GlossaryofImportantBusiness,Economic,andFinancialHistoryTerms

ByRobertE.Wright,DirectoroftheThomasWillingInstitutefortheStudyofFinancial
Markets,Institutions,andRegulationsandtheNefFamilyChairofPoliticalEconomy,
AugustanaCollegeSD

This work is not copyrighted. Instead, it is Creative Commons by-nc-sa. Creative

Commons is a non-profit organization that promotes open access to and the
sharing of creative work.

acceptance(n.):anyvarietyofabillofexchange,inlandbill,draft,orotherfinancialinstrumentthathas
beenacceptedbythepayerasalegitimateclaimuponitsassetsbutisnotyetpaidbecausethe
instrumenthasnotyetmaturedorhasnotyetbeenpresentedforpayment.

accept(v.):toagreetopayabillofexchange,inlandbill,draft,orotherfinancialinstrumentaccording
toitsusance.Seealsosightdraft,timedraft

accountbooks(n.):books(orpapersorcomputerfiles)whereaccountsaremaintained.Seealsoday
books,doubleentry,journals,ledgers,singleentry

accounts(n.):arecordofdebitsand/orcreditsmaintainedbyanentityinitsaccountbooks.

actuarial(adj.):theconditionorstateofbeingcreatedbyanactuary.

actuary(n.):anentitythatcomputesinsurancerisksandpremiumsinascientificallyandstatistically
validway.

acquisition(n.):thepurchase,takeover,andbalancesheetconsolidationofonebusinessentityby
another,typicallylargersurvivingentity.

adverseselection(n.):atypeofasymmetricinformationwherebythehighestrisks(2)arethemost
eagertoborroworinsure.Seealsolemonsproblem

agencycosts(n.):thecostsincurredbyaprincipalwhenitsagentdoesnotactonitsbehalfbutratherin
theagentsowninterest.Seealsoprincipalagentproblem

agent(n.):anentityenjoinedtoactonbehalfofaprincipalinsomebusinessactivity.Seealsoagency
costs,insuranceagent

aggregateoutput(Y)(n.):1)thesumtotalofallfinalgoodsproducedinaneconomyinsomeperiod,
typicallyaquarterorayear;2)consumption(C)plusinvestment(I)plusgovernmentspending(G)plus
netexports(NX),asintheequationY=C+I+G+NX.Seealsogrossdomesticproduct

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amortize(v.):torepayaloanbymakinginterestandpartialprincipalpaymentseachrepaymentperiod,
typicallyamonth.

amortization(n.):theprocessofamortizingaloan.

annual(n.):year

annually(adj.):onceayear.Seealsosemiannually,quarterly

annuitant(n.):theownerorrecipientofanannuity.

annuity(n.):atypeofinsurancepolicythatpaystheannuitantasumofmoney(previouslyannuallybut
oftentodaymonthly)overaprespecifiedperiodorduringtheannuitantslifetimeorthatofhisorher
spouse.

askprice(n.):thepriceatwhichadealerwillsellasecurityfromitsinventory.Seealsobidprice

asset(n.):anygoodownedbyanyentityandheldonitsbalancesheet.

assetbubble(n.):theconditionwhenthepriceofanassetorassetclassexceedsitsfundamentalvalue
foranextendedperiod.

assetclass(n.):agroupofsimilarassetslikebonds,equities,orrealestate.

association(n.):1)anyoneofanumberoftypesofbusinessentity;2)atypeoforganization.Seealso
BuildingandLoanassociations,SavingsandLoanassociations

asymmetricinformation(n.):whenonepartytoacontract(buyerorseller)knowsmorethanthe
counterparty,suchasadverseselection,moralhazard,andtheprincipalagentproblem.

bad(n.):1)anythingthatnoentityvaluesatgreaterthanzero;2)anythingthatentitiesarewillingto
paytoreduceoreliminate.Seealsogood

BagehotsRule(n.):SeeHamiltonsRule.

balancesheet(n.):atypeoffinancialstatementthatlistsanentitysassets,liabilities,andcapital.So
calledbecauseassetsmustequal(orinotherwordsbeinbalancewith)liabilitiespluscapital(whichcan
benegative).

balancesheetconsolidation(n.):theactofcombiningthebalancesheetsoftwoormoreentities,asina
merger.

bank(n.):oneofavarietyoffinancialintermediariesthatacceptsdepositsandmakesloansand/orthat
engagesinbrokerage,mergerandacquisitionconsulting,orsecuritiesissuance.Seealsobankof
discountanddeposit,bankofissue,banker,BuildingandLoanassociation,centralbank,commercial
bank,creditunion,depositoryinstitution,investmentbank,mutualsavingsbank,privatebanker,Savings
andLoanassociation,savingsbank,thrift,unitbank,universalbank

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bank(v.):toutilizeoneormoreoftheservicesofabank,particularlytoobtainaloanormakeadeposit
atadepositoryinstitution.Seealsounbanked

bankofdiscountanddeposit(n.):anarchaictermforacommercialbank.

bankofissue(n.):anarchaictermforabankthatissueditsownbanknotes.

banker(n.):anindividualengagedinbankingasaprivatebankerorasanemployeeofabank.Seealso
financier

banknotes(n.):aformofpapermoneyissuedbybanks(banksofissue)andgenerallyconvertibleinto
specieattheirrespectivefacevaluesatcurrentcoinratingsatthebankofissue.Seealsosuspensionof
speciepayments

bankholdingcompany(n.):abankthatholdsoneormoreotherbanksasassetsonitsbalancesheet.

bankrun(n.):1)historically,whenholdersofabanksdemandliabilities,specificallyitsbanknotesor
deposits,requestpaymentorconversionenmasse;2)today,whencreditorsrefusetorenewshortterm
loanstoabank,alsoknownasasilentrun.Seealsoliabilityrun

banking(n.):theactivitiesofabankorbankersuchasmakingloans,takingdeposits,and/orengagingin
investmentbanking.

bankrupt(n.):anentityinastateofbankruptcyinsense1or2ofthatword.

bankruptcy(n.):1)generally,theconditionofanentitythathasnegativenetworth,towitthemonetary
valueofitsliabilitiesexceedsthemonetaryvalueofitsassets.2)thestateofanentitythathasfiledfor
protectionfromitscreditorsunderabankruptcylaw.Seealsoinsolvency

bankruptcylaw(n.):astatutethatdetermineshowabankruptentitysassetsshallbeusedtopayits
liabilities.

basemoney(n.):anytypeofmoneythatbankscancountasreserves.Seealsocash,specie

benefits(n.):1)thenonmonetarycompensationofanemployee,suchashealthinsurance;2)more
generally,theutilityorresourcesderivedbyanentityfromsomegoodoractivity.Seealsocosts

bill(n.):ashortdatedbond,especiallyoneissuedbytheU.S.Treasury.Seealsocommercialpaper

billofcredit(n.):atypeofmediumofexchangeorpapermoneyissuedbythecolonialgovernmentsof
mainlandBritishNorthAmericaandoften,thoughnotalways,madeafulllegaltender.

billofexchange(n.):ashortdatedinternationalfinancialinstrumentdrawnonforeignentityina
foreigncurrency.Seealsoinlandbill

bidprice(n.):thepriceatwhichadealerwillbuyasecurityforitsinventory.Seealsoaskprice

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bond(n.):1)generically,anyloan;2)infinance,anegotiable,longdated,interestbearingfinancial
instrument.Seealsobill,couponbond

bondholder(n.):1)theownerofabond;2)anylenderorcreditorwhoseloanissecuredbyabond.

boom(n.):Seeexpansion

borrower(n.):anyentitythatreceivesprincipalfromalenderinexchangeforapromisetorepaythe
principalplusinterestinthefuture.

branch(n.):anofficeofanintermediary,typicallyabank,wherefinancialservicesareprovidedto
customersremotelyfromthefinancialinstitutionsheadquarters.

broker(n.):anyentitythatbrokers(v.).

broker(v.):tomatchthebuyersandsellersoffinancialinstrumentsinexchangeforacommission.See
alsobroker,brokerage,deal,dealer,dealing,stockjobber,stockjobbing

brokerage(n.):anintermediarythatbrokersanddeals.Seealsobrokerdealer

brokerdealer(n.):abrokerage.

budgetdeficit(n.):thedifferencebetweenanentitys(typicallyagovernments)incomeandits
expendituresthatmustbefinancedthroughthesaleofassetsortheissuanceofsecurities,usuallybonds
ormoney.

business(n.):1)anentitywhoseprimarygoalistoearnprofits;2)aforprofitfirm;3)oforpertainingto
theactivitiescarriedoutbybusinesses.

businessactivity(n.):anyactionsundertakenbyanybusinessentitysuchasbuying,selling,brokering,
dealing,lending,borrowing,collateralizing,exchanging,ortrading.

businessentity(n.):anassociation,corporation,partnership,soleproprietor,orotherentitythatbuys
and/orsellsgoodsinanattempttoearnprofits.Seealsobusiness,organization

bust(n.):Seerecession

buyer(n.):theentityinatradethatgivesupmoneyandreceivesanonmonetarygoodinexchange.

BuildingandLoanassociation(n.):atypeofmutualcorporationthatspecializedinfinancingthe
constructionofhomesthatwerereplacedfollowingtheGreatDepressionbytheSavingsandLoan
association.

bullion(n.):goldorsilverintheformofbarsoringots.Seealsospecie

call(n.):ademandmadeforthepaymentofaliabilityowedtoacreditor.Seealsocall(v.),callloan,call
option

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call(v.):todemandrepaymentofasumdueorpayable.Seealsocall(n.)

callable(adj.):lawfullycapableofbeingcalled(v.);2)subjecttoacall(n.).

callloan(n.):aloan,typicallyanovernightonecollateralizedbystock,thatthelendercancall(v.)atany
time.

calloption(n.):atypeofoptionderivativethatgivestheoptionholdertherightbutnottheobligationto
purchasesomepredeterminedassetatapredeterminedstrikeprice.Seealsooption,putoption

capital(n.):1)anentitysnetworth;2)thecontributionsofstockholderstoajointstockcorporation;3)
productivephysicalassetssuchasfactories.Seealsohumancapital

capitalism(n.):aneconomicandpoliticalsystemcharacterizedbyLockeangovernment,amodern
financialsystem,openaccessentrepreneurship,andmodernmanagementbutalsobysomelevelof
corruption,rentseeking,andtheexploitationoftaxpayersandworkers.

capitalrequirements(n.):capital(1)mandatedbysomeregulatororlaw,typicallyexpressedasa
percentageofabanksassets.

cash(n.):1)anyphysicalmediumofexchangethatcirculatesorpasseseasilyhandtohandtomake
exchanges;2)slangforshortdatedcommercialpaper.

cash(v.):toconvertafinancialinstrumentlikeacheckorawholelifeinsurancepolicyintomoney.

cashflow(n.):themovementofcashintoandoutofanentityduringsomefiniteperiodsuchasa
monthoraquarter.

cashvalue(n.):thesumofmoneythatcanbeobtainedfortherelinquishingawholelifeinsurance
policy.

centralbank(n.):abankestablishedbyagovernmenttodevelopandimplementmonetarypolicy
and/oractasalenderoflastresortduringcrisesand/orregulatefinancialfirmsandmarkets.

certificateofdeposit(CD):atypeoftimedepositwherebythedepositoragreestopayapenaltyif
s/he/itwithdrawstheprincipalbeforematurity,aprespecifieddatesomemonthsoryearsaftermaking
thedeposit.Seealsonegotiablecertificateofdeposit

charter(n.):astatuteorspecialactofincorporationauthorizingthecreationofacorporation.Seealso
generalincorporationact

check(n.):atypeofdraftorwrittenrequestforpayment,typicallytoathirdparty,byadepositorina
bank.

circulation(n.):1)intheeconomy,passingfromhandtohandascash;2)anarchaictermthatreferred
tobanknotescirculatingoutsidethebankofissue.

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coins(n.):piecesofmetal,typicallyformedintotheshapeofthinrounddiscs,andembossedwith
informationaboutitsorigin(issuer,dateofissue,denomination,andsoforth).Seealsofullbodiedcoins,
tokencoins

coinrating(n.):themonetaryvalueassignedbygovernmentsorotherentitiestospecificspeciecoins,
typicallyfullbodied.

collateral(n.):anyassetpledgedfortherepaymentofaloan.

collateralize(v.):topledgecollateralfortherepaymentofaloan.

collateralized(adj.):backedbycollateral.

commercialbank(n.):atypeofbankthatprimarilymakesloans,traditionallydiscounts,tobusinesses
andthatissuesmainlycheckingorothertransactiondeposits.

commercialpaper(n.):agenerictermforanytypeofshortdatedfinancialinstrument,suchasabillof
exchange,issuedbyabusinessentity.Seealsobill

commission(n.):apercentageofthesalepriceofanassetpaidtoabrokerforitsbrokeringservices.

commoditymoney(n.):cashormediaofexchangethatderivetheirliquidityfromthemonetaryvalueof
thecommodities,suchascopper,silver,orgold,thatcomprisethem.

commonweal(n.):forthebenefitofthecommunitywritlarge.

communitybank(n.):anyrelativelysmallbankthatprovidesfinancialservicestoarelativelysmall
geographicalarea.SeealsoBuildingandLoanassociation,countrybank,creditunion,SavingsandLoan
association,savingsbank,thrift

consumption(n.):1)theuse,using,orusingupofagood;2)oneofthemajorcomponentsofaggregate
output(Y).

contract(n.):anagreement,writtenororalbuttypicallylegallybinding,betweentwoormoreparties
specifyingprecisetermsforthesaleorexchangeofoneormoregoods.

contract(v.):1)toshrink,asinaneconomiccontraction;2)theactofconsummatingacontract(n.).

conversion(n.):theactofchanging(converting)onetypeofassetintoanother.

convertible(adj.):subjecttobeingchanged(converted)fromonetypeofassettoanother.Seealso
banknotes,convertiblebonds

convertiblebonds(n.):atypeofbondthatcanbechanged(converted)intoanothersecurity,typically
anequity.

convertiblemoney(n.):anytypeofmoneythatcanbechanged(converted)intoanothertypeof
money,suchasbanknotesintospecie.Seealsocreditmoney

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copper(n.):ametallicelement,symbolCuandatomicnumber29,usedtomakesmalldenomination
fullbodiedandtokencoins.

corporation(n.):alegaldevicegrantinganentityspecialrights,including,inthecaseofbusiness
entities,perpetualsuccession,limitedliability,andentityshielding.Seealsocharter

corruption(n.):1)manipulationofthepoliticalsystembyspecialinterestsforspecialinterests;2)the
abuseofpowerbygovernmentofficials,typicallythroughrentseekingactivitiessuchastakingbribes.

costs(n.):theexpenditureofresources,includingcash.Seealsoopportunitycosts,sunkcosts

counterparty(n.):theotherpartytoacontractlikeaderivativeorloan.

countrybank(n.):anarchaictermforacommunitybanklocatedinaruralornonmoneycenter
(sub)urbanarea.

coupon(n.):1)thephysicalpieceofacouponbondthatbondholdersclippedoffandpresentedfor
paymenttothebondsissueroritsredemptionagent;2)aninterestpaymentonacouponbond.

couponbond(n.):1)specifically,atypeofbonduponwhichinterestwaspaidwhenthebondholder
clippedoffasectionofthebondcalledacouponandpresentedittotheissueroritsredemptionagent;
2)generically,anybondthatpaysinterestperiodically,suchasquarterlyorsemiannually.

creditmoney(n.):anytypeofmoney,suchasbanknotesanddeposits,thevalueofwhichisdependent
onthecreditworthinessoftheissuer.Seealsoconvertiblemoney

creditor(n.):anentitytowhichsomething,typicallymoney,isowedbyitsdebtor.

credits(n.):1)generically,anaccountingtermforthingsreceivedbyanentity,typicallystatedinterms
ofitsmonetaryvalue;2)inbanking,adepositorotherpaymentbyacustomertothebank.

creditworthy(adj.):anentitythatisthoughtwillingandabletomeetallofitscurrentfinancial
obligations.Seealsocreditworthiness

creditworthiness(n.):theconditionofbeingcreditworthy.

crisis(n.):Seefinancialcrisis

currency(n.):1)cash;2)theprevailingunitofaccountorcoinrating.

currentmoney(n.):anarchaictermforcash.

creditcrunch(n.):aperiodcharacterizedbyageneraldearthofliquidityandadeclineinthevolumeof
bondsandloans.

creditunion(n.):atypeofcommunitybank,depositoryinstitution,orthriftownedbyitsdepositorsand
charteredasacreditunion.Seealsomutualcorporation

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daybook(n.):atypeofsingleentryaccountbookthatrecordsexchangesonachronologicalbasis
withoutcategorization,muchlikeacashregisterroll.

deal(v.):tooffertobuysecuritiesatabidpriceandsimultaneouslyoffertosellthesamesecuritiesatan
offerpriceandprofitingfromthedifferenceorspreadbetweenthetwoprices.

dealer(n.):anentitythatdealsorengagesindealing.

dealing(n.):theactofbuyingandsellingsecuritiesatstatedbidandaskprices,respectively.

debits(n.):1)generically,anaccountingtermforthingsgivenupbyanentity,typicallystatedinterms
ofitsmonetaryvalue;2)inbanking,aloanorotherpaymentbyabanktoacustomer.

debt(n.):anythingowedtoanotherentity,typicallymoney.

debtinstrument(n.):anyofavarietyoffinancialinstrumentsrepresentingadebtsuggestasanIOU.See
alsobill,bond

debtor(n.):anentitywhichowessomething,typicallymoney,toitscreditor.

default(n.):thefailureofanissuerorotherlendertomakeoneormorecontractualpaymentsof
principalorinterestdueonabondorotherdebtinstrument.

default(v.):tofailtomakeapaymentdueonabondorotherdebtinstrument.

defaultrisk(n.):theprobabilityofdefault(n.).

demand(n.):1)thequantityofagoodthatbuyersdesiretopurchaseatanygivenprice;2)arequestfor
immediatepaymentorconversion.Seealsodemand(v.)

demand(v.):torequestapaymentorconversionthathasfallendue.Seealsocall,demandliabilities

demandliabilities(n.):liabilitiesthatlenderscancall(demandthepaymentof)ondemand(n.,2,noor
shortnotice).Seealsobanknotes,checkingdeposits

denomination(n.):thefacevalueofabanknote,billofcredit,orcoin.

depositor(n.):anentitythatownsabankdeposit.

depositoryinstitution(n.):anytypeofbankthatissuesdeposits,includingBuildingandLoan
associations,commercialbanks,creditunions,mutualsavingsbanks,SavingsandLoanassociations,
savingsbanks,anduniversalbanksbutnotinvestmentbanks.

deposit(n.):asumowedbyabanktoadepositor.Seealsocheckingdeposits,savingsdeposits

deposit(v.):tocreateanyvarietyofadeposit(n.)inabankbyplacingmoneyatitsdisposalorby
obtainingaloanfromit.

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derivative(n.):afinancialinstrumentthemonetaryvalueofwhichislinkedtothepriceofsome
underlyingasset.Seealsoforwards,futures,options,swaps

directpublicoffering(DPO)(n.):anofferingofsharesinitselfbyabusinessentitytomembersofthe
publicdirectly,towitwithouttheservicesofaninvestmentbankorotherintermediary.

discount(n.):atypeofloanwherebyabankorotherlenderpaystheborrowerthediscountedpresent
valueofapromissorynoteorbillofexchangeinexchangefortherighttocollectthefacevalueofthe
discountedinstrumentatitsmaturity.

discount(v.):tomakeadiscountloanbypayingthediscountedpresentvalueofafinancialinstrumentin
exchangefortherighttocollectitsfacevalueatitsmaturity.

discountedpresentvalue(v.):istheprice(presentvalue)ofanassetdeterminedbytheformulaPV
(price)equalsFV(futurevalueorfacevalue)dividedbyoneplustheinterestrate.Notethatforany
interestrategreaterthanzerotheequationwillyieldapricelessthanthefacevalue.Thedifference
betweenthefacevalueandcurrentpriceisthetimevalueofmoney.

dishonor(v.):anarchaictermmeaningtodefault(v.).Seealsohonor

disintermediation(n.):theprocessorconditionofreducingexchangesbetweenborrowersandlenders.
Seealsointermediation

doubleentry(adj.):amethodofkeepingaccountsthatismoresophisticatedthansingleentrybecause
itinvolvesdescribingboththecreditanddebitaspectofeachexchange.

draft(n.):awrittenrequestforpayment,typicallytoathirdparty,drawnbyacreditorofthepayer.See
alsocheck,sightdraft,timedraft

drawee(n.):theentitybeingdrawnuponbyadrawerorputativecreditor;2)theacceptor;3)thepayer.

drawer(n.):theentitydrawingonitsmoneyinthepossessionofitsputativedebtorordrawee.

drawon(v.):toformallyrequestaputativedebtortomakepaymentperthetermsspecifiedinacheck,
draft,orbillofexchange.

economiccontraction(n.):Seerecession

economichistory(n.):thestudyofpaststatesoftheeconomyusingtheanalyticaltoolsofeconomists
andthesourcematerialofhistorians.Seealsohistoryofeconomicthought

economics(n.):thesocialsciencedevotedtothestudyoftheeconomy,especiallytheproductionand
consumptionofgoods.Seealsoeconomists

economists(n.):individualswhostudyeconomics.

economy(n.):thesumtotalofalltheinteractionsofentitiesinmarketsatanygiventime.Seealso
aggregateoutput,grossdomesticproduct
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entity(n.):1)afirm,government,individual,organization,orbusinessentity;2)aneconomicunitof
productionand/orconsumption.

entityshielding(n.):aprivilegethatprotectstheassetsofcorporationsfromseizurebythecreditorsof
bankruptowners,typicallystockholders.

entrepreneur(n.):1)generally,anyentitythatattemptstoincreaseitsutilitybyinnovating;2)an
individualwhoestablishesanewbusinessentity;3)abusinessentitythatattemptstoinventanew
good,developanewmarket,introduceanewmethodofproductionordistribution,discoveranew
sourceofsupply,reorganizeanexistingindustry,orengageinrentseeking.

entrepreneurship(n.):thestateorconditionofbeinganentrepreneur.

equity(n.):1)ashareinacorporation;2)networth.

equitymarket(n):amarketwhereequitiesorsharesareexchanged.Seealsostockexchange

exchange(n.):1)theprocessofengaginginexchange(v.);2)aphysicallocationfortradingsecurities;3)
anentitythanmaintainsanexchange(2).

exchange(v.):togiveonethingforanother,typicallymoneyforanonmonetarygood.

expansion(n.):astateoftheeconomyduringwhichaggregateoutput,typicallyasmeasuredbyGross
DomesticProduct,increasespastallpreviouslevels.

expenditures(n.):moneythatflowsoutofoneentityand,typically,intoanother.Seealsoincome,
revenue

exploitation(n.):thestealingofresourcesfromanother,typicallyweaker,entity.

exports(n.):goodsproduceddomesticallybutconsumedabroadorconsumedbyforeignentities
domestically(e.g.tourism).

externalities(n.):atypeofmarketfailurecreatedwhenpricesdonotreflectthefullcostsorbenefitsof
agoodtosociety.Seealsonegativeexternalities,positiveexternalities

facevalue(n.):themonetaryvalueexpressedon(thefaceof)afinancialinstrument,banknote,orcoin.

FederalReserveSystem(Fed)(n.):theU.S.centralbankestablishedin1913andstillinoperationtoday.

FederalReserveNotes(FRN)(n.):fiatpapermoneyissuedbytheFederalReserveSystem.

fiatmoney(n.):1)atypeofnoncommoditymoney,typicallymadeofpaperortokencoins,thatderives
itsvaluefromlegaltenderprovisions;2)fiduciarymoney.Seealsopapermoney,tokencoins

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fiduciarymoney(n.):1)atypeofnoncommoditymoneycomposedofsubstanceswithamonetary
valuefarbelowthefacevalueofthefiduciarynoteorcointhatderivesitsvaluefromthepublicsbelief
thattheywillbeabletoexchangethemoneyatitsfacevalueduetoitscurrentwidespreadacceptance;
2)fiatmoney.Seealsopapermoney,tokencoins

finalgoods(n.):goodsthatareconsumedorinvestedandnotusedintheproductionofothergoods.

finance(n.):thescienceofmanagingassets,includingmoney.

finance(v.):toobtainthemoneynecessarytoattemptcompletionofsomeproject.

financialcondition(n.):theoverallstatusofanentitysassets,liabilities,equity(capital),income,and
cashflowatanygiventime.

financialcrisis(n.):aperiodcharacterizedbyrapidreductionsinthemonetaryvalueoffinancialassets
andthemarketcapitalizationoffinancialinstitutionsand,typically,nonfinancialentitiesaswell.See
alsobankrun,creditcrunch,financialpanic,stockmarketcrash

financialguarantee(n.):atypeoffinancialobligationwherebytheguarantororsuretypromisestopay
somethirdpartyifaguaranteedentitydefaultsonitsdebtorotherwisefailstoperformaccordingto
contract.

financialindustry(n.):thesumofallbusinessentitiesservinganyfinancialmarket.

financialinstitution(n.):1)narrowly,abusinessentitythatprovidesfinancialservice(s);2)broadly,any
businessorgovernmententityinvolvedinanywayinanyfinancialmarket.

financialinstrument(n.):anyvarietyoffinancialcontract,includingcash,bond,equity,orderivative.

financialmarket(n.):anymarketforanyfinancialinstrumentorfinancialservice.

financialobligations(n.):anythingowed,owing,orpotentialowing,suchasliabilities,endorsements,
andfinancialguarantees.

financialpanic(n.):aperiodcharacterizedbythepanickedsellingofassetstoincreasethereservesof
banksorthecashbalancesofothertypesofentities.SeePanicof1792

financialservice(n.):anyofarangeofservicesrelatedtofinancialinstruments,derivatives,insurance,
money,intermediation,oranyotherfinancialgood.

financialstatement(n.):agenerictermforanytypeofaccountofanyentitysfinancialcondition,
includingbalancesheetsandincomeandcashflowstatements.

financialsystem(n.):allfinancialinstitutionsandmarketsandtheirmultifariousinterconnections.

financier(n.):abankerorotherindividualwhoprovidesoneormorefinancialservicesonbehalfof
himself/herselforabank,broker,orotherintermediary.

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firm(n.):1)anybusinessentity;2)asmallorprivatebusinessentitysuchasasoleproprietorshipor
partnership,asinalawfirm.

forprofit(n.):anorganization,typicallyabusinessentity,withthecommongoalofearningaprofit.See
alsononprofit,notforprofit

forwardcontract(n.):singularversionofforwards

forwards(n.):atypeofderivativewherebyabuyerandselleragreetoexchangeaspecificquantityof
someassetorothergoodatafuturedateforpredeterminedprice.Seealsofutures

freeride(v.):toenjoythebenefitsofagoodwithoutpayingforit.

freerider(n.):anyentitythatfreerides.

fullbodiedcoins(n.):1)specie;2)coinsthatderivetheirmonetaryvaluefromtheintrinsicvalueofthe
gold,silver,copper(oroccasionallyothermetal)theycontainratherthanfromalegaltenderprovision;
nontokencoins.

fundamentalvalue(n.):therationalvalueofanassetbasedonitsintrinsiccharacteristicsandinterest
rates.

futurevalue(n.):theprincipal,parvalue,orfacevalueofabondorotherdebtinstrument,socalled
becausethatisthemonetarysumpromisedtobepaidinthefuture.

futures(n.):atypeofderivative,specificallyaforwardcontractthathasbeenstandardizedandtrades
onanexchange.

gold(n.):ametallicelementwithsymbolAuandatomicnumber79used,amongotherthings,tocreate
fullbodiedandtokencoins.Seealsospecie

good(n.):aproductorservicethatsomeonevaluesgreaterthanzero,thatpeoplearewillingtopayin
ordertoobtain.Seealsobad

governmentbond(n.):abondissuedbyanationalormunicipal(subnational)government.Seealso
municipalbond;sovereignbond

governmentexpenditure(G)(n.):1)moneyspentbythegovernmentonfinalgoods(i.e.,notsimply
redistributedtocitizensviaSocialSecurityorothersocialprograms);2)oneofthemajorcomponentsof
aggregateoutput(Y).

governmentfailure(n.):theinabilityofagovernmenttomeetoneormoreofitsgoalsduetoitsown
inadequacy.Seealsoregulatorycapture

grossdomesticproduct(GDP)(n.):oneofthemostwidelyusedestimatesofaggregateoutput(Y).

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HamiltonsRule(n.):aruledevelopedbyTreasurySecretaryAlexanderHamilton(17551804)duringthe
Panicof1792thatinstructscentralbanksorotherlendersoflastresorttolendfreelyatapenaltyrateof
interesttoanyentitythatcanpostsufficientcollateral.

healthinsurance(n.):aninsurancepolicythatindemnifiespolicyholdersifacoveredevent,suchasan
illnessorhospitalization,occurswhilethepolicyisineffect.

historyofeconomicthought(n.):thestudyofpastbeliefsofeconomists.Seealsoeconomichistory

honor(v.):archaictermmeaningtomakepayment.

humancapital(n.):theabilityofindividualstocreategoods.

hybridcorporation(n.):acorporationthatispartlyownedbystockholdersandpartlybycustomers;2)a
corporationthatispartjointstockandpartmutual.

hybridfailures(n.):intricatecombinationsofmarketfailuresandgovernmentfailures.

illiquid(adj.):theconditionofanassetthatcannotbesoldintimelymanneratorclosetoits
fundamentalvalue.Seealsoilliquidity,liquid,liquidity

illiquidity(n.):thestateofbeingilliquid.Seealsoliquid,liquidity

imports(n.):goodsproducedabroadbutconsumeddomesticallyorpurchasedabroadbycitizensofthe
importingnation(e.g.tourism).

income(n.):moneythatisincoming,thatflowsintoanentity.Seealsoexpenditure

indemnify(v.):tocompensateforadamageorlossactuallyincurred.

inflation(n.):sustainedincreasesinthepricelevel.

initialpublicoffering(IPO)(n.):anofferingofsharesinitselfbyabusinessentitytomembersofthe
publicwiththeaidofaninvestmentbankorotherintermediary.

inkindloan(n.):thelendingofaspecificgoodratherthanofmoney.

inlandbill(n.):ashortdatedfinancialinstrumentdrawnonadomesticentity.Seealsobillofexchange

insolvency(n.):theinabilityofanentitytopaylegitimatedemandsonit,eitherfrombankruptcyor
illiquidity.

insurance(n.):amechanismforspreadingrisks,typicallyinanactuariallyorscientificallysoundmanner,
throughtheissuanceofinsurancepolicies.

insuranceagent(n.):anagenthiredbyaninsurancecompanyorotherinsurertosellitsinsurance
policiesandtoprovidebasiccustomerservice.

insurancecompany(n.):abusinessentity,typicallyintheformofacorporation,thatactsasaninsurer.
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insurancepolicy(n.):acontractspecifyingthetermsuponwhichaninsurerpromisestoindemnifythe
policyholderorinsuredforsomeloss.

insured(n.):theentityreimbursedwhen/ifsomecontingencyspecifiedinaninsurancepolicyoccurs.
Seealsopolicyholder

insurer(n.):theissuerofaninsurancepolicy.

instrument(n.):1)afinancialinstrument;2)amonetarypolicytool.

interest(n.):1)theopportunitycostofmoney;2)arentalchargefortheuseofmoney.

interestonlyloan:aloaninwhichtheborrowerrepaysnoprincipal,onlyinterest,forever(perpetuity)
orforsomeprespecifiedperiod.

interestrate(n.):1)theinterest(promisedorreceived)oversomeperiod,typicallyayear,dividedby
theprincipalofabondorotherloan,generallyexpressedasapercentage;2)yield.Seealsorateof
return

intermediary(n.):anyentity,buttypicallyabusinessentity,thatbrokersexchangesbetweenlenders
andborrowers.Seealsobanks,insurers

intermediation(n.):1)thefunctionofanintermediary;2)theprocessofbrokeringexchangesbetween
borrowersandlenders.Seealsodisintermediation

investment(n.):1)anassetpurchasedbyaninvestorwiththeaimofearningaprofit;2)amajor
componentofaggregateoutput(Y)thatmeasurespurchasesofmachines,factories,andinventoryby
businesses(I).

investmentbank(n.):atypeofbankownedand/orrunbyinvestmentbankersthatengagesin
brokerage,issuanceofsecurities,andmergerandacquisitionconsulting.

investmentbanker(n.):abankerprimarilyengagedinbrokerage,issuanceofsecurities,andmergerand
acquisitionconsulting.

investmentbanking(n.):theactivitiesofaninvestmentbanker.

investor(n.):anentitythatintendstoearnaprofitbybuying,holding,orsellingafinancialinstrument
suchasabondorequity.

IOU(n.):ashortdateddebtinstrument,likeapromissorynote,socalledbecauseIoweyou.

issuance(n.):theactofissuing.

issue(n.):athing,typicallyabanknote,coin,deposit,insurancepolicy,orsecurity,issued.

issue(v.):toemit,putintocirculation,orputintoeffect.

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issuer(n.):anyentitythatissues(v.)anytypeofissue(n.).

jointstockcompany(n.):anunincorporatedoruncharteredbusinessentityownedbystockholders.See
alsojointstockcorporation

jointstockcorporation(n.):atypeofcorporationownedbystockholders.Seealsohybridcorporation,
jointstockcompany,mutualcorporation

journal(n.):atypeofdoubleentryaccountbookthattrackstransactionschronologicallyfirst,thenby
category.

ledger(n.):atypeofdoubleentryaccountbookthattrackstransactionsbycategoryfirst,then
chronologicallywithineachcategory.

legaltender(n.):1)anobligationcreatedandenforcedbygovernmentsonentitiestoacceptaspecific
mediumofexchangeatitsfacevalueineithera)alldebtspublicandprivate(fulltender)orb)allpublic
debts(publictender);2)anymediumofexchangethatenjoysfulllegaltenderstatus.Seealsofiat
money

lemonsproblem(n.):afamousexampleofadverseselectionandasymmetricinformationwherein
buyersofusedvehiclespaytoomuchforunreliableautomobiles,trucks,andsoforth.

lender(n.):anyentitythatprovidesprincipaltoaborrowerinexchangeforrepaymentoftheprincipal
plusinterestinthefuture.

lenderoflastresort(n.):acentralbankorothermonetaryauthoritychargedwithlendingtoentitiesin
thewakeofafinancialcrisisorpanicwhenothersourcesofloansarelessorcompletelyunavailabledue
tohighdegreesofriskand/oruncertainty.

liabilityrun(n.):whendepositors,lenders,orothercreditorscallorrefusetorenewloanstoanentity,
suchasabank.Seealsobankrun

liabilities(n.):anythingowedbyoneentitytoanother.Seealsodemandliabilities

lifeinsurance(n.):aninsurancepolicythatindemnifiesapolicyholderorbeneficiaryifacoveredevent,
suchasthedeathoftheinsured,occurswhenthepolicyisineffect.Seetermlife,wholelife

limitedliability(n):acommonfeatureinchartersthatprotectsstockholderspersonalwealthinthe
eventofthecorporationsbankruptcy.

liquid(adj.):theconditionofanassetthatcanbeeasilyorquicklysoldforcashatclosetoitsmonetary
value.Seealsoilliquid,liquidity

liquidity(n.):1)thestateofbeingliquid;2)cashissuedbyacentralbankorothermonetaryauthorityto
renderassetsmoreliquid.Seealsoilliquid

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loan(n.):atypeofcontractwherebyaborrowerpromisestorepaytoalendertheprincipalsum
borrowedplusinterest.

Lockeangovernment(n.):agovernmentostensiblydedicatedtotheprotectionofthelives,liberty,and
propertyofitscitizenry.

longdated(adj.):havingmorethanayeartomaturitybutnotaperpetuity.

loss(n.):1)thesaleofanassetatlessthanitspurchaseprice;2)diminutionofthemonetaryvalueofan
assetforwhichindemnificationfromaninsureronaninsurancepolicyissought;3)thenegative
differencebetweenabusinessentitystotalrevenuesanditstotalcosts.Seealsoprofit

Madisonianconstitution(n.):aframeofgovernmentthatlimitstyrannythroughtheuseofchecksand
balancesorthediffusionofpowerovermultiplebranchesorlevelsofgovernment.

management(n.):1)allofthemanagersofanentity;2)theartandscienceofefficientlyoperating
large,complexorganizations,especiallyjointstockcorporations.

manager(n.):anindividualchargedwithadministering,running,oroperatingabusinessentityor
organization.

marketcapitalization(n.):themonetaryvalueofacorporationcalculatedbymultiplyingthepriceof
oneofitssharesbythetotalnumberofsharesoutstanding.

marketfailure(n.):theinabilityofamarkettoachieveoneormoreofitsgoalsduetoitsown
inadequacy.Seealsoassetbubbles,asymmetricinformation,externalities,marketpower,publicgoods

marketpower(n.):

markets(n.):whereverorhoweverentitiesexchangegoodsatpricesdeterminedprimarilybysupply
anddemand.

maturity(n.):thedatewhenadebtinstrumentsprincipalfallsdueandneedstobepaidlestadefault
bedeclared.

mediaofexchange(n.):anythingthatcirculateshandtohandascashmoney.Seealsobanknotes,bills
ofcredit,checkingdeposits,FederalReservenotes

merger(n.):thebalancesheetconsolidationoftwobusinessentities,typicallyofsimilarsize,theresult
ofwhichisanew,largerentity.

monetaryauthority(n.):thecentralbank,currencyboard,orothergovernmentagencychargedwith
developingandimplementinganationsmonetarypolicy,includingthemoneysupplyandinterestrates.

monetarypolicy(n.):theactionsofmonetaryauthorities,suchascentralbanks,designedtoinfluence
themoneysupplyandinterestrates.

monetaryvalue(n.):thepriceorworthofsomethingintermsofmoney,asopposedtousevalue.
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money(n.):1)physicalmediaofexchange;2)abstractunitofaccount;3)longtermstoreofvalue.See
alsobasemoney,billsofcredit,cash,circulation,coins,commoditymoney,currency,deposits,Federal
ReserveNotes,fiatmoney,specie

moneyofaccount(n.):monetaryvaluesrepresentedinaccountbooks.

moneysupply(n.):thetotalmonetaryvalueofallthemoneyinactualcirculationoruseinaneconomy.

moralhazard(n.):

mortgage(n.):atypeofloanwhereintheborrowerpledgesrealestateascollateral.

municipalbond(n.):atypeofgovernmentbondissuedbyasubnationalgovernmentsuchasastate,
county,orcity.

mutualcorporation(n.):atypeofforprofitbusinesscorporationownedbyitscustomers,typicallyits
depositorsorpolicyholders.Seealsocreditunion,mutualsavingsbank

mutualsavingsbank(n.):atypeofsavingsbankorthriftownedbyitsdepositorsbutnotcharteredasa
creditunion.Seealsomutualcorporation

negativeequity(n.):whenthenetworthofanentityislessthanzero.Indicativeofbankruptcyor
insolvency.

negativeexternalities(n.):amarketfailurethatoccurswhenthefullcostsofagoodarenot
incorporatedinitsprice,asinthecase,forexample,ofpollution.Seealsopositiveexternalities

negotiable(adj.):transferablefromoneentitytoanotherbysale,gift,inheritance,orothermeans.

negotiablecertificateofdeposit(NCD)(n.):alargedenominationcertificateofdepositthatcanbe
boughtandsoldlikeabond.

netexports(n.):themonetaryvalueofexportsminusthemonetaryvalueofimports.

networth(n.):thesumofthemonetaryvalueofanentitysassetsandliabilities.Seealsonegative
equity

nominalprice(n.):thepriceofagoodincurrentdollars;2)pricesofgoodsnotadjustedforchangesin
thepricelevel.

nonprofit(n.):anorganizationthatisdesignednottoearnanyprofits.Seealsoforprofit,notforprofit

notforprofit(n.):anorganizationthatmayearnprofitsbutthatisnotprimarilyorientedtowarddoing
so.Seealsoforprofit,nonprofit

opportunitycost(n.):theinevitablecostincurredbyentitieswhentheychooseanactivity,thereby
precludingthecompletionofanotheractivityatthesametime.

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optionholder(n.):theownerofoneormoreoptions.

optioncontract(n.):Seeoptions

options(n.):aclassofderivativesincludingcalloptionsandputoptions.

organization(n.):agroupofindividualsworkingcloselytogethertowardsacommongoal.Seealsonon
profit,notforprofit

overthecounter(n.):anymarketfortradingsecuritiesoutsideofaformalexchange,typically
coordinatedbybrokersand/ordealers.

owe(v.):tobeobligedtorepay,usuallyasumofmoney;2)topossessbutnothavelegaltitleof
ownershipof.

own(v.):1)topossess;2)tohavelegaltitletoorthelegalrighttosell,lease,orenjoy.

owner(n.):anentitythatownsabusinessentityorasset.Seealsoprincipal,stockholder

ownership(n.):thestateorconditionofowning(v).

panic(n.):Seefinancialpanic

Panicof1792(n.):afinancialpanicthatoriginatedinthegovernmentbondmarketthatwassuccessfully
thwartedbytheapplicationofHamiltonsRule.

Panicof1819(n.):afinancialpanicthatledtoadeeprecessionandarealignmentofU.S.political
parties.

Panicof1837(n.):afinancialpanicthatledtoalong,deeprecession.

papermoney(n.):agenerictermforanytypeofmoneycomposedofpaper,includingfiatmoniesand
convertiblemoniessuchasbanknotes.

partners(n.):theindividualswhoownapartnership.

partnership(n.):atypeofbusinessentityownedbytwoormoreindividualscalledpartners.

payer(n.):theentityuponwhichadraftisdrawn,typicallythedrawersdebtor.

perpetualsuccession(n.):aprivilegeofcorporationstochangetheirowners/stockholderswithout
havingtoreconstitute,aspartnershipstraditionallyhadtodowheneverapartnerjoinedorleftthe
businessentity.

perpetuity(n.):1)afinancialinstrumentwithnomaturitydate;2)aninterestonlyloan.

personalestate(n.):anyassetownedbyanindividualthatisnotrealestate.

policyholder(n.):theownerofaninsurancecontract.Seealsoinsured

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positiveexternalities(n.):amarketfailurethatoccurswhenthefullsocietalbenefitsofagoodarenot
incorporatedinitsprice,asinthecase,forexample,ofeducation.Seealsonegativeexternalities

premiums(n.):thepriceapolicyholdermustpaytoeffectaninsurancecontract.

presentvalue(n.):thepriceofanassetorothergoodtoday(atthepresent).

price(n.):themonetaryvalueofagooddeterminedbytheinteractionofsupplyanddemandina
market.

pricelevel(n.):theaverageofallnominalpricesinaneconomy.Seealsorealprices,relativeprices

principal(n.):1)asumlentorinvesteduponwhichinterestorrateofreturnarecalculated;2)the,or
oneofthe,ownersofanentity.

principalagentproblem(n.):aspecifictypeofmoralhazardthatoccurswhenanagentactsinitsown
bestinterestratherthanintheinterestoftheowner(s).Seealsoagencycosts

privatebank(n.):1)abankoperatingwithoutacharter;2)abankthatmanagestheassetsofwealthy
entities,typicallyindividuals.

privatebanker(n.):1)anindividualoramemberofapartnershipinanuncharteredbank,i.e.,private
bank(1);2)abankerinaprivatebank.

product(n.):aphysicalthingorcontractthatabusinessentitycreates,produces,makes,manufactures,
orgrows

profit(n.):thepositivedifferencebetweenabusinessentitystotalrevenuesanditstotalcosts.Seealso
loss

promissorynote(n.):ashortdatednegotiabledebtinstrumentsuchasanIOU.

price(n.):theamountofcompensationorpaymentabuyergivesthesellerinexchangeforagood.

primaryreserves(n.):Seereserves

project(n.):1)anyspecifictaskaimedatachievingagoal;2)inbusiness,anyspecificactionstakeninan
attempttoearnaprofit.

public(adj.):1)governmentowned;2)privatelyownedbystockholderswhoaremembersofthepublic,
asininitialpublicofferingorpubliccompany.

publiccompany(n.):1)abusinessentitythatisownedbyprivateindividuals(membersofthepublic),
typicallystockholderswhocantradetheirequitystakesinthecompanypublically;2)ajointstock
companyorcorporation.

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publicgoods(n.):amarketfailurethatariseswhenitisnotintheinterestofanybusinessentityto
supplyaspecificgood,likenationaldefense,becausetheentitycannoteasilyprofitfromitsprovision
becausesuchgoodsarenonexcludable(thereisnowaytoforcefreeriderstopay)andnonrivalrous
(consumptionbyonedoesnotpreventconsumptionbyothers).

putoption(n.):atypeofoptionderivativethatgivestheoptionholdertherightbutnottheobligation
tosellsomepredeterminedassetatapredeterminedstrikeprice.Seealsooption,calloption

quarter(n.):aquarterofayearorthreemonths,typicallyJanuary,February,March;April,May,June;
July,August,September;October,November,December.

quarterly(adj.):onceeveryquarter.Seealsoannually,semiannually.

rateofinterest(n.):Seeinterestrate

rateofreturn(ROR)(n.):1)theratioofthemoneylostorgainedonaninvestmentrelativetothe
principalinvestedoversomeperiod,typicallyaquarteroryear;2)returnoninvestment(ROI).

recovery(n.):astateoftheeconomyfollowingarecessionduringwhichaggregateoutput,typicallyas
measuredbyGrossDomesticProduct,increasestowardapreviouspeak.

realestate(n.):atypeofassetconsistingoflandandanyimprovementsthereto,suchasbuildings,
drainageorsewagesystems,roads,wells,andsoforth.Seealsopersonalestate

realprice(n.):thepriceofagoodadjustedforchangesinthepricelevel.

recession(n.):astateoftheeconomyduringwhichaggregateoutput,typicallyasmeasuredbyGross
DomesticProduct,declines.

regulatedfirm(n.):abusinessentitythatissubjecttotheregulationsofoneormoreregulators.

regulations(n.):asetofrulesprescribedbyaregulatordescribingthebusinessactivitiesthatcanand/or
cannotlawfullybeundertakenbyabusinessentity.

regulator(n.):anentity,usuallyagovernment,thatmakesand/orenforcesregulations.

regulatorycapture(n.):theconditionofaregulatedfirmtakingcontrolofitsregulatorinwholeorpart.

relativeprices(n.):theratioofthenominalpriceofonegoodtothenominalpriceofanother.

rentseeking(n.):attemptstogainsomethingfornothingbymanipulatingthegovernmenttosubsidize
orotherwisesupportspecialinterestsattheexpenseofthecommonweal.

requiredreserves(n.):Seereserverequirements

reserves(n.):1)cashheldbybankstomeetcallsontheirdemandliabilities,suchascheckingdeposits
andbanknotes;2)anyassetthatbanksowntohelpmanagetheirliquidity.Seealsorequiredreserves,
secondaryreserves.

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reserverequirements(n.):reservesmandatedbysomeregulatororlaw,typicallyexpressedasa
percentageofabanksdemandliabilities.

resources(n.):1)goods,suchascopper,gold,silver,oil,diamonds,createdbynatureratherthanby
entities;2)inaloosesense,anyassetorgood,includingmoreintangibleonesliketime.

returns(n.):moneythatreturnstoaninvestoronaninvestment.Seealsorateofreturn

revenues(n.):incomefromanysource,includingthesaleofgoodsorreturnsoninvestments

risk(n.):knownvolatilityintherateofreturn.Seealsouncertainty

riskappetite(n.):theamountofriskaninvestorcantolerate.Seealsoriskaversion

riskaverse(adj.):avoidanceofriskevenatahighcost.

riskaversion(n.):thepracticeofbeingriskaverse.

risks(n.):1)theriskrepresentedbyanentityseekingaloanorinsurance;2)theentityitself.

risky(adj.):characterizedbyexcessiverisk,eitherfortheexpectedrateofreturnorfortheinvestors
riskappetite.

SavingsandLoanassociation(n.):atypeofsavingsbankwithaSavingsandLoancharterdesignedto
modernizetheolderBuildingandLoanassociationform.

savingsbank(n.):agenerictermforanybankthatfocusesonmakingmortgageloansandissuing
savingsdeposits,includingbutnotlimitedtocreditunions,mutualsavingsbanks,andSavingsandLoan
associations.

savingsdeposit(n.):1)atypeoftimedepositinabankthatearnsinterestinexchangeforadecreasein
itsliquidity.

secondaryreserves(n.):asortofbackupformofreservesheldbybanksthatearnsincomebutisliquid
(readilyconvertibleintocash).

securities(n.):anynegotiablefinancialinstrument,includingdebt,equity,andhybridinstruments.

securitiesexchange(n.):Seeexchange

seller(n.):theentityinatradethatgivesupanonmonetarygoodandreceivesmoneyinexchange.

semiannually(adj.):twiceayearoreverysixmonths.Seeannually,quarterly

service(n.):agoodconsumedatthepointofcontactwiththeserviceproviderincludingbutnotlimited
toconsulting,education,healthcare,andretail.Seealsofinancialservices

share(n.):1)afinancialinstrumentrepresentinganownershiporequitystakeinajointstock
corporation;2)anequity.
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shareholder(n.):Seestockholder

short(v.):1)tosellanassetundertheexpectationofbuyingitbacklateratalowerprice;2)borrowing
assets,typicallyequities,sellingthemintheexpectationofapricedecrease,thenbuyingthembacklater
torepaytheinkindloan.

short(adj.):havingfewershares(orotherassets)thannecessarytorepaytheinkindloantakenatthe
startofashortingoperation,asintheexpressioncaughtshort.

shortdated(adj.):havinglessthanayeartomaturity.

shortsale(n.):1)traditionally,atransactionwherebyanentityshortsanasset;2)morerecently,the
saleofahomeforlessthantheoutstandingmortgagebalance.

shorting(v.):theprocessofmakingashortsale.

sightdraft(n.):adraftdueuponitsacceptanceforpaymentbythepayer.Seealsotimedraft

silentrun(n.):atypeofbankrunorliabilityruncharacterizedbytherefusalofcreditorstorenewshort
termloanstoabankorotherentity.

silver(n.):ametallicelementwiththesymbolAgandtheatomicnumber47usedtocreatefullbodied
andtokencoins.Seealsospecie

singleentry(adj.):asimplemethodofkeepingaccountsthatentailslistingthemajorattributes(e.g.,
date,price,counterparty)ofexchanges.

soleproprietor(n.):theownerofasoleproprietorship.

soleproprietorship(n.):atypeofbusinessentityownedandoperatedbyasingleindividual.

sovereignbond(n.):agovernmentbondissuedbyasovereignnationalgovernment.SeealsoTreasury
bond

specialinterests(n.):entitiesthatengageinrentseekingorotheractivitiesdesignedtosubsidizethem
attheexpenseofothers,orthecommonweal.

specialty(n.):atypeofcontractwherethepartiesagreethatpaymentwillbemadeinaspecific
mediumofexchange,suchasgoldorsilver.

specie(n.):fullbodied(i.e.,nontoken)goldorsilvercoins.Seealsobullion

speculate(v.):toengageinspeculation.

speculation(n.):anattempttoearnquickprofitsbybuyingassets,typicallysecurities,lowandselling
themhighorviceversa,asinshorting.

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spread(n.):1)thedifferencebetweenadealersbidpriceanditsaskpriceforasecurity;2)the
differencebetweenwhatabankreceivesforitsassetsandpaysforitsliabilities.

stock(n.):1)synonymouswithequity(1)andshare(1);2)archaicforgovernmentbond.

stockexchange(n.):Seeexchange(n.)

stockmarket(n.):1)exchange(n.);2)anymarketinwhichstocksaretraded,includingexchangesbut
alsooverthecounterorbrokerdealermarkets.

stockmarketcrash(n.):atypeoffinancialcrisischaracterizedbyrapiddecreasesinthepricesofa
broadswathofequities.

stockholder(n.):anownerofoneormoreshares(stocks,equities)inajointstockcorporation.

stockjobbing(v.):buyingandsellingsecuritiesinordertospeculate.

stockjobber(n.):anarchaictermforanyentitythatengagesinstockjobbing.

storeofvalue(n.):anyassetthatmaintainsmostorallofitsmonetaryvalueoverlongperiodsoftime,
e.g.years.

strikeprice(n.):thepredeterminedpriceatwhichanoptionderivativecanbecontractuallyexercisedby
theoptionholder.

swap(n.):atypeofderivativewherebytwopartiesexchangeoneassetforanotheronanongoingbasis
accordingtothevalueofsomeunderlyingasset,forexampledollarsforyen.

subsidize(v.):tograntasubsidytoanentity.

subsidy(n.):resources,typicallybutnotalwaysmoney,giventoanentity,usuallybyagovernment.

sunkcosts(n.):coststhathavealreadybeenincurredandcannotberecouped.

supply(n.):thequantityofagoodthatsellersmakeavailableatanygivenprice.Seealsodemand

suspensionofspeciepayments(n.):whenbanksofissueceasedconvertingtheirbanknotesand
depositsintospecieduetotheirbankruptcy,insolvency,orageneralsuspensionofpaymentsintimesof
warorfinancialpanic.

termlife(n.):aninsurancepolicythatindemnifiesapolicyholderorbeneficiaryiftheinsureddiesduring
theduration(term)ofthecontract.Seealsowholelife

thrift(n.):adepositoryinstitutionwithacommunitybankfocussuchascreditunionsandsavingsbanks.

timedeposit(n.):atypeofdeposit,likeasavingsdepositoracertificateofdeposit,thatcannotbe
withdrawnbythedepositoruntilaspecifiedperiodhaselapsedorapenaltyhadbeenpaid.

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timedraft(n.):adraftduesomedays,weeks,ormonthsafteritsacceptanceforpaymentbythepayer.
Seealsosightdraft

tokencoinage(n.):atypeoffiatmoneythattakestheformofcoinsthatcontainmetalsworth
considerablylessthanthecoinsfacevalue

trade(n.):anexchangeofgoods,typicallybetweentwoentities.

trade(v.):toengageinatrade.

transactiondeposits(n.):Seecheckingdeposits

Treasurybill(n.):ashortdatedsovereignbondissuedbytheU.S.TreasurytohelpmanagetheU.S.
governmentscashflowneeds.

Treasurybond(n.):asovereignbondissuedbytheU.S.TreasurytofundU.S.governmentbudget
deficits.

unbanked(n.):entities,typicallyindividuals,whodonotbank(v.).

uncertainty(n.):unknown/unknowablevolatilityintherateofreturn.Seealsorisk

underlyingasset(n.):anassetthatcontractuallydeterminesthepriceofanotherasset.

unitbank(n.):abankthatdoesnot,probablybecauseitlawfullycannot,operateanybranches.

unitofaccount(n.):1)theabstractmeasuringrodagainstwhichmonetaryvaluesaredetermined;2)
moneyofaccount.

universalbank(n.):atypeofbankthatcombinesthefunctionsofadepositoryinstitutionwiththoseof
aninvestmentbank.

usance(n.):theperiodbetweentheissuanceoracceptanceofafinancialinstrument,suchasabillof
exchange,anditsmaturityorduedate.

usevalue(n.):theworthorutilityofagoodstemmingfromitsactualutilizationorconsumption.

utility(n.):aneconomicconceptmeasuringanentitysrelativesatisfactionwithagood.

wholelife(n.):alifeinsurancepolicythatindemnifiesapolicyholderorbeneficiarywhentheinsured
dies,ifthepolicyiscurrentorhasbeenpaidup,andthatcanbecashedorborrowedagainstusingthe
cashvalueofthepolicyascollateral.Seealsotermlife

yield(n.):1)thecurrentyield,ortheincome(typicallytheannualdividendsorcoupons)fromsome
investmentdividedbytheinvestmentscurrentprice;2)theyieldtomaturityordiscountedcashflow
rateofreturn.

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