IAR flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Real GDP
- Nominal GDP adjusted for price changes using a deflator, so growth reflects changes in quantity produced rather than inflation.
- Business cycle trough
- The low point of a contraction, where economic activity stops falling and begins to expand; unemployment is typically high and inflation pressure low.
- Demand-pull inflation
- Inflation caused by aggregate demand outpacing productive capacity, often described as too much money chasing too few goods.
- Cost-push inflation
- Inflation driven by rising input costs such as energy, wages, or raw materials, which firms pass through as higher prices.
- Leading indicators
- Series that change before the overall economy, such as building permits, initial jobless claims, and the yield curve slope.
- Fiscal policy
- Government use of spending and taxation to influence economic activity, set by legislatures rather than central banks.
- Structural unemployment
- Joblessness from a mismatch between workers' skills or locations and available jobs, persisting even during economic expansions.
- Yield curve inversion
- A condition where short-term interest rates exceed long-term rates, historically a recession signal reflecting tight policy expectations.
- Duration
- A measure of a bond's price sensitivity to interest rate changes, expressed in years; higher duration means greater price volatility.
- Yield to maturity
- The single discount rate equating a bond's future coupons and principal repayment to its current market price, assuming held to maturity.
- Current yield
- Annual coupon interest divided by the bond's current market price, ignoring capital gain or loss at maturity.
- Preferred stock
- Equity with a stated dividend priority over common stock and a liquidation claim ahead of common, but behind all bondholders.
- Net asset value
- A fund's total assets minus liabilities divided by shares outstanding, typically calculated once per day at market close.
- Authorized participant
- An entity that creates or redeems ETF shares in kind with the fund, keeping the ETF's market price near its net asset value.
- Closed-end fund discount
- A situation where an exchange-traded closed-end fund trades below net asset value, common because shares are not continuously redeemable.
- Call option buyer
- Holder of the right, not obligation, to buy the underlying at the strike price; maximum loss is the premium paid.
- Futures contract
- A standardized, exchange-traded agreement to buy or sell an asset at a future date, marked to market daily through a clearinghouse.
- REIT distribution rule
- To retain pass-through tax treatment, a real estate investment trust must distribute at least 90% of its taxable income to shareholders.
- Risk tolerance
- The combination of a client's financial ability to bear loss and psychological willingness to accept risk in pursuit of objectives.
- Investment policy statement
- A written document setting client objectives and constraints, including liquidity, time horizon, tax, legal, and unique circumstances.
- Dollar-cost averaging
- Investing a fixed dollar amount at regular intervals, which buys more shares when prices are low and fewer when high.
- Sharpe ratio
- Excess return over the risk-free rate divided by standard deviation; a higher value indicates better risk-adjusted performance.
- Beta
- A measure of an asset's sensitivity to market movements; a beta of one indicates volatility matching the overall market.
- Systematic risk
- Market-wide risk such as interest rates or recession that cannot be eliminated through diversification and is compensated with return.
- Rebalancing
- Periodically returning portfolio weights to target allocations, which systematically trims winners and adds to underweighted holdings.
- Asset location
- Placing tax-inefficient holdings in tax-deferred accounts and tax-efficient holdings in taxable accounts to improve after-tax returns.
- Fiduciary duty
- The obligation to act with care and loyalty in the client's best interest, including full disclosure of conflicts and reasonable basis.
- Material nonpublic information
- Information a reasonable investor would consider important that has not been publicly disseminated; trading or tipping on it is prohibited.
- Front-running
- Trading for one's own account ahead of a known pending client order to profit from the expected price impact.
- Soft dollar arrangement
- Using client brokerage commissions to pay for research and execution services that benefit the client's account, not firm overhead.
- Know-your-customer rule
- The requirement to verify client identity and understand financial circumstances, objectives, and risk tolerance before recommending investments.
- Fair dealing
- The standard requiring equitable treatment of all clients, with allocations of oversubscribed securities following disclosed, pre-established procedures.