Finance & Risk Management Overview

Risk from changes in market conditions.

Risk that a counterparty won't pay what they owe.

Risk of internal failures in a company's processes.

Reducing risk through financial instruments.

Investing in various assets, spreading risk.

Transferring risk to an insurance company.

Rules and practices for accountability, fairness, transparency in companies.

The group that oversees company management decisions.

Protecting and representing shareholder interests.

Openly disclosing financial/operational info.

Allocating capital for a return.

Owning shares of a company.

Lending money to an entity.

Investments like real estate, commodities, hedge funds, private equity.

Uncertainty in investment returns.

Market-wide risk (can't be diversified).

Risk specific to a company/industry.

Gain or cost of an investment (income + capital gains).

Weighted average of possible returns.

A strategy focusing on investments that generate regular returns, like dividends from stocks or bonds.

A strategy of investing in assets that are overlooked or facing market downturns, usually going against common opinion.

Behavioral bias where investors overestimate their knowledge and abilities leading to riskier investment decisions.

Following the actions of other investors, often without proper analysis of the investment.

The tendency to fixate on initial information (like purchase price) when making investment decisions.

A tendency to strongly dislike losing money more than liking gaining an equivalent amount.

A theory suggesting that asset prices fully reflect all available information.

Market prices reflect all past market data (historical prices).

Market prices reflect all publicly available data.

Market prices reflect all public and private information.

Represent ownership in a company, offering potential periodic dividends and capital gains.

Debt instruments issued by governments or corporations, providing periodic interest payments and principal repayment.

The total return of an investment without comparing it to a benchmark.

The performance of an investment compared to a similar asset or market index.

A risk-adjusted measure of return.

An investment's excess return compared to a benchmark.

Measures the volatility or sensitivity of an investment to the overall market.

Higher risk investments generally offer the potential for higher returns, and lower risk investments usually offer lower returns.

A framework for building investment portfolios that maximize returns for a given level of risk.

Reducing investment risk by spreading your money across different assets.

The set of investment portfolios offering the highest possible expected return for any given level of risk.

A model that calculates the expected return of an asset based on its risk and the risk-free return.

A measure of an asset's volatility relative to the market.

Equity ownership with voting rights.

Limited or no voting rights, fixed dividends, higher claim on assets in a bankruptcy.

Debt securities issued by a government.

Debt securities issued by corporations.

Debt securities issued by local governments.

Interest paid on a bond.

Total return earned if a bond is held until maturity.

Sensitivity of a bond's price to interest rate changes.

Low-risk, readily available assets such as treasury bills and money market funds.

Investments outside of traditional stocks and bonds, including real estate, commodities, and hedge funds.

Valuation method that discounts future cash flows to their present value at a required rate.

Valuation method that values stocks based on the present value of future dividends.

Valuation method comparing company valuations against benchmarks or multiples, such as P/E, P/B, and P/S.

Determination of a bond's fair value based on the present value of expected future cash flows.

Difference between a bond's yield and a benchmark yield.

Attempting to beat the market by actively selecting stocks, timing trades, and performing research.

Matching the performance of a market index through index funds or ETFs.

Stocks of companies expected to have strong growth in earnings and revenue.

Stocks of companies believed to be undervalued based on their fundamentals and intrinsic value.

Allocating capital to earn future income or increased value.

Spreading investments to reduce overall risk.

Studying market trends and economic conditions for investment opportunities.

Planning to avoid or reduce investment losses.

Specific plans for achieving investment goals.

Dividing investments among different asset types.

Different ways to invest, like stocks, bonds, and real estate.

Higher risk often leads to higher potential returns.

Groups of similar investments (stocks, bonds, etc.).

Techniques to estimate the value of an investment.

Commitment of resources today for future benefits, aiming for financial or other returns.

Higher potential returns usually come with higher risks; lower returns with lower risks.

Spreading investments across different asset classes to reduce risk.

Represent ownership in a company, potentially high returns, but also high risk.

Loans to entities (governments or companies) carrying lower risk and generally lower returns.

Investment in physical property, like land, buildings, or apartments, for income and appreciation.

Investments in raw materials (gold, oil, etc.), serving as a hedge against inflation, but volatile.

Pools of investor money invested in a diversified portfolio, managed by professionals.

Exchange-traded funds, similar to mutual funds, but traded on stock exchanges.

Less traditional investments (private equity, hedge funds, collectibles) with higher potential returns but higher risk.

Possibility of losing your initial investment or not reaching expected returns.

Gain from an investment, calculated as a percentage of the initial investment.

Stocks representing ownership shares in a company.

Bonds and debt instruments representing loans.

Physical property like land, buildings, apartments.

Raw materials like gold, oil, and agricultural products.

Investments like private equity, hedge funds, collectibles.

True value based on an asset's inherent characteristics.

Current trading price of an asset.

Valuation using discounted future cash flows.

Valuation using similar company values.

Valuation using previous similar transaction data.

Comparing asset valuation metrics to others.

Systematic tendencies in investment decisions deviating from rationality.

Disliking losses more than liking equivalent gains.

Excessive trust in one's abilities and predictions.

Reliance on initial information when making decisions.

Following others' actions in investments.

Separating investments into different mental compartments.

Different presentations of information influencing decisions.

Explaining decision-making based on options.

Fear, greed, and impulse affecting investment choices.

Investment patterns contradicting standard theories.

Evaluating the success or failure of an investment strategy.

Profitability of an investment relative to its cost.

Investment return including capital gain and income.

Comparing return to the risk taken.

Risk-adjusted return, (portfolio return - risk-free rate) / portfolio standard deviation.

Comparing investment performance to market indices.

Identifying factors driving investment return.

Fees and costs factored into investment performance.

Allocating capital to assets expecting future returns.

Risk tolerance, time horizon, and goals influence investment decisions.

Reducing portfolio risk by spreading investments across asset classes.

Balancing risk and return by adjusting asset class proportions.

Market, fundamental, and technical analyses for informed decisions.

Different approaches to investing, long-term to short-term.

Evaluating investment success using metrics like ROI, total return, and Sharpe ratio.

A theory stating asset prices reflect all available information.

Weak, semi-strong, and strong form EMH describe different information sets.

Past market data is irrelevant for predicting future prices.

Publicly available information cannot be used to consistently outperform the market.

Even private information cannot be used to consistently outperform the market.

Contractual agreements involving financial assets traded for investment.

Represent ownership shares in a company.

Loan agreements between borrowers and lenders.

Financial instruments whose value depends on an underlying asset.

Pools of investor money invested in a diversified portfolio.