GLOSSARY

List of Financial Terms in alphabetical order:

[ A ][ B ][ C ][ D ][ E ][ F ][ G ][ H ][ I ][ J ][ K ][ L ][ M ][ N ][ O ][ P ][ Q ][ R ][ S ][ T ][ U ][ V ][ W ][ X ][ Y ][ Z ]

Face Amount The amount of insurance coverage provided by a life insurance company as stated in the contract. Face amount can also refer to the denomination (or maturity value) of a bond.

Face Value Denomination or value (exclusive of discount or premium) due to a security holder at maturity. It is also referred to as par value and is usually inscribed on the face of the security.

Factoring The sale or transfer of a company's accounts receivable to an outside company called a factoring company that now collects and processes the receivables as well as incurs any risks associated with their collection. Usually a company "factors" its receivables, selling them at a discount to the factoring company, in exchange for cash.

Facultative Reinsurance The reinsuring of a part or all of a risk provided by a single policy. The original insurer offers the risk to be reinsured and the reinsurer has the option to accept or reject the individual risk.

Fail A trade that does not settle on its settlement date. When this occurs on the sell side, it is called "failure to deliver" and on the buy side it is called a "fail to receive".

Fannie Mae A shareholder-owned US corporation that purchases mortgages from lenders. Fannie Mae raises funds to purchase mortgages by issuing stock or mortgage-backed securities backed by mortgage loans it holds.

FDIC See Federal Deposit Insurance Corporation

Federal Deposit Insurance Corporation (FDIC) A U.S. federal agency created in 1933 that guarantees, up to a stated limit, the reimbursement to depositors of deposits in member banks and thrift institutions that are liquidated as the result of insolvency (collapse).
FedFunds See Federal Funds

Federal Funds (FedFunds) FedFunds are short-term borrowings and investments (typically overnight) between other banks transferred using each bank's Federal Reserve District Bank. One bank (borrowing bank) requires short-term funding and refers to that transaction as FedFunds purchased. The other bank (lending bank) has excess funds and refers to the transaction as FedFunds sold. FedFunds are not loans from the Federal Reserve.

Fed Funds Market Interbank market for borrowing and lending deposits held by commercial banks in the U.S. that are member banks at theFederal Reserve. Since reserve requirements are satisfied with federal funds, banks with deposits in excess of the required reserves will lend these excess funds to banks with a shortage of reserves at a market determined interest rate, known as the Fed Funds Rate. The Fed Funds Market is usually an overnight market, with all loans made in immediately available funds that are repaid by 11 am EST on the following day. Fed Funds can also trade for periods as long as six months.

Federal Funds Rate Rate at which overnight FedFunds are traded.

Federal Reserve System A system established in 1913 to regulate the U.S. monetary and banking system. The system consists of a board of governors in Washington, D.C., 12 regional Federal Reserve Banks and their 24 branches. The Federal Reserve has monopoly power over the monetary base and has the authority to set reserve requirements, to conduct open market activities and to lend directly to commercial banks. The regional reserve banks monitor commercial and savings banks in their area for compliance with Federal Reserve Board regulations, provide emergency funds from their discount windows, act as depositories and provide transfer and other services for their member banks.

Federal Wire (FedWire) Electronic communication network that links all the Federal Reserve Banks' related offices and associated federal agencies. The network facilitates transfer money between member institutions quickly in immediately available funds at a minimal cost.

FedWire See Federal Wire

Fidelity Bonds A type of insurance policy that protects employers against loss of monies, securities or property due to employee dishonesty and fraud.

Fiduciary A person in a position of great trust and responsibility who supervises the financial affairs of others. In the financial services area, it can be a person or institution that manages money or property for another and must exercise proper and prudent judgment as stipulated by law.

Finance Companies Finance companies are similar to banks in that they issue loans to customers. However, finance companies cannot accept deposits. Instead, they raise funds by issuing debt, selling off assets and borrowing from other financial institutions. Since they do not accept deposits, finance companies are less regulated than banks and other depository institutions. Some finance companies focus specifically on loans to consumers (referred to as consumer finance companies) or loans to businesses (referred to as commercial finance companies). Some finance companies focus on one specific line of business, while others offer a wide range of diversified financial services.

Financial Planning Process of providing a client with impartial assistance in analyzing and organizing their financial affairs to achieve a financial goal or outcome.

Financial Reinsurance A special form of limited liability insurance aimed at the financial and strategic goals of the reinsured rather than the risk transfer goals.

Financial Services Authority (FSA) Financial services industry regulator in the United Kingdom.

Finite Risk Reinsurance A highly customized insurance contract that spreads the risks for an individual policyholder over time. Claims are geared towards actual claim experiences instead of general industry performance.

First Pillar Term used to describe funding for financing retirement benefits as articulated by the World Bank. Under their three-pillared system, the first pillar consists of mandatory, publicly financed solutions.

Fixed Annuity An annuity contract with a guaranteed interest rate provided by the insurance company for the life of the contract. Fixed annuities can be either immediate or deferred.

Fixed Assets The tangible property used in operating a business. These items, which include plant, premises, machinery and equipment, are listed on the balance sheet at their depreciated values. Fixed assets are the least liquid assets held by a company.

Fixed Costs The company's expenses that remain fairly stable and do not vary from period to period in response to changes in the degree to which capacity is utilized on the basis of business or sales volume. Examples include salaries, depreciation expense and rent.

Fixed Income See Fixed Income Investment.

Fixed Income Investment A financial instrument that pays a fixed rate of return. Examples include a bond that pays a fixed rate of interest until maturity, or a preferred stock that pays a fixed dividend.

Fixed-Rate Loan A loan whose interest rate remains fixed over time. Examples include conventional mortgages and consumer installment loans.

Flexible Premium Annuity A deferred annuity with periodic payments over time. The payment amount and frequency may vary over time.

Flipping The practice of buying and selling a security quickly in order to turn a profit. An example is an investor who purchases a stock at an initial public offering and then resells it almost immediately in the aftermarket or secondary market. Some securities are underwritten with penalties to discourage flipping.

Float In banking, this refers to the time between the deposit of a check in the bank and the crediting of available funds to the depositor's account. This time difference creates float or short-term available funds to the bank. The term "floated shares" refers to the number of a company's outstanding shares that are available for sale to the public.

Floor A contract on a short-term interest rate in which the writer of the floor pays the buyer the difference for any period prior to expiration when the rate is fixed at a level below the floor rate specified in the cap. Floor can also refer to the minimum interest rate on an adjustable-rate security or loan.

Foreclosure Legal process in which a property owner (borrower) forfeits its property to a lender, following a default on the lender's loan by the borrower. The property is considered collateral and used to allow the lender to attempt to recover the principal and interest it loses because the loan defaulted.

Foreign Currency Intervention Purchases and sales of foreign exchange by the central bank in an effort to support the exchange rate of the country's currency at a specific level. Like central bank open market operations, this activity impacts the monetary base of the country.

Foreign Exchange Options Contracts that allow the holder to call (buy) or put (sell) a predetermined amount of currency for another currency within a specific period. Options do not have to be exercised.

Foreign exchange risk See Currency Risk.

Forward Contractual agreement between two parties to buy or sell financial instruments such as, commodities, securities and currencies etc. for delivery at a specified future date and a fixed price. The buyer is said to be "long" the forward while the seller or "short" agrees to deliver the items under the specified conditions. Banks act as intermediaries in forward transactions and may function as the depository for any collateral associated with forward contracts.

Forward Rate Agreement cash-settled interbank forward contract on interest rates. The seller pays the buyer the difference between the current rate and the agreed-upon rate if the interest rate has risen above the agreed-upon rate. If the interest rate has fallen below the agreed-upon rate, then the buyer pays the seller.

FRA See Forward Rate Agreement.

Front Office Refers to the sales and/or customer service personnel in banks, insurance, brokerage or other financial services institutions.

FSA See Financial Services Authority.

Footsie100 (FTSE)- Stands for the Financial Times Stock Exchange, an index of 100 blue chip stocks traded on the London Stock Exchange

FTSE See Footsie 100

Fundamental Analysis The study of a company's earnings history, products, management, operating environment and other factors that will affect profitability and growth.

Futures Contracts that cover the purchase and sale of financial instruments or physical commodities for future delivery at a predetermined quantity, date and price.

FX Risk Foreign exchange risk. See Currency Risk.

[ A ][ B ][ C ][ D ][ E ][ F ][ G ][ H ][ I ][ J ][ K ][ L ][ M ][ N ][ O ][ P ][ Q ][ R ][ S ][ T ][ U ][ V ][ W ][ X ][ Y ][ Z ]

<Go Back