Terms related to investment Banking
Analyst: person who studies an industry sector and makes BUY, HOLD and SELL recommendations. Also, a different term referring to entry-level career position in many investment banks.
Asset: an item with economic value that is owned or controlled by an individual, business or government.
Bear: investor who sells believing prices will fall.
Bid price: the price at which the market maker will buy.
Bonds: a government, or company can raise capital by issuing a bond. Bondholders receive interest (a ‘coupon’) and the capital is repaid at maturity. The difference between bonds and loans is that bonds can be traded between investors (who are lending to the issuer).
Broker: intermediary between a buyer and a seller, receiving commission on the trade.
Brokerage: the payment from the client to the broker.
Bull: investor who buys believing prices will rise.
Capital markets: the market for long-term funding, eg bonds and equity.
Casino banking/finance: a colloquial term used to describe an investment approach in which investors at commercial banks employ risky financial strategies to earn large rewards.
Chinese walls: information barriers within investment banks to manage potential compliance and conflict of interest issues.
Clearing: the mechanism for making transactions happen: matching the buyer and seller, making sure the buyer has the cash and the seller has the securities.
Commodities: goods such as oil, petrol, metal or grain.
Credit crunch: the term that has come into common usage to refer to a severe shortage of money or credit. The start of the global credit crunch can be dated to August 2007 when default rates on sub-prime loans in the US housing market rose to record levels.
Credit default swap: insurance-like contract that transfers credit risk. The buyer of the swap makes payments to the seller in exchange for protection in the event of a default. Banks and other institutions have used credit default swaps to cover the risk of mortgage holders defaulting.
Debt capital markets (DCM): investment bank division responsible for issuance and pricing of debt securities (eg bonds).