Active management - trying to achieve higher than the commensurate with the risk portfolio returns by forecasting the general market trends or identifying the specific market sectors or the financial instruments with price variations.
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Auction of the Bulgarian National Bank (BNB) - A system for trading in government bonds issued by the Ministry of Finance offered to primary dealers of government bonds held by the BNB. Primary dealers may be banks and investment intermediaries. Buyers can bring competitive and noncompetitive bids which are classified according to the rules of the auction.
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Basis point - one hundredth of a percent - a unit for measuring changes in interest rates.
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Blue chips - shares that are characterized by significantly higher reputation and average trading volume.
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Bonds - a type of interest-bearing long-term securities, issued by the government, local authorities, banks, other financial institutions and companies. Bonds are a form of long-term loans used by the issuer.
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Broker - an individual who under contract with an investment intermediary directly executes transactions with securities for the investment intermediary`s own account or on behalf of its clients on the regulated market of financial instruments or outside this market.
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Bulgarian Depository Receipt - securities issued in the country conferring rights derived from the rights on other (underlying) securities, and the rights on the underlying securities are exercised for the benefit of the holders of the derivative securities.
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Capital market - market in which there is an exchange of long-term financial instruments - shares, bonds, compensation instruments and others.
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Central securities depository - an institution whose main activity consists in maintaining a centralized register of financial instruments, recording of transaction with dematerialized financial instruments, clearing, settlement, the process of borrowing of financial instruments, etc. In Bulgaria, this activity is carried out by the Central Depository AD that opens and maintains such accounts. Central Depository AD maintains a national register of all
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Clearing - offsetting of the counter receivables of the parties to the financial instrument transactions.
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Collective investment scheme - enterprise, organized as an investment company, mutual fund or unit trust, which invests money in financial instruments, raised by public offering of stocks and shares, and which operates on the principle of risk allocation and at the request of the shareholders respectively the stockholders, repurchases its stocks and shares at a price based on the net value of its assets.
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Contract for Difference - a derivative financial instrument certifying the right for receiving, respectively, the obligation to pay the difference between the market value of a certain number of securities or other financial instruments and their predetermined price in the contract.
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Convertible Bond - bond that is convertible (at the request of the holder) in certain number of common shares of the issuing company.
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Corporate bonds - bond, issued by a certain company. Maturity is the term for which the bond is issued. The maturity date is the date on which the issuer pays to the bondholder the principal (the nominal value).
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Dealer - a person who buys and sells financial instruments and/or currency for its own account.
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Deposit certificate - securities issued by a bank for fixed-term money deposit.
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Depository receipt - securities issued on the basis of securities of an issuer registered in another state and entitling their holders to exercise the rights related to the underlying securities.
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Diversification - the inclusion in a portfolio of various assets to reduce the risk and improve the investment performance of the portfolio. For example, in a portfolio may be included bonds of different issuers with different terms (maturities) having a different credit rating.
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Dividend - part of the profit after its taxation determined by the competent authority of the company, which is distributed among the holders of shares.
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Duration - duration measures the price sensitivity of an asset with a fixed return (bonds). It is defined as the average weighted time to the maturity of the bond cash flows. Generally, the longer the maturity, the greater is the duration and variability in the price, and the higher is the coupon, the smaller is the duration and respectively the variability in the price.
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Equity stock - the sum of the nominal value of stocks issued by the joint-stock company.
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Eurobonds - international bonds denominated in currency other than that of the issuer. For example, Bulgaria issued Eurobonds denominated in Euros and Dollars.
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Fixed income security - a security (a bond) that pays a certain fixed cash flow over a period of time.
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Floating Rate Bond - a bond whose coupon interest is corrected periodically in accordance with a definite market interest.
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Forward contract - a non-standardized contract between two parties respectively to buy or sell a certain asset on a specified future date at a pre-agreed price. Forward contracts, unlike futures contracts, are traded on the OTC market and the parameters of the contract between the two parties are not standardized. With this type of instruments each party is exposed to the credit risk of the counterparty under the contract.
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Forward rates - quotes on prices under fixed-term transactions showing what value will have a certain financial instrument or commodity over a period of time. It considers the costs associated with the asset keeping, the possible change in supply and demand of such asset, etc.
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Futures - a standardized financial instrument that is traded on the regulated markets for financial instruments and certifies the right and obligation to buy or sell a certain quantity of an asset (securities, a market indicator or a commodity) under predetermined price on a specified date.
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Government bonds - bonds issued by the Ministry of Finance for budget financing. They can be short, medium and long term. Short-term bonds have period of repayment up to one year, medium-term bonds have period of repayment of 1 to 5 years and long-term bonds have period of repayment over 5 years. On the primary market government bonds are acquired on auctions organized by the BNB. Government bonds may yield income in the form of discount from the face
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Hedge - a way of reducing the risk by making fixed transactions so that the existing risk under any transaction contracted in advance or available position to be avoided or minimized against payment of the agreed price of the hedge.
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Investment advice - provision of advices through oral statements, documents or otherwise regarding the value of such instruments or assessment for investing in financial instruments, including assessment of their type, positions and price of the instruments to be invested in, excluding advices made through publications addressed to undetermined group of people.
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Investment consultant - an individual who under a contract signed with an investment intermediary, a managing company and/or an investment company performs investment analyses and renders advices on financial instruments.
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Investment fund - a joint-stock company, which invests money, raised through public offering of shares in the form of financial instruments.
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Investment intermediary - a person who professionally provides investment services and/or performs investment activities.
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IPO - Initial Public Offering - offering of newly issued financial instruments to a wide circle of investors.
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Issuer - the person who is liable under issued by him financial instruments.
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Joint-stock company - a company with its capital divided into shares.
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Leverage - also known as a lever effect. Use of borrowed capital in order to increase the return rate. The use of leverage involves taking of additional risk, because not only the profit increases but also the eventual loss. Typical leverage instrument are the options, futures and the margin trading.
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Limit order - order to buy or sell a specified amount of particular financial asset when reaching a certain price. A particular period of time can be specified during which the order to be active.
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Liquidity - the liquidity shows how fast a given asset can be sold and turned into money. Usually the more liquid assets are considered as safer because if necessary the investor can get rid of them faster. With high level of liquidity are distinguished the money market instruments and the so called blue-chip stocks (stocks that are characterized by a significantly higher average trading volume).
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Lot - smallest, indivisible units of volume of an asset (currency, shares, bonds, etc.) that are traded.
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Managing company - a joint-stock company that manages the operations of collective investment scheme, including investment management, administration of stocks / shares, marketing, legal and accounting services related to asset management.
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Margin account - the margin account is done by borrowed capital. The customer opens a margin account with a broker who borrows him money to trade. Usually the leverage is in a certain proportion to the deposit, for example 1:10. This means that with a bank account in the amount of 1000 BGN the customer will be able to open a position in the amount of 10 000 BGN. The profit or loss from the financial operations is calculated on the account. If the loss
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Market capitalization - the market value of the share capital of a public company in a definite moment. It is calculated through the number of issued shares multiplied by their current market price.
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Market operator - one or more persons who manage and/or organize the activity of a regulated market. The Market operator may be the regulated market itself.
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Market order - order for the purchase or sale of a given financial instrument at the best counter-price as of the moment of its performance.
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Market price - the amount of money for which one asset can be sold as of the moment of estimation in a direct deal between informed, independent and willing to perform the deal buyer and seller.
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Market-maker - a person who is permanently present on the financial markets to deal on own account by buying and selling financial instruments against his own capital funds at prices defined by him.
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Maturity - remaining term until a given financial instrument or liability becomes mature.
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Modified duration - a measure indicating the relative change in the bond price upon change in the interest rates.
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Money market - a market on which short-term financial instruments are traded. They have a maturity of less than one year and are usually used to lend liquidity.
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Money market instruments - instruments normally traded in the money market, that are liquid and which value can be determined precisely at any time.
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Mortgage bonds - securities, issued by the banks on the basis of their portfolio loans, secured by one or more first line mortgages in favour of the banks upon a real estate (mortgages).
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Mutual Fund - a pool of assets for the purpose of collective investment in financial instruments of funds raised through public offering of shares on the principle of spreading the risk carried out by the managing company.
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Net Asset Value - the total value of all assets in the portfolio of the collective investment scheme, less all liabilities.
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Offset deal - a deal in which the reverse of an existing deal is performed for the purpose of its closure.
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Option - the option is the right, but not the obligation, to buy or sell a given asset at a fixed price until a definite maturity. Call-options give the right to buy and Put-options - to sell. The exercise price is also known as "strike" and represents the fixed price on which the underlying asset can be bought or sold. The price which the option buyer pays to its issuer regarding the right is called (option) premium. It is determined by the time to ma
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Portfolio management - management of investment portfolios at the order of clients which is done at the discretion of the investment immediacy for each client and the investment portfolios which include one or more financial instruments.
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Preferred shares/stocks - shares/stocks which represent a definite class of ownership that is in a preferred position compared to ordinary shareholders (see Shares), regarding the assets and profits of the public limited liability company - issuer. Usually the preferred shares/stocks are without a voting right but distribute the dividend before the respective for ordinary shareholders. In some cases the preferred shares/stocks have the right to a prefe
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Primary market - a market on which initial public offering is performed.
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Prospectus - a document containing detailed information about the issuer of a given financial instrument and about the issue itself.
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Public company is a public limited liability company which has a registered issue of securities for the purpose of trading on a regulated market and whose securities are traded on such market.
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Quote
1. price (rate) fixing of financial instruments, which is reached at the market;
2. official publication of exchange rates on securities, foreign currencies, stocks.
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Regulated market - multilateral system, organized and /or managed by a market operator, which meets or assists for meeting the interests in purchase and sale of financial instruments of many third parties.
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Repo - contract with engagement for reverse deal. A deal in which one of the parties sells (buys) a financial instrument and at the same time undertakes the obligation to buy (sell) back after a definite time at a price which is fixed in advance.
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Rights / Subscription rights - securities giving the right to underwrite a definite number of shares in relation to a decision taken to increase of capital of a public company.
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Risk - the possibility to obtain an investment return which is different from expected. This includes probability of losing a part of the invested funds or the entire investment.
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Risk free asset - an asset with secure future rate of return, usually such assets are short-term government bonds.
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Risk premium - expected return exceeding the one of risk-free securities. The premium represents compensation for the risk of an investment.
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Scalping - trading in very short time intervals. Positions are held for several minutes and the purpose is to obtain quick profits.
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Secondary market - market on which is carried out secondary trade with financial instruments after their initial sale upon issue.
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Securities - transferable rights registered with the depository institution (dematerialized securities) or documents materializing transferable rights (materialized securities), which can be traded on capital markets, such as stocks, bonds, government bonds, rights, etc.
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Settlement - the performance of obligations under certain transaction with financial instruments for delivery of the financial instruments in the possession of the buyer and the counter payment in favor of the seller.
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Shareholder - holder of stocks in a joint-stock company.
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Special purpose vehicle joint-stock company (SPV JSC) - a joint stock company incorporated under the Companies Act with a special purpose vehicle, which invests money raised by issuing securities in real estate or receivables.
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Speculator - a person who usually takes a higher investment risk to obtain higher returns. The traded instruments are generally high leverage and positions are held relatively for short periods of time.
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Spot rate - the present value of any assets, unlike the futures, forward or option price.
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Spread - the difference between the "buy" rate and "sale" rate of a certain financial instrument.
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Stocks - securities issued by joint-stock companies certifying the holder participation in the capital of the joint-stock company. They give right to dividend, right to vote at the general meeting of shareholders and a right to liquidation proceeds.
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Stop Loss Order - a type of limited order that is executed when the market price of traded financial instrument reaches a predetermined market price. Usually it is used to limit the potential loss of open positions.
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Subscription of securities - the unconditional and irrevocable intention to acquire securities in the process of issuing and for payment of their issue value.
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Trust management - management in accordance with a contract signed with a client of individual portfolio including financial instruments, in its sole discretion without special instructions by the client Trust management is performed by licensed investment intermediaries using the services of investment consultants.
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Underwriting of security issues exists when, according to a contract with the issuer, an investment agent underwrites or undertakes the obligation to underwrite at his expense a part or the entire issue of securities and to offer it for initial public sale.
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Warrant - a security certifying the right to subscribe a certain number of securities at a predetermined or determinable issue value until the expiry of a specified period of time.
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Yield Curve - graphics of the yield to maturity as a function of the time remaining until maturity.
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Yield to maturity - measure for the average rate of return that can be obtained from a bond, if it is held to maturity.
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