For investors, it refers to their stock of wealth, which can be put to work in order to earn income. For companies, it typically refers to sources of financing such as newly issued shares
Capital adequacy ratio
A measure of a bank’s ability to absorb losses. It is defined as the value of its capital divided by the value of risk-weighted assets (ie taking into account how risky they are).
Capital Gains Tax
A tax on the increase of a value of assets realised in a particular year. Tax is payable on gains above an individual’s Capital Gains Tax allowance (£11,100 2015/6). The rate at which the tax is payable can vary and will typically be announced in the Government’s Budget Statements.
Fund management fees that are all inclusive, to which there will be no extra charges added.
Closed End Fund
Closed End Funds usually refer to investment trusts. They are companies whose shares are traded on the stock exchange. Because of this the number of shares that the Fund Portfolio is divided into is fixed, unless the fund has a new share issue. This means that those wishing to invest in the fund have to buy shares on the secondary market. As a consequence, Closed End Funds rarely trade at Net Asset Value (see below), their price being determined by supply and demand.
Products that, in their basic form, are all the same so it makes little difference from whom you buy them and therefore have a common market price.
Contracts to buy and sell commodities usually specify minimum common standards, such as the form and purity of the product, and where and when it must be delivered.
Markets range from soft commodities such as sugar, cotton and pork bellies to industrial metals such as iron and zinc.
Consumer Price Index (CPI)
The the official measure of inflation of consumer prices of the United Kingdom. The CPI calculates the average price increase as a percentage for a basket of 600 different goods and services. Around the middle of each month it collects information on prices of these commodities from 120,000 different retailing outlets.
Contract for Difference (CFD)
An agreement between two parties to exchange the difference between the opening price and closing price of a contract. You can use CFDs to trade and speculate on the price movements of thousands of financial markets regardless of whether prices are rising or falling.
A Bond issued by a company. Bonds are debt that usually pay a fixed rate of interest. The repayment of the principal is due at a pre-determined date called maturity.
A short-term drop in stock market prices. The term comes from the notion that, when this happens, overpriced or underpriced stocks are returning to their “correct” values
The amount of interest expressed as a percentage of the book cost (see book price) which an investor will receive each year on his investment in, for example, a bond. Fixed coupons are eroded in percentage terms if the price of the asset goes up.
1. The fixed rate at which interest is paid on a bond. 2. The physical ticket attached to a bearer certificate that, when presented to the appropriate authority, usually a bank, will be redeemed for the dividend.
A situation where banks and other lenders all cut back their lending at the same time, because of widespread fears about the ability of borrowers to repay.
If heavily-indebted borrowers are cut off from new lending, they may find it impossible to repay existing debts. Reduced lending also slows down economic growth, which also makes it harder for all businesses to repay their debts.
Credit default swap (CDS)
A financial contract that provides protection against the risk of a third-party borrower defaulting on its debts. E.g. a bank that has made a loan to Greece may choose to hedge the loan by buying CDS protection on Greece. The bank makes periodic payments to the CDS seller. If Greece defaults, the CDS seller must buy the loans from the bank at their full face value. As well as hedging, CDSs are used by investors to speculate on whether a borrower such as Greece will default.
The system used within the London Stock Exchange whereby shares are registered and settled electronically.
A company that is responsible for the safekeeping of assets, income collection and settlement of trades.