Finance glossary

B

Bear market

A sustained decline in prices, conventionally at least 20% from a peak.

Bond

A debt security: the issuer (state, company) borrows, pays interest (coupons) and repays at maturity. Its price falls when rates rise.

Bull market

A sustained rise in prices, conventionally at least 20% from a trough.

C

Compound interest

Interest that earns interest itself: capital grows exponentially over time. Explore →

D

Diversification

Spreading an investment across weakly correlated assets to reduce overall risk without giving up as much return.

Dividend

The share of profits paid out to shareholders, in cash or in shares.

E

ECB (European Central Bank)

The euro area’s central bank. It sets policy rates to keep inflation close to 2% over the medium term. Explore →

ETF (exchange-traded fund)

A listed fund that tracks an index (S&P 500, CAC 40…). Usually low fees and instant diversification.

F

Fed (Federal Reserve)

The US central bank. Dual mandate: price stability and maximum employment. Its policy rate moves every market worldwide. Explore →

Financial asset

Any security or contract that holds value: stocks, bonds, currencies, commodities, crypto-assets, fund units.

G

GDP (gross domestic product)

The value of all goods and services produced in a country over a period. Its change measures economic growth. Explore →

I

Inflation

A general, sustained rise in prices that erodes money’s purchasing power. Measured by the CPI (HICP in the euro area). Explore →

L

Liquidity

How easily an asset can be bought or sold quickly without moving its price.

M

Market capitalisation

A company’s market value: number of shares × share price.

P

P/E ratio

Share price divided by earnings per share. Shows how many years of earnings the market is paying for.

Policy rate

The rate a central bank sets to steer the cost of credit across the economy. Explore →

Q

Quarterly earnings

A listed company’s results published every three months: revenue, margins, profit, guidance.

R

Real interest rate

The nominal rate minus inflation - the true cost of money. Explore →

Recession

A decline in economic activity. Common rule of thumb: two consecutive quarters of falling GDP.

Return / yield

The gain on an investment relative to the capital invested, usually in % per year.

Risk (volatility)

How widely an asset’s price swings. Higher expected returns usually come with higher risk.

S

Share (stock)

A unit of ownership in a company. It entitles the holder to a share of profits (dividends) and usually to voting rights.

Spread

The gap between two rates or prices, e.g. a country’s borrowing rate versus Germany’s.

Stablecoin

A crypto-asset designed to keep a stable value, usually pegged to the dollar or the euro. Explore →

V

VIX

The S&P 500 implied-volatility index, nicknamed the “fear gauge”.

Y

Yield curve

Bond yields plotted by maturity. An inverted curve (short rates above long rates) has often preceded recessions. Explore →