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The Layman's Financial Crisis Glossary

The Layman's Financial Crisis Glossary

BBC News

The current financial crisis has thrown terminology from the business pages onto the front page of newspapers, with jargon now abounding everywhere from the water cooler to the back of a taxi.

Here is a guide to many of the business terms currently cropping up regularly, as well as some of the more exotic words coined to describe some of the social effects of the credit crunch.

Administration
Bear market
Bond
Bull market
Chapter 11
Collateralised debt obligation
Commercial paper
Commodities
Credit crunch
Credit default swap
Derivatives Equity
Fundamentals
Futures
Hedge fund
Hedging
Investment bankLimited liabilityLeveraging
Libor
Liquidity

Loans to deposit ratio
Mark-to-market
Mortgage-backed securities
Nationalisation
Negative equity
Profit warning
Rating
Securities lending
Securitisation
Security
Short selling

Spiv
Stagflation
Sub-prime mortgages
Swap
Unwind
Write-down

Administration

A rescue mechanism for UK companies in severe trouble. It allows them to continue as a going concern, under supervision, effectively to try to trade out of difficulty.

A firm in administration cannot be wound up without permission from a court.

Bear market

In a bear market, prices are falling and investors, anticipating losses, tend to sell. This can create a self-sustaining downward spiral.

Bond

A debt security – or more simply an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. Banks and investors buy and trade bonds.

Bull market

A bull market is one in which prices are generally rising and investor confidence is high.

Chapter 11

The term for bankruptcy protection in the US. It postpones a company’s obligations to its creditors, giving it time to reorganise its debts or sell parts of the business, for example.


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