GISI Securities Course Professional Level flashcards
GISI Securities Course Professional Level · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Modified duration
- The percentage change in a bond's price for a one-percentage-point change in yield, equal to Macaulay duration divided by one plus yield per period.
- DV01
- The dollar change in a bond's value for a one-basis-point move in yield, calculated as modified duration times dirty price times 0.0001.
- Put-call parity
- For European options on a non-dividend-paying stock, the call price minus the put price equals the stock price minus the present value of the strike.
- High-water mark
- The highest net asset value at which a fund has previously paid a performance fee, above which new performance fees can accrue after losses.
- WACC
- The market-value weighted average of a company's after-tax cost of debt and cost of equity, used to discount free cash flow to the firm.
- Expected shortfall
- The average loss in the worst tail of the return distribution beyond the value-at-risk threshold, also called conditional value at risk.
- Fiduciary duty
- The obligation to act in a client's best interest through loyalty, avoiding or disclosing conflicts, and care, applying competence and prudence.
- Spoofing
- Entering orders with the intent to cancel before execution to create a false impression of supply or demand and move prices.
- Stop order
- An order that becomes a market order once a specified trigger price is reached, used to limit losses or protect gains.
- Dirty price
- A bond's full price including accrued interest since the last coupon date, equal to the clean price plus accrued interest.
- Credit default swap
- A derivative in which the protection buyer pays a periodic premium and receives a contingent payment if a specified credit event occurs.
- Swing pricing
- A fund valuation mechanism that adjusts the net asset value per unit to pass dealing costs from large subscriptions or redemptions onto the transacting investors.
- Sharpe ratio
- A risk-adjusted performance measure equal to the portfolio return minus the risk-free rate, divided by the portfolio's standard deviation.
- Gordon growth model
- A dividend discount model valuing a stock as next year's dividend divided by the difference between required return and constant growth rate.
- Value at risk
- A statistical estimate of the maximum loss a portfolio is expected to incur over a given horizon at a specified confidence level.
- Suitability
- The requirement that a recommendation match a client's objectives, risk tolerance, time horizon, liquidity needs, and financial circumstances based on know-your-client information.
- Best execution
- The obligation to take all sufficient steps to obtain the best possible result for client orders, considering price, cost, speed, and likelihood of execution and settlement.
- Theoretical ex-rights price
- The price per share after a rights issue, calculated as the pre-issue market value plus subscription proceeds divided by the total shares outstanding after the issue.
- Yield to worst
- The lowest yield among yield to maturity and all yield-to-call scenarios for a callable bond, used as a conservative yield measure.
- Delta
- The change in an option's price for a one-unit change in the underlying price; it also approximates the hedge ratio for a small move.
- Net asset value
- A fund's total assets minus total liabilities divided by units outstanding, typically struck at a defined valuation point using market prices.
- Efficient frontier
- The set of portfolios offering the highest expected return for each level of risk, from which investors choose based on risk aversion.
- Free cash flow to firm
- Cash available to all capital providers after operating expenses and reinvestment, calculated as EBIT after tax plus depreciation minus capital expenditure and working capital increases.
- Three lines of defense
- A risk governance model in which business units own risk, risk and compliance functions oversee it, and internal audit provides independent assurance.
- Front-running
- Trading ahead of a known client order to profit from the expected price impact, a prohibited form of unfair dealing.
- Circuit breaker
- A market-wide volatility control that halts trading for a set period when a price index moves beyond a predefined threshold.
- Rights issue
- An offering of new shares to existing holders, usually at a discount, in proportion to their current holdings, preserving pre-emptive rights.
- Interest rate swap
- An agreement to exchange fixed and floating interest payments on a notional principal, with the fixed swap rate set so both legs have equal present value at inception.
- Implied volatility
- The volatility input that makes an option pricing model reproduce the observed market price, reflecting supply and demand for the option.
- Closed-ended fund
- A collective investment scheme with a fixed number of shares that trade on an exchange, so the market price can differ from net asset value.
- Information ratio
- Active return divided by tracking error, measuring the consistency of a manager's outperformance relative to a benchmark.
- DuPont decomposition
- A breakdown of return on equity into net profit margin, asset turnover, and financial leverage, used to diagnose sources of profitability.