Term
what you thought it was
What it actually is
Liquidity
The ability to turn yourself into water.
How easily an asset can be spent; for example, cash is wholly liquid.
Equity
Fairly-traded tea.
The value of ownership of a firm in the form of stocks; also: the value of total assets in a firm minus total liabilities to non-shareholders.
Hedging
Advanced gardening technique.
Deliberately taking on a new risk to offset an existing one, in order to reduce overall risks.
Monetary policy
A phrase Alan Greenspan made up to confuse George W. Bush.
The actions taken by a central bank to control a country’s money supply, for example raising and lowering interest rates.
Asset-backed commercial paper (AB)
A really valuable piece of paper with a long name.
A loan that is repaid in three to six months and is collateralized by other assets. This security is typically traded by a bank.
Stock options
Well, you can have chicken stock, beef stock…
The right to buy a share of a company for a fixed price in the future.
Shortselling
Not selling enough (because the trader is too wimpy for scary stock markets).
The practice of borrowing securities with the intention of buying them back at a lower, speculated price and retaining the difference in price as profit.
Bond yield
The 007-like feeling when you realize how much interest you scored.
The interest rate paid on a bond (a type of loan to a firm or government) divided by its market price.
In the red
Being in a shareholder’s meeting and seeing a lot of of angry faces.
When a business is spending more money than it makes; comes from the traditional practice of showing negative numbers in red ink.
DOW Jones
Tom Jones’s evil twin.
An index of consumer prices that measures the general movement of prices in the economy known as inflation.
Derivatives
That thing the teacher was talking about when you fell asleep in math class. Grade 11 was a tiring time.
Financial assets that derive their value from other assets.
—Amrit Ahluwalia and Ashleigh Ryan
Sources: investopedia.com and economist.com/research/economics
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