined by Alan Greenspan, irrational exuberance refers to investor enthusiasm that drives asset prices up to levels that aren’t supported by fundamentals, indicating a potential overvaluation and risk of price correction.

ISA Account

An ISA account, or individual savings account, is a tax-efficient savings account available in the UK, allowing individuals to hold cash, shares, and unit trusts free of tax on dividends, interest, and capital gains.

ISM manufacturing

The ISM Manufacturing Index is an index based on surveys of more than 300 manufacturing firms by the Institute for Supply Management (ISM) and serves as an indicator of the economic health of the manufacturing sector.Learn more

ISO

ISO rules refer to standards and guidelines set by the International Organisation for Standardisation, which help ensure quality, safety, and efficiency in products and services across different industries.

Isoelastic utility

Isoelastic utility, also known as constant relative risk aversion (CRRA), is a type of utility function in economics that exhibits constant relative risk aversion throughout different levels of wealth.

Issue (Process)

In financial terms, an issue refers to a new offering of securities, such as stocks or bonds, to the public or the private market.Learn more

Issuer

An issuer is an entity, such as a corporation or governmental body, that develops, registers, and sells securities to finance its operations.