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Glossary

I

I Bonds 
A type of inflation-adjusted security issued by the US Treasury. Series I savings bonds pay interest according to an earning rate that is partly a fixed rate of return and partly adjusted for inflation.
IA
Impact Assessment
IAIS
International Association of Insurance Supervisors
IASB
International Accounting Standards board
IASCF
International Accounting Standards Committee Foundation
IASs
International Accounting Standards
ICAAP
Internal Capital Adequacy Assessment Process
Identifiable intangible
An intangible that can be acquired singly and is typically linked to specific rights or privileges having finite benefit periods (e.g., a patent or trademark).
If-converted method
A method for accounting for the effect of convertible securities on earnings per share (EPS) that specifies what EPS would have been if the convertible securities had been converted at the beginning of the period, taking account of the effects of conversion on net income and the weighted average number of shares outstanding.
Illiquidity premium
Compensation for the risk of loss relative to an investment’s fair value if an investment needs to be converted to cash quickly.
Immunization
An asset/liability management approach that structures investments in bonds to match (offset) liabilities’ weighted average duration; a type of dedication strategy.
Immunization target rate of return
The assured rate of return of an immunized portfolio, equal to the total return of the portfolio assuming no change in the term structure.
Immunized time horizon 
The time horizon over which a portfolio’s value is immunized; equal to the portfolio duration.
Impairment
Diminishment in value as a result of carrying (book) value exceeding fair value and/or recoverable value.
Impairment of capital rule
A legal restriction that dividends cannot exceed retained earnings.
Implementation shortfall 
The difference between the money return on a notional or paper portfolio and the actual portfolio return.
Implementation shortfall strategy
A strategy that attempts to minimize trading costs as measured by the implementation shortfall method.  Synonyms: arrival price strategy
IEG
Industry Expert Group
IESBA
International Ethics Standards Board for Accountants
IFRS
International Financial Reporting Standards
Ijarah Fund
In this leasing fund the subscription amounts are used to purchase assets like real estate, motor vehicles, or other equipment for the purpose of leasing them out to their ultimate users. The ownership of these assets remains with the Fund and the rentals are charged from the users. These rentals are the source of income for the fund which is distributed pro rata to the subscribers. Each subscriber is given a certificate to evidence his subscription and to ensure his entitlement to the pro rated share in the income. These certificates may be preferably called "sukuk" -- a term recognized in the traditional Islamic jurisprudence. Since these sukuk represent the pro rated ownership of their holders in the tangible assets of the fund, and not the liquid amounts or debts, they are fully negotiable and can be sold and purchased in the secondary market.
Illiquid
A market is illiquid when there is insufficient cash flowing to meet financial debts or obligations. In the context of bonds or other investments, illiquid refers to a bond or other investment that cannot be converted into cash quickly or near prevailing market prices. Liquid investments or assets are defined as those that can be converted into cash quickly and without great impact on the price of the asset.
IMF
International Monetary Fund
Implicit transaction costs
The indirect costs of trading, including bid–ask spreads, the market price impacts of large trades, missed trade opportunity costs, and delay costs.
Implied repo rate
The rate of return from a cash-and-carry transaction implied by the futures price relative to the spot price.
Implied volatility
The volatility that option traders use to price an option, implied by the price of the option and a particular option-pricing model.
Implied yield
A measure of the yield on the underlying bond of a futures contract implied by pricing it as though the underlying will be delivered at the futures expiration.
Imputation
In reference to corporate taxes, a system that imputes, or attributes, taxes at only one level of taxation. For countries using an imputation tax system, taxes on dividends are effectively levied only at the shareholder rate. Taxes are paid at the corporate level, but they are attributed to the shareholder. Shareholders deduct from their tax bill their portion of taxes paid by the company.
Income
Increases in economic benefits in the form of inflows or enhancements of assets, or decreases of liabilities that result in an increase in equity (other than increases resulting from contributions by owners).
Income statement
A financial statement that provides information about a company’s profitability over a stated period of time.
Synonyms: statement of operations profit and loss statement
Income tax paid
The actual amount paid for income taxes in the period; not a provision, but the actual cash outflow.
Income tax payable
The income tax owed by the company on the basis of taxable income.
Income tax recoverable
The income tax expected to be recovered, from the taxing authority, on the basis of taxable income. It is a recovery of previously remitted taxes or future taxes owed by the company.
Incremental cash flow
The cash flow that is realized because of a decision; the changes or increments to cash flows resulting from a decision or action.
Incremental VAR
A measure of the incremental effect of an asset on the VAR of a portfolio by measuring the difference between the portfolio’s VAR while including a specified asset and the portfolio’s VAR with that asset eliminated.
Independent
With reference to events, the property that the occurrence of one event does not affect the probability of another event occurring.
Independent and identically distributed
With respect to random variables, the property of random variables that are independent of each other but follow the identical probability distribution. Synonyms: IID
Independent projects

Independent projects are projects whose cash flows are independent of each other.
Independent variable
A variable used to explain the dependent variable in a regression; a right-hand-side variable in a regression equation.
Index amortizing swap
An interest rate swap in which the notional principal is indexed to the level of interest rates and declines with the level of interest rates according to a predefined schedule. This type of swap is frequently used to hedge securities that are prepaid as interest rates decline, such as mortgage-backed securities.
Index option
An option in which the underlying is a stock index.
Indexing
An investment strategy in which an investor constructs a portfolio to mirror the performance of a specified index.
Indirect commodity investment
Commodity investment that involves the acquisition of indirect claims on commodities, such as equity in companies specializing in commodity production.
Indenture
Issuer legal document which details the mechanics of the bond issuer, security features, covenants, events of default and other key features of the issue’s legal structure. Bond resolutions and trust agreements are functionally similarly types of documents, and the use of each depends on the individual issue and issuer.
Index ratio
For any particular date and any particular inflation-indexed security, the Reference CPI-U applicable to such date divided by the Reference CPI-U applicable to the original issue date (or dated date, when the dated date is different from the original issue date).
Indexed rate bonds
Tax-exempt bonds where the rate is periodically reset on a formula that incorporates an index, such as The Securities Industry and Financial Markets Association Municipal Swap Index.
Indirect format
With reference to cash flow statements, a format for the presentation of the statement which, in the operating cash flow section, begins with net income then shows additions and subtractions to arrive at operating cash flow. Synonyms: indirect method
Individualist investors
Investors who have a self-assured approach to investing and investment decision making.
Industry structure
An industry’s underlying economic and technical characteristics.
Inferential statistics 
Methods for making estimates or forecasts about a larger group from a smaller group actually observed.
Inflation
An increase in the general level of prices; a decrease in the purchasing power of a unit of currency.
Inflation hedge
An asset whose returns are sufficient on average to preserve purchasing power during periods of inflation.
Inflation premium
An extra return that compensates investors for expected inflation.
Information coefficient
The correlation between forecast and actual returns.
Information ratio
Mean active return divided by active risk. Synonyms: IR
Information-motivated traders
Traders that seek to trade on information that has limited value if not quickly acted upon.
Infrastructure funds
Funds that make private investment in public infrastructure projects in return for rights to specified revenue streams over a contracted period.
Initial margin requirement
The margin requirement on the first day of a transaction as well as on any day in which additional margin funds must be deposited.
Initial margin requirement
The margin requirement on the first day of a transaction as well as on any day in which additional margin funds must be deposited.
Initial public offering
The initial issuance of common stock registered for public trading by a formerly private corporation. Synonyms: IPO
Input uncertainty
Uncertainty concerning whether the inputs are correct.
In-sample forecast errors
The residuals from a fitted time-series model within the sample period used to fit the model.
Inside ask
The lowest available ask price. Synonyms: market ask
Inside bid
The highest available bid price. Synonyms: market bid
Inside bid–ask spread
Market ask price minus market bid price. Synonyms: market bid–ask spread inside spread market spread
Inside quote
Combination of the highest available bid price with the lowest available ask price. Synonyms: market quote
Industrial revenue bond
A security issued by a state, political subdivision or certain agencies or authorities, for certain specific purposes, but backed by the credit of a private enterprise.
Inflation
The rate of increases in the price of goods and services usually measured on an annualized basis.
Inflation-adjusted principal
For an inflation-indexed security, the principal amount of the security, derived by multiplying the par amount by the applicable index ratio.
Inflation-indexed securities
1. Securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index as a guide, the value of the securities’ principal is adjusted to reflect the effects of inflation. Also known as Treasury Inflation Protected Securities (TIPS) or Treasury Inflation-Indexed Securities (TIIS). 2. Notes periodically issued by the GSEs whose return is adjusted with changes in the PPI or CPI.
Initial delivery
The delivery of a new issue by the issuer to the original purchaser, upon payment of the purchase price. Also called “original delivery."
Initial offering price
The price (based upon yield to maturity) stated as a percentage of par at which the account determines to market the issue during a set period of time, called the initial offering period. Members of the account may not offer any part of the issue at any other price during that period.
Instability in the minimum-variance frontier
The characteristic of minimum-variance frontiers in which they are sensitive to small changes in inputs.
Installment
Said of a sale in which proceeds are to be paid in installments over an extended period of time.
Installment method
With respect to revenue recognition, a method that specifies that the portion of the total profit of the sale that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash.
Institutional investors 
Corporations or other legal entities that ultimately serve as financial intermediaries between individuals and investment markets.
Intangible assets
Assets lacking physical substance, such as patents and trademarks.
Interest coverage
A solvency ratio calculated as EBIT divided by interest payments.
Interest rate
A rate of return that reflects the relationship between differently dated cash flows; a discount rate.
Interest rate call
An option in which the holder has the right to make a known interest payment and receive an unknown interest payment.
Interest rate cap
A series of call options on an interest rate, with each option expiring at the date on which the floating loan rate will be reset and with each option having the same exercise rate. A cap in general can have an underlying other than an interest rate.
Interest rate collar
A combination of a long cap and a short floor, or a short cap and a long floor. A collar in general can have an underlying other than an interest rate.
Institutional investors
Large organizational entities with significant amounts of money to invest such as insurance companies, pension funds, investment companies and unit trusts. Institutional investors account for a majority of overall volume in the bond markets.
Insurance
Municipal bond insurance companies guarantee timely payment of principal and/or interest on municipal and certain other types of bonds in the event of a default. The major insurers are identified by these symbols: ACA = American Capital Access; AMBAC = AMBAC Indemnity Corp.; CapMAC = Capital Markets Assurance Corp.; CL= Connie Lee; FGIC = Financial Guaranty Insurance Co.; FSA = Financial Security Assurance Inc.; MBIA = MBIA Insurance Corp.
Interest
Compensation paid or to be paid to borrow money, generally expressed as an annual percentage rate.
Interest rate
Interest rates change in response to a number of things including revised expectations about inflation, and such changes in the prevailing level of interest rates affects the value of all outstanding bonds.
Interest rate cap
An agreement where a party pays a premium up front or in installments to the counterparty. If the floating interest rate exceeds a stated fixed rate during the time of the cap agreement, the counterparty will pay the difference, based on the notional amount. The cap rate is also called the strike rate. An interest rate cap can protect the purchaser against rising interest rates. 
Interest rate floor
A series of put options on an interest rate, with each option expiring at the date on which the floating loan rate will be reset and with each option having the same exercise rate. A floor in general can have an underlying other than the interest rate.
Interest rate forward
See forward rate agreement.
Interest rate management effect
With respect to fixed-income attribution analysis, a return component reflecting how well a manager predicts interest rate changes.
Interest rate option
An option in which the underlying is an interest rate.
Interest rate parity
A formula that expresses the equivalence or parity of spot and forward rates, after adjusting for differences in the interest rates.
Interest rate put
An option in which the holder has the right to make an unknown interest payment and receive a known interest payment.
Interest rate risk 
Risk related to changes in the level of interest rates.
Interest rate swap
A swap in which the underlying is an interest rate. Can be viewed as a currency swap in which both currencies are the same and can be created as a combination of currency swaps.
Interest spread 
With respect to banks, the average yield on earning assets minus the average percent cost of interest-bearing liabilities.
Intergenerational data mining
A form of data mining that applies information developed by previous researchers using a dataset to guide current research using the same or a related dataset.
Interest-rate swaps
Interest-rate swaps are a derivative financial instrument which exchange or swap fixed rate interest rate payments for floating rate interest rate payments. Usually these swaps are an agreement between to parties to exchange one stream of interest payments for another over a set period of time. Plain, “vanilla” swaps are the most commonly used type of interest rate swap in the market. Investors use interest-rate swaps for debt portfolio management; corporate finance; to lock in interest rates; and to manage and hedge risk. It is important for an individual investor to understand that swaps are between institutions and not between individual investors; however, the result of these swaps may affect his/her portfolio or the price he/she may pay for a particular bond. Interest-rate swaps have become critical to the bond markets. Initially interest-rate swaps helped corporations pay fixed rates and receive floating rate payments (or vice versa depending on their business needs). But then, swaps were seen to reflect market expectations and sensitivity to interest rates and credit concerns via what an interest-rate swap reflects which is a desire to exchange loans-one that was borrowed at a fixed rate and the other at a floating rate tied to, most commonly, (London Interbank Offered Rate) LIBOR. The graph plotting swap rates across available maturities became known as the swap curve. Swap rates suggest what the market expects the direction of LIBOR rates to be; and reflect the market's perception of credit quality. The swap rate curve is an important interest-rate benchmark for the bond markets and is commonly used in Europe as the pricing reference for all European government bonds.
Internal rate of return
The discount rate that makes net present value equal 0; the discount rate that makes the present value of an investment’s costs (outflows) equal to the present value of the investment’s benefits (inflows). Synonyms: IRR
Interquartile range
The difference between the third and first quartiles of a dataset.
Interval
With reference to grouped data, a set of values within which an observation falls.
Interval scale
A measurement scale that not only ranks data but also gives assurance that the differences between scale values are equal.
In-the-money
Options that, if exercised, would result in the value received being worth more than the payment required to exercise.
Intrinsic value
The value obtained if an option is exercised based on current conditions. Synonyms: exercise value
Inventory
The unsold units of product on hand.
Inventory blanket lien
The use of inventory as collateral for a loan. Though the lender has claim to some or all of the company’s inventory, the company may still sell or use the inventory in the ordinary course of business.
Inventory cycle 
A cycle measured in terms of fluctuations in inventories, typically lasting 2–4 years.
Inventory turnover
An activity ratio calculated as cost of goods sold divided by average inventory.
Inverse floater
A floating-rate note or bond in which the coupon is adjusted to move opposite to a benchmark interest rate.
Investing activities
Activities that are associated with the acquisition and disposal of property, plant, and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other companies.
Investment constraints
Internal or external limitations on investments.
Investment objectives
Desired investment outcomes; includes risk objectives and return objectives.
Investment opportunity schedule
A graphical depiction of a company’s investment opportunities ordered from highest to lowest expected return. A company’s optimal capital budget is found where the investment opportunity schedule intersects with the company’s marginal cost of capital.
Investment policy statement IPS
A written document that sets out a client’s return objectives and risk tolerance over a relevant time horizon, along with applicable constraints such as liquidity needs, tax considerations, regulatory requirements, and unique circumstances.
Investment skill
The ability to outperform an appropriate benchmark consistently over time.
Investment strategy
An approach to investment analysis and security selection.
Investment style
A natural grouping of investment disciplines that has some predictive power in explaining the future dispersion in returns across portfolios.
Investment style indexes 
Indices that represent specific portions of an asset category. For example, subgroups within the U.S. common stock asset category, such as large-capitalization growth stocks.
Inverse floater bonds
A primary derivative tax-exempt bond. The interest payable is based on a formula that has a ceiling rate less a specified floating rate index or bond.
Inverted, or negative, yield curve
The interest rate structure which exists when short-term interest rates exceed long-term interest rates. See ascending, or positive, yield curve.
Investment-grade bond (or high grade bond)
Bonds rated Baa (by Moody’s) or BBB (by S&P and Fitch) or above, whose higher credit ratings indicate a lower risk of default. These bonds tend to issue at lower yields than less creditworthy bonds.
Investor’s benchmark
The benchmark an investor uses to evaluate performance of a given portfolio or asset class.
IRR rule
An investment decision rule that accepts projects or investments for which the IRR is greater than the opportunity cost of capital.
IO (interest-only) security
A security or tranche that pays only interest and not principal. IO securities are priced at a deep discount to the "notional" amount of principal used to calculate the amount of interest due.
IOSCO
International Organization of Securities Commissions
IRB
Internal Ratings Based Approach
ISIN
ISIN is the numbering code system set up by the International Organization for Standardization and used by internationally traded securities to identify and number each issue of securities. An ISIN code has twelve characters structured as follows: the first two characters of the ISIN are the country of origin for the security; the security identification number (which is called the National Securities Identifying Number NSIN) is the next 9 characters long; and a final character, called a check digit, is added to prevent errors and provide an additional verification for authenticity. The organization that allocates ISINs in any given country is called the National Numbering Agency (NNA). The NNA of the appropriate country administers the 9 digit security identification number. In the U.S., that NNA is called the Committee on Uniform Security Identification Procedures (CUSIP) Service Bureau, established under the auspices of the American Bankers Association to develop a uniform method of identifying securities.
Issue
The issue description includes the name of the issuer of the bonds. If a municipal bond, the issuer is typically a state, political subdivision, agency or authority which borrows money through the sale of bonds or notes. Corporate bonds are issued by private corporations.
Issue date
See dated date.
Issuer
The entity obligated to pay principal and interest on a bond it issues.
Issuer
 A company that develops, registers and sells securities for the purpose of financing its operations.
Institutional Investor
  Large organizational entities with significant amounts of money to invest such as insurance companies, pension funds, investment companies and unit trusts. Institutional investors account for a majority of overall volume in the markets.
Investment Committee
means the management-level committee that reports to the Committee with regard to investments and divestments made by the Company and recommends investments, divestments and Investment Guidelines to the Committee.
Investment Guidelines
means the investment guidelines approved and amended from time to time by the Executive Committee in accordance with these terms of reference that set out the rules and policies for investments and divestments to be made by the Company.
Investor Relations
Individuals within a company who provide investors and the financial community with material information on the company, including financial disclosures and proxy voting procedures.
IWCFC
Interim Working Committee on Financial Conglomerates
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