Active Management

An approach to asset management, which relies on a fund manager's ability to select and actively trade stocks so that, over time, they will outperform a particular market index or benchmark

Alpha

A statistical measure of investment manager skill

Alternative Investments

Investments which do not fit into the mainstream areas of equities, bonds, cash, currency and property. Examples include venture capital, hedge funds, and commodities.

Analyst

A person with expertise in companies, markets and economies

Annualise

To take a cumulative return over a certain period and restate it on an annual basis.

Appreciate

To increase in value over a period of time.

Arbitrage

The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Ask Rate

Ask Rate - The rate at which a financial instrument if offered for sale (as in bid/ask spread)

Asset

Any item which has a monetary value.

Back Office

Administrative activity related to investment management, for example, settlement, processing, pricing and accounting. Usually referred to as operations.

Base Currency

It is the first currency quoted in a currency pair. Also, it is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, the US Dollar is normally considered the 'base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.

Basis Point

One basis point represents one-hundredth of a percentage point or 0.01%

Bear Market

A market distinguished by declining prices.

Bid Rate

The rate at which a trader is willing to buy a currency.

Bid/Ask Spread

The difference between the bid and offer price

Bourse

French term for Exchange

Broker

An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee

Bull Market

A market distinguished by rising prices.

Call Option

An option which gives the holder the right, but not the obligation, to purchase an asset at a specified price on or before a given date.

Carat

A measurement used to show how pure gold is.

Cash Market

see Spot Market

CBOT

Chicago Board of Trade

Central Bank

A government or quasi-governmental organization that manages a country’s monetary policy. The Central Bank of the U.A.E plays a vital role in the national economy. Its main responsibility is to formulate and implement the banking, credit and monetary policy to ensure price stability, and to support the Dirham and its free convertibility; in addition to acting as "the bank of banks" and the banker and financial advisor to the Government.

Certificate of Deposit (CD)

A certificate from a bank stating that the named party has a specified sum on deposit, usually for a given period of time at a fixed rate of interest.

Churning

Excessive trading of a client’s portfolio. Sometimes used to unethically generate extra commissions.

Clearing

The process of settling a trade.

Clearing House

A facility for settling the transfer of funds between banks.

CME

Chicago Mercantile Exchange

Collateral

Something given to secure a loan or as a guarantee of performance.

Commission

A transaction fee charged by a broker. Commissions vary across markets and between, brokers.

Commodity

A raw material, for example oil, natural gas, gold, etc

Commodity Exchange

An exchange where commodities can be bought or sold. Example, CBOT

Consumer Price Index (CPI)

A measurement of prices for goods and services used to determine the rate of inflation.

Contagion

The tendency of an economic crisis to spread from one market to another.

Contract (Unit or Lot)

The standard unit of trading.

Contract for Differences (CFD)

a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time.

Counterparty

One of the participants in a financial transaction.

Cross Rate

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency.

Currency

any form of money issued by a government or central bank and used as legal tender

Currency Hedging

Reduction or elimination of exchange rates risk by buying forward, using financial futures or borrowing in the exposed currency.

Day Trading

Refers to positions which are opened and closed on the same trading day.

Default

Failure to make a payment on schedule.

Delivery

An FX trade where both sides make and take actual delivery of the currencies traded.

Depreciate

To decrease in value

Devaluation

The deliberate downward adjustment of a currency’s price, normally by official announcement

DGCX

Dubai Gold and Commodities Exchange

Diversification

Spreading investments across a range of assets in order to reduce risk.

DME

Dubai Mercandile Exchange

Economic Indicator

Statistic which gives an indication of the cyclical position of an economy.

Economist

Person who analyses trends in economic indicators and attempts to forecast economic growth

Emerging Market

Financial market in a developing or newly industrialising country. Charecterized by high returns due to rapid growth and high risk due to low liquidity and political instability.

Euro

A single currency adopted on January 1, 1999, by 12 of the 15 EU nations, who switched to a single set of euro bills and coins on January 1, 2002.

European Central Bank (ECB)

Independent central bank responsible for setting monetary and exchange rate policy for the members of the European Monetary Union (EMU).

Exchange Rate Risk

The risk caused by varying exchange rates between two currencies.

Federal Reserve

The central bank of the United States,

Financial Regulator

The regulator of all financial services firms in a country. Example, The Central Bank of the U.A.E. in the U.A.E.

Fixed Exchange Rate

Official rate set by monetary authorities for one or more currencies

Floating Rate

refer to the value of a currency as decided by supply and demand

Foreign Exchange Rate

The value of two currencies with respect to each other.

Forex

is Foreign Exchange Market. FOREX is a market in which brokers located in various parts of the world trade currencies for many nations. FOREX transactions are not traded in futures markets.

Forward Contract

A forward contract fixes the exchange rate for future delivery at a date to be agreed by both participants.

Forward Exchange Rate

The exchange rate set today for a foreign currency transaction with payment or delivery at some future date.

Forward Premium

is when a currency trade forward price is higher than its spot price.

Forward Rate (or Swaps)

refers to a cash price of 2 currencies interest difference for a fixed term.

Front Office

Administration, research and marketing activity of a financial brokerage company.

Fundamental Analysis

focuses on the economic forces of supply and demand that causes price movement.

Futures Contract

An obligation to exchange a good or instrument at a set price on a future date

GAAP

Generally Accepted Accounting Principals – A common set of accounting principles.

GBP

is United Kingdom Pound Sterling

GTC Order (Good Till Cancelled)

An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

Hedging

A hedging transaction is a purchase or sale of a financial product, having as its purpose the elimination of loss arising from price fluctuations.

Hurdle Rate

The minimum acceptable rate of return on a project/investment.

Inflation

is an increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar or other currency.

Inflation

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial Margin

initial deposit of collateral required to enter into a position as a guarantee on future performance.

Insolvency

Having insufficient assets to meet debt obligations and/or liabilities.

Interbank Rates

The Foreign Exchange rates at which large international banks quote other large international banks.

Jobless

People without a job considered as a group.

Leading Indicators

Statistics that are considered to predict future economic activity.

Liabilities

A financial obligation, debt, claim, etc due to be made

LIBOR

The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit Order

An order with restrictions on the maximum price to be paid or the minimum price to be received.

Liquid Asset

Asset that can be readily and cheaply turned into cash.

Liquidation

The closing of an existing position through the execution of an offsetting transaction.

Liquidity

The ability of a market to accept large transaction with minimal to no impact on price stability.

Long Position

A position that appreciates in value if market prices increase. When one buys a currency, their position is long.

Margin

The required equity that an investor must deposit to collateralize a position.

Margin Call

>A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the client. If the equity balance in your account falls below the margin requirement, a margin call will be generated. In the event that an account exceeds its maximum allowable leverage, ALL open positions are liquidated immediately, regardless of the size or the nature of positions held within the account.

Margin Deposit

The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value, which allow for this high leverage. In the event that funds in the account fall below margin requirements, brokerage firms will automatically close all open positions.

Marked to Market

When profits and losses are posted to accounts for all positions. This is done at the end of each day.

Market Maker

A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk

Exposure to changes in market prices.

Mark-to-Market (or MTM)

Process of re-evaluating all open positions with the current market prices in order to determine margin requirements.

Maturity

The date for settlement or expiry of a financial instrument.

Monetary Policy

Government policy concerning money supply and interest rates.

Moving Average

An analysis term used to indicate market trends. Obtained by averaging prices/indices over a specified period of time, for example, the last 30 days.

Natural Gas

Gas used for heating and lighting, taken from under the earth or under the sea.

NYMEX

New York Mercantile Exchange

OCO (One cancels the other) Order

A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Offer

The rate at which a dealer is willing to sell a currency.

Offsetting Order

A trade with which serves to cancel or offset some or all of the market risk of an open position.

Open Order

An order that will be executed when a market moves to its designated price

Open Position

A deal not yet reversed or settled with a physical payment.

OTC (Over the Counter) Order

Used to describe any transaction that is not conducted over an exchange.

Overnight

trade that remains open until the next business day.

Position

The netted total holdings of a given currency.

Premium

In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Quartile

One quarter of a set of things or people, arranged in order of value, amount, wealth etc.

Rate

The price of one currency in terms of another,

Reuters

Reuters supplies the global financial markets with the widest range of information including real time financial data.

Risk Tolerance

An investor’s ability to handle volatility and possible declines in the value of his/her portfolio.

Short

A market position where the client has sold a currency with the expectation that the currency will fall, at which time the currency would be bought back in order to make a profit.

Spot Exchange Rate

Current exchange rate

Spot Market

A market in which commodities such as grain, gold or crude oil, are bought and sold for cash and delivered immediately. It can also be referred to as a cash market.

Swaps

is when one currency is temporarily exchanged for another, then the currency is held and exchanged later after a fixed period of time.

Technical Analysis

Attempt to predict share price movements on the basis of past patterns.

Tola

Unit of measuring mass used as popular denomination for gold bullion bars in India, Pakistan, Singapore and U.A.E., with a ten tola bar being the most common. Standardised as 180 troy grains or 11.663 ?8038 grams

Total Return

The return on an investment, including income from dividends and interest, as well as appreciation or depreciation in the price of positions, over a given time period.

Transaction Costs

Costs incurred when buying or selling currencies or commodities, such as commissions and the spread

Troy Ounce

Units of measuring mass customarily used for precious metals.One troy ounce (ozt) is equal to 31.1034768 grams.

Yen

is the currency of Japan. Its subdivisions are 100 sen and 1000 rin.