Financial Terms Dictionary - A-Z Glossary

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FAANG stocks

FAANG stocks describe five prominent American technology companies: Facebook (Meta), Apple, Amazon, Netflix, and Google (Alphabet), known for driving significant movements in the US stock market. The acronym is sometimes known as FAANG+, a term encompassing other prominent stocks such as Nvidia and Tesla.

Face value (par value, principal)

Face value is the nominal value printed on a bond, note, or other financial instrument and represents the amount due at maturity. It is also used in reference to the value of a stock or other security as stated by the issuer.Learn more

Factoring

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party (factor) at a discount to obtain immediate cash.

Failure to deliver

Failure to deliver refers to a situation where one party in a trading contract does not deliver on their obligations, either the financial instrument or the cash value, by the settlement date.

Fair Value Accounting

Fair value accounting denotes a financial reporting approach in which companies measure and report certain assets and liabilities at prices that reflect their actual value, which often means the current market value at the time of reporting.

Fama–French three-factor model

The Fama-French three factor model is an asset pricing model that expands on the capital asset pricing model (CAPM) by adding size risk and value risk factors to the market risk factor, providing a better explanation of portfolio returns.

FAS 133

FAS133, known as 'accounting for derivative instruments and hedging activities' is a standard set by the Financial Accounting Standards Board (FASB) that requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value.

Fat-finger error

A fat finger error refers to a mistake made in the trading of financial instruments, typically caused by pressing a wrong button or entering a transaction amount far greater than intended.

FCA

The FCA, or Financial Conduct Authority is a UK regulator, operating independently of the government, that aims to maintain integrity across domestic financial markets.

Featherbedding

Featherbedding in labour refers to the practice of hiring more workers than are necessary to perform a given job, or to enforce work rules that increase the number of workers required to perform a particular task.

Federal Reserve

The Federal Reserve is the US central bank. Its duties are to regulate economic conditions through monetary policy, supervising banks and maintaining financial stability, as well as provide financial services to depository institutions, the US government, and foreign official institutions.

Feeder fund

A feeder fund is a type of investment fund that invests most of its capital into another master fund with a common investment objective, thereby pooling resources to gain economies of scale with other feeder funds into the master fund.

Fence

In trading, a fence or 'collar' is an options strategy used to limit the range of potential returns on a financial instrument by buying and selling options with different strike prices.

Fiat Money

Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. Instead, its value comes from the trust that people place in the issuing government.

Fiduciary

A fiduciary is a person or organisation that acts on behalf of another person or persons, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust.

Financial astrology

Financial astrology is a pseudoscientific belief system that claims to predict financial market trends by interpreting astrological data for periods of time corresponding to various planetary positions.

Financial betting

Financial betting is a type of wagering on the outcome of financial markets, where the bet is based on the price movement of a financial instrument within a specified time frame.

Financial condition report

A financial condition report examines and assesses the financial health, stability, and liquidity of a company or financial institution.

Financial institution (FI)

A financial institution (FI) refers to any public or private organisation that is engaged in financial activities such as banking, dealing in stocks and other securities, or providing money services including currency exchange.Learn more

Financial integration

Financial integration refers to when financial markets in neighbouring, regional or global economies are closely linked together - for example, through cross-border capital flows, foreign participation in the domestic financial markets, and information sharing among financial institutions. Legal restrictions can sometimes hinder financial integration.Learn more

Financial Market

A financial market is a location or facility for the trading of financial instruments such as shares, currencies, or commodities. A market may have a physical trading floor or it may exist only online, but in all cases there are rules of conduct and regulatory practices that traders must observe.Learn more

Financial market participants

Financial market participants describes the people and institutions that trade or invest across assets like commodities, shares and forex. Institutional traders include organisations such as investment banks, while retail traders are individuals using their own funds to take positions. Learn more

Financial Model

A financial model is used for forecasting a business's future financial performance based on historical data and assumptions about future conditions.

Financial plan

A financial plan is a comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.

Financial Product (Instrument)

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Examples include CFDs.

Financial quote

A financial quote represents the latest price that a buyer and seller agreed upon and at which some amount of the asset was transacted.

Financial Regulation

Financial regulation refers to the laws and rules that govern what financial institutions such as banks, brokers, and investment companies can do. These regulations are enacted to ensure integrity and stability in the financial system.

Financial Report

Financial reporting involves the disclosure of financial results and related information to management and external stakeholders (eg, investors, creditors, regulators) about how a company is performing over a specific period.

Financial result

Financial risk modelling is the use of formal econometric techniques to determine the aggregate risk in a financial portfolio. Risk models are often used to assess market, credit and other factors. Learn more

Financial Risk

Financial risk refers to the possibility of losing money on financial investments or business operations due to market fluctuations, credit issues, or other financial failures.Learn more

Financial risk modelling

Financial risk modelling involves using statistical models to predict and manage potential risks that could impact financial investments or portfolios, often utilising historical data to forecast future outcomes.

Financial services

Financial services encompass a broad range of services provided by the finance industry, including banking, insurance, investments, and derivatives brokerages.Learn more

Financial Services Compensation Scheme (FSCS)

The Financial Services Compensation Scheme (FSCS) is a UK statutory fund that provides compensation to consumers when authorised financial services firms fail, protecting individuals from losses in areas such as deposits, investment, and insurance.

Financial signal processing

Financial signal processing involves the application of signal processing techniques to financial data, aiming to extract meaningful information and make forecasts or analyses about financial markets.Learn more

Financial Statement

A financial statement is a formal record of the financial activities and position of a business, person, or other entity, detailing written reports that quantify the financial strength, performance, and liquidity of the company.Learn more

FINRA

The Financial Industry Regulatory Authority (FINRA) is a US non-governmental organisation that regulates member brokerage firms and exchange markets domestically, with the aim to ensure fairness and honesty in the markets.

Fintech

The term fintech, derived from 'financial technology', refers to an industry encompassing any technological innovation in financial services, including those in financial literacy, education, retail banking, investment, and even cryptocurrencies.

First Chicago Method

The First Chicago Method is a valuation approach used in venture capital which involves scenario analysis to forecast future values of companies based on different potential outcomes (eg, best, base, and worst-case scenarios).

FIS (company)

FIS, or Fidelity National Information Services Inc, is an international provider of financial services technology and outsourcing services based in Jacksonville, Florida, that employs over 55,000 people around the world. The company provides payment processing and banking software, services and outsourcing of associated technology.

Fiscal policy

Fiscal policy involves government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation.

Fitch Ratings

Fitch Ratings is a prominent global rating agency that provides credit ratings, commentary, and research for global capital markets, assessing the creditworthiness of entities and their financial commitments.

Fixed asset

A fixed asset is a long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income and is not expected to be consumed or converted into cash within a year.

Fixed bill

Fixed bill refers to a set amount billed to a customer for services or goods over a specified period, often seen in utility or subscription services where the fee does not change regardless of usage.

Fixed deposit

A fixed deposit is a financial instrument provided by banks that offers investors a higher rate of interest than a regular savings account until the given maturity date.Learn more

Fixed income

Fixed income refers to investments that return regular, fixed interest payments and return the principal at maturity. Examples include government and corporate bonds.

Fixed income arbitrage

Fixed income arbitrage is an investment strategy that attempts to profit from price differences between related fixed income securities, balancing risk and leveraging discrepancies.

Fixed-income attribution

Fixed income attribution is a method used in finance to measure returns attributed to different sources of risk in a fixed income portfolio, such as duration, yield curve positioning, and sector allocation.

Flash crash

Flash cash transactions refer to rapid and sometimes large movements of cash, typically associated with speculative trading where large sums of money are quickly deposited and withdrawn.

Floor Broker

A floor broker is a member of an exchange who is authorised to execute trades on behalf of clients on the exchange floor, acting as an intermediary to help facilitate stock purchases and sales.

Flow-through share

Flow-through shares are a type of share offered by a company to investors that allow the company to pass on tax benefits, such as deductions for mineral exploration, to those investors.

Foreign Exchange (Forex, FX)

Foreign exchange, or forex, is the market in which currencies are traded, with participants able to buy, sell, exchange, and speculate on currencies. It is the largest market in the world with $7.5+ trillion in volume traded every day. Learn more

Forex signal

Forex signals are suggestions for entering a trade on a currency pair, usually at a specific time and price, intended to help traders decide on market entries and exits.

Forfeiture

Forfeiture is the loss or giving up of something as a penalty for wrongdoing. In financial terms, it can refer to the loss of property, rights, or privileges due to a breach of legal obligation.

Forward bet

A forward bet in finance typically refers to an agreement to purchase or sell an asset at a future date at a price agreed upon today, similar to a forward contract.

Forward Contract

A forward contract is a customised agreement between two parties to buy or sell an asset at a specified price on a future date. These are over-the-counter instruments, not traded on an exchange.

Forward market

The forward market involves trading forward contracts, which are agreements to buy or sell an asset at a predetermined future date and price. It's used primarily for hedging and risk management.

Forward Price-to-Earnings (Forward P/E)

Forward price to earnings (P/E) is a valuation ratio based on the expected earnings of a company, as opposed to historical profits. It indicates what investors are willing to pay today for earnings expected in the future.

Forward split

A forward split is a corporate action where a company increases the number of its outstanding shares, thereby reducing the price per share proportionately, making shares more affordable to a broader range of investors.

Founding partner

A founding partner is one of the original group of individuals who start a business or partnership, playing a crucial role in the establishment and early direction of the company.Learn more

Fractional-reserve banking

Fractional reserve banking is a banking system where banks hold only a fraction of the money deposited by customers as reserves, lending out the remainder to generate profits through interest.

Frankfurt Stock Exchange

The Frankfurt Stock Exchange is one of the world's largest trading centres for securities, and the largest of Germany's seven stock exchanges, playing a vital role in the global finance market.

Free cash flow (FCF)

Free cash flow is the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It's an important measure for investors, indicating the funds available for dividends, debt repayment, or reinvestment.

Free float

Free float refers to the proportion of a company’s shares that are publicly traded and available for investors to buy, excluding locked-in shares held by insiders, governments, and other restricted entities.Learn more

Free Market

A free market is an economic system where prices for goods and services are determined by open market and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.

Free Riding

Free riding occurs when an investor uses a cash account to buy and sell securities without having the cash to pay for the original purchase.

Freelance Economy

The freelance economy, or gig economy, consists of a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs.

Frequency Identification

Radio frequency identification is a technology using electromagnetic fields to automatically identify and track tags attached to objects, widely used in inventory and asset management.

Frictionless market

A frictionless market is an idealised concept where there are no transaction costs, taxes, or restrictions on trading, and prices fully reflect all available information at all times.

FT30 Index

The FT30, also known as the Financial Times Industrial Ordinary Index, is a longstanding stock market index in the UK, comprising 30 significant British companies.

FTSE 100

The FTSE 100 is an index composed of the 100 largest UK companies listed on the London Stock Exchange, widely used as a barometer for the overall performance of the UK’s major companies and economy. It is traded as the UK 100 on Capital.com. Learn more

FTSE Fledgling Index

The FTSE Fledgling Index includes UK companies listed on the main market of the London Stock Exchange that are not large enough to be included in the FTSE All-Share Index.

FTSE futures

FTSE futures are financial contracts to buy or sell the FTSE stock index at a future date. They are used by investors to hedge against potential market movements.Learn more

FTSE MIB index

The FTSE MIB is the benchmark stock market index for the Borsa Italiana, Italy's national stock exchange, representing the 40 most-traded stock classes listed on the exchange.

FTSE MID 250 Index

The FTSE Mid 250 Index (FTSE 250) includes the next 250 largest UK companies after those included in the FTSE 100, providing a broader picture of the UK corporate landscape beyond the largest companies.

FTSE techMark Index

The FTSE Techmark Index tracks the performance of innovative and technology-oriented companies listed on the London Stock Exchange’s TechMARK market.

Fuel price risk management

Fuel price risk management involves strategies and financial instruments used by companies exposed to volatile fuel prices to hedge against the risk of price fluctuations, thus stabilising cash flows and profit margins.

Fully Diluted Market Capitalisation in Cryptocurrency

Crypto market cap refers to the total market value of a cryptocurrency, calculated by multiplying the current price of the coin by its total circulating supply.Learn more

Fund

A fund is a pool of money set aside for a specific purpose. These funds are typically managed by investment professionals who allocate the money into different assets aiming to generate returns for the investors.

Fund governance

Fund governance refers to the system by which investment funds are regulated, managed, and audited, ensuring that they operate in the best interest of their investors and in compliance with legal and ethical standards.

Fund platform

A fund platform is an online service that offers investors access to a range of investment funds from different fund managers, allowing them to buy, hold, and sell investments in a consolidated environment.

Fundamental Analysis

Trading fundamental analysis involves assessing the macroeconomic factors that can impact a security's price. For a share, this might involve scrutinising a company's financial statements and health, while forex traders might consider key data points such as interest-rate decisions, inflation data and GDP releases. Learn more

Fundrise

Fundrise is a company that operates an investment platform through which individuals can invest in property portfolios, often structured as real estate investment trusts (REITs).

Funds management

Funds management is the overseeing and handling of a financial institution's cash flow. The funds manager ensures that the maturity schedules of the deposits coincide with the demand for loans.

Futures Contract

A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future.

Futures Market

The future market is a marketplace for the trading of futures contracts, which are agreements to buy or sell an asset at a future date at a price that is agreed upon today.