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840 terms · page 32 of 35

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Derivatives, Futures & Options

Strangle

Buying or writing a call and a put at different out-of-the-money strikes with the same expiry.

Long Strangle Cost = Call Premium + Put Premium; Break-evens = Call Strike + Total Premium, and Put Strike - Total Premium ₹ Risk & Portfolio Management

Strategic Asset Allocation

A long-term target mix of asset classes based on objectives and risk capacity, held through market conditions.

Test: target weights are set for the long term and changed only when circumstances change, not when markets move % Risk & Portfolio Management

Stress Testing

Estimating how a portfolio would perform under specified severe but plausible adverse scenarios.

Test: apply a defined set of shocks to prices, rates, spreads and correlations, and compute the resulting portfolio value % Derivatives, Futures & Options

Strike Price

The fixed price at which an option's holder may buy or sell the underlying if the option is exercised.

Test: the strike is set by the exchange in standard intervals and does not change over the contract's life ₹ Bonds & Fixed Income

Subordinated Debt

Debt that ranks behind other debt for repayment if the borrower is wound up.

Repayment order: secured creditors, then senior unsecured, then subordinated, then hybrid capital, then equity qualitative Corporate Actions, Dividends & Governance

Subsidiary

A company controlled by another company, whose accounts are consolidated line by line into the parent's.

Test: the parent controls the composition of the board or holds more than one half of the total voting power qualitative Fundamental Analysis & Valuation

Sum-of-the-Parts Valuation

Valuing a diversified company by valuing each business separately and adding the results, less net debt and holding-company costs.

Value = Sum of (Value of Each Segment) + Value of Investments - Net Debt - Holding Company Discount ₹ crore Market Psychology & Behavioural Finance

Sunk Cost Fallacy

Continuing with a course of action because of resources already committed, rather than because of expected future returns.

Test: the decision to continue references money, time or effort already spent, which cannot be recovered by continuing qualitative Indicators & Oscillators

Supertrend

A trailing band plotted at a multiple of average true range from the midpoint of price, flipping sides when price crosses it.

Upper Band = (High + Low) / 2 + Multiplier x ATR; Lower Band = (High + Low) / 2 - Multiplier x ATR ₹ Technical Analysis & Chart Patterns

Support

A price level at which buying has previously been sufficient to halt a decline.

Test: price has reversed upward from approximately this level on at least two prior occasions ₹ Market Psychology & Behavioural Finance

Survivorship Bias

Drawing conclusions from a sample that includes only the entities that survived, omitting those that failed.

Test: the dataset excludes delisted, merged or closed entities, so the surviving sample's average overstates the true population average % Corporate Actions, Dividends & Governance

Swap Ratio

The number of acquirer shares issued for each share of the target in a share-based merger.

Swap Ratio = Value per Target Share / Value per Acquirer Share, as determined by the valuers ratio (x, times) Corporate Actions, Dividends & Governance

Sweat Equity

Shares issued to employees or directors at a discount, or for non-cash consideration such as know-how or value addition.

Test: shares are issued to employees or directors for consideration other than cash, or at a discount, under a special resolution qualitative Indicators & Oscillators

Swing High and Swing Low

A local peak or trough defined by a stated number of lower highs or higher lows on either side of it.

Swing High: a high greater than the n highs before it and the n highs after it; Swing Low: the mirror condition ₹ Market Basics & Instruments

Swing Trading

Holding a position for several days to a few weeks in order to capture one directional move in the price.

Test: holding period spans multiple sessions but well under a year, with the exit defined by a price target or stop rather than by a valuation view qualitative Technical Analysis & Chart Patterns

Symmetrical Triangle

A formation with a falling upper boundary and a rising lower boundary converging at similar angles.

Test: successively lower highs and successively higher lows converging toward an apex qualitative Derivatives, Futures & Options

Synthetic Position

A combination of options and the underlying that reproduces the payoff of a different single instrument.

Synthetic Long = Long Call + Short Put at the same strike and expiry; Synthetic Short = Short Call + Long Put qualitative Funds, ETFs & Index Investing

Systematic Investment Plan

An arrangement to invest a fixed amount in a mutual fund at regular intervals, usually monthly.

Future Value = Instalment x [((1 + r) raised to n - 1) / r] x (1 + r), where r is the periodic return and n the number of instalments ₹ Risk & Portfolio Management

Systematic Risk

Risk affecting the entire market that cannot be removed by diversification.

Test: the risk arises from factors common to all assets, such as interest rates, inflation, policy or global shocks qualitative Funds, ETFs & Index Investing

Systematic Transfer Plan

An arrangement to move a fixed amount at regular intervals from one scheme to another within the same fund house.

Test: units are redeemed from the source scheme and invested in the target scheme on a stated schedule ₹ Funds, ETFs & Index Investing

Systematic Withdrawal Plan

An arrangement to redeem a fixed amount from a mutual fund at regular intervals.

Units Redeemed each period = Withdrawal Amount / NAV on the withdrawal date ₹ Indian Market, Regulation & Taxation

T Plus Zero Settlement

Same-day settlement, in which securities and funds are exchanged on the trade date itself.

Test: pay-in and pay-out both occur on the trade date rather than on a subsequent day days Risk & Portfolio Management

Tactical Asset Allocation

Short-term deviations from a strategic allocation, intended to exploit expected differences in asset class returns.

Test: actual weights differ from strategic targets by a bounded amount, with a stated basis and a horizon for reverting % Risk & Portfolio Management

Tail Risk

The risk of rare, extreme outcomes that sit far in the tails of the return distribution.

Test: outcomes beyond three standard deviations occur far more often than a normal distribution would imply qualitative