C
Call option
Buying a call option gives you, as owner, the right to buy a fixed quantity of the underlying product at a specified price, called the strike price, within a specified time period. If the price of the stock does go up, the call option will increase in value. You might choose to sell your option at a profit or exercise the option and buy the shares at the strike price. But if the stock price at expiration is less than the strike price the option will be worthless. The amount you lose, in that case, is the premium you paid to buy the option plus any brokerage fees. In contrast, you can sell a call option, which is known as writing a call. That gives the buyer the right to buy the underlying investment from you at the strike price before the option expires. If you write a call, you are obliged to sell if the option is exercised and you are assigned to meet the call.
Capital gain
When you sell an asset at a higher price than you paid for it, the difference is your capital gain. For example, if you buy 100 shares of stock for Rs.20 a share and sell them for Rs.30 a share, you realize a capital gain of Rs.10 a share, or Rs.1,000 in total. If you own the stock for more than a year before selling it, you have a long-term capital gain. If you hold the stock for less than a year, you have a short-term capital gain.
Capital gains tax (CGT)
A capital gains tax is due on profits you realize on the sale of a capital asset, such as stock, bonds, or real estate. There are two types of capital gains – Short Term and Long term where the reference period is of 365 days. Long-term gains on financial assets are generally taxed at a lower rate than short-term gains, depending on the asset class under consideration.
Capital markets
Capital markets are the physical and electronic markets where equity and debt securities, commodities, and other investments are sold to investors. When you place an order through a brokerage firm, trade online, you're participating in a capital market. Corporations use capital markets to raise money through public offerings of stocks and bonds or private placements of securities to institutional investors, such as mutual fund companies.
Capital preservation
Capital preservation is a strategy for protecting the money you have available to invest by choosing insured accounts or fixed-income investments that promise return of principal. The downside of capital preservation over the long term is that by avoiding the potential risks of equity investing, you exposure yourself to inflation risk. That’s the case because your investments are unlikely to increase enough in value to offset the gradual loss of purchasing power that’s a result of even moderate inflation.
Cash market
In a cash market buyers pay the market price for securities, currency, or commodities "on the spot," just as you would pay cash for groceries or other consumer products. Cash markets are also called spot markets. A cash market is the opposite of a futures market, where commodities or financial products are scheduled for delivery and payment at a set price at a specified time in the future.In a cash market, ownership is transferred promptly, and payment is made upon delivery.
Churning
Churning is when intentionally, buying and selling in securities is done at an excessive rate, or at a rate that’s inconsistent with your investment goals or the amount of money you have invested. One indication of potential churning is that you're paying more in commissions than you are earning on your investments.
Claim
You file an insurance claim when you send your insurance company paperwork asking the company to pay for any of the expenses your policy covers.
Closed-end fund
Closed-end mutual funds are actively managed funds that raise capital only once, by issuing a fixed number of shares. Like other mutual funds, however, fund managers buy and sell individual investments in keeping with their investment objectives.The shares are traded on an exchange and their prices fluctuate throughout the trading day, based on supply, demand, and the changing values of their underlying holdings.
Coinsurance
When your healthcare insurance has a coinsurance provision, you and your insurer divide the responsibility for paying doctor and hospital bills by splitting the costs on a percentage basis. With an 80/20 coinsurance split, for example, your insurer would pay 80% of medical bill, and you would pay 20%. Some policies set a cap on your out-of-pocket expenses, so that the insurance company covers 95% to 100% of the cost once you have paid the specified amount.
Collateral
Assets with monetary value, such as stock, bonds, or real estate, which are used to guarantee a loan, are considered collateral. If the borrower defaults and fails to fulfill the terms of the loan agreement, the collateral, or some portion of it, may become the property of the lender. For example, if you borrow money to buy a car, the car is the collateral. If you default, the lender can repossess the car and sell it to recover the amount you borrowed. Loans guaranteed by collateral are also known as secured loans.
Collectible
When you invest in objects ranging from fine art, antique furniture, stamps, and coins to cars, you are said to be investing in collectibles. Their common drawback, as an investment, is their lack of liquidity. If you need to sell your collectibles, you may not be able to find a buyer who is willing to pay what you believe your investment is worth. In fact, you may not be able to find a buyer at all. On the other hand, collectibles can provide a sizable return on your investment if you have the right thing for sale at the right time.
Compound interest
When the interest you earn on an investment is added to form the new base on which future interest accumulates, it is compound interest. For example, say you earn 5% compound interest on $100 every year for five years. You'll have 105 after one year, 110.25 after two years, 115.76 after three years, and 127.63 after five years. Without compounding, you earn simple interest, and your investment doesn't grow as quickly.
Compounding
Compounding occurs when your investment earnings or savings account interest is added to your principal, forming a larger base on which future earnings may accumulate. As your investment base gets larger, it has the potential to grow faster. And the longer your money is invested, the more you stand to gain from compounding.
Consumer price index (CPI)
"CPI is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. Inflation is measured using CPI. The percentage change in this index over a period of time gives the amount of inflation over that specific period, i.e. the increase in prices of a representative basket of goods consumed.
CPI is a fixed quantity price index and considered by some a cost of living index. Under CPI, an index is scaled so that it is equal to 100 at a chosen point in time, so that all other values of the index are a percentage relative to this one."
Contingent deferred sales load
A contingent deferred sales load (CDSL), also called a back-end load, is a sales charge some mutual funds impose when you sell shares in the fund within a certain period of time after you buy them. The charge is a percentage of the amount of the investment you're liquidating. It typically begins at a higher level and drops as time progresses until it disappears entirely. Information about the charge and how long it's levied is provided in the fund's prospectus.
Convertible bond
Convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature.
Corporate bond
Corporate bonds are debt securities issued by publicly held corporations to raise money for expansion or other business needs. Corporate bonds typically pay a higher rate of interest than government or municipal government bonds but the interest you earn is generally fully taxable. You can buy bonds on the secondary market at their current market price, which may be higher or lower than par. However, most individual investors buy corporate bonds though a mutual fund that specializes in those issues.
Correction
A correction is a drop - usually a sudden and substantial one of say 5% or more - in the price of an individual stock, bond, commodity, index, or the market as a whole. Market analysts anticipate market corrections when security prices are high in relation to company earnings and other indicators of economic health. When a market correction is greater than 10% and the prices do not begin to recover relatively promptly, some analysts point to the correction as the beginning of a bear market.
Correlation
In investment terms, correlation is the extent to which the values of different types of investments move in tandem with one another in response to changing economic and market conditions. Correlation is measured on a scale of -1 to +1. Investments with a correlation of +.5 or more tend to rise and fall in value at the same time. Investments with a negative correlation of -.5 to -1 are more likely to gain or lose value in opposing cycles.
Counterparty
In any financial contract, the persons or institutions entering the contract on the opposite sides of the transaction are called the counterparties. Counterparty risk is the risk that the person or institution with whom you have entered a financial contract - who is a counterparty to the contract - will default on the obligation and fail to fulfill that side of the contractual agreement.
Coupon rate
The coupon rate is the interest rate that the issuer of a bond or other debt security promises to pay during the term of a loan. For example, a bond that is paying 6% annual interest has a coupon rate of 6%.The term is derived from the practice, now discontinued, of issuing bonds with detachable coupons. To collect a scheduled interest payment, you presented a coupon to the issuer or the issuer's agent. Today, coupon bonds are no longer issued. Most bonds are registered, and interest is paid by check or, increasingly, by electronic transfer.
Credit rating
An individual's credit rating is an independent statistical evaluation of the ability to repay debt based on borrowing & repayment history. Having good credit rating helps in receiving favorable terms such as relatively low finance charges. A corporation's credit rating is an assessment of whether it will be able to meet its obligations to bond holders and other investors. Credit rating systems for corporations generally range from AAA or Aaa at the high end to D (for default) at the low end. The credit rating is done by independent houses.
Current yield
Current yield is a measure of your rate of return on an investment, expressed as a percentage. With a bond, current yield is calculated by dividing the interest you collect by the current market price. For example, if a bond paying 5% interest, or Rs.50, is selling for Rs.900, the current yield is 5.6%. If the market price is Rs.1,200, the current yield is 4.2%. And if bond is selling exactly at par, or $1,000, the current yield is 5%, the same as the coupon rate. If you own a stock, its current yield is the annual dividend divided by its market price.
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