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Glossary of terms used on this site

  Glossary of terms used on this site
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Glossaries

Term Definition
Back office

The part of a firm that is responsible for post-trade activities. Depending upon the organizational structure of the firm, the back office can be a single department or multiple units (such as documentation, risk management, accounting or settlements). Some firms have combined a portion of these responsibilities, usually found in the back office, particularly those related to risk management, into what they term as a middle office function.

Banker to an issue

A scheduled bank carrying on all or any of the issue related activities namely acceptance of application and application monies; acceptance of allotment or call monies; refund of application monies; and payment of dividend or interest warrants.

Basis

In a futures market, basis is defined as the cash price (or spot price) of whatever is being traded minus its futures price for the contract in question. It is important because changes in the relationship between cash and futures prices affect the values of using futures as a hedge. A hedge, however, will always reduce risk as long as the volatility of the basis is less than the volatility of the price of whatever is being hedged.

Basis of Allotment

An allotment pattern of an issue among different categories of applicant.

Basis Point

One hundredth of a percentage point. Basis points are used in currency and bond markets where the size of trades mean that large amounts of money can change hands on small price movements . Thus if the yield on a Treasury bill rose from 5.25% to 5.33% the change would have been eight basis points.

Bear

A pessimist market operator who expects the market price of shares to decline. The term also refers to the one who has sold shares which he does not possess, in the hope of buying them back at a lower price, when the market price of the shares come down in the near future.

Bear Hug

A variety of takeover strategy that seeks to hurry target company managements to recommend acceptance of a tender offer in a short period of time.

Bear Market

A weak or falling market characterized by the dominance of sellers.

Benchmark index

Indicators used to provide a point of reference for evaluating a fund’s performance.

Beta

A measure of the volatility of a stock relative to the market index in which the stock is included. A low beta indicates relatively low risk; a high beta indicates a high risk.

Bid

An offer of a price to buy as in an auction. Business on the Stock Exchange is done through bids. Bid also refers to the price one is willing to pay for a security.

Bid – Ask spread

The difference between the bid price and the ask price.

Block Trading

Buying and selling a block of securities usually takes place when restructuring or liquidating a large portfolio.

Blue Chip

The best rated shares with the highest status as investment based on return, yield, safety, marketability and liquidity.

Bonus Shares

Shares issued by companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years.

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