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Calmar ratio
 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.

Chinese wall
A 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 information.

The process of completing the details of a securities trade prior to settlement.

A financial 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.

closed fund
An open-end 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 disadvantage.

closed-end fund
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.

compliance department
A brokerage or stock exchange department that oversees trading and other activities to ensure that company and governmental 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.

convergence investment strategy
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.

cumulative return
Performance over a set of periods, either the life of the portfolio or a given number of periods.

CUSIP Number
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 Numbering System).

A financial 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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