GLOSSAIRY

GLOSSARY

Basis point:
0.01%

BRIC:
Brazil, Russia, India, China

Collateral:
Assets from commercial banks deposited as a guarantee with central banks to obtain loans from the latter

Corporate bonds:
Bonds issued by companies

Deflation:
General lowering of price levels

Deleveraging:
Lowering of the leverage, generally forced by events beyond the control of the economic agents

Depression:
Very severe and very long recession

Devaluation:
Of a currency, lowering of the value of a currency decided arbitrarily by the authorities, or forced by the financial markets

Dow Jones Eurostoxx 50 Index:
Index representing the stock market development of the 50 largest quoted companies in the Euro zone.

ECB (European Central Bank):
Central bank of the Euro zone

Economic agents:
Enterprises, private individuals, governments and other state organisations

Euro zone: 16 countries of the European Union that have adopted the Euro as their currency. The latest to date is Slovakia, since 1.1.2009
FDIC (Federal Deposit Insurance Corporation):
Federal agency of the USA tasked with ensuring the protection of the deposits placed in banks and savings banks as well as with liquidating as favourably as possible the assets of banks and savings banks that go bankrupt

FED (Federal Reserve):
American central bank

Flight to quality/security:
Sale of risky assets and purchase of assets without risk or entailing less risk

GDP (Gross Domestic Product):
Sum of the wealth created by an economy over a given period

Hard landing:
Rapid uncontrolled drop in economic activity

Hedge Funds:
Non-regulated investment funds authorised to establish a brand range of investment strategies, including selling short, generally using leveraging

High Yield:
Said of a bond with a high yield but of a quality lower than the average

Institutional investors:
Pension funds, mutual funds, insurance companies, banks

Investment Grade:
Said of a bond for which the probability of payment of the coupons and of reimbursement of the principal at maturity is very high

Leveraging:
Use of indebtedness to increase the possibilities of investment or to augment the returns on equity funds

Long-term rates:
Rates of interest applied on the financial markets, depending on supply and demand, for bonds with a maturity greater than 5 years

Monetary authorities:
Central banks

Official market rates:
Principal interest rates set by the central bank and practised in loans to commercial banks

PIIGS (Portugal, Ireland, Italy, Greece, Spain):
Set of countries in the Euro zone with the weakest economic foundations and sharing several of the following characteristics: high indebtedness of the economic agents, insufficient specialisation of supply, low productivity, excessively high property prices, very high unemployment, few structural reforms aimed at increasing the economy's potential for growth

Private Equity:
Investment fund that buys companies, generally not quoted on the stock market, by making strong use of leveraging

Quantitative easing:
Easing of the monetary conditions not connected with the level of the official market rates, obtained for example by lowering the yield of bonds on the financial markets through purchases by the central bank

Recession:
Drop in GDP

Soft landing:
Gradual, controlled slowdown of the economy

Soft restructuring:
Restructuring in terms of a bond in disfavour with investors but "voluntarily accepted" by the latter in order to avoid a default in payment by the issuer

Sovereign bonds:
Government bonds, treasury bonds issued by sovereign States

Swiss National Bank:
Swiss central bank

Treasury:
Ministry of finance

Value investor:
Investor basing decisions on valuation criteria (as opposed to the Momentum investor, who orients choices depending upon the movements of the price)


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