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Investment Glossary

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Back Testing and Balanced Fund

  Back Testing Back-testing is a very effective technique to assess the stock trading strategy.It is used by applying on the historical trading and price data of the shares.The basic objective of this technique to assess the success or failure of the past trading strategy.This makes easier for the investors  to devise a successful future trading strategy for the stocks. …

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Overweight and Underweight

Overweight Overweight is the situation when an investment portfolio contains an excess amount of a stock as compared to other stocks in the investment portfolio.Mostly portfolio manager uses the overweight strategy to increase the collective gain of the investment portfolio.Portfolio manager also expects that excessively bought security will outperform other stocks in the portfolio. Underweight Overweight is the situation when …

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What is Currency Band

Currency band is a very unique and effective type of exchange system used by some countries.In this type of currency exchange system country sets a range  for it currency.The currency of the country moves between this range.When currency moves out of this range,then central bank has to intervene to stabilize the exchange rate.In other words it is a mixture of …

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What is Hybrid Security

Hybrid security is a very special type of security which has the characteristics of both equity and debt securities. This type of security pays fixed amount of interest till a fixed date.The buyer can easily convert this security into a equity.   Like other types of securities buying and selling of these securities are also done through brokerage houses at exchanges.Convertible bond and …

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Dirty Float Regime

Dirty float regime is a type of currency exchange system in which currency rates rise and fall with the international  financial environment.In this type of exchange rate system,mostly exchange rates are managed by timely intervention by the central bank of the country.   According to the economic experts,this type of intervention by the central bank helps the country to protect its …

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Black-Scholes-Merton Model

  Black-Scholes-Merton model is a very popular financial model to calculate the price of options.It made the options very popular among the american and European investors. This formula can be applied only to the financial markets containing specific type of derivative securities.   According to the market analysts,the prices calculated through Black-Shcoles are most of the time close to the actual …

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Electronic trading is a very innovative and latest method of trading in different types of securities such as Stocks,bonds,derivatives etc.It is getting more and more popular with every passing day due to various reasons.Its low trading cost,.increase in transnational transparency and greater availability of the liquidity are the three most important reasons of its popularity all over the world.   …

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Hedging is a very useful investment strategy for the risk averse  investors.They can easily use this strategy to minimize their risk of their investments.It helps the investor to avoid very  adverse market price movements. Investors use different types of hedging strategies to hedge their investments such as  covered calls,short straddles,forward exchange,money market operations and future contracts etc.     Investors can …

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Foreign exchange Market Intervention

Foreign exchange market intervention is done by the primary monetary authority of the country to stabilize the domestic market.It is done by buying or selling of the currency on the foreign exchange market. Sterilized and Non-Sterilized are the two main types of foreign exchange market intervention.   Sterilized Intervention Sterilized intervention is done in two different phases.In first phase central bank buys …

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