金融专业英语重要概念和理论

1、 Economy: An economy or economic system consists of the production, distribution or trade, and consumption of limited goods and services . Finance: Finance is a field that deals with the allocation of assets and liabilities over time under conditions of certainty and uncertainty. ( -A key point in f

2、inance is the time value of money, which states that purchasing power of one unit of currency can vary over time. Finance aims to price assets based on their risk level and their expected rate of return. set of markets and other institutions used for financial contracting and the exchange of assets

3、and risks.available funds to people who have a shortage. Corporate finance: Corporate finance is about how toincrease the value of the firm by dealing with the sources of funding and the capital structure of the firm. (The primary goal of corporate finance is to maximize or increase shareholder valu

4、e. or say corporate finance is a branch of finance dealing with financial decisions of firms. Option : an option is a contract which gives the buyer (the owner the right, but not the obligation, to buy or sell an underlying asset at a specified strike price on or before a specified date.The seller h

5、as the corresponding obligation to fulfill the transaction that is to sell or buy if the buyer (owner "exercises" the option. The buyer pays a premium to the seller for this right. An option that conveys to the owner the right to buy something at a specific price is referred to as a call;

6、an option that conveys the right of the owner to sell something at a specific price is referred to as a put.In basic terms, the value of an option is commonly decomposed into two parts:The first part is the intrinsic value, which is defined as the difference between the market value of the underlyin

7、g asset and the strike price of the given option.The second part is the time value. Future: a futures contract is a contract between two parties to buy or sell an asset for a price agreed upon today (the futures price with delivery and payment occurring at a future point, the delivery date. The buye

8、r of the contract is said to be "long", and the party selling the contract is said to be "short".1 APT : arbitrage pricing theory (APT is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various macr

9、o-economic factors or theoretical market indices, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient.The model-derived rate of return will then be used to price the asset correctly - the asset price should equal the present value of the future cash inflo

10、w at an interest rate or discount rate calculated by APT. MM theorem: The basic theorem states that the value of a firm is not affected by it's capital structure under certain assumptions. Instead it's decided by the value of it's real assets.without transaction costs.Consequently the Mo

11、digliani Miller theorem is also often called the capital structure irrelevance principle. CAPM: the capital asset pricing model (CAPM is used to determine a theoretically appropriate required rate of return of an asset if every investor hold the effective portfolio according to Markowitz model.The m

12、ain idea of CAPM is that if all investors only hold risk-free asset and market portfolio, there will be a linear relation between the expected rate of return and the risks of the asset.The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk o

13、r market risk, often represented by the quantity beta ( in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. CAPM suggests that an investors cost of equity capital is determined by beta. EMH : the efficient-market hypothesi

14、s (EMH asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns .There are three major versions of the hypothesis: "weak", "semi-strong", and "strong". T

15、he weak form of the EMH claims that prices on traded assets already reflect all past publicly available information. The semi-strong form of the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong form

16、of the EMH additionally claims that prices instantly reflect even hidden or "insider" information.【 10】 DuPont analysis: DuPont Analysis is an expression which breaks ROE (Return On Equity into three parts in order to analyze a company's financial condition,operating efficiency &pr

17、ofitability.【 Basic formula 】ROE = (Profit margin*(Asset turnover*(Equity multiplier = (Net profit/Sales*(Sales/Assets*(Assets/Equity= (Net Profit/EquityProfitability (measured by profit marginOperating efficiency (measured by asset turnoverFinancial leverage (measured by equity multiplier【 11】 asym

18、metric information: Asymmetric information deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst

19、 case. Examples of this problem are adverse selection,1 moral hazard, and information monopoly.2Information asymmetry is in contrast to perfect information, which is a key assumption in neo-classical economics.【 12】 Derivative: Derivatives are financial instruments that derive their value from the p

20、rices of one or more other assets. Their principal function is to serve as tools for managing risks associated with the underlying assets.【 13】 Investment bankAn investment bank is a financial institution that assists individuals, corporations, and governments in raising financial capital. An invest

21、ment bank may also assist companies involved in mergers and acquisitions (M&A.(1.They are both intermediaries between those people who have an excess of available funds and people who have a shortage. But commercial banks are intermediaries of indirect finance and investment bank direct finance.

22、(2.Basic business: the basic business of commercial banks is making loans and taking deposits. Investment banks securities underwriting business.(3.Commercial banks do their business in money market,whereas investment bank in capital market.【 14】 Open market operation: An open market operation (also

23、 known as OMO is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy. The usual aim of open market operations is to manipulate the short-term interest rate and the supply of base money in an e

24、conomy, and thus indirectly control the total money supply, in effect expanding money or contracting the money supply.【 15】 Quantitative easing: Quantitative easing (QE is monetary policy used by a central bank to stimulate an economy when standard monetary policy has become ineffective.123 A centra

25、l bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base.Expansionary(扩张性的 monetary policy

26、to stimulate the economy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.However, when short-term interest rates reach or approach zero, this method can no longer work.14 In such circumstances monetary authorities may then use

27、 quantitative easing to further stimulate the economy by buying assets of longer maturity than short-term government bonds, thereby lowering longer-term interest rates further out on the yieldcurve.1516【 16】 direct finance:Direct finance is a method of financing where borrowers borrow funds directly

28、 from the financial market without using a third party service, such as a financial intermediary. This is different from indirect financing where a financial intermediary takes the money from the lender against an interest rate and lends it to a borrower against a higher interest rate. Direct financ

29、ing is usually done by borrowers that sell securities and/or shares to raise money and circumvent the high interest rate of financial intermediary(banks.1 We may regard transactions as direct finance, even when a financial intermediary is included, in case no asset transformation has taken place.【 1

30、7】 operating leverage means that because of fixed cost the percentage change in EBIT( earnings before interest and taxes is larger than the % change in sales. It can be measured by DOL( the degree of operating leverage which is equal to the % change in EBIT divided by the % change in sales.- financi

31、al leverage: because of the fixed cost of borrowing. EPS/EBIT. Earning per share.DFL: the degree of financial leverage.【 18】 exchange rate: an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one countrys curren

32、cy in terms of another currency.【 19】 interest rate: is the cost of borrowing funds.【 20】 swap : a derivative in which two parties exchange future cash flows.【 21】 warrant: a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date.【 22】 convertible bond: a convertible bond is a type of bond that the holder can convert into a specified number of s