Korea Securities Investment Advisor key terms

A security representing ownership in a company, giving the holder a residual claim on assets and earnings plus voting rights. Returns come from dividends and price appreciation, and holders rank behind creditors on liquidation.

A debt security in which the issuer borrows principal and promises scheduled coupon interest and repayment at maturity. Price moves inversely to market yields, and holders rank ahead of shareholders in the issuer's capital structure.

The standard equity class carrying voting rights at shareholder meetings and a variable dividend set by resolution. It bears the greatest residual risk, ranking last among claimholders when an issuer is liquidated.

A security issued by a collective investment vehicle representing a pro-rata share of the fund's net assets. Its value is the fund's net asset value per unit, and investors redeem rather than trade it on an exchange.

A contract whose value is derived from an underlying asset, rate, index, or event. Futures, options, and swaps are typical forms, used for hedging or leverage and settled by delivery or cash.

A standardized exchange-traded contract obliging both parties to buy or sell an underlying at a fixed price on a future date. Daily mark-to-market margining and clearing house guarantee distinguish it from a forward.

A contract granting the buyer a right, not an obligation, to buy (call) or sell (put) an underlying at a strike price by or on an expiry date. The buyer pays a premium and risks only that premium.

Collateral a clearing member or client deposits to secure performance on derivative positions. Initial margin covers potential future exposure and is topped up through variation margin as daily settlement losses accrue.

The nominal principal amount printed on a bond or share certificate, used to compute coupon interest and redemption. Bond prices are often quoted as a percentage of par, above or below it.

The fixed annual interest rate stated on a bond, applied to par value to determine each coupon payment. It differs from yield to maturity, which reflects the price actually paid and reinvestment assumptions.

The single discount rate equating a bond's future coupons and principal repayment to its current price, assuming coupons are reinvested at that same rate until maturity. It is the standard total-return measure for bonds.

A weighted average time until a bond's cash flows are received, also used to estimate price sensitivity to a small yield change. Higher duration means greater interest-rate risk for a given rate move.

The curvature of the price-yield relationship, capturing how duration itself changes as yields move. Positive convexity makes price gains from falling yields larger than losses from equal yield rises.

A measure of a security's sensitivity to movements in the market portfolio, estimated by regressing its returns on market returns. Beta above one implies amplified market risk; beta near zero implies little systematic exposure.

Risk from market-wide factors such as interest rates, inflation, or recessions that cannot be removed by diversification. Investors are compensated for bearing it, which is why it drives expected returns in asset pricing models.

Spreading capital across assets whose returns are imperfectly correlated to reduce portfolio volatility without lowering expected return. It eliminates unsystematic risk but leaves market-wide risk intact.

The set of portfolios offering the highest expected return for each level of risk, or the lowest risk for each return. Rational mean-variance investors choose from portfolios lying on this curve.

Excess return over the risk-free rate divided by return volatility, measuring reward per unit of total risk. Higher values indicate better risk-adjusted performance, and it suits portfolios holding undiversified or total risk.

Active return relative to a benchmark divided by tracking error, measuring skill per unit of deviation from the benchmark. It is the standard gauge for evaluating active managers against a stated index.

The standard deviation of the difference between portfolio returns and benchmark returns over time. Low values suit index-tracking strategies, while active managers accept higher tracking error seeking excess return.

An investor meeting statutory thresholds of financial sophistication or asset size, such as a professional or institutional category, who may access private funds and higher-risk products with reduced protections.

The duty to recommend or sell a financial product only after assessing the investor's objectives, financial situation, and risk tolerance, and confirming the product fits. Breach can trigger liability for unsuitable advice.

The obligation to give an investor the information needed to understand a product's structure, risks, and costs before a contract is formed, and to obtain confirmation of that explanation.

A disclosure document describing a fund's or security's strategy, fees, risks, and redemption terms, which must be delivered before subscription. It forms the basis for informed consent and later claims of mis-selling.

A legal structure pooling money from multiple investors to invest in securities or other assets under professional management. Korean law distinguishes securities, real estate, special asset, and mixed-asset types.

The per-unit value of a fund's net assets calculated at each valuation point, used to price subscriptions and redemptions. It reflects market value of holdings less liabilities divided by units outstanding.

A charge deducted when fund units are sold to an investor, either upfront or on redemption, compensating the distributor. It reduces the effective return and must be disclosed in the prospectus.

Annual fund operating costs, including management and administrative fees, expressed as a percentage of average net assets. It excludes trading commissions and sales loads but is the main recurring cost drag on returns.

Deciding how to divide a portfolio among asset classes such as equities, bonds, and cash, based on goals, horizon, and risk tolerance. It is generally the largest driver of long-run return variability.

Periodically adjusting holdings back to target weights after market moves shift the mix. It enforces disciplined selling of winners and buying of laggards, controlling drift in the portfolio's risk profile.

Tax levied on profit from selling qualifying assets, computed as sale proceeds minus acquisition cost and allowable expenses. In Korea, listed share gains are taxed only for major shareholders or specified holdings.

Tax on dividends and fund distributions, typically withheld at source and included in comprehensive financial income above a threshold. The rate and aggregation rules depend on the investor's total financial income.

A regime aggregating interest and dividend income above an annual threshold with other income and taxing it at progressive marginal rates. It raises effective tax for high-income investors and affects product choice.

The payer of income deducts tax before paying the recipient and remits it to the tax authority. It secures collection and makes most investment income tax effectively settled at payment.

A situation where a firm's or adviser's own interest, or a related party's, could improperly influence advice given to a client. Firms must identify, disclose, and manage such conflicts, and may be barred from acting.

The Korean statute governing financial investment businesses, products, and investor protection, unifying prior securities, futures, and asset management laws. It sets licensing, conduct, and disclosure requirements for firms.

Policies and procedures a financial firm maintains to ensure compliance with law, manage conflicts, and prevent misconduct by employees. Regulators require a designated compliance officer and periodic review.

The volatility level implied by an option's market price when inserted into a pricing model. It reflects market expectations of future price swings and rises in uncertainty, lifting option premiums.