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CMFAS Exams

Appendix G — Glossary and cross-reference

General finance language used throughout the chapters. The most important terms are defined in context above; use this compact cross-reference when revising:

  • Market basics: absolute/relative return, alpha, benchmark, beta, bid/ask, blue chip, asset class, asset allocation, diversification, position, portfolio, risk appetite, risk tolerance, systematic/specific risk, spot market/rate, primary/secondary market, supply/demand and price discovery.
  • Accounting/economics: accounts payable/receivable, balance sheet, cash-flow statement, current assets/liabilities, equity, book value, net income/profit margin, ROA/ROE, EBITDA, GDP, inflation/deflation, recession, fiscal/monetary policy, business cycle, balance of payments, current/capital account, exports/imports, trade balance, goodwill, amortisation, depreciation, fixed/variable costs, WACC, DCF/NPV, EPS, P/E/P/B/P/S/P/CF, enterprise value and EV/S.
  • Derivatives: derivative, forward, futures, options, premium, strike/exercise, call, put, American/European, ITM/ATM/OTM/moneyness, intrinsic/time value, delta, gamma, theta, vega, rho, compound/exotic/plain-vanilla option, options on futures, warrant, structured warrant, conversion ratio, gearing, effective gearing, CBBC, DLC, CFD, swap, swaption, IRS, currency/commodity/equity swap, CDS, cap, floor, collar, basis, basis point, carry, mark-to-market, initial/maintenance/additional margin, notional, delivery, settlement, contract specification, hedge/hedge ratio, stack/strip, spread, calendar/horizontal, vertical, diagonal, butterfly, condor, ratio and seagull.
  • Structured products/funds: structured product, structured deposit, structured note, ELN, CLN, BLN, RAN, CDRAN/VMRAN, inverse floater, zero-plus, accumulator/decumulator, discount/capped certificate, participation rate, basket/worst-of, barrier, knock-in/knock-out, one-touch/no-touch, CPPI, cushion/multiplier, DPPI, TRS, zero-coupon bond, ETN, ETF, NAV, AUM, TER/expense ratio, Sharpe/Treynor/information ratio, tracking error, UCITS, CIS, SICAV, umbrella, open/closed-ended fund, custodian, trustee, prospectus, PHS, trust deed, accredited/institutional/retail investor.
  • Risk/control: market, basis, leverage, liquidity, credit/counterparty, settlement, operational, legal, transaction, structure, correlation, volatility, currency, financing, reinvestment, early termination, mis-selling, sovereign, political, model, gap and roll risk; VaR, stress test, open-contract/maturity/maximum-loss/Greek/book/intraday limits, CSA, front/middle/back office, DMM and authorised participant.
  • Corporate/market terms: dividend/stock dividend, bonus/rights issue, share split/reverse split/buyback, conversion value, straight value, convertible bond, current yield/YTM, credit spread/rating, default/credit event, repo, T-bill/T-bond, MBS/ABS/CDO, dark pool, ECN, dealer/market maker, brokerage, proprietary trading, hedge fund, private equity, venture/growth/buyout/distressed funds, REIT, real estate, alternative investment, index/price-weighted/capitalisation-weighted, index fund, passive manager, technical analysis, EMH, APT, CAPM, efficient frontier, GIPS and information ratio.

The less product-specific entries — annuity, appraisal, appreciation/depreciation, assets, banks, board, foundations, fraud, insurance, legal/regulatory terms, policies/procedures/processes, reserve currency/requirement, retained earnings, shareholders/voting rights, tariffs, underwriters, trade bills, trust deed and similar general terms — are ordinary definitions supporting the product chapters. When a question uses one, translate it back to the underlying cash flow, risk or legal relationship.