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Risk & Portfolio Management

Correlation

A measure from -1 to +1 of how closely two assets' returns move together.

Correlation = Covariance of A and B / (Standard Deviation of A x Standard Deviation of B) ratio (x, times)
Indian Market, Regulation & Taxation

Cost of Acquisition

The amount treated as having been paid for an asset, used as the base against which a capital gain is computed.

Capital Gain = Sale Consideration - Cost of Acquisition - Transfer Expenses
Derivatives, Futures & Options

Cost of Carry

The net cost of holding the underlying until a derivative's expiry, comprising financing cost less any income received.

Futures Fair Value = Spot x (1 + Risk-Free Rate x Days to Expiry / 365) - Dividends Expected before Expiry %
Fundamental Analysis & Valuation

Cost of Equity

The return shareholders require for bearing the risk of owning a company's shares.

Cost of Equity = Risk-Free Rate + Beta x Equity Risk Premium %
Financial Statements & Accounting

Cost of Goods Sold

The direct cost of producing the goods or services actually sold during a period, principally materials and direct labour.

COGS = Opening Inventory + Purchases - Closing Inventory ₹ crore
Risk & Portfolio Management

Counterparty Risk

The risk that the other party to a contract fails to perform its obligations.

Test: performance of the contract depends on a specific party's solvency, with no guarantor standing behind it qualitative
Bonds & Fixed Income

Coupon Rate

The annual interest a bond pays, expressed as a percentage of its face value.

Annual Coupon = Face Value x Coupon Rate %
Risk & Portfolio Management

Covariance

A measure of how two assets' returns vary together, unscaled by their individual volatilities.

Covariance = Average of [(Return A - Mean A) x (Return B - Mean B)] %
Orders, Execution & Market Structure

Cover Order

An intraday order that must be placed together with a compulsory stop-loss, allowing the broker to grant higher leverage.

Test: entry and a mandatory stop-loss are submitted as one instruction; margin is computed from the distance between them qualitative
Derivatives, Futures & Options

Covered Call

Writing a call option against shares already owned, so the delivery obligation is covered by the holding.

Maximum Gain = (Strike - Purchase Price + Premium) x Lot Size; Break-even = Purchase Price - Premium
Funds, ETFs & Index Investing

Creation Unit

The large block of ETF units in which new units are created or existing ones redeemed with the fund.

Test: units are created or redeemed only in multiples of the specified block size, in exchange for the underlying basket or cash shares
Economy, Macro & Market Cycles

Credit Growth

The rate of increase in bank lending to the economy.

Credit Growth = (Current Outstanding Bank Credit - Year-Earlier Credit) / Year-Earlier Credit x 100 %
Bonds & Fixed Income

Credit Rating

An agency's opinion on an issuer's ability to meet its debt obligations, expressed on a letter scale.

Scale in India runs AAA, AA, A, BBB, BB, B, C, D, with plus and minus modifiers within categories qualitative
Bonds & Fixed Income

Credit Risk

The risk that a borrower fails to make interest or principal payments as promised.

Expected Loss = Probability of Default x Loss Given Default x Exposure at Default %
Bonds & Fixed Income

Credit Spread

The extra yield a bond offers over a government security of the same maturity, compensating for credit risk.

Credit Spread = Corporate Bond Yield - Government Security Yield of the same maturity bps
Economy, Macro & Market Cycles

Crude Oil Price

The price of crude oil, a key macroeconomic variable for India because most of its requirement is imported.

Impact on Import Bill = Change in Price per Barrel x Annual Barrels Imported %
Technical Analysis & Chart Patterns

Cup and Handle

A rounded base followed by a smaller, shallower pullback near the prior high, resembling a cup with a handle.

Test: a rounded recovery to near the prior high, then a shallow consolidation typically retracing less than a third of the cup's depth qualitative
Market Basics & Instruments

Currency Pair

A quotation of one currency's value in terms of another, such as USD/INR, where the first currency is bought or sold against the second.

Quote convention: BASE/QUOTE, where the price states how many units of the quote currency buy one unit of the base
Risk & Portfolio Management

Currency Risk

The risk that exchange rate movements change the value of an investment or cash flow measured in the home currency.

Return in Home Currency = (1 + Foreign Return) x (1 + Currency Change) - 1 %
Economy, Macro & Market Cycles

Current Account Deficit

The excess of a country's payments for imports, services and transfers over its receipts from them.

Current Account Balance = Trade Balance + Net Services + Net Primary Income + Net Transfers %
Financial Statements & Accounting

Current Assets

Assets expected to be converted to cash, sold or consumed within twelve months or one operating cycle.

Current Assets = Inventory + Trade Receivables + Cash and Equivalents + Short-Term Investments + Other Current Assets ₹ crore
Financial Statements & Accounting

Current Liabilities

Obligations a company must settle within twelve months, including trade payables, short-term borrowings and accrued expenses.

Current Liabilities = Trade Payables + Short-Term Borrowings + Current Maturities of Long-Term Debt + Provisions + Other Current Liabilities ₹ crore
Fundamental Analysis & Valuation

Current Ratio

Current assets divided by current liabilities, measuring whether short-term obligations are covered by short-term assets.

Current Ratio = Current Assets / Current Liabilities ratio (x, times)
Bonds & Fixed Income

Current Yield

A bond's annual coupon expressed as a percentage of its current market price.

Current Yield = Annual Coupon / Current Market Price x 100 %