← All Glossary CAGR (Compound Annual Growth Rate) The mean annual growth rate of an investment over a specified period longer than one year, representing the smooth rate at which it would have grown if compounded annually. Call Option A financial contract giving the buyer the right, but not the obligation, to purchase a specified quantity of an underlying asset at a predetermined price within a set timeframe. Callable Bond A bond that the issuer can redeem before its maturity date at a specified call price, generally when interest rates fall, exposing investors to reinvestment risk. Candlestick A charting method displaying price movements through visual candles showing open, high, low, and close prices for a specific time period, widely used in technical analysis. Cap Rate (Capitalization Rate) A real estate metric calculated as net operating income divided by property value, used to estimate the potential return on an income-producing property. Capital Gains The profit realized from selling an asset at a higher price than its purchase price, classified as short-term or long-term for tax purposes. Capital Markets Financial markets where long-term debt and equity securities are bought and sold, including stock exchanges, bond markets, and other platforms for raising capital. CD Ladder A strategy of purchasing multiple certificates of deposit with staggered maturity dates to maintain liquidity while capturing higher interest rates on longer terms. Certificate of Deposit (CD) A time deposit offered by banks paying a fixed interest rate for a specified term, insured by FDIC up to $250,000, with early withdrawal typically incurring a penalty. Churning An unethical practice where a broker executes excessive trades in a client's account primarily to generate commissions, violating securities regulations and fiduciary duty. Clean Shares A class of mutual fund shares with no front-end load, deferred sales charge, or 12b-1 distribution fees, allowing brokers to charge a separate, transparent advisory fee. Closing Price The final price at which a security trades during regular exchange hours, used as the benchmark for daily performance calculations and portfolio valuation. Collective Investment Trust (CIT) A tax-exempt pooled investment vehicle offered by banks and trust companies to retirement plans, similar to mutual funds but with lower costs and regulatory oversight by the OCC. Commission A fee paid to a broker or agent for executing a trade or providing financial services, typically charged per transaction or as a percentage of the trade value. Compound Interest Interest earned on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time — often called the eighth wonder of the world. Confirmation Bias A cognitive bias where investors favor information that confirms their existing beliefs while dismissing contradictory evidence, often leading to poor decision-making. Convertible Security A hybrid investment, typically a bond or preferred stock, that can be converted into a specified number of common shares at the holder's option, blending fixed income with equity upside. Convexity A measure of the curvature in the relationship between bond prices and interest rates, capturing how duration changes as yields change beyond linear approximation. Copy Trading An automated strategy allowing investors to replicate the trades of experienced traders in real time, popular on social trading platforms for passive participation. Core-Satellite Strategy An investment approach combining a passive core portfolio (index funds) with actively managed satellite holdings (individual stocks, sectors) to balance cost and potential alpha. Corporate Governance The system of rules, practices, and processes by which a company is directed and controlled, balancing interests of shareholders, management, and other stakeholders. Correlation A statistical measure ranging from -1 to +1 indicating how two investments move in relation to each other, used in portfolio diversification and risk management. Cost Basis The original purchase price of an asset adjusted for stock splits, dividends, and return of capital, used to calculate capital gains or losses when sold. Coupon Payment The periodic interest payment made to bondholders by the issuer, typically semi-annual, calculated as a fixed percentage of the bond's face value. Coupon Rate The annual interest rate paid by a bond issuer, expressed as a percentage of the bond's face value, determining the periodic coupon payments to bondholders. Covariance A statistical measure of how two variables move together, indicating the direction of their linear relationship — positive means they move together, negative means inversely. Covered Call An options strategy where an investor holds a long position in an asset and sells call options on that same asset to generate income, capping upside potential. Credit Rating Agency A firm that assesses the creditworthiness of bond issuers, assigning ratings (AAA to D) that reflect default risk and influence borrowing costs and investment decisions. Credit Spread The difference in yield between a corporate bond and a benchmark Treasury of similar maturity, reflecting the issuer's credit risk relative to a risk-free asset. Cryptocurrency A digital or virtual currency secured by cryptography, operating on decentralized blockchain networks without central bank or government backing. Current Yield A bond's annual coupon payment divided by its current market price, providing a simple measure of return that does not account for capital gains or losses at maturity. CUSIP Number A unique nine-character alphanumeric identifier assigned to all securities in the US and Canada, used to facilitate clearing and settlement of trades. Custodian A financial institution holding customers' securities for safekeeping to prevent theft or loss, providing settlement, reporting, and asset servicing functions.
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