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A return/risk ratio used to determine return relative to downside risk in a fund.
Return (the numerator) is defined as the compound annualized rate of
return for the last 3 years. Risk (the denominator) is defined as the
maximum drawdown for the last 3 years.
The higher the Calmar ratio, the better.
Some funds have high annual returns, but they also have
extremely high drawdown risk. This ratio helps determine
return on a downside risk-adjusted basis.
communication barrier between two functional groups at
the same institution, e.g., between investment bankers
and traders. Its purpose is to prevent the sharing of inside
The process of completing the details of a securities trade prior to
organization, typically associated with one or more
exchanges, that matches the buy and sell orders that take
place and handles the
confirmation, delivery, and settlement of transactions.
fund that has closed, either temporarily or permanently, to
new investors. This usually occurs when the fund manager
judges the fund's increasing asset size to be a
A fund whose
shares are traded through a stock exchange. The fund will not redeem
shares at their net asset value, only at their market value, which is
determined by the market.
A brokerage or stock exchange department that
oversees trading and other activities to ensure that company
regulations are being observed.
compounded monthly return
The average monthly increase that would have produced a fund's total return for
x period of time, with compounding taken into account. A fund
with a one-year
return of 20%, for example, would have a compounded monthly return
of 1.53%, the amount it would have needed to gain in each of 12 months
to achieve a 20% return for the year.
A test applied to a portfolio’s properties and the
assets underlying that portfolio. They serve to place
user-definable limits on portfolio properties to better assist
in managing the portfolio.
A strategy that seeks to exploit discrepancies in the values of
securities that have historically been almost identical; it
assumes that they will ultimately converge.
A relationship between two variables.
A correlation coefficient is a statistical measure of the
interdependence of two or more random variables.
Fundamentally, the value indicates how much of a change in one
variable is explained by a change in another.
The parties on
either side of a transaction.
A measure of the degree to which returns on two assets
move in tandem. A positive covariance means that the asset
returns move together. A negative covariance means that they
vary inversely. If the two variables are independent, then the
covariance will equal zero.
Commodity Trading Advisor. CTAs are asset
managers exclusively in derivatives markets. A person or
entity providing advice to others on investments in commodity
futures, options and foreign-exchange contracts, or invests
in those instruments on behalf of others.
Performance over a set of periods, either the life
of the portfolio or a given number of periods.
Committee on Uniform Securities Identification Procedures. A
CUSIP number identifies most securities, including stocks of
all registered U.S. and Canadian companies, and U.S.
government and municipal bonds. The CUSIP system—owned by
the American Bankers Association and operated by Standard
& Poor’s—facilitates the clearing and settlement
process of securities. The number consists of nine characters
(including letters and numbers) that uniquely identify a
company or issuer and the type of security. A similar system
is used to identify foreign securities (CUSIP International
institution which holds stocks, bonds and other securities
for guaranteed safekeeping. Related services include the
collection of income on securities in custody, transaction
settlement, the investment of cash overnight, and the
provision of accounting reports. Additional services may
include performance evaluation and analysis, on-line
reporting, global custody and securities lending.
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