The following outline is provided as an overview of and topical guide to finance:

Finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

– addresses the ways in which individuals and organizations raise and allocate monetary resources over time, taking into account the

risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...

s entailed in their projects.

Overview

The term finance may incorporate any of the following: * The study of

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money ar ...

and other

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...

s * The

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...

and control of those assets * Profiling and managing project risks

Fundamental financial concepts

Arbitrage In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between t ...

Capital (economics) In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. At the macroeconomic level, "the nation's capital stock includes buildings, ...

Capital asset pricing model In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into ac ...

** Cash flow ** Cash flow matching **

Debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

*** Default *** Consumer debt *** Debt consolidation *** Debt settlement *** Credit counseling ***

Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...

*** Debt diet ***

Debt-snowball method The debt snowball method is a debt-reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first, while paying the minimum payment on larger debts. Once the smallest debt is paid ...

***

Debt of developing countries The debt of developing countries usually refers to the external debt incurred by governments of developing countries. There have been several historical episodes of governments of developing countries borrowing in quantities beyond their abilit ...

**Asset types ***

Real Estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...

*** Securities ***

Commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

*** Futures ***

Cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...

Discounted cash flow The discounted cash flow (DCF) analysis is a method in finance of valuing a security, project, company, or asset using the concepts of the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate de ...

Financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provi ...

*** Funding ** Entrepreneur ***

Entrepreneurship Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...

Fixed income analysis Fixed income analysis is the process of determining the value of a debt security based on an assessment of its risk profile, which can include interest rate risk, risk of the issuer failing to repay the debt, market supply and demand for the sec ...

** Gap financing ** Global financial system **

Hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoi ...

*** Basis risk **

Interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, t ...

*** Risk-free interest rate *** Term structure of interest rates **

Short-rate model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a s ...

***

Vasicek model In finance, the Vasicek model is a mathematical model describing the evolution of interest rates. It is a type of one-factor short-rate model as it describes interest rate movements as driven by only one source of market risk. The model can be use ...

***

Cox–Ingersoll–Ross model In mathematical finance, the Cox–Ingersoll–Ross (CIR) model describes the evolution of interest rates. It is a type of "one factor model" ( short-rate model) as it describes interest rate movements as driven by only one source of mark ...

*** Hull–White model ***

Chen model In finance, the Chen model is a mathematical model describing the evolution of interest rates. It is a type of "three-factor model" (short-rate model) as it describes interest rate movements as driven by three sources of market risk. It was the fir ...

***

Black–Derman–Toy model In mathematical finance, the Black–Derman–Toy model (BDT) is a popular short-rate model used in the pricing of bond options, swaptions and other interest rate derivatives; see . It is a one-factor model; that is, a single stochastic factor—t ...

Interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...

*** Effective interest rate *** Nominal interest rate *** Interest rate basis ***

Fisher equation In financial mathematics and economics, the Fisher equation expresses the relationship between nominal interest rates and real interest rates under inflation. Named after Irving Fisher, an American economist, it can be expressed as real interest ...

*** Crowding out ***

Annual percentage rate The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mo ...

*** Interest coverage ratio **

Investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...

***

Foreign direct investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct c ...

*** Gold as an investment *** Over-investing ** Leverage **

Long (finance) In finance, a long position in a financial instrument means the holder of the position owns a positive amount of the instrument. The holder of the position has the expectation that the financial instrument will increase in value. This is known a ...

** Liquidity ** Margin (finance) **

Mark to market Mark-to-market (MTM or M2M) or fair value accounting is accounting for the " fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fai ...

** Market impact ** Medium of exchange **

Microcredit :''This article is specific to small loans, often provided in a pooled manner. For direct payments to individuals for specific projects, see Micropatronage. For financial services to the poor, see Microfinance. For small payments, see Micropa ...

Money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money ar ...

***

Money creation Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money creation is controlled by the central bank ...

***

Currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...

***

Coin A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order ...

***

Banknote A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable instrument, negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes w ...

*** Counterfeit ***

History of money The history of money concerns the development throughout time of systems that provide the functions of money. Such systems can be understood as means of trading wealth indirectly; not directly as with bartering. Money is a mechanism that facili ...

***

Monetary reform Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system. Monetary reformers may advocate any of the following, among other proposals: * A return t ...

** Portfolio *** Modern portfolio theory ***

Mutual fund separation theorem In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be constructed by holding each of certain mutual funds in a ...

***

Post-modern portfolio theory Post-Modern Portfolio Theory (PMPT) is an extension of the traditional Modern Portfolio Theory (MPT), an application of mean-variance analysis (MVA). Both theories propose how rational investors can use diversification to optimize their portfolios. ...

Reference rate A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of LIBOR rate, but it can take many forms, such as a consumer price index, a house pri ...

*** Reset **

Return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or t ...

***

Absolute return The absolute return or simply return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital. The adjective "absolute" is used to stress the distinction with the relative return measures often us ...

*** Investment performance *** Relative return **

Risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...

***

Financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financia ...

*** Risk management ****

Financial risk management Financial risk management is the practice of protecting economic value in a firm by using financial instruments to manage exposure to financial risk - principally operational risk, credit risk and market risk, with more specific variants as l ...

****

Uncompensated risk In investments, uncompensated risk is the level of additional risk for which no additional return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the ...

*** Risk measure **** Coherent risk measure ****

Deviation risk measure In financial mathematics, a deviation risk measure is a function to quantify financial risk (and not necessarily downside risk) in a different method than a general risk measure. Deviation risk measures generalize the concept of standard deviation. ...

**** Distortion risk measure **** Spectral risk measure **** Value at risk ***** Expected shortfall ***** Entropic value at risk ** Scenario analysis **

Short (finance) In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional "long" position, where the investor will profit if the value of the ...

** Speculation ***

Day trading Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks ...

** Position trader ** Spread trade ** Standard of deferred payment ** Store of value **

Time horizon Time is the continued sequence of existence and events that occurs in an apparently irreversible succession from the past, through the present, into the future. It is a component quantity of various measurements used to sequence events, to co ...

** Time value of money *** Discounting *** Present value *** Future value *** Net present value ***

Internal rate of return Internal rate of return (IRR) is a method of calculating an investment’s rate of return. The term ''internal'' refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or ...

*** Modified internal rate of return *** Annuity ***

Perpetuity A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For example, the United Kingdom (UK) government issued them in the past; these were known as cons ...

Trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct exc ...

***

Free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econ ...

***

Free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...

***

Fair trade Fair trade is an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and envir ...

** Unit of account ** Volatility ** Yield ** Yield curve

History

* History of finance *

History of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BCE in Assyria, India and Sumeria. Later, in an ...

History of insurance The history of insurance traces the development of the modern business of insurance against risks, especially regarding cargo, property, death, automobile accidents, and medical treatment. The insurance industry helps to eliminate risks (as whe ...

* Tulip mania (Dutch Republic), 1620s/1630s * South Sea Bubble (UK) &

Mississippi Company The Mississippi Company (french: Compagnie du Mississippi; founded 1684, named the Company of the West from 1717, and the Company of the Indies from 1719) was a corporation holding a business monopoly in French colonies in North America and t ...

(France), 1710s; see also

Stock market bubble A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bu ...

* '' Vix pervenit'' 1745, on usury and other dishonest profit * Panic of 1837 (US) * Railway Mania (UK), 1840s * Erie War (US), 1860s * Long Depression, 1873–1896 (mainly US and Europe, though other parts of the world were affected) * Post-World War I hyperinflation; see Hyperinflation and Inflation in the Weimar Republic *

Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange coll ...

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

1930s *

Bretton Woods Accord The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Brett ...

1944 *

1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had su ...

1979 energy crisis The 1979 oil crisis, also known as the 1979 Oil Shock or Second Oil Crisis, was an energy crisis caused by a drop in oil production in the wake of the Iranian Revolution. Although the global oil supply only decreased by approximately four pe ...

* Savings and Loan Crisis 1980s *

Black Monday Black Monday refers to specific Mondays when undesirable or turbulent events have occurred. It has been used to designate massacres, military battles, and stock market crashes. Historic events *1209, Dublin – when a group of 500 recently arriv ...

1987 * Asian financial crisis 1990s *

Dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Comp ...

1995-2001 * Stock market downturn of 2002 * United States housing bubble *

Financial crisis of 2007–08 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

, followed by the

Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...

Finance terms by field

Accounting (financial record keeping)

* Auditing * Accounting software *

Book keeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. Tr ...

FASB The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Sec ...

* Financial accountancy ** Financial statements ***

Balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

***

Cash flow statement In financial accounting, a cash flow statement, also known as ''statement of cash flows'', is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to op ...

***

Income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...

* Management accounting * Philosophy of Accounting *

Working capital Working capital (WC) is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is consi ...

* Hedge accounting ** IFRS 9 **

Fair value accounting Mark-to-market (MTM or M2M) or fair value accounting is accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" ...

Banking

*See articles listed under:

Corporate finance

* Balance sheet analysis **

Financial ratio A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financia ...

Business plan A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on ...

* Capital budgeting ** Investment policy *** Business valuation *** Stock valuation *** Fundamental analysis *** Real options *** Valuation topics *** Fisher separation theorem ** Sources of financing ** Securities **

Initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...

Capital structure In corporate finance, capital structure refers to the mix of various forms of external funds, known as capital, used to finance a business. It consists of shareholders' equity, debt (borrowed funds), and preferred stock, and is detailed in th ...

Cost of capital In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". It is used to evaluate ne ...

*** Weighted average cost of capital ***

Modigliani–Miller theorem The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy cos ...

*** Hamada's equation ** Dividend policy ***

Dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...

***

Dividend tax A dividend tax is a tax imposed by a jurisdiction on dividends paid by a corporation to its shareholders (stockholders). The primary tax liability is that of the shareholder, though a tax obligation may also be imposed on the corporation in the ...

***

Dividend yield The dividend yield or dividend–price ratio of a share is the dividend per share, divided by the price per share. It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant ...

***

* Corporate action * (

Strategic Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the "art ...

) Financial management ** Managerial finance ** Management accounting *

Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...

** leveraged buyout **

takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to ...

** corporate raid **

Contingent value rights In corporate finance, Contingent Value Rights (CVR) are rights granted by an acquirer to a company’s shareholders, facilitating the transaction where some uncertainty is inherent. CVRs may be separately tradeable securities; they are occasiona ...

* Real options * Working capital management **

***

Current assets In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...

***

Current liabilities In accounting, current liabilities are often understood as all liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle of a given firm, whichever period is longer. A more complete definition is t ...

Return on investment Return on investment (ROI) or return on costs (ROC) is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably ...

***

Return on capital Return on capital (ROC), or return on invested capital (ROIC), is a ratio used in finance, valuation and accounting, as a measure of the profitability and value-creating potential of companies relative to the amount of capital invested by sharehold ...

*** Return on assets *** Return on equity ** loan covenant **

cash conversion cycle In management accounting, the Cash conversion cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales. It is thus a measure of the liquidity risk entailed by grow ...

** Cash management *** ** Inventory optimization ***

Supply chain management In commerce, supply chain management (SCM) is the management of the flow of goods and services including all processes that transform raw materials into final products between businesses and locations. This can include the movement and st ...

*** Just In Time (JIT) *** Economic order quantity (EOQ) *** Economic production quantity (EPQ) *** Economic batch quantity **

Credit (finance) Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt ...

** Credit scoring **

Default risk A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased c ...

** Discounts and allowances ** Factoring (trade) &

Supply chain finance Supply chain financing (or reverse factoring) is a form of financial transaction wherein a third party facilitates an exchange by financing the supplier on the customer's behalf. Also it refers to the techniques and practices used by banks and ...

Investment management

Active management Active management (also called ''active investing'') is an approach to investing. In an actively managed portfolio of investments, the investor selects the investments that make up the portfolio. Active management is often compared to passive ma ...

* Efficient market hypothesis * Portfolio * Modern portfolio theory **

* Arbitrage pricing theory * Passive management **

Index fund An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, avai ...

Activist shareholder An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full ...

Mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICA ...

** Open-end fund ** Closed-end fund ** List of mutual-fund families * Financial engineering **

Long-Term Capital Management Long-Term Capital Management L.P. (LTCM) was a highly-leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York. LTCM was founded in ...

Hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...

* #Quantitative investing, below

Personal finance

* 529 plan (US college savings) * ABLE account (US plan for benefit of individuals with disabilities) * Asset allocation **

Asset location Asset location (AL) is a term used in personal finance to refer to how investors distribute their investments across savings vehicles including taxable accounts, tax-exempt accounts (e.g., TFSA, Roth IRA, ISAs, TESSAs), tax-deferred accounts (e.g ...

Budget A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environme ...

Coverdell Education Savings Account A Coverdell education savings account (also known as an education savings account, a Coverdell ESA, a Coverdell account, or just an ESA, and formerly known as an education individual retirement account), is a tax advantaged investment account in the ...

(Coverdell ESAs, formerly known as Education IRAs) * Credit and debt **

Credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the ...

** Debt consolidation **

Mortgage loan A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...

*** Continuous-repayment mortgage *

Debit card A debit card, also known as a check card or bank card is a payment card that can be used in place of cash to make purchases. The term '' plastic card'' includes the above and as an identity document. These are similar to a credit card, but ...

* Direct deposit *

Employment contract An employment contract or contract of employment is a kind of contract used in labour law to attribute rights and responsibilities between parties to a bargain. The contract is between an "employee" and an "employer". It has arisen out of the old ...

** Commission **

Employee stock option Employee stock options (ESO) is a label that refers to compensation contracts between an employer and an employee that carries some characteristics of financial options. Employee stock options are commonly viewed as an internal agreement prov ...

** Employee or fringe benefit **

Health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among m ...

Paycheck A paycheck, also spelled paycheque, pay check or pay cheque, is traditionally a paper document (a cheque) issued by an employer to pay an employee for services rendered. In recent times, the physical paycheck has been increasingly replaced by e ...

** Salary **

Wage A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', '' prevailing wage'', and ''yearly bonuses,'' and remune ...

* Financial literacy *

Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

* Predatory lending * Retirement plan ** Australia –

Superannuation in Australia In Australia, superannuation, or just super, is the term for retirement pension benefit funds. Employers make compulsory contributions into these funds on behalf of their employees. Superannuation is compulsory for all employed people workin ...

** Canada *** Registered retirement savings plan *** Tax-free savings account ** Japan –

Nippon individual savings account A Nippon individual savings account (NISA) is an account that is meant to help residents in Japan save money with tax-exempt benefits. It is modeled after the Individual Savings Account in the United Kingdom. History NISA was created in 2014 as ...

** New Zealand – KiwiSaver ** United Kingdom ***

Individual savings account An individual savings account (ISA; ) is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax i ...

***

Self-invested personal pension A self-invested personal pension (SIPP) is the name given to the type of UK government-approved personal pension scheme which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and ...

** United States *** 401(a) ***

401(k) In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodical employee contributions come directly out of the ...

*** 403(b) *** 457 plan *** Keogh plan *** Individual retirement account ****

Roth IRA A Roth IRA is an individual retirement account (IRA) under United States law that is generally not taxed upon distribution, provided certain conditions are met. The principal difference between Roth IRAs and most other tax-advantaged retirement p ...

****

Traditional IRA A traditional IRA is an individual retirement arrangement (IRA), established in the United States by the Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ). Normal IRAs also existed before ERISA. Overview An author ...

**** SEP IRA **** SIMPLE IRA **

Pension A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...

Simple living Simple living refers to practices that promote simplicity in one's lifestyle. Common practices of simple living include reducing the number of possessions one owns, depending less on technology and services, and spending less money. Not only is ...

Social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...

Tax advantage Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. Examples of tax-advantaged accounts and investments include retirement plans, education savi ...

Wealth Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an I ...

Comparison of accounting software The following comparison of accounting software documents the various features and differences between different professional accounting software, personal and small enterprise software, medium-sized and large-sized enterprise software, and oth ...

* Personal financial management * Investment club *

Collective investment scheme An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...

Public finance

Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

Fractional-reserve banking Fractional-reserve banking is the system of banking operating in almost all countries worldwide, under which banks that take deposits from the public are required to hold a proportion of their deposit liabilities in liquid assets as a reserv ...

Deposit creation multiplier Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money creation is controlled by the central bank ...

* Tax ** Capital gains tax **

Estate tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an ...

(and inheritance tax) **

Gift tax In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must ...

Income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...

** Inheritance tax ** Payroll tax **

Property tax A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inher ...

(including land value tax) **

Sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a gove ...

(including value added tax, excise tax, and use tax) ** Transfer tax (including stamp duty) **

** Tax, tariff and trade **

Tax amortization benefit In accounting, tax amortization benefit (or tax amortisation benefit) refers to the present value of income tax savings resulting from the tax deduction generated by the amortization of an intangible asset. Intangible asset valuation When the purch ...

* Crowding out *

Industrial policy An industrial policy (IP) or industrial strategy of a country is its official strategic effort to encourage the development and growth of all or part of the economy, often focused on all or part of the manufacturing sector. The government takes m ...

* Agricultural policy * Currency union *

Risk management

Constraint finance

Environmental finance Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impac ...

Feminist economics Feminist economics is the critical study of economics and economies, with a focus on gender-aware and inclusive economic inquiry and policy analysis. Feminist economic researchers include academics, activists, policy theorists, and practitio ...

* Green economics * Islamic economics * Uneconomic growth * Value of Earth * Value of life

Insurance

* Actuarial science *

Annuities In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, m ...

* Catastrophe modeling * Earthquake loss * Extended coverage * Insurable interest * Insurable risk *

*** Disability insurance *** Accident insurance *** Flexible spending account ***

Health savings account A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal in ...

***

Long term care insurance Long-term care insurance (LTC or LTCI) is an insurance product, sold in the United States, United Kingdom and Canada that helps pay for the costs associated with long-term care. Long-term care insurance covers care generally not covered by health ...

*** Medical savings account **

Life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the dea ...

*** Life insurance tax shelter ***

Permanent life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the de ...

***

Term life insurance Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaran ...

*** Universal life insurance *** Variable universal life insurance *** Whole life insurance ** Property insurance *** Auto insurance *** Boiler insurance *** Business interruption insurance *** Condo insurance *** Earthquake insurance ***

Home insurance Home insurance, also commonly called homeowner's insurance (often abbreviated in the US real estate industry as HOI), is a type of property insurance that covers a private residence. It is an insurance policy that combines various personal insu ...

*** Title insurance ***

Pet insurance Pet insurance is a form of insurance that pays, partly or in total, for veterinary treatment of the insured person's ill or injured pet. Some policies will pay out when the pet dies, or if the pet is lost or stolen. As veterinary medicine is in ...

*** Renters' insurance **

Casualty insurance Casualty insurance is a defined term which broadly encompasses insurance not directly concerned with life insurance, health insurance, or property insurance. Casualty insurance is mainly liability coverage of an individual or organization for ne ...

*** Fidelity bond *** Liability insurance *** Political risk insurance *** Surety bond *** Terrorism insurance ** Credit insurance *** Trade credit insurance ***

Payment protection insurance Payment protection insurance (PPI), also known as credit insurance, credit protection insurance, or loan repayment insurance, is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabl ...

*** Credit derivative **

Mid-term adjustment {{distinguish, Mid-year adjustment In insurance, mid-term adjustment (MTA), also called a mid-term modification or mid-term change, refers to a change to an insurance policy Policy is a deliberate system of guidelines to guide decisions and ...

Reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own ins ...

** Self insurance **

Travel insurance Travel insurance is an insurance product for covering unforeseen losses incurred while travelling, either internationally or domestically. Basic policies generally only cover emergency medical expenses while overseas, while comprehensive policies ...

Niche insurance Niche insurance is insurance provided for small, low-demand markets. It is outside of the usual insurance types available, such as Vehicle insurance, automobile, Home insurance, home, Life insurance, life, Travel insurance, travel, and business ins ...

* Insurance contract * Loss payee clause * Risk Retention Group

Economics and finance

Finance-related areas of economics

Financial economics Financial economics, also known as finance, is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade". William F. Sharpe"Financia ...

Monetary economics Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and ...

Mathematical economics Mathematical economics is the application of mathematical methods to represent theories and analyze problems in economics. Often, these applied methods are beyond simple geometry, and may include differential and integral calculus, difference ...

* Managerial economics *

Economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate o ...

theory * Decision theory *

Game theory Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...

* Experimental economics / Experimental finance * Behavioral economics / Behavioral finance

Corporate finance theory

* Fisher separation theorem *

Theory of the firm The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in ec ...

The Theory of Investment Value John Burr Williams (November 27, 1900 – September 15, 1989) was an American economist, recognized as an important figure in the field of fundamental analysis, and for his analysis of stock prices as reflecting their " intrinsic value". He is ...

* Agency theory *

** ** Capital structure substitution theory ** Pecking order theory ** Market timing hypothesis ** Trade-off theory of capital structure **

Merton model The Merton model, developed by Robert C. Merton in 1974, is a widely used credit risk model. Analysts and investors utilize the Merton model to understand how capable a company is at meeting financial obligations, servicing its debt, and weighing ...

** Tax shield * Dividend policy ** **

Walter model Otto Moritz Walter Model (; 24 January 1891 – 21 April 1945) was a German field marshal during World War II. Although he was a hard-driving, aggressive panzer commander early in the war, Model became best known as a practitioner of def ...

Gordon model In finance and investing, the dividend discount model (DDM) is a method of valuing the price of a company's stock based on the fact that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. I ...

** Lintner model ** Residuals theory ** Clientele effect ** Dividend puzzle ** **

* Capital budgeting (valuation) ** ** Clean surplus accounting ** Residual income valuation ** Economic value added /

Market value added Market value added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. If MVA is positive, the firm has added value. If it is negative, the firm has destroyed value. The amount of value ad ...

** T-model ** Adjusted present value **uncertainty ***

Penalized present value The Penalized Present Value (PPV) is a method of capital budgeting under risk developed by Fernando Gómez-Bezares in the 1980s, where the value of the investment is "penalized" as a function of its risk. Method PPV is best understood by compariso ...

*** Expected commercial value *** Risk-adjusted net present value *** Contingent claim valuation *** Real options *** Monte Carlo methods *Risk management ** ** Hedging irrelevance proposition **

Risk modeling Financial risk modeling is the use of formal mathematical and econometric techniques to measure, monitor and control the market risk, credit risk, and operational risk on a firm's balance sheet, on a bank's trading book, or re a fund manager's ...

Risk-adjusted return on capital Risk-adjusted return on capital (RAROC) is a risk-based profitability measurement framework for analysing risk-adjusted financial performance and providing a consistent view of profitability across businesses. The concept was developed by Banker ...

Asset pricing theory

Value (economics) In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a speci ...

** Fair value ** Intrinsic value ** Market price **

Expected value In probability theory, the expected value (also called expectation, expectancy, mathematical expectation, mean, average, or first moment) is a generalization of the weighted average. Informally, the expected value is the arithmetic mean of a ...

** Opportunity cost ** Risk premium ** #Underlying theory below * Equilibrium price ** market efficiency **

economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the st ...

** rational expectations **

Risk factor (finance) In finance, risk factors are the building blocks of investing, that help explain the systematic returns in equity market, and the possibility of losing money in investments or business adventures.Roncalli, T. (2014). Strategy - Risk factor investin ...

* General equilibrium theory **

Supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...

** Competitive equilibrium **

Economic equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the st ...

** Partial equilibrium * Arbitrage-free price ** Rational pricing *** § Arbitrage free pricing *** § Risk neutral valuation **

Contingent claim analysis In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,Dale F. Gray, Robert C. Merton and Zvi Bodie. (2007). Contingent Claims Approach to Measuring and Managing Sovereign Credit R ...

** Brownian model of financial markets ** Complete market & Incomplete markets *

Utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophe ...

Risk aversion In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more ...

** Expected utility hypothesis **

Utility maximization problem Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stuart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my ...

Marginal utility In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a good or service describes how much pleasure or satisfaction is gained by consumers as a result of the increase or decrease in consump ...

** Generalized expected utility * Economic efficiency ** Efficient-market hypothesis **

efficient frontier In modern portfolio theory, the efficient frontier (or portfolio frontier) is an investment portfolio which occupies the "efficient" parts of the risk–return spectrum. Formally, it is the set of portfolios which satisfy the condition that no o ...

** Production–possibility frontier ** Allocative efficiency **

Pareto efficiency Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engi ...

** Productive efficiency * State prices ** Arrow–Debreu model ** Stochastic discount factor ** Pricing kernel **application: *** *** * Fundamental theorem of asset pricing ** Rational pricing ** Arbitrage-free **

No free lunch with vanishing risk No free lunch with vanishing risk (NFLVR) is a no-arbitrage argument. We have ''free lunch with vanishing risk'' if by utilizing a sequence of time self-financing portfolios, which converge to an arbitrage strategy, we can approximate a self-fina ...

** Self-financing portfolio **

Stochastic dominance Stochastic dominance is a partial order between random variables. It is a form of stochastic ordering In probability theory and statistics, a stochastic order quantifies the concept of one random variable being "bigger" than another. These are us ...

*** Marginal conditional stochastic dominance * Martingale pricing ** Brownian model of financial markets **

Random walk hypothesis The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted. History The concept can be traced to French broker Jules Regnault who ...

** Risk-neutral measure **

Martingale (probability theory) In probability theory, a martingale is a sequence of random variables (i.e., a stochastic process) for which, at a particular time, the conditional expectation of the next value in the sequence is equal to the present value, regardless of all ...

*** Sigma-martingale *** Semimartingale * Quantum finance

Asset pricing models

*Equilibrium pricing **Equities; foreign exchange and commodities ***

*** Consumption-based CAPM *** Intertemporal CAPM *** Single-index model *** Multiple factor models ****

Fama–French three-factor model In asset pricing and portfolio management the Fama–French three-factor model is a statistical model designed in 1992 by Eugene Fama and Kenneth French to describe stock returns. Fama and French were colleagues at the University of Chicago Bo ...

****

Carhart four-factor model In portfolio management, the Carhart four-factor model is an extra factor addition in the Fama–French three-factor model, proposed by Mark Carhart. The Fama-French model, developed in the 1990, argued most stock market returns are explained by ...

*** Arbitrage pricing theory **Bonds; other interest rate instruments *** Vasicek *** Rendleman–Bartter *** Cox–Ingersoll–Ross *Risk neutral pricing **Equities; foreign exchange and commodities; interest rates *** Black–Scholes ***

Black Black is a color which results from the absence or complete absorption of visible light. It is an achromatic color, without hue, like white and grey. It is often used symbolically or figuratively to represent darkness. Black and white ha ...

*** Garman–Kohlhagen *** Heston *** CEV *** SABR **Bonds; other interest rate instruments *** Ho–Lee *** Hull–White *** Black–Derman–Toy *** Black–Karasinski *** Kalotay–Williams–Fabozzi *** Longstaff–Schwartz *** Chen *** Rendleman–Bartter *** Heath–Jarrow–Morton **** Cheyette *** Brace–Gatarek–Musiela ****

LIBOR market model The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing interest rate derivatives, especially exotic deriv ...

Mathematics and finance

Time value of money

* Present value * Future value * Discounting * Net present value *

* Annuity *

Financial mathematics

Mathematical tools

Probability Probability is the branch of mathematics concerning numerical descriptions of how likely an event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and 1, where, roughly speaking, ...

Probability distribution In probability theory and statistics, a probability distribution is the mathematical function that gives the probabilities of occurrence of different possible outcomes for an experiment. It is a mathematical description of a random phenomenon ...

***

Binomial distribution In probability theory and statistics, the binomial distribution with parameters ''n'' and ''p'' is the discrete probability distribution of the number of successes in a sequence of ''n'' independent experiments, each asking a yes–no ques ...

***

Log-normal distribution In probability theory, a log-normal (or lognormal) distribution is a continuous probability distribution of a random variable whose logarithm is normally distributed. Thus, if the random variable is log-normally distributed, then has a norma ...

*** Poisson distribution * Stochastic calculus ** Brownian motion *** Geometric Brownian motion ** Cameron–Martin theorem ** Feynman–Kac formula **

Girsanov's theorem In probability theory, the Girsanov theorem tells how stochastic processes change under changes in measure. The theorem is especially important in the theory of financial mathematics as it tells how to convert from the physical measure which des ...

** Itô's lemma **

Martingale representation theorem In probability theory, the martingale representation theorem states that a random variable that is measurable with respect to the filtration generated by a Brownian motion can be written in terms of an Itô integral with respect to this Brownian m ...

** Radon–Nikodym derivative ** Stochastic differential equations **

Stochastic process In probability theory and related fields, a stochastic () or random process is a mathematical object usually defined as a family of random variables. Stochastic processes are widely used as mathematical models of systems and phenomena that ap ...

*** Jump process *** Lévy process ***

Markov process A Markov chain or Markov process is a stochastic model describing a sequence of possible events in which the probability of each event depends only on the state attained in the previous event. Informally, this may be thought of as, "What happen ...

*** Ornstein–Uhlenbeck process ***

Wiener process In mathematics, the Wiener process is a real-valued continuous-time stochastic process named in honor of American mathematician Norbert Wiener for his investigations on the mathematical properties of the one-dimensional Brownian motion. It is ...

Monte Carlo method Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be deter ...

s ** Low-discrepancy sequence **

Monte Carlo integration In mathematics, Monte Carlo integration is a technique for numerical integration using random numbers. It is a particular Monte Carlo method that numerically computes a definite integral. While other algorithms usually evaluate the integrand ...

** Quasi-Monte Carlo method ** Random number generation *

Partial differential equation In mathematics, a partial differential equation (PDE) is an equation which imposes relations between the various partial derivatives of a multivariable function. The function is often thought of as an "unknown" to be solved for, similarly to h ...

s ** Finite difference method ** Heat equation ** Numerical partial differential equations ***

Crank–Nicolson method In numerical analysis, the Crank–Nicolson method is a finite difference method used for numerically solving the heat equation and similar partial differential equations. It is a second-order method in time. It is implicit in time, can be writ ...

*** Finite difference method: Numerical analysis * Volatility ** ARCH model ** GARCH model ** Stochastic volatility ** Stochastic volatility jump

Derivatives pricing

*Underlying logic (see also #Economics and finance above) ** Rational pricing *** Risk-neutral measure *** Arbitrage-free pricing ** Brownian model of financial markets ** Martingale pricing * Forward contract ** Forward contract pricing * Futures ** Futures contract pricing *

Options Option or Options may refer to: Computing *Option key, a key on Apple computer keyboards *Option type, a polymorphic data type in programming languages *Command-line option, an optional parameter to a command *OPTIONS, an HTTP request method ...

(incl. Real options and ESOs) ** Valuation of options ** Black–Scholes formula *** Approximations for American options **** Barone-Adesi and Whaley **** Bjerksund and Stensland **** Black's approximation **** Optimal stopping **** Roll–Geske–Whaley ** Black model ** Binomial options model ** Finite difference methods for option pricing ** Garman–Kohlhagen model ** The Greeks ** Lattice model (finance) ** Margrabe's formula ** Monte Carlo methods for option pricing *** Monte Carlo methods in finance ***

Quasi-Monte Carlo methods in finance High-dimensional integrals in hundreds or thousands of variables occur commonly in finance. These integrals have to be computed numerically to within a threshold \epsilon. If the integral is of dimension d then in the worst case, where one has a gua ...

*** Least Square Monte Carlo for American options ** Trinomial tree ** Volatility *** Implied volatility *** Historical volatility *** Volatility smile (& Volatility surface) *** Stochastic volatility **** Constant elasticity of variance model **** Heston model **** SABR volatility model *** Local volatility **** Implied binomial tree **** Implied trinomial tree **** Edgeworth binomial tree **** Johnson binomial tree * Swaps ** Swap valuation *** *** *** *** ****

Multi-curve framework In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations wi ...

*** * Interest rate derivatives ( bond options, swaptions, caps and floors, and others) ** Black model *** caps and floors ***

swaptions A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap. Although options can be traded on a variety of swaps, the term "swaption" typically refers to options on interest rate swaps. Types o ...

*** Bond options **

s (generally applied via lattice based- and specialized simulation-models, although "Black like" formulae exist in some cases.) ***

Rendleman–Bartter model The Rendleman–Bartter model (Richard J. Rendleman, Jr. and Brit J. Bartter) in finance is a short-rate model describing the evolution of interest rates. It is a "one factor model" as it describes interest rate movements as driven by only one s ...

***

*** Ho–Lee model *** Hull–White model ***

*** Black–Karasinski model ***

*** Kalotay–Williams–Fabozzi model ***

Longstaff–Schwartz model A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written r_t \,. The short rate Under a s ...

***

Forward rate The forward rate is the future yield on a bond. It is calculated using the yield curve. For example, the yield on a three-month Treasury bill six months from now is a ''forward rate''.. Forward rate calculation To extract the forward rate, we n ...

/ Forward curve -based models (Application as per short-rate models) ***

(also called: Brace–Gatarek–Musiela Model, BGM) *** Heath–Jarrow–Morton Model (HJM) *** Cheyette model *Valuation adjustments **

Credit valuation adjustment Credit valuation adjustments (CVAs) are accounting adjustments made to reserve a portion of profits on uncollateralized financial derivatives. They are charged by a bank to a risky (capable of default) counterparty to compensate the bank for taking ...

** XVA * Yield curve modelling **

** Bootstrapping (finance) ** ** ** Nelson-Siegel **

Portfolio mathematics

* #Mathematical techniques below * #Quantitative investing below * *

Portfolio optimization Portfolio optimization is the process of selecting the best portfolio (asset distribution), out of the set of all portfolios being considered, according to some objective. The objective typically maximizes factors such as expected return, and mini ...

** § Optimization methods ** § Mathematical tools * Merton's portfolio problem *

Kelly criterion In probability theory, the Kelly criterion (or Kelly strategy or Kelly bet), is a formula that determines the optimal theoretical size for a bet. It is valid when the expected returns are known. The Kelly bet size is found by maximizing the expe ...

* Roy's safety-first criterion *Specific applications: ** Black–Litterman model ** Universal portfolio algorithm ** Markowitz model ** Treynor–Black model

Financial markets

Market and instruments

* Capital markets * Securities *

Financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial ma ...

Primary market :''"Primary market" may also refer to a market in art valuation.'' The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the issuer, with the issuer being paid the proc ...

* Aftermarket *

* Bull market * Bear market *

Bear market rally A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fra ...

Market maker A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the '' bid–ask spread'', or ''turn.'' The benefit to the firm is that ...

Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity inde ...

Nasdaq The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...

* List of stock exchanges * List of stock market indices *

List of corporations by market capitalization The following is a list of publicly traded companies having the greatest market capitalization. In media they are described as being the most valuable companies, a reference to their market value. Market capitalization is calculated from the shar ...

Value Line Composite Index The Value Line Composite Index was launched on the Kansas City Board of Trade (KCBT) in 1982, pioneering the first market index to trade futures market, ushering in a ground-breaking approach to risk management. KCBOT dropped the Value Line indi ...

Equity market

Stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, ...

* Stock * Common stock * Preferred stock *

Treasury stock A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). Stock repurchases are used as a tax efficie ...

* Equity investment * Index investing *

Private Equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...

Financial reports Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

and statements * Fundamental analysis *

* Stock split

Equity valuation

* Dow theory *

Elliott wave principle The Elliott Wave Principle, or Elliott wave theory, is a form of technical analysis that finance traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology and price levels, such as hi ...

* Economic value added *

Fibonacci retracement In finance, Fibonacci retracement is a method of technical analysis for determining support and resistance levels. It is named after the Fibonacci sequence of numbers, whose ratios provide price levels to which markets tend to retrace a portion ...

Growth stock In finance, a growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry. A growth c ...

PEG ratio The 'PEG ratio' ( price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth. In general, the P/E ratio is h ...

PVGO In corporate finance, Alex Stomper (N.D.Finance Theory I MIT OpenCourseWare the present value of growth opportunities (PVGO) is a valuation measure applied to growth stocks. It represents the component of the company’s stock value that corres ...

* Leveraged buyout *

Takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to ...

* Corporate raid *

PE ratio Pe may refer to: Physical education Language * Pe language * Pe (Cyrillic), a letter (П) in the Cyrillic alphabet * Pe (Semitic letter), a letter (פ ,ف, etc.) in several Semitic alphabets ** Pe (Persian letter), a letter (پ) in the Arabic ...

* Market capitalization *

Income per share Earnings per share (EPS) is the monetary value of earnings per outstanding share of common stock for a company. It is a key measure of corporate profitability and is commonly used to price stocks. In the United States, the Financial Accounting ...

* Stock valuation * Technical analysis *

Chart patterns A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which ...

* V-trend * Paper valuation

Investment theory

* Behavioral finance * Dead cat bounce * Efficient market hypothesis * Market microstructure * Stock market crash *

January effect The January effect is a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month of January more than in any other month. This calendar effect would create an opportunity for investors to ...

* Mark Twain effect *

Quantitative behavioral finance Quantitative behavioral finance is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. The research can be grouped into the following areas: # Empirical studies that d ...

Quantitative analysis (finance) Quantitative analysis is the use of mathematical and statistical methods in finance and investment management. Those working in the field are quantitative analysts (quants). Quants tend to specialize in specific areas which may include derivativ ...

* Statistical arbitrage

Bond market

Bond (finance) In finance, a bond is a type of security under which the issuer ( debtor) owes the holder ( creditor) a debt, and is obliged – depending on the terms – to repay the principal (i.e. amount borrowed) of the bond at the maturity date as wel ...

* Zero-coupon bond * Junk bonds *

Convertible bond In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock ...

Accrual bond An accrual bond is a fixed- interest bond that is issued at its face value and repaid at the end of the maturity period together with the accrued interest. In Germany, the accrued interest is compounded. In contrast to zero-coupon bonds, accrual ...

* Municipal bond *

Sovereign bond A government bond or sovereign bond is a form of Bond (finance), bond issued by a government to support government spending, public spending. It generally includes a commitment to pay periodic interest, called Coupon (finance), coupon payments' ...

* Bond valuation ** Yield to maturity **

Bond duration In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, du ...

Bond convexity In finance, bond convexity is a measure of the non-linear relationship of bond prices to changes in interest rates, the second derivative of the price of the bond with respect to interest rates ( duration is the first derivative). In general, th ...

Fixed income Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the prin ...

Money market

* Repurchase agreement * International Money Market *

Exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of t ...

* International currency codes * Table of historical exchange rates

Commodity market

Commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

Asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...

Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options. The Commodity Exchange Act ...

** Commodity trade ** Drawdowns ** Forfaiting ** Fundamental analysis ** Futures contract **

Fungibility In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for exa ...

** Gold as an investment ** Hedging **

Jesse Lauriston Livermore Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader. He is considered a pioneer of day trading and was the basis for the main character of ''Reminiscences of a Stock Operator'', a best-selling book by Edw ...

** List of traded commodities ** Ownership equity ** Position trader ** Risk (Futures) **

Seasonal traders Seasonal spread traders are spread traders that take advantage of seasonal patterns by holding Long (finance), long and Short (finance), short positions in futures contracts simultaneously in the same or a related commodity markets, such as the Chi ...

** Seasonal spread trading ** Slippage ** Speculation ** Spread trade ** Technical analysis *** Breakout *** Bear market ***

Bottom (technical analysis) A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which n ...

*** Bull market ***

MACD MACD, short for moving average convergence/divergence, is a trading indicator used in technical analysis of securities prices, created by Gerald Appel in the late 1970s. It is designed to reveal changes in the strength, direction, momentum, ...

*** Moving average ***

Open Interest Open interest (also known as open contracts or open commitments) refers to the total number of outstanding derivative contracts that have not been settled (offset by delivery). For each buyer of a futures contract there must be a seller. From the ...

*** Parabolic SAR *** Point and figure charts *** Resistance *** RSI ***

Stochastic oscillator In technical analysis of securities trading, the stochastic oscillator is a momentum indicator that uses support and resistance levels. George Lane developed this indicator in the late 1950s. The term '' stochastic'' refers to the point of a ...

*** Stop loss ***

Support Support may refer to: Arts, entertainment, and media * Supporting character Business and finance * Support (technical analysis) * Child support * Customer support * Income Support Construction * Support (structure), or lateral support, a ...

*** Top (technical analysis) **

** Trend

Derivatives market

* Derivative (finance) *(see also Financial mathematics topics;

Derivatives pricing In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be u ...

) *

Underlying instrument In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be use ...

Forward markets and contracts

* Forward contract

Futures markets and contracts

Backwardation Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward or futures contract is trading below the ''expected'' spot price at contract maturity. The resulting futures or forward ...

Contango Contango is a situation where the futures price (or forward price) of a commodity is higher than the ''expected'' spot price of the contract at maturity. In a contango situation, arbitrageurs or speculators are "willing to pay more owfor a co ...

* Futures contract ** Financial future ***

Currency future A currency future, also known as an FX future or a foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date; see Foreign ex ...

***

Interest rate future An interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative. Examples include Treasury-bill futures, Treasury-bond future ...

*** Single-stock futures *** Stock market index future *

Futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity o ...

Option markets and contracts

* Options ** Stock option *** Box spread ***

Call option In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call option to exchange a security at a set price. The buyer of the call option has the right, but not the obligation, to buy ...

***

Put option In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the ''underlying''), at a specified price (the ''strike''), by (or at) a ...

*** Strike price *** Put–call parity *** The Greeks *** Black–Scholes formula *** Black model *** Binomial options model *** Implied volatility *** Option time value *** Moneyness ****

At-the-money In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly ...

**** In-the-money ****

Out-of-the-money In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly ...

*** Straddle ***

Option style In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

**** Vanilla option **** Exotic option **** Binary option ****

European option In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options� ...

***** Interest rate floor ***** Interest rate cap **** Bermudan option **** American option **** Quanto option ****

Asian option An Asian option (or ''average value'' option) is a special type of option contract. For Asian options the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European o ...

***

Warrants Warrant may refer to: * Warrant (law), a form of specific authorization ** Arrest warrant, authorizing the arrest and detention of an individual ** Search warrant, a court order issued that authorizes law enforcement to conduct a search for eviden ...

** Foreign exchange option **

Interest rate option An Interest rate option is a specific financial derivative contract whose value is based on interest rates. Its value is tied to an underlying interest rate, such as the yield on 10 year treasury notes. Similar to equity options, there are two ty ...

s ** Bond options ** Real options ** Options on futures

Swap markets and contracts

Swap (finance) In finance, a swap is an agreement between two counterparties to exchange financial instruments, cashflows, or payments for a certain time. The instruments can be almost anything but most swaps involve cash based on a notional principal amoun ...

** Interest rate swap ** Basis swap ** Asset swap ** Forex swap **

Stock swap In corporate finance a stock swap is the exchange of one equity-based asset for another, where, during the merger or acquisition, the swap provides an opportunity to pay with stock rather than with cash; see . Overview The acquiring company e ...

** Equity swap **

Currency swap In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. ...

Variance swap A variance swap is an over-the-counter financial derivative that allows one to speculate on or hedge risks associated with the magnitude of movement, i.e. volatility, of some underlying product, like an exchange rate, interest rate, or stock inde ...

Derivative markets by underlyings

= Equity derivatives

= * Contract for difference (CFD) * Exchange-traded fund (ETF) ** Closed-end fund **

Inverse exchange-traded fund An inverse exchange-traded fund is an exchange-traded fund (ETF), traded on a public stock market, which is designed to perform as the ''inverse'' of whatever index or benchmark it is designed to track. These funds work by using short selling, t ...

* Equity options * Equity swap * Real estate investment trust (REIT) *

** Covered warrant

= Interest rate derivatives

= *

LIBOR The London Inter-Bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. The resulting average rate is u ...

* Forward rate agreement * Interest rate swap * Interest rate cap * Exotic interest rate option * Bond option *

* Money market instruments * Range accrual Swaps/Notes/Bonds * In-arrears Swap * Constant maturity swap (CMS) or Constant Treasury Swap (CTS) derivatives (swaps, caps, floors) * Interest rate Swaption * Bermudan swaptions * Cross currency swaptions * Power Reverse Dual Currency note (PRDC or Turbo) * Target redemption note (TARN) * CMS steepener * Snowball * Inverse floater * Strips of Collateralized mortgage obligation * Ratchet caps and floors

= Credit derivatives

= * Credit default swap * Collateralized debt obligation * Credit default option * Total return swap * Securitization ** Strip financing

= Foreign exchange derivative

= * Basis swap *

*Binary option#Foreign exchange, Foreign exchange binary option *Foreign exchange market#Forward, Foreign exchange forward * Foreign exchange option *Forward exchange rate *Foreign exchange swap *Foreign exchange hedge *Non-deliverable forward *Power reverse dual-currency note

Financial regulation

* Corporate governance * Financial regulation ** Bank regulation *** Banking license * License

Designations and accreditation

* Certified Financial Planner * Chartered Financial Analyst ** CFA Institute * Chartered Alternative Investment Analyst * Professional risk manager * Chartered Financial Consultant * Canadian Securities Institute * Independent financial adviser ** Chartered Insurance Institute * Financial risk manager * Chartered Market Technician * Certified Financial Technician

Litigation

* Liabilities Subject to Compromise

Fraud

* Forex scam * Insider trading * Legal origins theory * Petition mill * Ponzi scheme

Industry bodies

* International Swaps and Derivatives Association * National Association of Securities Dealers

Regulatory bodies

International

* Bank for International Settlements * International Organization of Securities Commissions * Security Commission * Basel Committee on Banking Supervision * Basel Accords – Basel I, Basel II, Basel III * International Association of Insurance Supervisors * International Accounting Standards Board

European Union

* European Securities Committee (European Union, EU) * Committee of European Securities Regulators (European Union, EU)

Regulatory bodies by country

=United Kingdom

= * Financial Conduct Authority * Prudential Regulation Authority (United Kingdom)

=United States

= *

* Federal Trade Commission * Municipal Securities Rulemaking Board * Office of the Comptroller of the Currency * U.S. Securities and Exchange Commission, Securities and Exchange Commission

United States legislation

* Glass–Steagall Act (US) * Gramm–Leach–Bliley Act (US) * Sarbanes–Oxley Act (US) * Securities Act of 1933 (US) * Securities Exchange Act of 1934 (US) * Investment Advisers Act of 1940 (US) * USA PATRIOT Act

Actuarial topics

* Actuarial topics

Valuation

Underlying theory

*Valuation (finance) and specifically Valuation (finance)#Valuation overview, § Valuation overview *"

" * *Valuation risk *Real versus nominal value (economics) *Real prices and ideal prices * Fair value **

* Intrinsic value * Market price *Value in use *Fairness opinion *Asset pricing (see also #Asset pricing theory above) ** Equilibrium price *** market efficiency ***

*** rational expectations ** Arbitrage-free price *** ***

Context

* (Corporate bond, Corporate) Bond (finance), Bonds ** Bond valuation ** ** * Stock, Equity valuation ** #Equity valuation above ** Fundamental analysis ** Stock valuation ** Business valuation ** ** ** Capital budgeting and ** ''

'' *Real estate valuation **Real estate appraisal **Real estate economics

Considerations

*Bonds **Bond (finance)#Others, covenants and indentures **secured loan, secured / unsecured debt **senior debt, senior / subordinated debt **embedded options *Equity ** Minimum acceptable rate of return ** Margin of safety (financial) ** Enterprise value ** Sum-of-the-parts analysis ***Conglomerate discount ** Minority discount ** Control premium ** Accretion/dilution analysis ** Certainty equivalent ** Haircut (finance) ** Paper valuation

Discounted cash flow valuation

* Bond valuation **Modeling *** *** *** ***embedded options: ****Pull to par **** **Results ***Clean price ***Dirty price *** Yield to maturity ***Coupon yield ***Current yield ***Bond duration, Duration ***Bond convexity, Convexity ***embedded options: ****Option-adjusted spread ****effective duration ****effective convexity **Cash flows ***Principal (finance) ***Coupon (bond) ***Fixed rate bond ***Floating rate note *** Zero-coupon bond ***

***sinking fund provisions *Real estate valuation ** **Income approach ***Net Operating Income *** ***German income approach * Equity valuation **Results *** Net present value *** Adjusted present value *** Equivalent Annual Cost *** Payback period *** Discounted payback period ***

*** Modified Internal Rate of Return ***

*** Profitability index **Specific models and approaches *** Dividend discount model *** Gordon growth model ***

/ Economic value added *** Residual income valuation *** First Chicago Method *** rNPV *** Fed model *** Chepakovich valuation model *** Sum of perpetuities method *** Benjamin Graham formula *** LBO valuation model *** Goldman Sachs asset management factor model ** Cash flows *** Cash flow forecasting *** EBIDTA *** NOPAT *** Free cash flow **** Free cash flow to firm **** Free cash flow to equity *** Dividends ***

Relative valuation

*Bonds ** ** Yield spread *** I-spread *** Option-adjusted spread *** Z-spread *** Asset swap spread ** Credit spread (bond) ***Bond credit rating ***Altman Z-score ***Ohlson O-score ***Book value ***Debt-to-equity ratio ***Debt-to-capital ratio ***Current ratio ***Quick ratio ***Debt ratio *Real estate ** Capitalization rate ** Gross rent multiplier ** Sales comparison approach *** ** Cash on cash return *Equity **

** Market-based valuation ** Comparable company analysis **

*** Yield gap ** Return on equity *** DuPont analysis **

***

***Cyclically adjusted price-to-earnings ratio ***

** P/B ratio ** Valuation using multiples#Equity price based multiples, Price to cash based earnings ** Stock valuation#Price to Sales (P/S), Price to Sales ** EV/EBITDA ** Stock valuation#EV to Sales, EV/Sales ** Stock valuation#Market criteria (potential price), Stock image ** Valuation using the Market Penetration Model ** Graham number ** Tobin's q

Contingent claim valuation

*Valuation techniques **general *** Valuation of options *** ***#Derivatives pricing above **as typically employed ***Real options valuation#Valuation, Real options valuation *** *** *** *** Monte Carlo methods in finance *Applications **Corporate investments and Corporate finance#Investment and project valuation, projects *** Real options *** ***

*** ***structured finance investments (funding dependent) ***special purpose entities (funding dependent) **

assets and liabilities ***Warrant (finance), warrants and other convertible security, convertible securities ***securities with embedded options such as callable bonds ***employee stock options

Other approaches

*"Fundamentals"-based (relying on accounting information) ** T-model ** Residual income valuation ** Clean surplus accounting **Valuation (finance)#Net asset value method, Net asset value method **Valuation (finance)#Net asset value method, Excess earnings method **Mergers and acquisitions#Business valuation, Historical earnings valuation **Mergers and acquisitions#Business valuation, Future maintainable earnings valuation **Graham number

Financial modeling

* Cash flow ** Cash flow forecasting **

** Operating cash flow ** EBIDTA *** ** NOPAT ** Free cash flow *** Free cash flow to firm *** Free cash flow to equity ** Dividends ** Cash is king ** Mid-year adjustment ** Owner earnings * Required rate of return, Required return (i.e. discount rate) ** **

** Weighted average cost of capital **Cost of equity **Cost of debt **

*** *** Hamada's equation ***Pure play#Pure play method, Pure play method ** Arbitrage pricing theory ** ***Total Beta ** T-model ***T-model#The cash-flow T-model, cash-flow T-model * Terminal value (finance), Terminal value ** **Forecast period (finance) **long term growth rate *** *** *Forecasted financial statements **Financial forecast ** ** **Revenue ***Revenue model *** *** ***Net sales **Costs ***Profit margin ****Gross margin ****Net margin ****Cost of goods sold ***Operating expenses ****Operating ratio ***Cost driver ***Fixed cost ***Variable cost ***Overhead cost ***Value chain ***activity based costing ***Financial analysis#Method, common-size analysis ***Profit model **Capital ***

***Financial analysis#Method, common-size analysis ***Equity (finance) ****Equity (finance)#Shareholders' equity, Shareholders' equity ****Book value ****Retained earnings ***

****Long term asset / Fixed asset *****Fixed-asset turnover ****Long-term liabilities *****Debt-to-equity ratio *****Debt-to-capital ratio ***

****Current asset ****Current liability ****Inventory turnover / Days in inventory, Cost of goods sold ****Debtor days, Debtor & Creditor days ****Days sales outstanding / Days payable outstanding

Portfolio theory

General concepts

*Portfolio (finance) *Portfolio manager *Investment management **

** Passive management (Buy and hold) ***

**Core & Satellite **Smart beta **Expense ratio **Investment style *** Value investing *** Contrarian investing *** Growth investing **** CAN SLIM *** Index investing *** Magic formula investing *** Momentum investing *** Quality investing *** Style investing *** Factor investing **Investment strategy ***Benchmark-driven investment strategy ***Liability-driven investment strategy ** *Investor profile *Rate of return on a portfolio / Investment performance *Risk return ratio **Risk–return spectrum *

*Diversification (finance) *Asset classes **Exter's Pyramid * Asset allocation **Tactical asset allocation ***Global tactical asset allocation **Asset allocation#Strategic asset allocation, Strategic asset allocation **Dynamic asset allocation *Sector rotation *Correlation & covariance **Covariance matrix **Covariance matrix#Correlation matrix, Correlation matrix * Risk-free interest rate *Leverage (finance) *Utility function *Intertemporal portfolio choice *Portfolio insurance **Constant proportion portfolio insurance * *Quantitative investment / Quantitative fund (see #Quantitative investing, below) *

Modern portfolio theory

**Risk return ratio **Risk–return spectrum ** Economic efficiency *** Efficient-market hypothesis ***

** Markowitz model ** Merton's portfolio problem **

** Roy's safety-first criterion *Theory and results (derivation of the CAPM) ** Equilibrium price ** Market price **Systematic risk ***

**Idiosyncratic risk / Specific risk **Mean-variance analysis (Two-moment decision model) **Efficient frontier (Mean variance efficiency) **Feasible region, Feasible set **

***Separation property (finance) **Tangent portfolio **Market portfolio **Beta (finance) ***Fama–MacBeth regression *** Hamada's equation *** **Capital allocation line **Capital market line **Security characteristic line **

*** Single-index model **Security market line **Roll's critique *Related measures **Alpha (finance) **Sharpe ratio **Treynor ratio **Jensen's alpha *Optimization models ** Markowitz model ** Treynor–Black model *Asset pricing#General Equilibrium Asset Pricing, Equilibrium pricing models (CAPM and extensions) **

(CAPM) **Consumption-based capital asset pricing model (CCAPM) ** Intertemporal CAPM (ICAPM) ** Single-index model ** Multiple factor models (see

) ***

***

*** Arbitrage pricing theory (APT)

Post-modern portfolio theory

*Approaches **Behavioral portfolio theory **Stochastic portfolio theory **Maslowian portfolio theory **Dedicated portfolio theory (fixed income specific) **Risk parity **Tail risk parity *Optimization considerations **

**Bayesian efficiency **Multiple-criteria decision analysis **Multi-objective optimization **

***Stochastic dominance#Second-order, Second-order Stochastic dominance *** Marginal conditional stochastic dominance **Downside risk **Post-modern portfolio theory#Volatility skewness, Volatility skewness **Variance#Semivariance, Semivariance ** Expected shortfall (ES; also called conditional value at risk (CVaR), average value at risk (AVaR), expected tail loss (ETL)) **Tail value at risk **Statistical dispersion **Discounted maximum loss **Indifference price *Measures **Dual-beta ***Downside beta ***Upside beta **Upside potential ratio **Upside risk **Downside risk **Sortino ratio **Omega ratio **Bias ratio **Information ratio ***Active return ***Active risk **

** Distortion risk measure ** Spectral risk measure *Optimization models ** Black–Litterman model ** Universal portfolio algorithm

Performance measurement

*Performance attribution **Market timing **Stock selection criterion, Stock selection *Fixed-income attribution *Performance attribution#Validity of benchmarks, Benchmark *Lipper average *Returns-based style analysis *Rate of return on a portfolio *Holding period return *Tracking error *Alpha (finance) *Beta (finance) *Simple Dietz method *Modified Dietz method *Modigliani risk-adjusted performance *Upside potential ratio *Maximum Downside Exposure (MDE), Maximum Downside Exposure *Maximum drawdown **Sterling ratio *Sharpe ratio *Treynor ratio *Jensen's alpha *Bias ratio *V2 ratio *Calmar ratio (hedge fund specific)

Mathematical techniques

* *Quadratic programming **Critical line method *Nonlinear programming *Mixed integer programming *Stochastic programming (Stochastic programming#Multistage portfolio optimization, § Multistage portfolio optimization) *Copula (probability theory) (Copula (probability theory)#Quantitative finance, § Quantitative finance) *Principal component analysis (Principal component analysis#Quantitative finance, § Quantitative finance) *Deterministic global optimization *Genetic algorithm () *Machine learning (Machine learning#Applications, § Applications) *Artificial neural network *

Quantitative investing

*Quantitative investing *Quantitative fund * and Quantitative analysis (finance)#Algorithmic trading quantitative analyst, § Algorithmic trading quantitative analyst *Trading: **Automated trading **High-frequency trading **Algorithmic trading **Program trading **Systematic trading *** **Trading strategy **Mirror trading **Copy trading **Social trading **VWAP **TWAP **Electronic trading platform ** Statistical arbitrage *Portfolio optimization: ** ** ** Black–Litterman model ** Universal portfolio algorithm ** Markowitz model ** Treynor–Black model **Portfolio optimization#Improving portfolio optimization, other models **Factor investing ***low-volatility investing ***value investing ***momentum investing **Alpha generation platform **

** Roy's safety-first criterion *Risks: **Best execution **Implementation shortfall **Trading curb ** Market impact **Market depth **Slippage (finance) **Transaction costs *Discussion: ** ** ** ** **2010 flash crash ** ** *Leading companies: **Prediction Company **Renaissance Technologies **D. E. Shaw & Co **AQR Capital **Barclays Investment Bank **Cantab Capital Partners **Robeco **Jane Street Capital

Financial software tools

* Straight Through Processing Software * Technical Analysis Software (Finance), Technical Analysis Software * Fundamental Analysis Software * Algorithmic trading * Electronic trading platform * List of numerical-analysis software * Comparison of numerical-analysis software

Financial modeling applications

Corporate Finance

* Business valuation / stock valuation - especially via Valuation using discounted cash flows, discounted cash flow, but including Valuation (finance)#Valuation overview, other valuation approaches *Scenario planning and Management accounting#Role within a corporation, management decision making ("what is"; "what if"; "what has to be done" §39 "Corporate Planning Models". See also, §294 "Simulation Model".) * Capital budgeting, including cost of capital (i.e. Weighted average cost of capital, WACC) calculations *Financial statement analysis / Financial ratio, ratio analysis (including of Operating lease, operating- and finance leases, and Research and development, R&D) *Revenue related: Revenue management#Forecasting, forecasting, Revenue#Financial statement analysis, analysis *Project finance modeling *Cash flow forecasting *Credit decisioning: Credit analysis, Consumer credit risk; Impairment (financial reporting), impairment- and Provision (accounting), provision-modeling *working capital management, Working capital- and treasury management; asset and liability management *Management accounting: Activity-based costing, Profitability analysis, Cost analyst, Cost analysis, Whole-life cost

Quantitative finance

*Valuation of options, Option pricing and calculation of Greeks (finance), their "Greeks" *Other derivative (finance), derivatives, especially interest rate derivatives, credit derivatives and exotic derivatives *Modeling the term structure of interest rates (Bootstrapping (finance), bootstrapping / multi-curve framework, multi-curves, short-rate models, Heath–Jarrow–Morton framework, HJM framework) and credit spread (bond), credit spreads *

, CVA, as well as the various XVA *Credit risk, counterparty credit risk, and regulatory capital: exposure at default, EAD, probability of default, PD, loss given default, LGD, potential future exposure, PFE *Structured product#Product design and manufacture, Structured product design and manufacture *

See for example: ; and Quantitative investing more generally; see further re Portfolio optimization#Optimization methods, optimization methods employed. *Financial risk modeling: value at risk (Value at risk#Computation methods, parametric- and / or Historical simulation (finance), historical, conditional value at risk, CVaR, extreme value theory, EVT), stress test (financial), stress testing, PnL Explained#Sensitivities method, "sensitivities" analysis

Financial institutions

Financial institutions * Bank ** List of banks *** List of banks in the Arab World *** List of banks in Africa *** List of banks in the Americas *** List of banks in Asia *** List of banks in Europe *** List of banks in Oceania *** List of international banking institutions ** Advising bank **

*** List of central banks ** Commercial bank ** Community development bank ** Cooperative bank ** Custodian bank ** Depository bank ** Ethical bank ** Investment bank ** Islamic banking ** Merchant bank **

** Mutual savings bank ** National bank ** Offshore bank ** Private bank ** Savings bank ** Swiss bank ** Bank holding company * Building society * Broker ** Broker-dealer ** Brokerage firm ** Commodity broker ** Insurance broker ** Prime brokerage ** Retail broker ** Stockbroker * Clearing house (finance), Clearing house * Commercial Loan, Commercial lender * Community development financial institution * Credit rating agency * Credit union * Diversified financial * Edge Act Corporation * Export Credit Agencies * Financial adviser * Financial intermediary * Financial planner *

** List of futures exchanges * Government sponsored enterprise * Hard money lender * Independent financial adviser * Industrial loan company * Insurance company * Investment adviser * Investment company * Investment trust * Large and Complex Financial Institutions *

* Non-banking financial company * Savings and loan association * Stock exchange ** List of stock exchanges * Trust company

Education

*For the typical finance career path and corresponding education requirements see: **Financial analyst generally, and esp. Financial analyst#Qualification, § Qualification, discussing various investment, banking, and corporate roles (i.e. financial management, corporate finance, investment banking, securities analysis & valuation, portfolio & investment management, credit analysis, working capital & treasury management; see ) **Quantitative analyst, and , specifically re roles in quantitative finance (i.e. derivative pricing & hedging, interest rate modeling, financial risk management, financial engineering, computational finance; also, the mathematically intensive variant on the banking roles; see ) *Business education lists undergraduate degrees in business, commerce, accounting and economics; "finance" may be taken as a academic major, major in most of these, whereas "quantitative finance" is almost invariably postgraduate, following a Mathematics education#Content and age levels, math-focused Bachelors; the most common degrees for (entry level) investment, banking, and corporate roles are: **Bachelor of Business Administration (BBA) **Bachelor of Commerce (BCom) **Bachelor of Accountancy (B.Acc) **Bachelor of Economics (B.Econ) **The tagged degree, tagged Bachelor of Science, BS / Bachelor of Arts, BA "in Finance" - the undergraduate version of the MSF below - or less common, Investment management#Education or certification, "in Investment Management" or "in Personal Finance" *At Business education#Postgraduate education, the postgraduate level, the MBA, master of commerce, MCom and Master of Science in Management, MSM (and recently the Master of Applied Economics) similarly offer training in finance generally; at this level there are also the following specifically focused master's degrees, with MSF the broadest - see for their focus and inter-relation: **Master of Applied Finance (M.App.Fin) **Master of Computational Finance **Master's in Corporate Finance **Master of Finance (M.Fin, MIF) ** Master's in Financial Analysis **Master of Financial Economics **Master of Financial Engineering (MFE) **Master of Financial Planning **Master's in Financial Management **Master of Financial Mathematics **Master of Quantitative Finance, Master's in Financial Risk Management **Master's in Investment Management **Master of Mathematical Finance **Master of Quantitative Finance (MQF) **Master of Science in Finance (MSF, MSc Finance) **Master of Science in Global Finance *Business education#Doctoral, Doctoral-training in finance is usually a requirement for academia, but not relevant to industry **quants often ''enter'' the profession with Doctor of Philosophy, PhDs in disciplines such as physics, mathematics, engineering, and computer science, and learn finance "on the job” **as List of fields of doctoral studies in the United States#Business management/administration, an academic field, finance theory is studied and developed within the disciplines of management, (financial economics, financial) economics, accountancy, and applied mathematics, applied / financial mathematics. *For specialized roles, there are various Professional certification in financial services, Professional Certifications in financial services (see #Designations and accreditation above); th
best recognized
are arguably: **Association of Corporate Treasurers (MCT / FCT) **Certificate in Quantitative Finance (CQF) **Certified Financial Planner (CFP) **Certified International Investment Analyst (CIIA) **Certified Treasury Professional (CTP) **Chartered Alternative Investment Analyst (CAIA) **Chartered Financial Analyst (CFA) **Professional_certification_in_financial_services#Chartered_Wealth_Manager, Chartered Wealth Manager (CWM) **CISI Diploma, CISI Diploma in Capital Markets (MCSI) **Financial Risk Manager (FRM) **Professional Risk Manager (PRM) *Various organizations offer executive education, Continuing professional development, CPD, or other focused training programs, including: **Amsterdam Institute of Finance **Canadian Securities Institute **Chartered Institute for Securities & Investment **Global Association of Risk Professionals, GARP **ICMA Centre **The London Institute of Banking & Finance **New York Institute of Finance **PRMIA **South African Institute of Financial Markets **Swiss Finance Institute *See also qualifications in related fields: ** **Actuarial credentialing and exams **Business education ** **Economics education **

Related lists

* Index of accounting articles * Outline of business management * Outline of marketing * Outline of economics * Outline of production * List of international trade topics * List of business law topics * List of business theorists * Actuarial topics

References

External links

Wharton Finance Knowledge Project
– finance knowledge for students, teachers, and self-learners.
Prof. Aswath Damodaran
- financial theory, with a focus in Corporate Finance, Valuation and Investments. Updated Data, Excel Spreadsheets.

(Prof. John M. Wachowicz) -Links to finance web sites, grouped by topic
studyfinance.com
- introductory finance web site at the University of Arizona
SECLaw.com
- law of the financial markets

- stock market related definitions {{DEFAULTSORT:Finance Outlines of economics, Finance Wikipedia outlines, Finance Finance lists, Business terms, Finance topics