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Terms starting with C

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Derivatives, Futures & Options

Calendar Spread

Writing an option in a nearer expiry and buying the same strike in a further expiry, or the equivalent in futures.

Net Debit = Far Expiry Premium - Near Expiry Premium, at the same strike
Orders, Execution & Market Structure

Call Auction

A matching mechanism that collects orders over a window and executes them all at a single price that maximises traded quantity.

Equilibrium Price = the price at which the largest quantity can be matched; ties are broken by minimum unmatched quantity
Derivatives, Futures & Options

Call Option

An option giving its buyer the right to buy the underlying at the strike price on or before expiry.

Payoff at expiry for the buyer = max(Spot - Strike, 0) - Premium Paid
Bonds & Fixed Income

Callable Bond

A bond the issuer may redeem before maturity, at a stated price on stated dates.

Test: the terms give the issuer an option to redeem early; the investor's return should be computed to the earliest call date qualitative
Risk & Portfolio Management

Calmar Ratio

Annualised return divided by the maximum drawdown over the same period.

Calmar Ratio = Compound Annual Growth Rate / Maximum Drawdown ratio (x, times)
Technical Analysis & Chart Patterns

Candlestick

A chart element showing a period's open, high, low and close as a body between open and close with wicks to the extremes.

Body = distance between Open and Close; Upper Wick = High - max(Open, Close); Lower Wick = min(Open, Close) - Low qualitative
Economy, Macro & Market Cycles

Capacity Utilisation

The proportion of installed productive capacity that is actually being used.

Capacity Utilisation = Actual Output / Maximum Possible Output x 100 %
Fundamental Analysis & Valuation

Capital Allocation

Management's decisions about where to deploy the cash a business generates: reinvestment, acquisitions, debt repayment, dividends or…

Test: incremental capital deployed earns a return above the cost of capital, judged over several years qualitative
Fundamental Analysis & Valuation

Capital Asset Pricing Model

A model that estimates the return required on an asset as the risk-free rate plus a premium proportional to its market risk.

Expected Return = Risk-Free Rate + Beta x (Expected Market Return - Risk-Free Rate) %
Financial Statements & Accounting

Capital Expenditure

Spending on acquiring or improving long-lived assets, recorded on the balance sheet and expensed over time through depreciation.

Capital Expenditure = Increase in Gross Block + Increase in Capital Work in Progress ₹ crore
Market Basics & Instruments

Capital Gain

The profit made when a capital asset is sold for more than its cost of acquisition.

Capital Gain = Sale Consideration - Cost of Acquisition - Transfer Expenses
Indian Market, Regulation & Taxation

Capital Gains Tax

Tax on the profit realised when a capital asset is transferred.

Taxable Gain = Sale Consideration - Cost of Acquisition - Cost of Improvement - Transfer Expenses
Market Basics & Instruments

Capital Loss

The loss incurred when a capital asset is sold for less than its cost of acquisition.

Capital Loss = Cost of Acquisition + Transfer Expenses - Sale Consideration
Risk & Portfolio Management

Capital Market Line

The line showing the risk-return combinations available by mixing the risk-free asset with the optimal risky portfolio.

Expected Return = Risk-Free Rate + [(Market Return - Risk-Free Rate) / Market Standard Deviation] x Portfolio Standard Deviation %
Corporate Actions, Dividends & Governance

Capital Reduction

A court-approved reduction of a company's share capital, by cancelling shares or returning capital to shareholders.

Test: approved by special resolution and confirmed by the National Company Law Tribunal, with creditor objections heard ₹ crore
Financial Statements & Accounting

Capital Work in Progress

Expenditure on assets still under construction, held on the balance sheet until the asset is ready for use.

Test: the asset is not yet ready for its intended use, so no depreciation is charged and costs accumulate on this line ₹ crore
Market Psychology & Behavioural Finance

Capitulation

The point in a decline at which remaining holders abandon their positions, typically on heavy volume.

Test: a sharp price fall on unusually high volume, accompanied by broad negative sentiment and heavy redemptions qualitative
Indian Market, Regulation & Taxation

Carry Forward of Losses

The ability to carry an unabsorbed loss into future years to set off against future income of the permitted type.

Test: the return is filed by the due date, and the loss is set off in later years only against income of the category the rules permit
Derivatives, Futures & Options

Cash and Carry Arbitrage

Buying the underlying in the cash market while selling its futures, locking in the basis as a return.

Locked-in Return = (Futures Price - Spot Price - Transaction Costs) / Spot Price, annualised over the days to expiry %
Financial Statements & Accounting

Cash and Cash Equivalents

Cash on hand, bank balances and short-term highly liquid investments readily convertible to a known amount of cash.

Test: the instrument matures within three months of acquisition and carries insignificant risk of change in value ₹ crore
Fundamental Analysis & Valuation

Cash Conversion Cycle

The number of days between paying for inputs and collecting cash from customers.

Cash Conversion Cycle = Inventory Days + Debtor Days - Creditor Days days
Financial Statements & Accounting

Cash Flow Statement

A statement reconciling the change in a company's cash balance over a period, split into operating, investing and financing activities.

Change in Cash = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow ₹ crore
Economy, Macro & Market Cycles

Cash Reserve Ratio

The proportion of deposits banks must hold as cash with the Reserve Bank, earning no interest.

Required Reserves = Net Demand and Time Liabilities x Cash Reserve Ratio %
Derivatives, Futures & Options

Cash Settlement

Settlement of a derivative by paying the cash difference between the contract price and the final settlement price.

Settlement Amount = (Final Settlement Price - Contract Price) x Lot Size, sign adjusted for the position