The International Bank Account Number (IBAN) is part of an international initiative to standardize account numbers. Together with the BIC Code (separate entry) IBAN serves as the international standard for mapping bank data in cross-border payment business in Europe. The IBAN code is made up of a maximum of 27 alphanumerical characters in Europe; (the German IBAN has 22 characters). Outside of Europe it may have up to 34 digits. The IBAN format, which varies according to national specifications, combines an international identification element (country code and check digit) with a bank code and account number.
Type of order in the Xetra electronic trading system requiring that all or part of the order be executed immediately after it has been brought to the market. Any portions not executed immediately are automatically cancelled.
Implied volatility (IV) reflects expectations regarding the underlying asset's future volatility, used to determine an option price. Implied volatility is computed iteratively from the Black-Scholes formula, provided all other parameters (such as option price, maturity, interest rate) are known. With everything else being equal, i.e. the same share, comparable basis, maturity and subscription ratio, the option which has the lowest implied volatility is the 'least expensive'.
If an option is 'in the money' that means it has a positive 'intrinsic value'. A call option is in the money if the price of the underlying asset is above the strike price. A put option is in the money if the price is below the strike price.
The International Commercial Terms, also known as terms of delivery, are standard trade definitions most commonly used in international trade contracts. They define basic contract responsibilities and liabilities between buyer and seller, particularly as concerns the transport of goods and the distribution of costs and risks between the parties. Two widely-known terms are CIF (= Cost, Insurance, Freight) and FOB (= Free on Board).
Plural: indices. Statistical instrument used to track the development of prices and volumes of commodities and securities (stock index) over time. This is usually done by comparing the performance of the components in the index, either in percentage or relative terms, to a basic parameter which is assumed to be 100 %.
With this financial instrument, investors are guaranteed a fixed rate of return in real terms, since the nominal interest rate is regularly adjusted to match changes in the price index.
In macroeconomic terms, inflation is a lasting rise in the general level of prices. Inflation can be caused by non-monetary (rise in demand) or monetary factors (expansive monetary policy). To combat inflation, central banks can tighten the money supply, or economic policies can be pursued to reduce state spending and dampen demand. Disciplined collective bargaining and reasonable wage settlements can also help keep inflation with bounds. The opposite of inflation is deflation, which typically leads to falling prices, recession or even economic crises.
Security deposit to be made when placing a futures trade; also known as 'first margin'. It serves primarily to secure the counterparty's financial claims, thereby reducing the risks involved.
Term used to refer to companies tapping the stock market for the first time as part of a capital increase or reallocation. In other words, shares in a company are offered publicly for sale to interested investors for the first time. In most cases, an IPO involves the company's listing and the quotation of its shares on the stock exchange. From the company's point of view, an IPO is a way of using its stock as a financing instrument to acquire third-party risk capital. Synonym: Going public.
According to §13 of the Securities Trading Act ('WpHG'), inside information is concrete knowledge pertaining to
(1) circumstances which have not been made public, relating to (2) one or more issuers of insider securities, or to insider securities themselves, which (3) if it were made public, would be likely to have a significant impact on the price of the insider security.
Examples of such events are major incoming orders, company mergers, an unexpected fall in profits, a research breakthrough and the like, provided these developments have not been made public.
In general usage an insider is anyone who has access to information not yet available to others. An insider is also someone who is aware - ahead of the great majority of current or potential shareholders - of company developments which could have a considerable impact on the price of the securities involved. Attempts to gain unfair advantages by trading on the basis of inside information are subject to prosecution.
Pursuant to § 14 of the Securities Trading Act, insiders are prohibited from (1) taking advantage of their knowledge of inside information to acquire or dispose of insider securities for their own account, or for the account or on behalf of a third party; (2) disclosing or making available inside information to a third party without authority to do so; (3) recommending or persuading a third party to acquire or dispose of insider securities.
Criminal proceedings may be instituted against insiders who act in violation of these regulations. The Federal Financial Supervisory Authority (BaFin) is responsible for tracing and prosecuting insider trades prohibited by § 14 of the Securities Trading Act.
Sustained inability of a debtor to repay his debt when due. In microeconomic terms, insolvency almost always results in the collapse of the debtor's business enterprise.
Also: coupon. The receipt form accompanying fixed-income securities which is presented on the interest payment date against payment of the due interest amount. A renewal coupon is attached to the interest coupon sheet on which several interest coupons are combined.
Security for which the purchase price is calculated on the date of purchase by discounting the interest on the nominal amount to be repaid at a later date. The interest (plus compound interest) is only paid out upon redemption at the end of the term. Typical interest discount papers are zero bonds, financing bills, etc. The opposite of interest discount paper is accrued interest paper.
Date specified in the bond terms for the payment of interest. In Germany, interest is generally paid annually, in other countries mostly semi-annually or quarterly (e.g. in the USA) on a retroactive basis.
The interest rate indicates the interest rate level in percent. It is the price a borrower must pay for borrowing money, respectively the money a creditor receives for providing capital.
Current yield differs from nominal yield, because securities are purchased at a flexible market price, which can be higher or lower than the face value. Since the interest is always paid on the face value, the following calculation is applied: (interest rate x 100) / market value = current yield; also return.
The IFRS are drawn up and published by the International Accounting Standards Board (IASB). The IASB is a private and independent accounting standard-setter based in London. It is made up of 14 members from 9 countries. The IASB works together with national standard-setting bodies (DRSC in Germany, FASB in the U.S.A.) to promote the harmonization of national rules with international accounting standards. The IASC was the predecessor body to the IASB. www.iasb.org.
Predecessor to the International Accounting Standards Board (IASB).Voluntary, private organization of over 100 professional associations from 80 countries. It addressed accounting questions with the aim of formulating, publishing and raising worldwide acceptance of principles and regulations for drawing up annual statements of account. A further declared aim was to promote the international harmonization of standards, accounting principles and methods for the preparation of annual statements of account.
www.standardsetter.de/ drsc/docs/iasb_about.html.
The ICMA was formed in 2005 by the merger of the International Primary Market Association (IPMA) and the International Securities Market Association (ISMA) entstanden. The ICMA is an organization representing the interests of international investment banks with the aim of maintaining and developing an efficient and cost effective international capital market. As part of its work, it addresses regulatory issues affecting the capital market and supports product innovation or qualification initiatives. www.icma-group.org
A securities settlement system which clears and settles trades on international and certain local markets, usually through a network of direct or indirect links (via local banks) to local central securities depositories (CSDs). Originally the work of ICSDs was limited to eurobond clearing and settlement, for which there was no supporting market infrastructure at the time. In Europe there are 2 ICSDs: Clearstream Banking Luxembourg (CBL) and Euroclear Bank in Brussels.
Certificates that represent ownership of international securities. An international depositary receipt, or IDR, is the international equivalent of an American Depositary Receipt (ADR). IDRs were introduced by Morgan Guaranty Trust Company in 1970 to facilitate international trading in securities; they are only used outside the United States.
Financial reporting standards published by the IASC or IASB. These regulations, formerly known as International Accounting Standards (IAS), are now referred to as International Financial Reporting Standards (IFRS) to reflect their broader remit. IAS standards retain their current designations. As with IAS, new IFRS rules are consecutively numbered ("IFRS 1", "IFRS 2" etc.). Therefore, both an IAS 1 and an IFRS 1 exist side by side.
Reporting under IFRS/IAS values securities by the 'mark to market' method and therefore restricts the formation of undisclosed reserves. The main objective of reporting is to provide information, primarily for investors, to meet the basic criteria of comprehensibility, relevance to decision-making, comparability and reliability. In contrast to the emphasis on creditor protection and the principle of caution typical of traditional German accounting methods, IFRS is guided by the concept of "fair presentation". To be admitted to the Prime Standard listing segment of the Frankfurt Stock Exchange, companies are required to report according to IFRS or U.S.-GAAP.
The IMF is an international organization established in 1945 to foster international trade and global economic cooperation. Further objectives include promoting exchange rate stability, providing temporary financial assistance to countries to help ease balance of payments adjustment, and participating in debt restructuring agreements. Today, it has over 180 member countries. Germany joined the IMF in 1952. www.imf.org.
Umbrella organisation established in 1979 on the initiative of Citibank, Deutsche Bank and Union Bank of Switzerland. Its objective is to standardize and promote the development of securities settlement techniques and procedures. Today, ISSA has nearly 100 members institutions. www.issanet.org.
Banking service which enables customers to use the decentralized, global electronic network known as the Internet to obtain cash / custody account information and conduct other payment and securities transactions. Safe data transmission channels protect the confidentiality of the information conveyed. Internet banking is a form of home banking.
If an option is 'in the money' that means it has a positive 'intrinsic value'. A call option is in the money if the price of the underlying asset is above the strike price. A put option is in the money if the price is below the strike price.
The intrinsic value of an option is equivalent to the proceeds an option buyer would gain from the immediate exercise of his option right. An option has intrinsic value if the strike price of a call (put) option is below (above) the current price of the underlying asset. An immediate exercise of the option would generate a profit equivalent to the positive difference between strike price (including ancillary costs) and the current asset price.If the underlying asset is quoted below (above) the strike price of a call (put), or equals it, the intrinsic value is zero.
Formula: Intrinsic value = (asset price - strike price) x exercise ratio
Capital invested in an investment company against the issue of shares and assets thus acquired are investment assets. Investment assets must be held separately from the investment company's own assets. Investment companies may form several pools of investment assets bearing different names which must be managed separately. The investment assets do not serve as collateral for the liabilities of the investment company.
Under the traditional U.S. separate banking system, investment banks are specialized in securities issuing and underwriting as well as mergers and acquisitions business (M&A).
Shares (or units) in a securities or real estate fund. As a rule, they can be sold back to the investment company at any time at the bid price. However, there is no organized market to date for shares in closed-ended investment trusts (real estate funds).
Institution for the management of investment funds consisting of securities (equity or fixed-income funds) or real estate (property funds). The shares in the funds are referred to as investment certificates (investment fund certificates) which are sold on the market. Investment funds offer clients - even those with smaller investment budgets - the advantage of a diversified portfolio made up of a wide range of securities or other assets.
Special income tax levied on specific types of domestic investment income. Invest income tax must be withheld by the debtor or his bank for the account of the creditor and paid to the tax office. Withholding of investment income tax can be avoided by submitting a non-assessment certificate or a tax exemption application (for investment income). The sum withheld counts against the income tax to be paid.
Fixed-income securities which have been awarded a high rating by major credit rating agencies. A distinction is made between top-quality bonds (investment grade) and speculative-grade bonds (high yield oder junk bonds). A downgrading of a borrower to less than 'investment grade' will usually result in steep price markdowns on the bonds.
Standard & Poor´s considers investment-grade bonds to range from AAA to BBB- ( BB+ to CCC- = non-investment grade) and Moody´s from Aaa to Baa3 ( Ba1 to Caa3 = non-investment grade).
The placement of securities on the market. These may be stocks, bonds, mutual fund shares or other securities. An issue is typically effected via a bank (underwriting house) or a consortium of banks (underwriting syndicate). The purpose is to procure equity or debt capital. If the issue price is above the security's par value, it is known as an issue above par, if it is below that value, as an issue under par. The difference between the issue price and the par value is the premium or discount, respectively.
Pfandbriefe and public-sector bonds may only be issued by mortgage banks up to a certain limit. The total amount of bonds outstanding is governed by law. The amount is determined by the share capital (equity capital) and the bank's reserves. The issue limit guarantees the issued securities.
The price at which mutual fund management companies in Germany sell their fund units. The issue price is the repurchase price (unit price) plus, as a rule, a front load.
Company or institution that issues securities launched for the first time. Issuers can be companies, banks, entities under public law, the state or other institutions. The issuer benefits from an issue by having immediate access to liquidity, and the subscriber stands to achieve a return on his capital input through interest income, dividends and/or, ideally, proceeeds from the sale of securities.