Financial Education

Lexicon v1

Comprehensive financial glossary with 154+ terms

of 154 terms

Backtesting

Technical

Testing a strategy on historical data

Backtesting involves applying a trading or investment strategy to historical market data to evaluate its performance. While useful for strategy develo... ...read more

strategy testing historical data overfitting validation

Beta

Technical

Sensitivity of a security's returns to market returns

Beta measures the volatility of a security or portfolio relative to the overall market. A beta of 1.0 indicates the security moves with the market. Be... ...read more

volatility market sensitivity regression systematic risk

Gamma

Technical

Second derivative of option price to underlying; rate of change of delta

Gamma measures how quickly delta changes as the underlying asset price moves. High gamma means delta is very sensitive to price changes. Gamma is high... ...read more

options greeks delta sensitivity option pricing volatility

Implied Volatility (IV)

Technical

Market's implied future volatility via option pricing

Implied volatility is the market's forecast of future price volatility, derived from option prices using models like Black-Scholes. High IV suggests m... ...read more

options pricing volatility forecast black-scholes market sentiment

MACD (Moving Average Convergence Divergence)

Technical

Momentum indicator from exponential moving averages

MACD shows the relationship between two EMAs (12-period and 26-period) with a signal line (9-period EMA of MACD). Crossovers, divergences, and histogr... ...read more

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Moving Average (MA)

Technical

Average of past prices. Simple (SMA) or exponential (EMA)

Moving averages smooth price data to identify trends. SMA gives equal weight to all periods, while EMA gives more weight to recent prices. Crossovers... ...read more

trend identification smoothing support/resistance signal generation

Put-Call Parity

Technical

C − P = S − K/(1+r)^t (ignoring dividends)

Put-call parity establishes the relationship between put and call options with the same strike and expiration. Formula: Call - Put = Stock - PV(K). Vi... ...read more

options pricing arbitrage risk-neutral valuation derivative relationships

R-Squared

Technical

Proportion of variance explained by the model/benchmark

R-squared measures how well a model explains data variation. In finance, it shows how closely a portfolio tracks its benchmark. Range: 0-1, where 1 in... ...read more

correlation model fit benchmark tracking statistical measure

Technical Analysis

Technical

Price pattern and volume analysis for trading decisions

Technical analysis studies price movements, patterns, and volume to forecast future price direction. Uses charts, indicators, and statistical measures... ...read more

price analysis chart patterns volume trend analysis

Theta

Technical

Option time decay; value loss per day

Theta measures how much option value decreases with time passage. Options lose value as expiration approaches. Long options suffer from theta decay, w... ...read more

options greeks time value decay option pricing

Vega

Technical

Option sensitivity to implied volatility

Vega measures option price sensitivity to volatility changes. Options with higher vega gain/lose more value with volatility changes. Important for opt... ...read more

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Volatility

Technical

Statistical measure of price dispersion

Volatility measures price variation magnitude. Realized volatility uses historical data, implied volatility from options. Higher volatility increases... ...read more

price variation risk measure statistical dispersion market uncertainty