- X -
- Difficulty, cost, and/or delay in selling an
asset on short notice without offering substantial price
- Illiquidity Cost
- Costs due to imperfect liquidity of some
- Illiquidity Premium
- Extra expected return as compensation
for limited liquidity.
- A strategy that matches durations of assets
and liabilities so as to make net worth unaffected by interest
- Implied Volatility
- The standard deviation of stock returns
that is consistent with an options market value.
- In the Money
- In the money describes an option whose
exercise would produce profits. Out of the money describes
an option where exercise would not be profitable.
- Incentive fee
- A fee charged by hedge funds equal to a
share of any investment returns beyond a stipulated
- Income Beneficiary
- One who receives income from a trust.
- Income Statement
- A financial statement showing a firm's
revenues and expenses during a specified period.
- The document defining the contract between the
bond issuer and the bondholder.
- Index Arbitrage
- An investment strategy that exploits
divergences between actual futures prices and their
theoretically correct parity values to make a profit.
- Index Fund
- A mutual fund holding shares in proportion
to their representation in a market index such as the
- Index Model
- A model of stock returns using a market
index such as the S&P 500 to represent common or systematic
- Index Option
- A call or put option based on a stock market
- Indifference Curve
- A curve connecting all portfolios with
the same utility according to their means and standard
- Industry Life Cycle
- Stages through which firms typically
pass as they mature.
- The rate at which the general level of prices for
goods and services is rising.
- Information Ratio
- Ratio of alpha to the standard deviation
of diversifiable risk.
- Initial Public Offering
- Stock issued to the public for the first
time by a formerly privately owned company.
- Input List
- List of parameters such as expected returns,
variances, and covariances necessary to determine the optimal
- Inside Information
- Nonpublic knowledge about a corporation
possessed by corporate officers, major owners, or other
individuals with privileged access to information about a firm.
- Insider Trading
- Trading by officers, directors, major
stockholders, or others who hold private inside information
allowing them to benefit from buying or selling stock.
- Insurance Principle
- The law of averages. The average
outcome for many independent trials of an experiment will
approach the expected value of the experiment.
- Interest Coverage Ratio
- Measure of financial leverage.
Earnings before interest and taxes as a multiple of interest
- Interest Coverage Ratio, or Times Interest Earned
- A financial
leverage measure (EBIT divided by interest expense).
- Interest Rate
- The number of dollars earned per dollar
invested per period.
- Interest Rate parity relationship (theorem)
- The spot‐futures
exchange rate relationship that prevails in well‐functioning
- Interest Rate Swaps
- A method to manage interest rate risk
where parties trade the cash flows corresponding to different
securities without actually exchanging securities directly.
- Intermarket Spread Swap
- Switching from one segment of
the bond market to another (from Treasuries to corporates,
- Intrinsic Value (of a Firm)
- The present value of a firm's
expected future net cash flows discounted by the required
rate of return.
- Intrinsic Value of an Option
- Stock price minus exercise
price, or the profit that could be attained by immediate
exercise of an in‐the‐money option.
- Inventory Turnover Ratio
- Cost of goods sold as a multiple of
- Commitment of current resources in the
expectation of deriving greater resources in the future.
- Investment Bankers
- Firms specializing in the sale of new
securities to the public, typically by underwriting the issue.
- Investment Company
- Firm managing funds for investors.
An investment company may manage several mutual funds.
- Investment Horizon
- Time horizon for purposes of investment
- Investment Portfolio
- Set of securities chosen by an investor.
- Investment-grade Bond
- Bond rated BBB and above or BAA
and above. Lower‐rated bonds are classified as speculative
grade or junk bonds.