Lexicon v1

Arbitrage involves simultaneously buying and selling the same or equivalent assets in different markets to profit from price differences. True riskles... ...read more

The ask price (also called offer price) is the minimum price that a seller is willing to accept for a security. It represents the supply side of the m... ...read more

A basis point is a unit of measurement equal to 1/100th of 1% (0.01%). It's commonly used to express small changes in interest rates, yields, and spre... ...read more

The bid price is the maximum price that a buyer is willing to pay for a security. It represents the demand side of the market. Market makers and speci... ...read more

The bid-ask spread is the difference between the highest bid price and lowest ask price for a security. Narrow spreads indicate high liquidity, while... ...read more

A broker acts as an intermediary between buyers and sellers of securities, executing trades on behalf of clients. Full-service brokers provide researc... ...read more

A Credit Default Swap is a derivative contract where the buyer pays a premium to the seller in exchange for protection against credit default. If the... ...read more

Collateral consists of assets pledged by a borrower to secure a loan. If the borrower defaults, the lender can seize and sell the collateral to recove... ...read more

Derivatives are financial contracts whose value depends on the price of an underlying asset. Common types include options, futures, forwards, and swap... ...read more

Float represents shares available for public trading (total shares minus restricted shares). Low float stocks are more volatile due to limited supply.... ...read more

Foreign exchange market where currencies are traded. Major pairs include EUR/USD, USD/JPY, GBP/USD. FX trading occurs 24/5 and represents the largest... ...read more

Futures contracts obligate parties to buy/sell an asset at a predetermined price on a future date. They're used for hedging commodity price risk or sp... ...read more

Haircut is the percentage reduction applied to collateral value when calculating loan amounts. For example, a 10% haircut on $100 stock collateral all... ...read more

Limit order executes only at the specified price or better. Buy limit orders execute at or below the limit price, while sell limit orders execute at o... ...read more

Liquidity measures how easily an asset can be bought/sold without affecting price. High liquidity means tight bid-ask spreads and large trading volume... ...read more

Margin allows trading with borrowed money, amplifying both gains and losses. Initial margin is deposit required; maintenance margin is minimum equity... ...read more

Market makers provide liquidity by continuously quoting bid and ask prices. They profit from bid-ask spreads and may receive payment for order flow. T... ...read more

Primary market involves new securities issuance (IPOs, bond offerings, secondary stock offerings). Companies raise capital directly from investors. Pr... ...read more

Repo involves selling securities with an agreement to repurchase them later at a higher price. The difference represents the interest rate. Used for s... ...read more

Secondary market involves trading existing securities among investors. Prices determined by supply/demand. Stock exchanges, OTC markets, and electroni... ...read more

Short interest measures shares sold short as percentage of float. High levels indicate bearish sentiment but also short squeeze potential. Formula: (S... ...read more

Short selling involves borrowing shares, selling them, and buying back later to return to lender. Profits from price declines, losses from increases.... ...read more

Spread measures the difference between two prices or rates. Credit spreads compare corporate to government bonds. Option spreads involve multiple opti... ...read more

Stop order becomes market order when price reaches the stop level. Used for loss limitation or entry triggers. Stop-loss orders protect profits/drawdo... ...read more