Glossario

L’industria bancaria utilizza una serie di termini specifici. Spesso si suppone, erroneamente, che tutti ne conoscano il significato. La presente sezione contiene i termini chiave che appaiono nel nostro sito e nei nostri documenti, con le relative spiegazioni.

A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   X   Y   Z   0-9   

Legal & compliance   Structured product   Currency   Banks

A

AMC (actively managed certificate): This is a structured financial product that gives investors access to the performance of a portfolio that is actively managed by an investment strategy. It offers flexibility to invest in a wide range of asset classes without directly owning them, however, it does carry risks tied to the strategy’s performance and the issuer’s creditworthiness.

AT1 (additional tier 1 capital): A category of regulatory capital for banks that consists of perpetual instruments designed to absorb losses during times of financial stress. AT1 securities, often referred to as contingent convertible bonds (CoCos), pay discretionary coupons and can be written down or converted into equity if specific capital thresholds are breached.

Agency MBS (agency mortgage-backed securities): Agency mortgage-backed securities are bonds backed by pools of residential mortgages that are issued or guaranteed by US government agencies, such as Ginnie Mae, or government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac. These securities provide investors with regular payments from mortgage repayments and are generally considered to be lower risk compared with non-agency MBS due to the explicit or implicit government backing.

Annualised return: This is the average annual return of a strategy or investment calculated since its inception and assuming a consistent rate of growth over time.

Annualised volatility: This measures the average annual variation in a strategy’s returns since inception. It is used to assess the historical risk of an investment strategy, with lower volatility indicating steadier returns and higher volatility reflecting greater fluctuations.

APT (arbitrage pricing theory): This states that an asset’s return is driven by multiple risk factors, and its expected return is determined by the asset’s sensitivities to these factors and their respective risk premiums.

ARC PCI (Asset Risk Consultants Private Client Indices): The Private Client Indices (PCI) compiled by Asset Risk Consultants reflect the actual returns achieved by UK discretionary private client portfolios managed by participating investment managers. Based on real performance data, the PCI provides an indication of the returns a private client might expect for a given risk appetite over specific periods of time. As a composite of many portfolios, the PCI represents average performance, and individual portfolio returns may vary.

AUM (assets under management): This is the total market value of the investments that a financial institution manages on behalf of its clients.

ADP (Automatic Data Processing): This is a company that provides payroll, HR, and workforce management solutions for businesses.

Asset allocation: “Don’t put all your eggs in one basket.” Asset allocation is the most important performance driver in a diversified portfolio. It combines the art and science of allocating investments across different kinds of assets to optimise risk and reward in a portfolio.

Asset class: An asset class is a category of financial instruments which tends to react similarly in different market conditions and which adheres to the same rules and regulations. The principal asset classes are: cash; equities (including listed, unlisted, domestic, and foreign), which are securities linked to the capital of the issuing company; bonds, which are debt securities from the issuer (such as government and corporate bonds); commodities (e.g. precious and heavy metals, agricultural commodities and energy); derivatives (including swaps, options and futures); and real estate and collectors’ items, for example, artworks, precious coins, wine and stamps.

Asset management: Asset management involves investing across different types of financial asset, such as equities, bonds, monetary products, commodities and derivatives. This capital can be own-account or come from a third party (either institutional or individual), which is known as third-party asset management or fiduciary management. Asset managers and asset management companies act in line with regulatory and contractual constraints. Their aim is to get the best possible return given an investor’s level of risk tolerance. Collective management accounts for the lion’s share of the asset management universe. It consists of attracting funds from a range of investors, all of which are then managed within a mutual fund, which follows an overarching asset management policy. Two major approaches coexist within collective management. In the case of active management, the asset manager picks the stocks that they are going to buy or sell after having carried out a range of analyses on them. Their aim is to outperform the benchmark. In contrast to this, passive asset management (also known as index-linked management) involves replicating a benchmark’s performance as closely as possible. Proponents of this approach believe that markets are efficient, meaning that they incorporate all relevant information and that an active approach is unnecessary. Passive management costs are generally lower than active management costs.

B

bpd (barrels per day): This is a unit measuring the daily production or consumption of oil, with one barrel equal to 42 US gallons.

bp (basis point): This is a unit of measurement used in finance to describe changes in interest rates or yield differences. One basis point equals 0.01% (or 1/100th of a percentage point). For example, a 25-bp increase in interest rates means a 0.25% rise. Basis points are used to provide clarity and avoid confusion when discussing small percentage changes.

BEVs (battery electric vehicles): These are fully electric vehicles powered by rechargeable batteries, with no internal combustion engine or emissions and which rely solely on electric motors for propulsion.

BDCs (business development companies): These are publicly traded investment companies that provides financing to small- and medium-sized businesses, often through loans or equity investments. BDCs offer dividend yields due to their requirement to distribute 90% of taxable income to shareholders and provide retail investors access to private equity-like investments.

Bearish: This refers to a negative or pessimistic outlook on a market, asset, or economy, where investors expect prices to decline. It is often associated with selling or shorting assets.

BRICS: A formal intergovernmental organisation and the name for a group of emerging economies initially composed of Brazil, Russia, India, and China, with South Africa joining later.

Benchmark: A reference parameter – or “benchmark” – is used to compare the performance of an investment strategy or of a portfolio of assets. It measures the market’s performance and volatility and reflects whether the portfolio’s management team has outperformed or not. For example, if a portfolio contains a varied selection of Swiss equities, the benchmark might be the SMI, which is Switzerland’s broad index of the twenty most important equities in the Swiss Performance Index.

C

Capex (capital expenditure): These are funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, or equipment.

CLO (collateralised loan obligation): This is a financial product that pools corporate loans, which are often high-risk, and repackages them into securities that are sold to investors. These are divided into tranches with varying risk and return levels, offering diversification and higher yields.

CFTC (Commodity Futures Trading Commission): This is an independent US government agency that regulates futures, options, and derivatives markets. Its role is to promote market integrity, protect market participants from fraud and manipulation, and ensure transparent and competitive financial markets.

CTA (commodity trading advisor): A CTA is a professional or firm registered with the CFTC that provides advice or manages client funds in trading futures, options, and derivatives, often using systematic or discretionary strategies.

CET1 (common equity tier 1 capital): This is the highest quality of regulatory capital held by banks, consisting primarily of common shares and retained earnings, after certain regulatory adjustments, such as the deduction of intangible assets. CET1 is a key measure of a bank’s financial strength and is used to assess its ability to absorb losses and comply with regulatory requirements, such as the minimum capital ratios set by Basel III.

CAGR (compound annual growth rate): CAGR is the average annual rate of return for an investment over a specific period, assuming that profits are reinvested at the end of each period to generate further earnings.

CMT (constant maturity Treasury): This is a benchmark yield for US Treasuries with fixed maturities; it is used to set interest rates for financial products such as mortgages and swaps.

CPI (consumer price index): This measures the overall change in prices of goods and services purchased by households, serving as a key gauge of inflation and cost of living. Headline CPI comprises all items, including volatile categories such as food and energy, while core CPI excludes these items to provide a more stable measure of underlying inflation, as these prices can fluctuate due to factors like weather, geopolitical events, or seasonal changes.

Counterparty risk: This is the risk involved when counterparty to a transaction entered into by a portfolio may default on its obligations, which could negatively impact the portfolio's performance and result in a loss of capital.

Coupon-minus returns: This occurs when the total return of a bond investment is lower than its coupon rate due to capital losses caused by rising interest rates.

CDS (credit default swap): This is a derivative that provides protection against the risk of default on a debt instrument, such as a bond or loan.

Credit rating: A credit rating is a risk assessment of an entity’s creditworthiness assigned by agencies such as S&P, Moody’s, or Fitch. Ratings range from AAA (highest quality) to CCC or lower (high risk), and can apply to countries, companies, or individuals.

Currency risk: This the risk that the value of overseas assets held in a portfolio when measured in one currency may fluctuate due to changes in exchange rates, potentially leading to gains or losses.

CFROI: CFROI (cash flow return on investment) is an indicator of a firm’s ability to create value. Technically, CFROI is the average level of internal profitability that is equal to a firm’s economic assets, taken as a gross total (i.e. before depreciation costs) and adjusted for inflation, and the series of gross surpluses after tax, calculated over the lifetime of fixed assets. The last of these is estimated by dividing the gross value of capital assets by the year’s depreciation costs. Compared to the average weighted capital cost, CFROI enables the calculation of the extent to which a firm’s cash flows are superior to its cost of capital. The CFROI is also a means of assessment if one assumes that a company’s cash flows are a better indicator than its earnings (the price/earnings ratio), which are often subject to accounting distortions. It is used to compare the economic profitability of a firm to that of its peers, and its variation from one year to another gives an indication of its development. It is also interesting to establish a relationship between the CFROI and a firm’s share value; for example, if an investor believes that the heightened CFROI of a firm is badly reflected by its share price, they will exploit this assessment anomaly by betting on a rising share price. CFROI, source : UBS HOLT

D

Deflation: A decrease in the general price level of goods and services.

Depreciation: The reduction in the value of an asset over time due to wear and tear.

Digital token: This is digital representation of an underlying value, much as a banknote is the physical representation of a value. Tokens can be transferred from one party to another. In technical terms, digital tokens are data, such as that stored in a distributed ledger, which can be accessed with a private digital key.

DCF (discounted cash flow): This is a valuation method used to estimate the value of an investment based on its expected future cash flows, discounted to present value.

Duration: Duration is a measure of a bond’s sensitivity to interest rate changes expressed in years. The longer the duration, the more a bond’s price is affected by rate fluctuations. It helps investors assess and manage interest rate risk in fixed income portfolios.

DXY (US Dollar Index): This measures the value of the US dollar relative to a basket of six major currencies, including the euro, yen, and pound sterling. It serves as a key indicator of the dollar's strength in the global market.

E

EBITDA (earnings before interest, taxes, depreciation and amortisation): This is a measure of a company's overall financial performance and profitability, excluding the effects of financing and accounting decisions.

EPS (earnings per share): This is a financial metric that measures how much profit is allocated to each outstanding share of common stock. It serves as a key indicator of a company’s financial performance and profitability.

ESI (Economic Surprise Index): This is a financial indicator that measures how much recent economic data releases deviate from market expectations. It is widely used by investors, analysts, and economists to assess overall economic sentiment and momentum.

EMEA: EMEA is a geographical grouping that refers to Europe, the Middle East, and Africa.

Estimated income: This is based on the 12-month historical yield, shown net of ongoing fund charges but gross of Union Bancaire Privée (UK) Limited’s annual management fee. For accumulation share class units, deemed distributed income may be higher.

ETF (exchange-traded fund): An ETF is an investment fund that holds a collection of underlying assets, such as stocks, bonds, or commodities, and which can be bought and sold on an exchange, just like an individual stock. Passive ETFs are designed to replicate the performance of a specific index, which can range from a broad market index like the S&P 500 to a more focused sector or trend.

F

FAANG: This is an acronym for the five best-performing US tech stocks in the market: Meta (formerly Facebook), Apple, Amazon, Netflix, and Alphabet (formerly Google). The FAANG companies have a significant collective market capitalisation and influence on the stock market.

FDIC (Federal Deposit Insurance Corporation): This is a US government agency that insures deposits in banks and savings institutions to protect depositors.

FOMC (Federal Open Market Committee): This is the branch of the Federal Reserve that sets the direction of US monetary policy by making key decisions on interest rates and the growth of the money supply.

Fed (Federal Reserve): The Fed manages US monetary policy, regulates banks, ensures financial stability, and supports economic goals like employment, price stability, and moderate interest rates.

Fiat money: This is a government-issued currency not backed by a physical commodity, such as gold; it derives its value from supply, demand, and the stability of the issuing government.

FCA (Financial Conduct Authority): This is the UK regulator that ensures fair, transparent, and competitive financial markets while protecting consumers.

FSB (Financial Stability Board): This is an international body that brings together representatives of national authorities responsible for financial stability (e.g. central banks, regulatory authorities, and finance ministries).

FX (foreign exchange, forex): This is a global decentralised market for trading currencies, where participants exchange one currency for another.

Free cash flow margin: This is a financial ratio that measures how efficiently a company converts revenue into free cash flow, showing the percentage of sales available for reinvestment or distribution after covering operating expenses and capital expenditures.

Futures: These are contracts to buy or sell an asset at a predetermined price on a specific date in the future.

Funds of funds: A fund of funds enables clients to invest in a variety of funds that offer different investment strategies, rather than investing directly in just one strategy. These are often used to reduce the volatility of a single strategy.

G

G10: The G10 is a group of 11 advanced economies that collaborate on global financial and monetary policies, and which support the IMF through the General Arrangements to Borrow (GAB).

GIPS- (Global Investment Performance Standards) compliant composite: The Global Investment Performance Standards (GIPS) are standardised, industry-wide principles that guide investment firms in calculating and presenting their performances to prospective clients. A GIPS-compliant composite reflects the average performance of real, independently audited client portfolios managed without constraints.

Gilt: A gilt is a UK government bond denominated in sterling (GBP), issued by His Majesty’s (HM) Treasury and listed on the London Stock Exchange.

Greenback carry trade: This is a strategy where investors borrow US dollars at low interest rates and invest in higher-yielding foreign assets or currencies, profiting from the interest rate differential; it carries risks from currency fluctuations and rate changes.

GNP (gross national product): The total value of goods and services produced by a country’s residents, regardless of their location.

Gross return: All figures quoted as ‘gross’ represent the return on an investment before deducting management fees, expenses, and taxes.

GDP (gross domestic product): The total monetary value of all goods and services produced within a country’s borders over a specific period. It serves as a key indicator of a country’s economic health and growth.

H

Hedge fund: Hedge funds are actively managed private investment funds that pool money from investors and which are managed by professional fund managers. They employ a wide range of strategies, including leverage and trading non-traditional assets, with the goal of achieving above-average investment returns.

Hedging: Hedging is a risk-management strategy designed to reduce or eliminate potential financial losses from adverse price movements of an asset. It involves taking an offsetting position in a related security, derivative, or financial instrument to protect an investment.

High beta: This refers to an asset’s strong sensitivity or responsiveness to changes in broader market or economic conditions, such as global growth dynamics.

HQLA (high-quality liquid assets): These are cash or assets that can be converted into cash quickly with no significant loss of value.

High-yield bonds: These are bonds rated below investment grade (below 'BBB-' by S&P and Fitch, or 'Baa3' by Moody’s) and are also known as junk bonds. These bonds offer higher yields to compensate for increased credit risk compared with investment-grade securities and are often sought by investors willing to take on more risk for higher returns.

Home country: This refers to the asset bias of a given strategy. For GBP strategies, the bias will be to the UK, for USD strategies the bias will be to the US, for EUR strategies the bias will be to the eurozone countries.

I

IFO (IFO Business Climate Index): The IFO Business Climate Index measures the confidence of German businesses across key sectors, providing insights into the current state and future expectations of the economy.

Implementation style: This refers to how an investment strategy is implemented, either through direct investments in securities or through funds and other investment vehicles.

LTV (indicative loan-to-value ratio): This represents the proportion of a loan amount compared with the value of the asset being purchased, typically expressed as a percentage.

Inflation: This is the gradual loss of purchasing power due to a general rise in prices of goods and services over time.

IPO (initial public offering): This is the first sale of a company’s shares to the public.

ISM (Institute for Supply Management): This is a US survey-based indicator that tracks the performance of manufacturing and services sectors.

IRR (internal rate of return): This is the discount rate that makes the net present value (NPV) of all cash flows from a project or investment equal to zero.

IMF (International Monetary Fund): This is an intergovernmental institution promoting global growth, financial stability, trade, and poverty reduction.

IG (investment grade) bonds: Investment grade bonds are debt securities issued by governments, corporations, or other entities with a low risk of default, as they are rated at least 'BBB-' by Standard & Poor's and Fitch, or 'Baa3' by Moody’s. These bonds are favoured by conservative investors, such as pension funds and insurance companies, due to their financial stability, low default risk, and moderate returns.

J

January Effect: This is the supposed increase in stock prices in the first month of the year.

JOLTS (Job Openings and Labor Turnover Survey): This is a monthly U.S. Bureau of Labor Statistics report that tracks job openings, hires, and separations (quits, layoffs, and discharges), providing insights into labour market demand and worker mobility.

K

KPI (key performance indicator): This is a measurable value that indicates how effectively an individual or organisation is achieving key business objectives.

Key rate increases: Generally speaking, one of central banks’ main purposes is to keep inflation under control, but also to support economic activity. To achieve this, they put in place a monetary policy that takes account of economic developments. The main tool a central bank has to steer monetary policy is its key interest rate – the rate for loans to commercial banks, which then charge it, along with their own margins, for the loans that they in turn make to their clients, i.e. households and businesses.

L

LBO (leveraged buyout): This involves acquiring a company primarily through borrowed funds, often using the target company’s assets as collateral.

LDP (Liberal Democratic Party): This is Japan’s dominant conservative political party, founded in 1955. It has governed Japan for most of the post-World War II era, focusing on economic growth, national security, and strong US-Japan relations.

LCR (liquidity coverage ratio): This indicates a bank’s ability to withstand short-term liquidity disruptions by comparing its liquid assets with net outflows over a 30-day stressed period.

Liquidity risk: Liquidity risk arises when the markets in which a portfolio invests become less liquid, potentially preventing the portfolio from executing transactions at the most favourable time and price.

LIBOR (London Interbank Offered Rate): This was a benchmark interest rate at which major global banks lend to one another on the international interbank market.

LME (London Metal Exchange): This is the world's largest market for trading industrial metals, offering price discovery, risk management, and physical delivery through futures and options.

M

Magnificent 7: This refers to the seven largest tech companies in the US stock market – Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Tesla, and Nvidia – which are recognised for their significant impact on market performance and technological innovation.

Market capitalisation: This is the total value of a company’s outstanding shares (share price multiplied by the number of shares).

MDD (maximum drawdown): This is the largest loss experienced by a strategy from its highest point (peak) to its lowest (trough) since inception before reaching a new peak. It serves as an indicator of downside risk.

M&A (mergers & acquisitions): This is the consolidation of companies and their assets into new or larger entities, typically aimed at strategic growth, market expansion, or gaining a competitive advantage.

Modified duration: This measures a bond’s price sensitivity to changes in interest rates. A higher modified duration indicates greater sensitivity of a bond’s price to interest rate movements.

Monetary Authority of Singapore: This is Singapore’s central bank and financial regulatory authority, responsible for managing monetary policy, issuing currency, and overseeing the country's financial sector.

MPC (monetary policy committee): This is a central bank body that sets interest rates and monetary policy to control inflation and stabilise the economy.

MSCI ACWI (All Country World Index): This is a global equity index that provides large- and mid-cap representation across 23 developed market (DM) and 24 emerging market (EM) countries, offering a comprehensive view of global equity performance.

Mutual funds: These pool money from multiple investors to build diversified portfolios of stocks, bonds, and other securities managed by financial professionals.

Master/Feeder structure: A master/feeder structure is used when a strategy is offered across various regulatory environments. Both funds will accept subscriptions and redemptions, but the feeder will invest all the proceeds in the master. Portfolio management is decided at master-fund level. Feeder funds are separate legal entities and may therefore show a difference in minimum investment amounts, investor types, fees and net asset value (NAV).

N

Nasdaq: This is an electronic stock exchange that lists over 5,000 companies, including tech giants like Apple and Microsoft, serving as a key benchmark for the technology industry and innovation-driven businesses.

NAV (net asset value): This is the value of an entity’s assets minus its liabilities, often used in the context of mutual funds or ETFs.

Net return: All figures quoted as ‘net’ indicate that the returns are calculated after deducting applicable management fees, expenses, and taxes.

Net value: This is the value of an asset or investment after deducting all liabilities and associated costs.

Network Effect: The increased value of a product or service as more people use it.

NYMEX (New York Mercantile Exchange): This is a major commodities exchange for trading energy, metals, and other futures, and is part of the CME Group.

NFP (non-farm payroll): This is a key economic indicator in the US that measures the number of jobs added or lost in the economy, excluding workers in farming, private households, self-employment, and active-duty military. Released monthly, it serves as a critical measure of the health of the labour market.

NPL (non-performing loan): This is a loan on which the borrower has failed to make scheduled payments for a specified period, typically 90 days or more, and is considered at risk of default.

NATO (North Atlantic Treaty Organization): This is a military alliance of 32 countries from North America and Europe established in 1949 to ensure collective defence and promote security and stability among its members.

O

OCF (ongoing charges figure): This represents the cost of investing in the underlying fund and includes all types of expenses incurred by a fund or investment company in its operations.

Operational risk: This is the risk involved when a portfolio or its service providers experience a failure in its processes leading to a loss for the portfolio.

OECD (Organisation for Economic Co-operation and Development): This is an international organisation that works to promote policies that improve economic and social well-being worldwide.

OPEC (Organization of the Petroleum Exporting Countries): This is an intergovernmental organisation of 13 oil-producing countries that coordinates and unifies petroleum policies to stabilise oil markets and ensure a steady supply of oil.

OIS (overnight index swap): This is a type of interest rate derivative that reflects market expectations for central bank policy rates over a specific period.

P

PIK (payment-in-kind): This is a financial arrangement in which interest or dividends are paid with additional securities or added to the principal, rather than paid in cash. This allows the borrower or issuer to defer cash payments while increasing the outstanding balance of the obligation.

PCE (personal consumption expenditure): This measures how much US households spend on goods and services. This is a key indicator of economic health and is also used by the Federal Reserve to monitor inflation.

PGM (platinum group metals): This group includes platinum, palladium, rhodium, ruthenium, iridium, and osmium. They are rare, corrosion-resistant, and widely used in catalytic converters, jewellery, electronics, and medical devices. Major sources of these metals are South Africa, Russia, and North America.

P/E ratio (price-to-earnings ratio): This compares a company's share price to its earnings per share (EPS). Analysts and investors use it to assess the relative value of a company’s shares, especially when comparing it to peers or industry benchmarks.

Primary market: This is the market where new securities are issued and sold for the first time.

Private markets: These are investments in assets that are not publicly traded, including private equity, venture capital, real estate, and private debt.

PPI (producer price index): This is an economic indicator that measures the average change in selling prices received by domestic producers for their goods and services, and serves as a measure of inflation at wholesale level.

PMI (Purchasing Managers’ Index): This is a leading economic indicator derived from monthly surveys of private sector companies. It provides insights into the economic health of the manufacturing and services sectors.

Performance: The goal of any investment strategy is to generate positive returns or to limit the downside in negative market conditions. Performance can thus be indicated in absolute or relative terms when compared to a benchmark. Performance is measured as gross or net, with the latter being the return after fees and expenses have been deducted. Some investment managers take a performance fee on the assets they manage, calculated against the portfolio’s outperformance when compared to its benchmark.

Performance attribution: Performance attribution is a method that uses quantitative tools to evaluate how investment choices made by a portfolio manager affect the performance of the portfolio against a benchmark. If there is a discrepancy between the portfolio and the benchmark, these tools help to determine the cause(s). The two main factors that are analysed are stock selection and asset allocation.

Q

Quantitative easing: This is a monetary policy whereby a central bank buys securities to increase the money supply.

R

REER (real effective exchange rate): This is a trade-weighted measure of a country’s currency’s value relative to a basket of other currencies and adjusted for inflation differences. It is used to assess international competitiveness.

REIT (real estate investment trust): This is a company that owns, operates, or finances income-generating real estate and allows investors to earn dividends from real estate investments.

Recession: This is a period of economic decline, typically defined as two consecutive quarters of negative GDP growth.

ROA (return on asset): This is a measure of how profitable a company is relative to its total assets. It indicates how efficiently assets are used to generate earnings.

ROE (return on equity): This measures a company’s profitability by showing how efficiently it uses shareholders’ equity to generate profits.

Risk premium: This is the additional return an investor expects to earn for taking on higher risk compared with a risk-free investment.

S

S&P 500: This is a stock index tracking 500 of the largest publicly traded US companies.

SEC (Securities and Exchange Commission): This is the US government agency responsible for regulating the securities industry and protecting investors.

Selic: This is Brazil’s benchmark interest rate set by the country’s central bank to control inflation and guide monetary policy, thus influencing borrowing costs and economic activity.

Senior debt: Senior debt is a type of debt that takes priority in liquidations or bankruptcies, being repaid before subordinated debt and equity.

Senior loans: These are floating-rate loans issued by companies with below-investment-grade credit ratings. They are typically secured and rank higher in the capital structure.

SOFR-like (Shekel Overnight Interest Rate): This is the risk-free overnight rate for the Israeli shekel (ILS) published by the Bank of Israel. It replaced the Telbor rate in 2025 as part of the global transition to risk-free benchmark rates.

STOXX Europe 600: This is a stock index tracking 600 companies across 17 European countries, offering a broad view of the European equity market.

Subordinated debt: This is a type of debt that is repaid after senior debt after liquidations or bankruptcies. It carries higher risk but typically offers higher returns to compensate for its lower repayment priority.

SARON (Swiss Average Rate Overnight): This is a secured overnight interest rate for the Swiss franc (CHF) based on actual transactions in the Swiss repo market. It replaced CHF LIBOR as a reliable benchmark for loans, derivatives, and bonds.

Systemic risk: This is the risk of collapse in an entire financial system or market.

T

T-Bills: These are short-term securities issued by the US Treasury with maturities of one year or less, typically sold at a discount and redeemed at face value.

Term premia: This is the additional yield investors require for holding long-term bonds instead of rolling over a series of short-term bonds. Term premia reflect the risks and uncertainties about future interest rates, inflation, and economic conditions, and represent the compensation for carrying these risks over a longer horizon.

TRR (total rate of return): This measures the overall return of an investment over a specific period, including capital gains, dividends, and interest.

Total return: This aims to deliver a combination of capital growth and income; however, this does not guarantee a consistently positive return under all market conditions.

TWI (trade-weighted index): This measures a currency’s value against a basket of other currencies weighted by the trade volumes with each country. It reflects a currency’s overall strength and competitiveness in international trade.

TIPS (Treasury Inflation-Protected Securities): These are US government bonds designed to protect investors from inflation, with their principal value adjusted based on changes in the consumer price index (CPI).

U

USMCA (United States-Mexico-Canada Agreement): This is a trade deal between the US, Mexico, and Canada that replaced NAFTA in 2020, modernising trade rules, strengthening labour and environmental protections, and promoting fair competition.

V

VaR (value at risk): This is a statistical measure of market risk. It represents the potential loss of a static portfolio due to market developments over a set time horizon at a specified level of confidence. VaR is primarily used for market risk management and for the determination of regulatory capital requirements.

VIX index (the so-called ‘fear index’): This measures the market’s expectation of 30-day forward-looking volatility for the S&P 500 index, derived from option prices. Volatility measures the degree of variation in the price of a financial instrument over time; high volatility reflects larger price swings, while low volatility indicates more stable and consistent prices.

Volatility: Volatility measures risk, reflecting the level of variation of the price of a security. Volatility is calculated on the standard deviation of the return of an asset over a certain period of time. For example, if an instrument has a volatility of 20% then it has the potential of increasing or decreasing by that amount over the given time. The higher the volatility, the higher the risk. Beta measures the volatility of a stock relative to the market.

W

WACC (weighted average cost of capital): This is the average rate of return a company is expected to pay its investors, weighted by the proportion of equity and debt in its capital structure.

Y

Y/Y (year-on-year): This is a comparison of financial data from one year to the next.

Yield: This is the income generated by an investment, typically expressed as a percentage of its original cost or current market value, and can include interest, dividends, or other returns.

Yield curve: This is a graphical representation of interest rates on government bonds across different maturities, reflecting economic expectations. A normal (upwards-sloping) curve indicates that long-term rates are higher than short-term rates, while an inverted (downwards-sloping) curve may signal a potential recession.

0-9

10-year Treasury yield: The 10-year Treasury yield is the return on investment for US government bonds with a maturity of 10 years. It serves as a benchmark for borrowing costs and the risk-free rate, and reflects market expectations about the economy and inflation. Its fluctuations influence mortgage rates, corporate borrowing costs, and overall market sentiment.

Structured Product Glossary

Counterparties’ Short Names

• BARC (Barclays)
• BNP (BNP Paribas)
• CA (Credit Agricole)
• CS (Citi Group)
• GS (Goldman Sachs)
• JPM (JP Morgan)
• SG (Societe Generale)
• VONT (Vontobel)
• NOMU (Nomura)

Call strike: This is the predetermined price at which the holder of a call option has the right to buy the underlying asset.

Callability: This is a feature of a security that allows the issuer to redeem the instrument before its maturity at predetermined terms.

Cap: This is a limit on profit potential.

Capital protected note: This is a structured financial product that guarantees the return of the initial invested capital at maturity while offering potential returns linked to the performance of an underlying asset or index.

Capital protection, conditional: This is a mechanism whereby the capital protection applies only if certain conditions are met (e.g. no credit event, or based upon the underlying closing above a capital barrier).

Cash settlement: At maturity, clients receive a cash payment as opposed to a physical delivery of shares.

Collateral: This is the asset on which a derivative’s value is based.

Conditional coupon: This is a mechanism whereby the coupon payment is conditioned to a predefined scenario. The coupon payment is therefore not guaranteed.

Credit event: This occurs when a debtor cannot meet their obligations; this may include bankruptcy, failure to pay, obligation default, potential/actual acceleration, repudiation/moratorium, government intervention or restructuring (as per ISDA definitions).

Credit rating: This is the current opinion of a rating agency (e.g. S&P, Moody’s, Fitch) on an issuer’s creditworthiness, indicating default likelihood via letter grades (A, B, C).

Coupon type: This is the structure that determines how interest payments are calculated and paid on a financial instrument. Common types include fixed coupons, floating coupons linked to a reference rate, zero coupons (no periodic payments), and conditional or structured coupons linked to market performance.

Delta: This is a dynamic indicator of an option’s or warrant’s leverage; it shows the percentage change in the option price for a 1% move in the underlying asset.

Dirty price: This is the valuation price including the ‘clean’ valuation (intrinsic plus embedded options) plus any accrued amounts since the last payment date (e.g. accrued coupon).

Digital/binary options: These are options that pay a fixed, predetermined amount if a specified condition on the underlying asset’s price is met at maturity, and nothing otherwise.

Call & put options: A call option gives the holder the right, but not the obligation, to buy an underlying asset at a predetermined price, while a put option gives the holder the right, but not the obligation, to sell the underlying asset at a predetermined price before or at a specified date.

Spread risk reversals: These are option strategies that combine the purchase and sale of options with different strike prices or types to manage risk or express a directional view on the market.

Straddles: This is an option strategy that involves buying or selling both a call and a put with the same strike price and expiration date on the same underlying asset.

Strangles: This is an option strategy that involves buying or selling a call and a put with the same expiration date but different strike prices on the same underlying asset.

ISDA (International Swaps and Derivatives Association): This is the global trade association that publishes standard documentation (e.g. ISDA Master Agreement) and protocols governing over-the-counter (OTC) derivatives and credit events.

Issuer call: This is a mechanism whereby the issuer has the right, but not the obligation, to redeem back to investors their investment in the note.

Issuer risk: Structured products are debt instruments, thereby exposing investors to the issuer’s credit risk.

Lock-in: If the lock-in level is reached, repayment is at least a preset amount regardless of subsequent underlying performance.

Look-back: A specified initial period (days to weeks) during which prices are observed but barrier/strike is not fixed yet.

Memory coupon: This is a mechanism whereby any previously missed coupon(s) payment(s) may be recovered again at any subsequent observation during the tenor of the investment if conditions are satisfied again.

Option: This is a contract whereby the buyer obtains the right (not the obligation) to buy or sell an underlying asset at predefined conditions. This includes call options (the right to benefit from a price appreciation) and put options (the right to benefit from a price depreciation). Options are key components of structured products.

Participation: This is a mechanism whereby investors can benefit from the price action of an underlying asset (appreciation or depreciation).

Physical settlement: This is a mechanism whereby investors can receive payment in shares of the underlying stock of the note.

Rebate: This is a coupon payment triggered upon the underlying closing above or below a predefined threshold.

Reference entity (for CLNs): This is the company or sovereign whose credit risk the note references determining whether a credit event triggers the CLN’s payout.

Strike: For options, this refers to the buy or sell price of the underlying asset; for participation and yield-enhancement products, this references a specific price of the underlying asset that defines thresholds such as conditional protection levels or participation starting points.

Secondary market: The issuer plans to act as market maker for the issued notes and will use commercially reasonable efforts to provide daily indicative bid and/or offer prices, depending on prevailing market conditions.

Underlying (asset): This is the asset on which a derivative is based (e.g. equities, indices, bonds, rates, credit reference entities, currencies).

Volatility: This is the intensity of a security’s price fluctuations, distinguished as historical or implied.

Worst-of: In a worst-of structure, redemption amount or delivery is determined by the underlying asset with the worst performance at maturity.

XAU: This is the currency code used to represent one troy ounce of gold in financial markets.

Currency Glossary

• AUD: Australian dollar
• BRL: Brazilian real
• CAD: Canadian dollar
• CHF: Swiss franc
• CNY: Chinese yuan
• EUR: Euro
• GBP: British pound
• ILS: Israeli shekel
• INR: Indian rupee
• JPY: Japanese yen
• KRW: South Korean won
• MXN: Mexican peso
• NOK: Norwegian krone
• NZD: New Zealand dollar
• PLN: Polish zloty
• SEK: Swedish krona
• SGD: Singapore dollar
• TRY: Turkish lira
• USD: United States dollar
• ZAR: South African rand

Banks Glossary

• BoC (Bank of Canada): Central bank of Canada.
• BoE (Bank of England): Central bank of the United Kingdom.
• BIS (Bank for International Settlements): An international financial institution that serves as a bank for central banks and fosters international monetary and financial cooperation.
• BoI (Bank of Israel): Central bank of Israel.
• BoJ (Bank of Japan): Central bank of Japan.
• Banxico (Bank of Mexico): Central bank of Mexico.
• BCB (Bank Central do Brasil): Central bank of Brazil.
• BofA (Bank of America): One of the largest financial institutions in the world. It provides retail banking, investment banking, wealth management, and corporate financial services, serving clients in over 35 countries.
• CB (central bank): This is a national institution that manages a country's currency, money supply, and interest rates, and oversees the banking system to ensure financial stability.
• CBRT (Central Bank of the Republic of Türkiye): Central bank of Türkiye.
• ECB (European Central Bank): Central bank of the eurozone.
• MAS (Monetary Authority of Singapore): Central bank of Singapore
• PBoC (People’s Bank of China): Central bank of China.
• RBA (Reserve Bank of Australia): Central bank of Australia.
• RBI (Reserve Bank of India): Central bank of India.
• RBNZ (Reserve Bank of New Zealand): Central bank of New Zealand.
• SARB (South African Reserve Bank): Central bank of South Africa.
• Sveriges Riksbank: Central bank of Sweden.
• SNB (Swiss National Bank): Central bank of Switzerland.