Implied Volatility: Volatility is calculated by determining the variable in the relevant option pricing formula (e.g. Black-Scholes) based on market option prices.
Income Distribution: The payment of income to unitholders by a Unit Trust in proportion to their holdings.
Independent Directors: Independent directors are directors who apart from receiving the director’s remuneration do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the judgement of the board may affect their independence of judgement.
Index: A measurement of the trend of share prices. It is not just an average of share prices but weighted to reflect the number of shares outstanding for an individual script.
Indexed Asset: An indexed asset has a coupon and principal payments that are adjusted upward in response to increases in the price level. This adjustment is intended to compensate lenders for the decline in purchasing power of loan repayments.
Index Fund: A mutual fund that invests in a portfolio of shares that matches identically the constituents of a well-known stock market index. Hence changes in the value of the fund mirror changes in the index itself. Futures contracts based on an index, the underlying asset being the index, are known as Index Futures Contracts. For example, futures contracts on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index.
Index Futures: A new model of stock market investment in which, instead of buying individual shares one buys so many units of a recognized index.
Index Option Contracts: The options contracts, which are based on some index, are known as Index options contracts. The buyer of Index Option Contracts has only the right but not the obligation to buy/sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised/assigned only on the expiry date.
Industry Sector: Companies listed on stock exchanges are usually categorized according to their principal area of activity, for example, banks, building materials, electronics, food producers, health care, leisure, oils, pharmaceuticals, and retailers.
Indian Depository Receipt: A receipt, evidencing underlying foreign security, issued in India by a foreign company that has entered into an agreement with the issuer and depository, custodian and depository or underwriters and depository, in accordance with the terms of prospectus or letter of offer, as may be prescribed.
Initial Margin: The initial amount which customers have to put in before taking up a futures contract to guarantee the transaction.
Initial Public Offering (IPO): The first public issue by a public limited company
Inflation: Not just a price increase of this or that commodity once in a while, but a general and sustained price increase, resulting in the fall of the real value of money which can buy only less and less.
Inflation Gap: Government expenditure in excess income from taxation and borrowing. The excess is financed by increasing the money supply, by either printing paper money or borrowing from banks or both.
Insider: Any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, connection, to unpublished price sensitive information in respect of securities of a company, or who has received or has had access to such unpublished price sensitive information.
Insider Trading: Practice of corporate agents buying or selling their corporation’s securities without disclosing to the public significant information which is known to them but which has not yet affected the price. Illegal activity in which persons in which a company has confidential information such as expansion plans, financial results, takeover bids, etc., take advantage of such information to make a profit on the stock exchange by buying or selling shares.
In-the-Money: A call option is said to be in the money when it has a strike price below the current price of the underlying commodity or security on which the option has been written. Likewise, when a put option has a strike price above the current price it is said to be in the money.
Intangible Assets: An item of value whose true worth is hard or almost impossible to determine such as goodwill reputation, patents, and so on.
Institutional Investors: Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, and endowment funds.
Institutionalization: The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.
Interest Rate Risk: The risk that movements in the interest rates may lead to a change in expected return.
Interim Dividend: A dividend payment made during the course of a company’s financial year. The interim dividend, unlike the final dividend, does not have to be agreed in a general meeting.
Internal Rate of Return (IRR): The rate at which future cash flows must be discounted in order to equal the cash cost of the investment.
Investment Banker: Financial conglomerate which conducts a full range of investment-related activities from advising clients on securities issues, acquisitions and disposal of businesses, arranging and underwriting new securities, distributing the securities, etc.
Investment Company: A corporation, trust, or partnership that invests pooled unit holder/shareholder money in securities appropriate to the organization’s objective. Mutual funds, close-ended funds, and unit investment trusts are the three types of investment companies.
Intraday Volatility: High and low prices of a traded stock in the course of a day.
Intrinsic Value (of an option): The difference between the strike price of a traded option and the market value of the underlying security.
Investment: Asset acquired for the purpose of producing income and/or capital gains for its owner
Investment Analyst: A finance professional employed by banks, stockbrokers, investment companies, mutual funds, and unit trusts to advise them on investment.
Investment Grade: The bond rating of equal to or greater than BBB (with S&P) or Baa3 (with Moody’s), indicating low uncertainty as to the issuer’s ability to meet the obligations undertaken in the bond.
Investment Objective: The goal that an investor and mutual fund pursue together, e.g. current income, long-term capital growth, etc.
Investment Philosophy: Set of principles or systems used by investors to govern the way they manage portfolios.
Investment Profit: Profit that results from the difference between the purchase and selling prices of a security. Trading profit is short term while investment profit is medium or long term.
Investment Risk: (1) Risk that an asset will not deliver the expected returns (or meet the objectives) for which it is held. (2) Chance that a permanent loss will be sustained on investment through company failure, default on loans, fraud, or other factors. (3) Volatility in the value of a security or market, usually measured as the standard deviation of returns over a given period.
Investment Strategy: Investor’s long-term distribution of assets among various asset classes, taking into consideration, for example, goals of the trustee group, attitude to risk and timescale, etc.
Investment Structure: The way in which fund managers are employed to invest assets, in particular, the type of investment managers employed (specialists, multi-asset, active or passive) and the number of managers employed. Also called investment manager structure.
Investment Team: Group of individuals in an investment management organization who is responsible for the construction of portfolios and the performance of funds under management. The team may include some or all of the following: a strategy specialist, economists, fund managers, investment analysts, equity and bond dealers, currency specialists, derivative specialists, property specialists, and money dealers.
Investment Trust: Closed-end fund quoted on a stock exchange that holds/manages shares and investments in other companies. The closed-end nature means that the price of the fund fluctuates in line with supply and demand as well as in line with the value of the underlying investments. Thus, investment trusts may trade at a premium or discount (usually the latter) to the value of the underlying investments.
ISIN (International Securities Identification Number): A unique identification number allotted for each security in the depository system by SEBI.
ISO 15022: Common messaging standard adopted for electronic trades under the Straight-through Processing (STP) system.
Issuer: An entity that is in the process of issuing its securities. Also known as the “Originator”.Stock Market Reference (A-Z)