Definitions: Financial and Economic

Here are some terms and concepts that are used every day in the financial and news media. I will add additional definitions to this list in the future. The definitions are from Investopedia and/or CNBC Explains.

Capitulation

As usual, I go to Investopedia.com for a definition, here it is:
“Throughout even the longest uptrends, investors experience declines against the main trend. These are referred to as corrections. At other times, markets correct more than expected in a short period of time. Such occurrences are called crashes. Both of these can lead to a misunderstood situation called capitulation.”

Read more: http://www.investopedia.com/articles/analyst/080702.asp#ixzz3iuq5NsiJ

Carry trade

http://www.cnbc.com/id/44357354

http://www.investopedia.com/terms/c/currencycarrytrade.asp

Carried interest

http://www.cnbc.com/2014/03/04/cnbc-explains-carried-interest.html

http://www.investopedia.com/terms/c/carriedinterest.asp

Euro-dollar parity

http://www.cnbc.com/2015/03/11/dollar-euro-parity-what-a-one-to-one-exchange-means.html

http://www.investopedia.com/terms/p/parity.asp

Fractional Reserve Banking

A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system.

Also known as “fractional deposit lending”. Definition courtesy of Investopedia.com:

Read more: Fractional Reserve Banking Definition | Investopedia http://www.investopedia.com/terms/f/fractionalreservebanking.asp#ixzz3vnXB7ZjM

Inversion

http://www.cnbc.com/2014/07/24/corporate-inversions-are-the-latest-ploy-to-upend-the-us-tax-code.html

http://www.investopedia.com/terms/c/corporateinversion.asp

Mark to market

http://www.cnbc.com/id/43296046

http://www.investopedia.com/terms/m/marktomarket.asp

Market maker

http://www.investopedia.com/terms/m/marketmaker.asp

Negative Interest Rate Policy (NIRP)

During deflationary periods, people and businesses hoard money instead of spending and investing. The result is a collapse in aggregate demand which leads to prices falling even farther, a slowdown or halt in real production and output, and an increase in unemployment. A loose or expansionary monetary policy is usually employed to deal with such economic stagnation. However, if deflationary forces are strong enough, simply cutting the central bank’s interest rate to zero may not be sufficient to stimulate borrowing and lending. A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.

Read more: Bank of Japan Announces Negative Interest Rates | Investopedia http://www.investopedia.com/articles/investing/012916/bank-japan-announces-negative-interest-rates.asp#ixzz3yfqvax3s

Real return vs. nominal return

http://www.investopedia.com/terms/n/nominal-rate-of-return.asp

http://www.investopedia.com/terms/r/realrateofreturn.asp

Relative Strength

“Relative strength is a momentum investing technique that compares the performance of a stock, exchange-traded fund or mutual fund to that of the overall market. Relative strength calculates which investments are the strongest performers, compared to the overall market, and recommends those investments for purchase. Relative strength is a “buy high, sell higher” strategy that assumes a stock whose price has been rising will continue its upward trajectory.”

Read more: Relative Strength Definition | Investopedia http://www.investopedia.com/terms/r/relativestrength.asp#ixzz48a2yvXHo

Sovereign debt

http://www.cnbc.com/id/44771099

http://www.investopedia.com/terms/s/sovereign-debt.asp

Transfer Payment
What is a ‘Transfer Payment’

A transfer payment, in the United States, is a one-way payment to a person for which no money, good, or service is given or exchanged. Transfer payments are made to individuals by the federal government through various social benefit programs. These types of payments are executed by the United States to individuals through programs such as Social Security.

Read more: Transfer Payment Definition | Investopedia http://www.investopedia.com/terms/t/transferpayment.asp#ixzz4HWCj9Mwt