Glossary of terms

A one-day trading pattern that starts with the market reaching a new high or low, preferably an instant high or low, referred to as an uptrend. It then reverses in direction and closes the trading session at or close to the low or high point, called a downtrend, of the price bar. This pattern indicates a dramatic shift in intraday market sentiment change and suggests a high probability of a reversal.

A contract between two companies in which the first company agrees to ensure that its subsidiary maintains minimum financial standards to protect a future deal between the subsidiary and the second company.

Key Information Document

Key Performance Indicator

The price level that will activate the option or structured product if touched or breached.

The price level that will de-activate the option or structured product if touched or breached.

Pictet’s internal product risk rating. Designed to give an indication of the risks associated with a specific financial instrument. It is based on a five-point scale where the higher the score, the higher the risk ranking.

The PRR calculation methodology is based on a 3-pillar system. The asset risk score which assesses the risk associated with the underlying of the instrument (it is based on a 10- year ex-post volatility study). The static elements of the product risk score are additional penalties that assess the risk associated with the intrinsic properties of the instrument. Complexity + Liquidity + Regulated + Leverage + Emerging/Developed. The dynamic elements of the product risk score are additional penalties that assess the risk associated with the market conditions. Duration + Rating + Size + Short/Long term. 

Example: Bond’s PRR 

If a rating is not available for the bond, the issuer’s rating will be used instead. Penalties are added for the market (emerging/developed) and size (depending on the outstanding amount). Complex bond types (such as inflation-linked bonds, perpetuals, convertibles, etc.) are also penalised. With this methodology, similar instruments have the same rank. The currency effect is added further on as an additional penalty.  

Power Purchase Agreement. 

polyvinyl chloride 

Purchasing manager index. 

The price paid by the buyer of an option to the seller of the option. Generally, it is paid at inception (upfront). An option strategy is said to be zero upfront premium when the sum of received premiums is equivalent to the sum of paid premiums. 

Pre-Provision Income 

Plug-in Hybrid Electric Vehicle 

People's Bank of China

Packaged retail and insurance-based investment products. 

A technical analysis term used to describe when a stock returns (“pulls” back) to a resistance and/or support line, usually after breaking out. Pullbacks can be in an uptrend or downtrend and can pull back upwards or downwards. Pullbacks frequently become a new support or resistance line for the new trend as well. 

Perpetual non-callable (e.g. PNC5: perpetual bond not callable in the next 5 years). 

An indication of a financial instrument’s return, which can be measured over any given timeframe, including since inception (for a fund). Performance can be measured according to the objectives of the fund, such as growth, income or total return. However, while performance indicates a return, it does not indicate the risk taken to achieve that return. 

The financial gain resulting from the sale of a product after deducting the original cost of the product and the expenses associated with selling it, such as fees, taxes or wages. 

payment-in-kind 

Performance Fee

These funds aim to offer a supplementary pension to their participants. They are considered institutional investors due to their large pool of assets under their management. Pension funds can be occupational – i.e. available only to a certain category of workers – or open, with no restrictions for membership. 

Perpetual. 

The historic performance of a financial instrument, also called its track record. Past performance is useful for analysing how the value of a financial instrument f luctuated in previous market conditions, but cannot be used as an indication of future performance. 

Precious Metal Linked Note, a short-term investment aimed at earning a return by taking a risk on precious metals. 

Price-to-Sales Ratio 

A debt instrument that reflects an interest in a mortgage pool. Monthly payments of principal and interest are passed from debtor to investor through an intermediary. 

Platinum group elements

Positive outlook (from the rating agency involved). 

Property can be held as an investment to either generate income or grow the initial investment over time. Property falls under two categories, either domestic property (houses and apartments) or commercial property, such as office buildings and factories. 

Perfluoroalkyl and Polyfluoroalkyl Substances (often quoted as there is a lot of litigation surrounding it)

The  fixed amount agreed in advance to be exchanged between two counterparties if a defined event occurs.

Funds that invest in unlisted, or private companies to enable their growth and development. Private equity funds can invest in the start-up phase of a company (activities typical of venture capitalists or business angels) or at any other stage of a company’s growth cycle.  

There is no industry-agreed definition of positive impact investing at the Pictet Group. Positive impact investing (often referred to in the industry as “impact investing”) is defined as investments that demonstrate: 

1. Intentionality: the clear articulation of a positive-impact ambition at its core 
2. Contribution: the investor’s ability to enable positive impact through capital allocation (fixed income, private equity), encourage improvement (active ownership) and influence the public discourse (advocacy) 
3. Contribution: the investor’s ability to enable positive impact through capital allocation (fixed income, private equity), encourage improvement (active ownership) and influence the public discourse (advocacy) 

Impact investments can be made through all asset classes and geographies and target a range of financial returns. Work to refine this definition is ongoing both at Pictet and across the financial community. 

Personal Consumption Expenditures 

A trade bloc including Chile, Colombia, Mexico, and Peru 

Price-to-earnings (PE) ratio. A company’s share price divided by its earnings per share over a specific period of time (usually a year).

Preferred shares, or preferred stock, function similarly to common stock in a company but offer additional benefits. For instance, preferred shares often have a higher claim on the assets and earnings of a company in the event of bankruptcy. Additionally, their dividends are usually paid out before those of common stock. However, preferred shares are generally more expensive and do not carry voting rights. 

Precious metals. 

Profit Before Tax 

Purchasing power parity. 

Point of Non-Viability

Used to determine whether an accumulation or decumulation will occur for a specific fixing. 

Price-to-book (PB) ratio. A company’s share price divided by its book value, which is defined as its net assets. 

Per annum

Price/Earnings to Growth Ratio 

Property & Casualty insurance

The amount that the bond issuer agrees to repay the bondholder at maturity. It’s often called the “par value” of the bond. 

For consistency and clarity, we refer to “proxy voting” rather than just “voting” which can be ambiguous to a broad (non-investment) audience. “Proxy” refers to the fact that, as a financial organisation, we are delegated by our clients (the final owner of the securities) to vote on his behalf. 

A contract under which the buyer of  the put has the right, but no obligation, to sell the underlying at the strike price. The buyer pays a premium in exchange for this right. The seller of a put has an obligation to buy the underlying at the strike price if the buyer wants to exercise their right. The seller receives a premium in exchange of the carried risk. 

Hedged

Hong Kong

A hedge is an investment that is much like an insurance policy and is used to reduce the potential risk of an adverse price movement in an asset. Using derivatives is the most common form of hedging, where both an asset is purchased and the option to sell it later, or vice versa, in order to guarantee some return on investment. Much like an insurance policy, by purchasing options on top of the actual assets, small costs will be incurred to hedge investments.

Hong Kong Monetary Authority, central bank of Hong Kong

Bonds issued by a government or corporation that carry a high risk of default. Typically, high yield bonds (also called “junk bonds”) are rated BBB- or lower by credit rating agencies.

High Yield

Emergence of a reversal pattern from a bullish or bearish trend (consisting of a left shoulder, a head and a right shoulder). The pattern is used to confirm and predict the potential continuation of the subsequent move from the neckline. The projected move is determined by measuring the vertical distance from the peak of the head to the neckline and applying the same distance from the neckline after the right shoulder is formed.

First Half / Second Half (of a year) 

Holding Company

A speculative investment fund which, to achieve its targets, deals in assets with high risk/return profiles.

Heavy Duty

Q1 stands for first quarter, Q2 for second quarter, Q3 for third quarter and Q4 for fourth quarter.

An unconventional monetary policy adopted by central banks to boost the economy. The central bank buys securities in the market, usually government bonds, by creating money. The new money which is used by the central bank to inject liquidity in the economy is not necessarily printed but can be created electronically, as book entries in the central bank’s accounts. Quantitative easing has the effect of keeping interest rates low. The increased liquidity and the lower cost of funds fosters an increase in economic activity. In theory, the QE should also facilitate access to credit, thus stimulating economic growth. 

Quarter on quarter, a comparison of a data point to data for the same time period a quarter previously.

Quick Ratio (Acid-Test Ratio) 

Year on year, a comparison of a data point to data for the same period a year previously.

Yield to worst

Respectively, 1Y (1 year), or YoY ( year on year)

The expected return on a bond or bond portfolio assuming the bond is held to maturity.

Yield curve control

Yield to call

Year to date, a measure of the most recent set of data to data at the beginning of the calendar year.

Return expressed as a percentage.

Analyst ratings (strong buy, buy, hold, caution, sell) provide a medium-term overview (around 12 months).

Asset-backed securities is a type of financial investment that is collateralized by an underlying pool of assets.

The percentage performance of a financial instrument above or below that explained by its exposure to the broader market.

Asset Management

While not equity owners, fixed income investors can still engage with debt issuers, a practice commonly referred to as active stewardship.

Actual

Average Revenue Per User

Autonomous Vehicle

A strategy that aims to balance the risks and rewards required by each investor. By specifying the weightings of asset classes that are assigned to your portfolio, asset allocation can be used to tailor the portfolio’s investing approach to each individual’s goals. Asset allocation normally uses the three main asset types: equities, fixed income and cash; and weightings of these can be used to create more aggressive or defensive styles of investing.

A put or call option with an exercise price close to or equal to the underlying security’s current market value.

A catch-all term for assets that are not shares, bonds or cash. It can include anything from hedge funds, private assets (private equity, private real estate and private debt), managed futures, commodities and derivatives to specialised investment areas such as fine wine and stamps. Together, they form their own asset class.

For exotic options, this refers to a condition that, when met, activates the option or the payout (Kick In, Kick In at the End, Lock In, One Touch).

Asset & Liability Management

Association of Southeast Asian Nations

Claim for repayment is backed by a specific set of underlying assets. It reflects bonds that are secured by assets which are legally separated from a borrower’s other assets.

Currency which the investment currency can be converted into under a certain scenario.

Asia-Pacific Economic Cooperation

Austria

Article 6 of the SFDR

A classification of a group of investable securities that have similar characteristics. The three main asset classes are equities (stocks or shares in public companies), fixed income (bonds or debt repayments) and cash. In addition, alternatives constitute a further asset class of non-mainstream assets such as hedge funds, private assets, commodities, derivatives, wine or art, among other things.

A generic term to indicate a tangible or intangible financial resource or item. In very broad terms, it indicates anything with an economic value. When reference is made to company assets, the focus is on the combination of goods, equipment and instruments that are required for the operation of the company and make up its overall value.

Advisory focus list highlights a tactical recommendation (around three months) based on the internal analyst rating.

Accounting process in which the cost of an intangible asset is spread over this asset’s expected useful life. For example, if a company buys a trademark in 2015 for EUR 10,000 and expects to use it for 10 years, amortisation of EUR 1,000 is charged annually over a period of 10 years.

With the American style feature, the contract terms allow the option to be exercised at any point during the contract period.

Accumulation

Additional Tier 1

Annualized New Premium

A strategy that aims to deliver positive real returns on an investment, irrespective of whether markets are rising, falling or flat.

An option can be activated or deactivated if the barrier is touched at any time during the lifetime of the option.

Affordable connectivity program

All Country World Index

The average yield shows the price-weighted or duration-weighted aggregate yield of instruments in a portfolio.

Assets Under Management

The average coupon shows the price-weighted aggregate coupon of instruments in a portfolio.

Advanced Driver Assistance System

Each investor will have a unique appetite for risk, or risk profile. Risk appetites should take into account both the willingness and financial ability to tolerate large swings in the value of the investment. To identify an investor’s risk appetite, many factors need to be considered, such as the time horizons for the investments, the investor’s age, future earning capacity and the existence of other assets such as a home or a pension.

Adjusted Funds From Operations

Active ownership activities include proxy voting (see below section P) at shareholder meetings and engagement (see below section E) with issuers, property managers, asset managers or third-party fund managers.

The restrictions an investor places on the style of their investment strategies, such as socially responsible investing or an inability to invest in certain countries. An acute understanding of investment needs is necessary when planning investments.

See the Elliott Wave theory.

An investment strategy entails a combination of asset allocation, styles, sectors and geographic locations with which an investment manager can choose to invest funds. A financial adviser can develop a tailored investment strategy if provided with information concerning investment objectives, financial goals, circumstances and risk appetite.

Indicative Pricing Terms

The financial goals or targets an investor would like to achieve from their investments, such as buying a house or saving for retirement. Knowledge of an investor’s financial circumstances and goals is necessary to establish the respective investment objectives.

Indication of interest

Annual change in headline inflation. An indicator that signals a risk of high inflation is deemed negative for the value of the currency. Between +1 and -1 is deemed neutral for a currency.

The process by which a company lists its shares on a stock exchange and becomes a publicly traded company.

Italy

The first investment into a financial instrument or portfolio.

A company or an individual that trades in financial markets by matching counterparties to a transaction. A broker trades on behalf of third parties without taking a position for itself. A financial intermediary is an institution that brings together liquidity-rich and liquidity-poor parties, such as investors and companies.

International Accounting Standards Board

Investment Banking

A way of measuring the value added by the portfolio manager relative to a benchmark. It is a measure of the risk-adjusted return of a portfolio and is calculated by dividing the active return (portfolio return minus benchmark return) by the tracking error.

International Capital Market Association

Initial Public Offering

Investment grade

Inflation Reduction Act

International Financial Reporting Standard

Currency in which the investment is denominated.

The charge paid for the privilege of borrowing money, typically expressed as an annual percentage rate.

An asset purchased with the hope that it will provide income in the future or be sold at a higher price for a profit.

A general increase in the prices of goods and services. Unless this increase is offset by rising salaries, consumers lose purchasing power.

The Ichimoku Kinko Hyo equilibrium analysis is based on a moving average concept that enables a pattern of signals to be generated (26 days in the past and 26 days in the future) with the current price. Used to identify short term momentum, long term trends and price targets.

International Securities Identification Number

Institute for Supply Management

Internal Combustion Engine

International Monetary Fund

A call option whose strike price is lower than the current value of the underlying, or a put option whose strike price is higher than the current value of the underlying.

An indicator used to highlight significant threats or opportunities not captured by other indicators. A typical example is political risk, which is difficult to measure but can have a major impact on a country’s currency.

Internal Rate of Return

There are usually two main reasons for investing: to grow money over time or earn regular income from it. Investing for income is a good way to supplement other forms of income such as wages or a pension. However, like any other form of investment, it carries a degree of risk. Income can be earned from various asset classes, mainly cash, bonds, equities and property.

constant currency

Issuer’s sustainability strategy

Equity investments to fund the startup or the growth phase of companies. Typically, a venture capital fund invests in technologically innovative startups or growing companies. Usually, venture capital funds invest in companies with a high operational or financial risk.

The deviation of the real effective exchange rate from its 10-year average as a measure of the under or overvaluation of a currency. More than 10% above the average means the currency is overvalued, 10% below means a currency is undervalued, else neutral.

Fixed Income

Also called investment objectives, the targets an investor would like to achieve from their investments, such as buying a house or saving for retirement. Knowledge of the investor’s financial circumstances and goals is necessary to establish the respective investment objectives.

Free Cash Flow

A fund that invests in other investment funds, rather than investing directly in stocks, bonds or other securities. By investing in an array of other funds, each with their own portfolio holdings, FOFs can achieve broad diversification benefits. However, due to the increased number of funds involved, fees can often be higher than usual investment funds.

Fair Value

Financial Industry Regulatory Authority

Federal Communications Commission

Swiss Financial Market Supervisory Authority

A collective investment managed by a professional asset manager that invests money pooled together from several investors.

The Federal Reserve System, central bank of the United States of America, the Federal Open Market Committee is a committee within the Federal Reserve that makes key decisions about interest rates.

Fixed Wireless Access

Fundamental Review of the Trading Book

Fiber To The Home

Financial Accounting Standards Board

Financial Conduct Authority in the UK

Pictet Wealth Management’s in-house ESG due diligence questionnaire (ESG DDQ) is an information-gathering form used to assess a fund manager’s ESG approach. The ESG DDQ is based on four pillars: the fund management firm’s commitment to ESG, investment process, monitoring and reporting, and active ownership.

Financial Stability Board

Fibonacci Retracement levels (23.6%, 38.2%, 76.4% and 100%)

Agreement between two counterparties to exchange one currency for another currency at a specific price at a future date.

An assessment of the state of an investor’s finances, including current cash, long-term assets or future income projections. Knowledge of the given financial circumstances is necessary to understand the limits of the respective investment plan.

Federal Trade Commission

Funds From Operations

Floating Rate Note

France

A fund manager is responsible for implementing a fund's investing strategy and managing its portfolio trading activities. This allows investors to delegate their investment decisions to a professional. Fund managers are paid a fee for their work, either as a percentage of the fund's average assets under management (AUM) or as a performance-related fee.

Federal Reserve System

Observation made as a reference during the lifetime of the option to determine if an exercise will occur or not (with a potential specific frequency).

In broad terms, futures are contracts under which one party promises another party to buy or sell an instrument, commodity or asset at specific terms and conditions. This type of contract is often entered into to hedge against risks that might arise from future trading activities involving the underlying instrument, commodity or asset. A financial future is a special type of futures contract, a derivative whose value is closely related to the value of its underlying.

The amount that the bond issuer agrees to repay the bondholder at maturity. It is often called the par value of the bond.

Foreign Exchange

Short term cash investment with a fixed rate of interest paid by the borrower.

Rating 1

• RI (responsible investing) policy missing or merely a directive that investment teams are unaware of.
• No mandatory alignment of incentives to achieve RI goals.
• Dedicated staff missing and thus adherence to RI policy is not enforced.
• Very low score compared to the peer group on our proprietary RI rating methodology.

Rating 2

• RI policy is only a superficial document and not distributed widely across the firm.
• Dedicated staff missing or yet not empowered enough to enforce adherence to RI policy.
• Implementation of ESG in the investment value chain remains limited.
• Scores towards bottom of peer group on our proprietary RI rating methodology.

Rating 3

• Clearly defined RI policy but not practiced consistently across the firm.
• Existence of dedicated staff is limited and only has a restricted degree of influence.
• ESG approach lacks coherency or consistency across the investment value chain.
• Scores in line with peer group median on our proprietary RI rating methodology.

Rating 4

• Clearly defined RI policy but it is selectively adhered to.
• Dedicated and empowered staff to ensure and supervise policy consistency.
• Coherent policy adherence and implementation across most of the investment value chain.
• Scores towards top of the peer group on our proprietary RI rating methodology.

Rating 5

• Clearly defined and broadly shared RI policy.
• Coherent policy adherence and implementation across the whole investment value chain and alignment of incentives to achieve RI goals – in line with a sustainable investing approach.
• Score tops peer group on our proprietary RI rating methodology.

Food and Drug Administration

Fscal Year

Fixed Charge Coverage Ratio

The last spot level prior to the expiry of the holder’s option to decide whether or not the option will be exercised.

Final Investment Decision

Non-Bank Financial Corporation

Nominal Effective Exchange Rate

North Atlantic Treaty Organization

Netherlands

Non-rated

Non-Performing Assets

New Global Note

Norway

Central bank of Norway

New York law

Net Debt-to-EBIT Ratio

Non-Bank Financial Institution

Net Operating Profit After Taxes

Net New Money

New Interest Income

Net Present Value

Nuclear New Build

Non-callable (e.g. 5NC3: 5 year maturity non-callable in the next 3 years)

North American Free Trade Agreement

Net International Investment Portfolio

Negative outlook (from the rating agency involved)

Net Stable Funding Ratio

Non-Performing Loans

Net Interest Margin

Newly initiated trades since the last publication

Net Debt-to-EBITDA Ratio

Net New Assets

Net Charge-Offs

Net Profit Margin

NAV is an acronym for net asset value. It is obtained by dividing the total value of a fund’s assets (cash + price x quantity of the fund’s shares) by the number of shares/units outstanding. It is the price that an investor should pay to purchase other fund shares/units or should collect if they sold such shares/units. In a property fund, it is the difference between assets and liabilities.

See double top/bottom.

1 year

Weighted Average Cost of Capital

See Elliott Wave theory.

Bonds issued by governments. They are widely regarded as the safest type of bond as they are backed by the government. However, they generally earn lower yields than bonds issued by corporations. Governments usually issue bonds in the country’s own currency and carry varying levels of risk depending on the local economic situation. Since foreign government bonds are often issued in their own currency, the return in another currency will vary as exchange rates fluctuate.

Gross Profit Margin

Graphic Processing Unit

Greece

Gigawatt

Generally Accepted Accounting Principle

Gross Written Premium

General Corporate Purposes

Gross Margin

Group of 10 main economies

Scorecard: Monthly growth-related indicators. The higher the indicator, the better it is for the growth outlook and the currency; between +1 and -1 is neutral.

Greenhouse Gas

The monetary or market value of goods and services produced in a period (quarterly, or yearly).

There are usually two main reasons for investing: to earn regular income or grow the investor’s money over time. Putting money into savings accounts may help to earn interest income, but it can only provide capital growth if this interest is reinvested. A better way to grow capital would be to invest in securities, such as equities. Once the investor is satisfied with the growth the investment has achieved, it can be sold at a profit and the initial investment, plus any proceeds, returned to the investor.

Great Britain

Organisation of the petroleum exporting countries, intergovernmental organization composed of 14 countries (oil producers).

The ounce (Oz) is an imperial unit of measure, now commonly used to measure the mass or weight of precious metals. One troy ounce is defined as exactly 31.1034768 grams.

An oscillator is a technical analysis tool moving within a band (above or below a centre line, or between levels). It is used to discover the overbought/oversold opportunities (common oscillators: MACD, RSI, ROC).

Organisation for Economic Co operation and Development

Organic Sales Growth 

Operating Company

Operating Expenditures

Oil & Gas

Options are derivative financial instruments which, for a premium, give the holder the right to buy or sell the asset (the underlying) at a predetermined strike price on a given date. An option that gives the holder the right to buy the asset is referred to as a call option. The call option holder expects prices to rise. On the other hand, if the investor believes that prices are falling, they can buy a put option which (for a premium) will give them the right to sell the underlying at the strike price at the given date.  

Operating Profit Margin 

Indicator which points to a potential upside correction. 

Indicator which points to a potential downside correction.

Ongoing trades that have not yet matured

Original Equipment Manufacturer

Over the counter refers to unregulated market where transactions are not governed by regulations enforced by financial market supervisors. Negotiations are conducted directly between the interested parties. OTM (out of the money) refers to a call option whose strike price is higher than the current value of the underlying, or a put option whose strike price is lower than the current value of the underlying. 

Operating Cash Flow

Overnight index swap

In technical analysis, past price movements are used to extrapolate future market trends and define the target price to enter/close positions.

Mandatory contributions from individuals and corporations that are used by a government to pay for public services. Taxes come in many forms, such as income tax, VAT or property tax.

Total Return

Historical mathematical calculation on various indicators (price, volume, open interest).

Titanium dioxhide

Bonds issued by the US Treasury to raise the funds necessary to meet its borrowing requirements.

The standard deviation of the active returns (portfolio return minus benchmark return). It measures how close a portfolio/fund return is to its benchmark return.

Too Big Too Fail

The process of analysing price charts with an aim to identify patterns that are likely to recur, in order to try to predict future price movements.

Transmission System Operator

Length of the investment/strategy..

Total charges paid by an investor for a fund including management fees, performance fees and any additional costs such as administrative fees.

Technology, Media, and Telecommunications (industries)

Total Addressable Market

A trend line can be drawn between a minimum of three points. To qualify as a trend line, it must be drawn between two points and tested by a third point at least.

We use an openness index, based on the sum of imports and exports divided by GDP as a way to assess the exposure of an economy to global economic trends.

Triangles are patterns derived from a contraction in the price range and converging trend lines (shape of a triangle ). There are three categories:

• Ascending (from an uptrend, often bullish if coupled with an increase of volume market expected to increase by the same amount of the widest section of the triangle;
• Descending (from a downtrend, often bearish if coupled with an increase of volume market expected to decrease by the same amount of the widest section of the triangle;
• Symmetrical are continuation patterns without a clear direction derived from a trend, but when the triangle is broken, it usually triggers a big move together with a big volume compared to the indecisive days before the breakout. It is advisable to usually wait for a one day closing price above or below the trend line before entering into the market.

Trade execution date (e.g. T+3 settlement = 3 business days after the trade is executed).

To Be Determined

Total Loss Absorbing Capacity

Total Cost of Ownership

Terawatt-hour

Part of a company’s earnings distributed to the company’s shareholders at the end of the year. Upon the proposal of the board of directors, the shareholders may decide whether to pay dividends, retain earnings to fund future investments or cover past losses. Dividends can be paid in cash or in the form of other shares. In the latter case, the shareholder increases their position without receiving any cash payment.

direct-to-home

A fixed payment (payout) is paid if the market value of the underlying never touches or breaches a defined level during a specific time period.

A long-term debt instrument that has no collateral other than the issuing company’s general credit.

Distribution System Operator

Digital options are used to express various market views depending on specific features. The option enables the buyer to receive a payout (specified amount) if the market expectations are met. In exchange for this, the buyer pays a premium.

The condition in exotic options where the option or payoff is deactivated due to a specific event (Knock Out, Lock Out, No Touch, Target reached, number of occurrences).

Depreciation reflects a decrease in the value of an asset. It is an accounting process in which the cost of a tangible asset is written down over its expected useful life. For example, if a company buys a machine in 2015 for EUR 10,000 and expects to use it for 10 years, depreciation of EUR 1,000 is charged annually over a period of 10 years.

This expression indicates the process of gathering information on a company (or a fund), including determining financial conditions, operating results and cash flows. In general, all the information relating to a company (or a fund) is analysed in view of an acquisition. Potential buyers are well advised to perform due diligence reviews before acquiring a company (or a fund) to determine the investment’s real rather than “on paper” conditions.

Denmark

This is an indicator that provides information on investment performance. The drawdown reflects the reduction of invested capital and can be calculated in absolute or in percentage terms. In essence, it is the widest fluctuation between a peak and its subsequent trough reached at a given time in the life of an investment, giving insight into the manager’s strategy.

Denominations

Discretionary Cash Flow

Dual currency note. A short-term investment aimed at earning a return by exploiting currency risk.

Dividend Yield

Distribution Yield

Digital TV

A percentage that reflects the difference between the spot rate at inception and the potential net purchase price of the underlying.

Deposits are structured products with no capital protection at maturity. The investor bears the credit risk of the institution where the deposit is made.

US Dollar Index

Diversification is a risk management technique that creates a mix of various investments and asset classes within a portfolio. The method is aimed at minimising the risk of large, undesirable swings in value by holding investments that all react differently to certain market scenarios. Diversification results in a portfolio that has less risk than the weighted average of its individual holdings.

The sensitivity of fixed income instruments to changes in interest rates.

A trend reversal pattern that is frequently observed at the end of the bull market (top) or bear market (bottom). This is characterised by two consecutive price levels being reached (double level touched) followed by subsequent pullbacks (setbacks). These define a neckline, which, when breached, confirms the emergence of the new trend. The two peaks (top) open a bearish trend after the neckline is breached. The two minima (bottom) open a bullish trend after the neckline is breached.

Debt to Equity Ratio

Debtor in possession

Department of Justice

A general decline in the prices for goods and services. It is not necessarily negative, as lower prices in deflation largely reflect excess supply. However, if deflation is due to a decline in demand, it means that consumption is stagnating and the economy is slowing down.

Weighted average dividend yield showing the dividends paid on a share as a fraction of the share price.

In the broadest sense, a derivative is a financial instrument whose price or value is calculated in relation to other market-traded assets or instruments. These other assets or instruments are called “underlyings” and may include indices, interest rates, government bonds, shares or commodities such as gold or oil. Derivatives are regarded as speculative instruments and are highly volatile, which is why potential gains or losses are very high. Due to their nature, they can also be used to hedge against the risk of volatility of the underlying assets. Derivatives are widely traded in the over-the-counter market, outside of the scope of standard market regulations enacted by market supervisors; both parties freely and directly negotiate the type of contract and the relevant terms and conditions. The most common derivatives include futures, options, warrants, ETFs and swaps.

Germany

Liquidity Coverage Ratio

Last Twelve Months

Liability Management Exercise

The amount of debt an investor can add to their available funds to finance a project or purchase. To measure leverage, using £100 in cash and £400 in debt to make a purchase would give a leverage ratio of 4:1. Leverage is used to increase the potential return on an investment.

Secured debt with the highest priority claim for repayment. It represents the first layer of capital in secured first lien financing, typically used in leveraged buyouts, acquisition financing, or project finance. 1st lien notes have a higher ranking than 2nd and 3rd lien notes.

Last 12 Months

Liquefied Natural Gas

Loan Loss Provisions

like-for-like growth; a way to express growth of a component on an organic basis.

Amount borrowed at a defined rate for a fixed term

Light vehicle

Legal Entity Identifier

London Interbank Offered Rate. The interest rate that banks in London charge for interbank loans. It is calculated by a panel of sixteen banks and currencies such as US dollar, euro, sterling pound, yen, Australian dollar, Canadian dollar, Swiss franc, New Zealand dollar and Swedish krona.

Secured debt with the third priority claim for repayment. It represents the third layer of capital in secured third lien financing, typically used in leveraged buyouts, acquisition financing, or project finance. 3rd lien notes rank below 1st and 2nd lien notes.

Refers to being exposed to the upside movement of the underlying. It also applies to an option when it is purchased.

Loan-to-Value Ratio

A position that starts with the purchase of a security and ends with its sale. A long position is usually taken in an asset when the price is expected to rise. On the other hand, a short position is opened with a view that the price will fall, starting with the sale of a security and ending with its purchase. The terms ‘long’ and ‘short’ can be misleading, as they have nothing to do with the holding period of the investment.

Last observed spot level

Latin America

Long-Term Debt

Secured debt with the second priority claim for repayment. It represents the second layer of capital in secured second lien financing, commonly used in leveraged buyouts, acquisition financing, or project finance. 2nd lien notes rank below 1st lien notes but above 3rd lien notes.

The feature in a structured product that enables an investor to secure a minimum redemption amount if a predetermined condition is met.

Lower trend line of the channel (see channel)

Luxembourg

The price level at which a l imit o rder will be executed and filled when reached.

United Nations

A lower performance of a fund relative to its benchmark.

Higher trend line of the channel (see channel).

United Kingdom

United States

Use of Proceeds

An upside breakout occurs when the price breaks out through the top of a trading range marked by horizontal boundary lines across the highs and lows. This pattern indicates that prices may rise explosively over a period of days or weeks as a sharp uptrend appears. A breakout from a longer and narrower trading range makes for a stronger and more reliable bullish signal. Conversely, a bearish downside breakout is observed when prices break out below the lower boundary.

United States Mexico-Canada Agreement. It is a trade agreement that replaced the North American Free Trade Agreement (NAFTA).

Claim for repayment that ranks behind senior unsecured and ahead of junior subordinated debt. It indicates the obligation is not backed by any collateral.

United States Dollar

European Pressurised Reactor

Engagement falls under active ownership. It involves interactions between an investor (or an engagement service provider) and issuers (companies/sovereigns). Engagement itself does not necessarily pursue responsible intentions. However, in the responsible investing context, it is conducted with the purpose of fostering ESG topics, changing a sustainability outcome or improving public disclosure. Engagements can also be carried out with non-issuer stakeholders, such as policymakers, standard setters or property managers and tenants in the case of real estate asset owners. Interactions that are not seeking change or an improvement in public disclosure are not considered engagement.

At Pictet, we have identified four priority engagement themes: climate change, water, nutrition and long-termism, in addition to other material ESG issuer-specific factors.

Engagement can be carried out bilaterally and collaboratively. Bilateral engagement is typically effective when an investor holds a significant portion of the target issuer’s equity or debt.

Collaborative engagement is done jointly with other investors. This might include:

1. groups of investors working together without the involvement of a formal investor network or other membership organisation; or
2. groups of investors working together with the support of a formal investor network or other membership organisation such as the Climate Action 100+ and the Valuing Water Finance initiatives; Pictet is a signatory of both.

Emerging markets

These are special types of indexed investment funds which are listed on the stock exchange just like a share. Unlike shares, however, they are passively managed and intended to replicate an index or a combination of indices. In this way, investors can take advantage of their two main strengths: risk diversification (typical of a fund) and the transparent flexibility of real-time trading (typical of shares).

Enterprise Value

Systematic and explicit inclusion of material ESG factors (also referred to as sustainability risks) into investment analysis and investment decisions to optimise the risk-return profile of corporate/sovereign issuers. The inclusion of ESG considerations in the investment process is not in itself sufficient to be classified as responsible investing. ESG-integrated investing does not take into account an issuer’s negative or positive externalities beyond what is financially material to its business/itself. At Pictet, investment and risk teams access this data through a common ESG scorecard. Typically, we look at how the firm is run, its operations, its product and service mix, and if there have been controversies. In the EU, under the Sustainable Finance Disclosure Regulation (SFDR), investments that integrate ESG considerations to optimise their risk-return profile (and do not promote environmental and social characteristics) should be disclosed as per Article 6.

European Commission

European Central Bank

An acronym of Euro OverNight Index Average and an interbank interest rate for 1-day loans in the eurozone. It is calculated by the ECB as the weighted average of the overnight rates of the main European banks. It is also the reference rate for different derivative instruments. EONIA was discontinued in 2019 and replaced by €STR, see below. EONIA was discontinued in 2019 and replaced by €STR, see below definition.

Action by the buyer to make use of the option, effectively triggering cash flows at the strike price. 

European Free Trade Association

Euribor is an acronym of Euro Interbank Offered Rate. This is the average interbank interest rate at which a large panel of banks in the eurozone (about 60 banks) lend funds to each other. Every business day at 11:00 a.m., the Euribor Panel Steering Committee sets the interest rate calculated on the basis of data received from the panel banks and discloses it to the market. There are eight different Euribors, reflecting maturities ranging from 1 week to 12 months.

€STR, which stands for Euro Short-Term Rate, is the interest rate utilised in financial contracts involving the euro. Administered by the European Central Bank, this interest rate is determined through the calculation and administration of the money market statistical reporting of the Eurosystem. In 2019, €STR replaced the Euro Overnight Index Average (EONIA) and is now widely recognised as the Euro risk-free rate for all products and contracts.

Expected Credit Loss

Spain

Expected

Electric Vehicle

With a European-style feature, the contract terms allow the option to be exercised only on the expiration date.

European Economic Area

Used as a standalone, it refers to extra-financial factors, specifically as concerns environmental, social and governance topics.

The European Central Bank (ECB) is the central bank of the 19 countries that adopted the euro. The ECB is tasked with maintaining price stability in the eurozone and keeping target inflation just below 2%. It sets monetary policy objectives, issues banknotes and intervenes in foreign exchange markets. It is an independent body managed by a Governing Council, an Executive Board and a General Council.

Enterprise Value to EBITDA Ratio

Earning per s hare (EPS) ratio divides net earnings available to common shareholders by the average outstanding shares over a certain period of time.

Date and time at which the instrument/right expires.

Environmental Protection Agency

Economic indicators are items of macroeconomic data that provide guidance on the direction and intensity of the development of a given economic variable.

An option can be activated or deactivated if the final spot or fixing on the expiration date and time is at or beyond the barrier.

A call or put option with additional features (i.e. includes all options which are not standard calls or puts).

Earnings Before Interest, Taxes, Depreciation, and Amortization

Earnings Before Interest and Taxes

Europe, Middle East and Africa

European Union

The Elliott theory suggests that market movements follow a pattern alternating between optimism and pessimism in natural sequences (crowd psychology): as impulse waves (1/3/5) always subdivided into five sub-waves (1/2/3/4/5) and corrective waves (2/4) subdivided into three sub-waves (a/b/c), starting with a five-wave counter-trend impulse, a retrace, and another impulse. These waves follow a set of specific rules and are linked to each other by target and retracement ratios based on the Fibonacci sequence. The personality of each wave is an integral part of the reflection of the mass psychology it embodies. Rules: wave 2 never retraces more than 100% of wave 1. Wave 3 cannot be the shortest of the three impulse waves (1/3/5). Wave 4 will usually not overlap the price territory of wave 1 (except in a diagonal triangle formation).

Euro medium-term notes

Economic and Monetary Union (of the European Union)

Exclusions refer to avoiding specific issuers, activities or industries. Motives can be driven by personal values or ESG considerations. At Pictet, we favour engagement over exclusions in seeking a desired outcome, but recognise that there are some cases (e.g. in the case of undiversifiable risk(s)) when engagement cannot be effective and blanket exclusions must apply (i.e. controversial weapons, thermal coal mining). When exclusions are applied, as they were to Pictet’s balance sheet when we defossilised it in 2020, we divest from and/or no longer invest in the securities of the excluded issuers. Pictet’s exclusions are part of our responsible investing policy.

Environmental, Social, and Governance

Investments that consider sustainability risks and promote environmental and social characteristics. In the EU, under the Sustainable Finance Disclosure Regulation (SFDR), investments that consider sustainability risks and promote environmental and social characteristics (but do not target specifically sustainable activities) should be disclosed as per Article 8.

The total value of a company equal to its equity value, plus net debt, plus any minority interest.

Network generations

Proved and probable reserves

Responsible Investment  

Each investor will have their own risk profile that takes into account their willingness and financial ability to accept large swings in the value of the investment. To identify their risk profile, investors must consider many factors, such as the time horizons of their investments, their age, their future earning capacity and the presence of other assets such as a home or a pension. A risk profile helps us to create an appropriate investment plan aligned with the respective objectives and circumstances. 

Pattern which indicates a trend reversal if a defined level is breached (see double top or double bottom).  

A proportion used to define the exchanged amount at the time of expiry. Strategies with ratios are asymmetrical; usually the ratio (or leverage) applies when the exchange occurs at an unfavourable level compared to prevailing market price. 

Based on the observation that after a period of trending in one direction, the price tends to retrace a portion (percentage) of the previous trend before resuming its original direction. Countertrend moves are believed to fail at certain predictable levels calculated from a number sequence (23.6%, 38.2%, 50%, 76.4% & 100%). A trend is expected to continue if the 50% retracement is exceeded.  

Real Estate Investment Trusts 

Radio Access Network

Research and Development

Ratings Moody’s/S&P/Fitch

Rest of the World 

Refers to a level that is anticipated to predict trend interruption which might prompt an increase in selling activity. 

There is no industry-agreed definition of responsible investing. At Pictet, responsible investing goes beyond integrating ESG (i.e. monitor sustainability risks to optimise the risk-return profile of corporate/sovereign issuers) and includes promoting environmental and social characteristics or seeks positive environmental and/or social impact in the real economy through the allocation of capital and/or a strategic approach to active ownership. At Pictet, we use “responsible investing” because it represents the breadth of the investment opportunity while at the same time capturing its primary objective to invest responsibly, regardless of what one’s personal definition of that may be. At Pictet, for responsible investing, we distinguish between ESG-focused (see above section E) and positive-impact investing (see above section P). 

Relative Value

Renewable Energy Sources

Regulation S

The currency in which a portfolio’s performance is measured.

Percentage retracement is calculated based on extreme values observed on a chart. It serves as a guide to define support and resistances and as a potential signal for a short-term reversal before the trend continues. 

Return on equity (ROE) is the measure of a company’s annual return (net income) divided by the value of its total shareholders’ equity. 

Risk is the likelihood that the actual outcome of the investment will differ to the expected return. Investments with a higher degree of risk increase the possibility that the investment will over or underperform expectations. Risk is often measured through the frequency and extent of deviations from the average historical performance, known as the standard deviation. Investors must understand the risk prior to investing. 

Return on Invested Capital 

Right-Hand Scale / Left-Hand Scale (for charts) 

Reserve Bank of New Zealand, central bank of New Zealand. 

Regulatory Asset Base

Central bank of Sweden

Revolving Credit Facility 

An indicator developed by J. Welles Wilder to measure the velocity of an underlying price movement to identify an overbought/oversold condition (counting up and down days from close to close). It is used to define a potential turning point to take entry/exit decisions: RSI <30 indicates an oversold market - Buy signal when the indicator crosses 30 from below- RSI value > 70 indicates an overbought market - Sell signal when the indicator crosses 70 from above. 

Return on Tangible Equity 

Risk and reward is the necessary understanding that in order to gain higher rewards. investors have to take on a higher degree of risk, making them more susceptible to losing some or all of their initial investment.  

Real Effective Exchange Rate

A resistance trend line is defined when the underlying declines at resistance pivot points. It is used to define entry/exit points.  

Return on Assets 

Reserve Bank of Australia, central bank of Australia

Return on Investment 

ROAA

Reverse Repurchase Agreement 

A collective investment pool that invests in the securities of public real estate companies. A real-estate investment trust is an investment vehicle that operates like a company, offering shares in the trust on a public exchange and owns commercial real estate. It then distributes the rents from these properties to its shareholders in the form of dividends. 

Risk-weighted assets are used to determine the minimum amount of capital a bank must hold in relation to the risk profile of its lending activities and other assets. 

Reserve Bank of India

A score awarded by rating agencies reflecting their opinion on the creditworthiness of an issuer. 

Southern Common Market (Mercado Común del Sur)

Maximum Distributable Amount

Million

Refers to an average of a defined initial subset of prices (commonly on 50 days, 100 days, 200 days) connected by a line. It is used to define short-term fluctuations and/or longer-term trends as the market assumes that prices at extremes tend to revert to the mean price. It can be simple or exponential.

3-month Libor

Markets in Financial Instruments Directive

The date on which a bond issuer must repay the principal to the bondholder. Bond maturities can range from short term (a few months) to long term (over 30 years).

Monetary Authority of Singapore, central bank of Singapore

Mortgage-backed securities are investments that represent claims on the money generated by pools of mortgage loans.

Mergers and Acquisitions

Minimum requirement for own funds and eligible liabilities

Respectively, 1-month, 3-month, 6-month and 12-month

Moving Average Convergence/Divergence. An indicator used to track changes in the underlying price trend. It provides insights into the strength, direction, momentum and duration of a trend. The calculation is based on three time constants derived from the three exponential moving averages (difference between time a and b and the signal line which is the average of a series of time c). Parameters are usually in number of days (commonly 12 (a), 26 (b) and 9 (c) days). A bar graph illustrates the divergence between the two lines. When (a) crosses (b), the histogram shows 0 (crosses above the zero line is a change from negative to positive MACD which is interpreted as bullish. However, this crossover has less momentum than a signal line crossover). A short-term setup can also be used, applying 5, 35 and 5 days.

The rate of price change (ROC) between two closing prices (commonly between today’s close and 10 days ago). A simple moving average (commonly 5 days) is shown as a second line. It is used to define buy signals, which occur when the momentum line crosses above the moving average, or sell signals, which occur when the momentum line crosses below the moving average.

Commonly known as M&A, this term includes different types of transactions that result in the merger of different companies. In a merger, two or more companies are combined to give rise to a new entity. An acquisition, on the other hand, involves one company merging into another, with the acquirer maintaining its legal identity while absorbing the acquiree.

Mobile virtual network operator

Multilateral trading facility

Mark-to-Market

Month on month, a comparison of a data point to data for the same time period a month previously.

Metals and Mining (industry)

Make-whole call

Collective investment schemes established to pool the resources of investors who, in turn, own a share of the scheme proportionate to their investment. This means that profits and losses are allocated to investors on the basis of the number of shares/units held. Investors do not manage investments directly but delegate this task to a specialist, an asset management company, which sets the fund’s investment strategies.

Medium-term note

Management Fee

A security, generally issued or guaranteed by a federal agency, that is backed by a pool of mortgages.

Month to Date

Zero Emission Vehicles

Bank of Korea

Billing & Delivery

barrels of oil equivalent per day

A consolidation in the price of a security, usually after a downtrend, before it begins its bullish phase. The resulting price pattern looks flat or slightly rounded.

Expecting a price to rise.

business-to-consumer

Expecting a price to fall.

Refers to an indicator which points to a potential further downside/upside correction when broken.

Billion

The use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development. This includes the use of concessional finance at below market interest rates (e.g. from development banks) designed to bridge the gap to private sector capital for a specific objective. Pictet does not currently offer any blended finance solutions.

Used in technical analysis to identify a reversal in the trading pattern. A small white body is contained within the large black candlestick (bearish). If a small black body is contained within the following large white candlestick, this is a bullish signal.

An intermediary or advisor that buys and sells securities solely for their own.

Bank of Japan, central bank of Japan

Benchmark

Battery Electric Vehicle

Belgium

Developed by John Bollinger, a band is determined using the standard deviation from a simple moving average. Used to identify low/high volatility periods.

Central Bank of Mexico

Central Bank of Colombia/Banco de la República

Oscillators are most useful and issue their most valid trading signals when their readings diverge from prices. A bullish divergence occurs when prices fall to a new low while an oscillator fails to reach a new low. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again. Often a bullish divergence marks the end of a downtrend. Bearish divergences signify potential downtrends when prices rally to a new high while the oscillator fails to reach a new peak. In this situation, bulls are losing their grip on the market, prices are rising only as a result of inertia, and the bears are ready to take control again.

The act of providing financial support to a state or a company that faces the risk of bankruptcy. In the former case, an independent entity - such as the European Union, the International Monetary Fund or the ECB (which together are commonly referred to as the troika) - steps in to provide credit in exchange for the implementation of plans to restructure the country’s debt. In the latter case, the state or a bank steps in to save a company from bankruptcy. Generally, depending on the seriousness of the situation, this objective is pursued through the injection of liquidity, the provision of ad hoc low-interest loans or tax breaks.

Central Bank of Brazil

A bond fund is an investment vehicle. Asset management companies invest in government and corporate bonds, depending on their yields and maturities. Bond funds can be short dated, and keep their investments for up to two years, or medium/long term and, accordingly, invest for more than two years.

Basis points

The average extent to which a fund’s return moves relative to the broader market. A fund with a beta above 1 moves on average more than the market and below 1 moves on average less than the market.

Bank for International Settlements

An investment strategy that generally invests the portfolio assets equally between equity and fixed income, aiming to achieve both capital growth from equities and income from fixed income, whilst diversifying risk across two different asset classes.

barrels of oil-equivalent

Bank of England, central bank of the United Kingdom

A certificate of debt issued by a government or corporation with the promise to pay back the principal amount as well as interest by a specified future date.

barrels of oil per day

barrels of crude oil

An index used as a yardstick against which the performance of a security, an asset or a market is measured. In asset management, benchmarks are used to measure the average risk and the return of a fund or an investment.

business-to-business

Bank of Canada, central bank of Canada

An intermediary or advisor that buys and sells securities solely for their own.

Unsecured claim for repayment that ranks behind other subordinated debt.

Joint bookrunners

Joint active bookrunners

Joint global custodian

A contract between two companies which is limited in time and is designed to achieve a specific objective. The arrangements, rules and roles of the ventures are set out in a specific agreement.

Joint lead managers

Japan government bonds

Sustainability is the degree to which an activity is “able to be maintained at a certain rate or level” into perpetuity. In 1987, the United Nations Brundtland Commission defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Given that today there are very few economic activities that can be defined as truly sustainable according to this definition, at Pictet we use “sustainability” selectively and prefer “responsibility”, which refers more directly to our actions rather than specific outcomes. 

South African Reserve Bank

Stakeholder is a person or group that has an interest in an organisation. The concept was developed in 1963 by the Stanford Research Institute to indicate those who have an interest in an organisation and who are necessary for the company’s survival.

A support trend line is defined when the underlying rebounds at support pivot points. It is used to define entry/exit points.  

Software as a Service

Used to indicate the level of risk of a fund by providing a number from 1 to 7. This risk is assigned because of the price variations resulting from its currency and the nature of the fund’s investments and strategy. The risk category shown is based on historical data and may not be a reliable indication for the future risk profile of the share class. It is not a target or a guarantee and may change over time. The lowest category does not mean a risk-free investment. The fund offers no capital guarantee or asset protection measures. The fund may be exposed to the different risks which are not adequately captured by the synthetic risk and reward indicator and may negatively impact its value. 

The Sustainable Finance Disclosure Regulation (SFDR) is a European regulation introduced to improve transparency in the market for sustainable investment products, to prevent greenwashing and to increase transparency around sustainability claims made by financial market participants. It imposes comprehensive sustainability disclosure requirements covering a broad range of Environmental, Social and Governance (ESG) metrics at both entity and product-level. The SFDR is a fundamental pillar of the EU Sustainable Finance agenda, having been introduced by the European Commission as a core part of its 2018 Sustainable Finance Action Plan, which also include the Taxonomy Regulation and the Low Carbon Benchmarks Regulation. Importantly, the SFDR is a regulation for disclosure, NOT product labelling. 

SFDR defines sustainable investment as i) an investment in an economic activity that contributes to an environmental objective, or ii) an investment in an economic activity that contributes to a social objective, iii) provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance. 

In the EU, under SFDR, financial products classified as Article 8 promote, among other things, environmental or social characteristics or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices. In parallel, financial products classified as Article 9 have sustainable investment as their objective.  

Stable outlook (from the rating agency involved). 

A bond that has priority over other bonds in claiming assets and dividends. Senior unsecured is also a debt obligation with no collateral, backed only by the debtor’s creditworthiness. 

The price at which a currency is currently trading on the market.

An indicator of a portfolio’s risk-adjusted performance calculated by dividing the excess return (portfolio return minus risk free return) by the volatility. 

The price at which an option can be exercised. 

Small Modular Reactor

The practice of pooling assets to be packaged and used as collateral to issue bonds on the market. 

Said of a claim for repayment that is secured by assets and will have priority before unsecured debt. In the event of a default, the creditor(s) of a secured bond has a priority claim to the pledged assets over the unsecured debt creditors. 

Singapore  

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries - developed and developing - in a global partnership. They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests. Achievement of the 17 global goals is inherently linked with the Paris Agreement goals.  

An order to buy or sell the underlying once a specific price level is reached. When the stop loss price is reached, it is generally executed at the next available price (which can be different from the initial price specified). A buy stop loss is entered at a level above the current price, a sell stop loss is entered at a level below the current price.

A short position is built by borrowing securities and selling them on the market. The investor does not own them because they expect the share price to fall. The position is closed by buying the securities back, at a hopefully lower price than they were sold for, and returning the shares to the lender. The terms ‘long’ and ‘short’ can be misleading as it has nothing to do with the holding period of the investment. 

The Securities and Exchange Commission

The act of selecting stocks believed to be good investments to include in a portfolio. 

An indicator when crossed/reached that indicates a buy (bullish) or sell (bearish) signal.

Secured Overnight Index Average

A classification system that is used to group the shares of companies or businesses that have related products, services or operating characteristics. Each sector will have a different risk profile, and therefore financial professionals often allocate their investment pool in different sector weightings in order to diversify risk. 

Stand-by Letter of Credit

Sweden

Said of an unsecured claim for repayment that ranks behind senior subordinated and ahead of junior subordinated debt. It indicates a note with a lower priority than other securities when dividends are paid or assets are distributed in liquidation or bankruptcy. 

Refers to a level believed to predict trend interruption which might prompt an increase in buying activity. 

A momentum indicator comparing a particular closing price of a security to a range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result. It is used to generate overbought and oversold trading signals, utilizing a 0–100 bounded range of values. 

An Islamic financial certificate, similar to a bond in Western finance, that complies with Islamic religious law commonly known as Sharia.

A measure of historical volatility calculated by comparing the average return with the average variance from that return. 

Ranks lower in priority than senior debt when dividends are paid or assets are distributed in liquidation or bankruptcy but ranks higher than junior subordinated debt. 

As defined by SFDR, sustainability factors means environmental, social and employee matters, respect for human rights along with anticorruption and antibribery matters. 

Secured Overnight Financing Rate

Bail-in eligible senior non-preferred debt that ranks between senior preferred bonds and existing Tier 2 subordinated debt. Issued by European financial institutions (e.g. BNP Paribas SA). 

A bond for which the issuer has set aside assets or collateral to ensure timely interest and principal payments. Senior secured takes priority over other secured debt of the issuer. 

Non bail-in eligible senior preferred debt that ranks between senior preferred bonds and existing Tier 2 subordinated debt. Issued by European financial institutions (e.g., BNP Paribas SA). 

The difference between the ask and bid prices. A credit spread refers instead to the difference between the yield of a bond and that of another taken as reference. Spreads are determined on the basis of market trading activities. Yields rise and fall depending on the degree of confidence of investors and lenders.  

Financial assets of any kind traded in financial markets. A distinction is made among debt securities, such as bonds; equity securities, such as ordinary shares; and derivative securities, such as futures.  

The Summary Risk Indicator (SRI) is defined by the PRIIPs regulation and is designed to show the relative risk of a product, using a combination of market and credit risk measures. For a Fund, the SRI is calculated using its unit price and the credit rating of the issuer. For funds whose closing prices are calculated daily, the values from at least two years are taken into account in the calculation, while values from up to f ive years are considered for funds whose closing prices are not calculated daily. Such calculation results in a ranking on a scale running from 1 to 7, with 1 being the lowest risk and 7 being the highest risk. 

Swiss National Bank, central bank of Switzerland. 

Securities that grant ownership of a portion of a corporation. The larger the number of shares owned, the greater the shareholder’s influence over the company’s life. There are different types of shares, the most important of which are ordinary, preference, savings shares and shares with or without voting rights.  

In the context of the European Commission’s regulation, “sustainable investment means an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices”.  

The six environmental objectives include climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems. The three social objectives include decent work, adequate living standards and well-being for end users as well as inclusive and sustainable communities and societies. Measurement methodologies can vary, but often include the % revenue contribution of the activity, given it abides by the do-no-significant-harm principle. Targeting means having sustainable investment as its main objective. 

At Pictet, we prefer to use the term responsible investing to sustainable investing. However it could be helpful to consider sustainable investing as component, rather than a synonym, of responsible investing. For example, some RI products could have 50% exposure to sustainable investments, while others could have 100% exposure. 

Selling, general, and administrative expenses, which refer to all non-production expenses. 

Refers to being exposed to the downside movement of the underlying. It also applies to an option when it is sold.  

Central Bank of Russia

Consumer Price Index

Centers for Disease Control and Prevention

Chief Investment Officer

An on-balance sheet obligation of the issuing institution. Typically carrying an AAA rating, a covered bond benefits from its legal structure, the issuer’s backing, and quality assets pledged as collateral in the event of default, resulting in a highly rated bond.

Compound Annual Growth Rate

Cash Flow from Operations

Development Bank of Latin America (Corporación Andina de Fomento)

Fee paid for the transfer of shares of one unit/share class to another unit/share class.

Congressional Budget Office

Contingent convertible

Swiss Federal Act on Collective Investment Schemes

The relationship between the return of two investments. Highly correlated investments tend to move up and down together while investments with low correlation do not. For funds, it refers to the fund’s return in relation to the benchmark.

The positive difference between the selling price and the purchase price of a financial instrument.

This indicates the difference between cash inflows and outflows of a company in an accounting period. Alternatively, it is the sum of net profit plus amortisation, depreciation and other provisions.

A set of parallel trend lines drawn from the graph, indicating various levels of support and resistance. These lines can be horizontal, ascending or descending in nature.

Current Ratio

Corporate & Investment Banking

Currency

Cost-to-Income Ratio

Combined Cycle Gas Turbine

Candlestick charts originated in Japan in the 1700s. A Japanese man named Homma discovered that while there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of traders. Just like a bar chart, a daily candlestick shows the market’s open, high, low and close price for the day. The candlestick has a wide part, which is called the “real body”. This real body represents the price range between the open and close of that day’s trading. When the real body is filled in or black, it means the close was lower than the open. If the real body is empty, it means the close was higher than the open. Just above and below the real body are the “shadows” or “wicks”. The shadows show the high and low prices of that day’s trading. If the upper shadow on a down candle is short, it indicates that the open that day was near the high of the day.

Common Equity Tier 1

Trades closed or expired since the last publication.

A mutual fund with a fixed number of shares/units which can be purchased by both institutional and retail investors. Investors can exit closed-end funds only at a pre-established maturity date, unlike open-end funds, whose shares/units can be sold at any given time. Typically, a closed-end fund’s maturity is 10 to 15 years.

The interest paid on a bond to a bondholder until maturity. The coupon can be paid at different intervals, depending on the bond (annually, semi-annually, or quarterly). Not all bonds have coupons, such as zero-coupon bonds. These bonds do not pay interest but are sold at a discount to their face value, which is paid back at maturity.

A contrarian investor assumes an investment style that goes against the prevailing market trends. They believe that market sentiment has a crowd mentality and an overemphatic influence on pricing. Therefore, they try to invest in securities that are perceived to be performing poorly, in the belief that their price is cheap compared to their actual value, and that they can sell them for a higher price when sentiment changes.

Switzerland

Consumer Price Index adjusted for tax changes and excluding energy.

Index, initially calculated by the Commodity Research Bureau (CRB), composed of industrial raw commodities. This index provides an indication of the broad trend of the raw commodity space.

A technical chart pattern that resembles a cup and handle where the cup is in the shape of a “u” and the handle has a slight downward drift. It is considered a bullish signal extending an uptrend, and it is used to spot opportunities to go long.

2 month deposit rate spread over the US dollar as an indicator of the carry of a given EM currency in relation to a universe of major EM currencies. Segmented into three subranges of equal size.

Commercial Vehicles

Credit Risk Weighted Assets.

A bond issued by a corporation. Corporate bonds generally offer higher yields than government bonds because there is a perceived higher risk of a company defaulting on the interest payments. The lower the company’s credit quality, the higher the interest paid as the potential risk is higher.

Raw materials of any kind that are traded in any organised exchange. Each commodity retains a singular purpose and their broad use is why they are used often as the assets that underlie derivatives. Agricultural commodities - such as tea, coffee, soy, rice and wheat are called soft commodities while those that are extracted from the earth such as gold, silver, platinum, aluminium and oil - are called hard commodities.

A bond that entitles the investor to recover the principal investment either as cash or shares of the issuing company at maturity.

Contracts for Difference

Capital Expenditure

Comprehensive Economic and Trade Agreement. An agreement between the EU and Canada.

Cboe Global Markets, which is an American company that owns the Chicago Board Options Exchange.

Central Processing Unit

A contract under which the buyer of the call has the right, but no obligation, to purchase the underlying at the strike price. The buyer must pay a premium for this right. The seller of a call has an obligation to sell the underlying at the strike price if the buyer wants to exercise their right. The seller receives a premium in exchange for the risk borne.

See Elliott Wave theory.

Capital Expenditures

Cost of Risk

Change of control

Coupon

A form of fiat money used as a medium of exchange. Often currencies are specific to a country and are issued by that nation’s government. Exchange rates, the price for which one nation’s currency can be exchanged for another’s, are used to match the respective values of these currencies. Since currency exchange rates are always changing, and often stocks of foreign companies are bought in their local currency, investors’ returns can be affected by fluctuations in currency exchange rates.

Consumer Price Index with a fixed interest rate. The Riksbank uses the CPIF to set its inflation target.

Common Equity Tier 1 is a component of Tier 1 capital and comprises primarily of common stock held by a bank or other financial institution.

The China Foreign Exchange Trade System index, used by the PBoC to measure the value of the renminbi (RMB) against a basket of currencies (selected based on international trade weights).

A currency option is a contract that grants the buyer the right, but no obligation, to buy or sell a specified currency at a specific exchange rate on (European style) or before (American style) a specific date. The buyer pays a premium for this right.

In technical analysis, a pattern in a chart that is believed to repeat in time and can be used to predict future price movements. Chart patterns are used as signals of either a reversal or continuation of a trend.

Capital Market Day

A forecast based on the combined estimates of the analysts covering a public company.

This generic product family is composed of multiple exotic options, enabling the underlying to be bought and sold at a more favourable price than the forward rate at inception.

Commodity Futures Trading Commission of the United States of America

Proved reserves