Financial Market Terms
Learn essential financial market terms with simple definitions and practical examples covering trading, stocks, forex, cryptocurrencies, commodities, and economic indicators.
Financial Glossary
300 resultsCore PCE Price Index
Core PCEQuick Definition
Core PCE is the US PCE price measure excluding food and energy to make underlying inflation easier to see.
Full Definition
Food and energy prices can move sharply from month to month, so excluding them may reveal a steadier inflation trend. Core PCE still covers a broad range of goods and services and can be revised when source data change. Policymakers also examine many other measures rather than relying on this index alone.
Example
Core PCE can remain elevated even when a temporary fall in oil prices lowers headline PCE inflation.
Also Known As
Correlation
Quick Definition
Correlation measures the direction and strength of the historical relationship between two sets of returns.
Full Definition
The standard correlation coefficient ranges from -1 to +1, where +1 means perfectly aligned linear movement and -1 means perfectly opposite linear movement. Correlation can change over time, does not prove causation, and may increase during market stress.
Example
Two assets with low correlation may not rise and fall together, which can improve portfolio diversification.
Also Known As
Coupon Rate
Quick Definition
The coupon rate is a bond's stated annual interest rate as a percentage of its face value.
Full Definition
Multiplying the coupon rate by face value gives the annual coupon amount for a traditional fixed-rate bond. The coupon rate usually stays fixed even when the bond's market price and current yield change.
Example
A 5% coupon on a $1,000 face-value bond pays $50 of interest per year, assuming payments are made as promised.
Also Known As
Covered Call
Quick Definition
A covered call combines ownership of an underlying asset with the sale of a call option on that asset.
Full Definition
The premium provides income and limited downside cushion, while the short call caps upside above the strike. The strategy remains exposed to most of the underlying asset's decline. Assignment can require the holder to sell the asset at the strike, including before expiration when the option permits early exercise.
Example
An investor owns 100 shares at 48 and sells one 55-strike call covering those shares.
Also Known As
Credit Rating
Quick Definition
A credit rating is an agency's opinion about an issuer's or debt security's relative credit risk.
Full Definition
Ratings use letter or symbol scales to summarize the agency's assessment of the ability and willingness to make promised payments. They are opinions rather than guarantees, can change, and should not replace an investor's own analysis.
Example
A rating downgrade can signal that an agency believes the bond's credit risk has increased.
Also Known As
Cross Currency Pair
CrossQuick Definition
A cross currency pair is a foreign exchange pair that does not include the US dollar.
Full Definition
Cross rates allow two non-dollar currencies to be traded directly, although dealers may still use dollar-based markets when pricing or hedging them. Some liquid crosses are also called minor pairs, while less liquid crosses may be treated differently by brokers. Cross-pair behavior can reflect economic and policy differences between both countries.
Example
EUR/JPY is a cross because neither the euro nor the Japanese yen is the US dollar.
Also Known As
Crypto Exchange
Quick Definition
A crypto exchange is a service or protocol where users buy, sell, or swap crypto assets.
Full Definition
An exchange may be centralized and company-operated or decentralized through smart contracts. It can provide markets between crypto assets and between crypto and government-issued currencies. Users should consider liquidity, fees, custody, security, withdrawal rules, market integrity, and legal availability.
Example
The buyer used a crypto exchange to trade euros for bitcoin.
Also Known As
Crypto Slippage
Quick Definition
Slippage is the difference between the price expected for a trade and the price at which it actually executes.
Full Definition
It can result from market movement, low liquidity, trade size, or the pricing curve of an AMM. A slippage tolerance tells a trading interface how much unfavorable price movement the user will accept before the transaction fails. Setting it too high can lead to a much worse fill and increase exposure to transaction-ordering attacks.
Example
A large swap in a small pool had 4% slippage because it moved the pool price sharply.
Also Known As
Crypto Wallet
Quick Definition
A crypto wallet is software or hardware that manages keys and helps a user interact with blockchain accounts.
Full Definition
The assets remain recorded on the blockchain; the wallet stores or accesses the keys needed to control them. Wallets can create addresses, sign transactions, and display balances. If the relevant private key or recovery phrase is lost without a backup, access may be permanently lost.
Example
The wallet signed the transaction locally, then broadcast it to the network.
Also Known As
Cryptocurrency
Quick Definition
A cryptocurrency is a digital asset that uses cryptography and a distributed network to record and transfer value.
Full Definition
A cryptocurrency exists electronically and is tracked on a blockchain or another distributed ledger. Network rules, rather than a single bank, usually determine how transactions are verified and how new units are issued. Its price can be highly volatile, and ownership normally depends on control of cryptographic keys.
Example
Bitcoin is a cryptocurrency that can be sent directly from one address to another.
Also Known As
Currency Appreciation
Quick Definition
Currency appreciation is an increase in a currency's value relative to another currency.
Full Definition
Because currencies are quoted in pairs, appreciation must always be stated against a comparison currency. It can make imports cheaper in domestic-currency terms while making exports more expensive for foreign buyers, all else equal. The numerical direction on a chart depends on which currency is the base.
Example
If EUR/USD rises from 1.10 to 1.15, the euro has appreciated against the US dollar.
Also Known As
Currency Carry Trade
Quick Definition
A currency carry trade seeks to earn from holding a higher-yielding currency while funding the position in a lower-yielding currency.
Full Definition
The strategy can benefit from the interest-rate difference when exchange rates remain favorable. A sudden rise in the funding currency or fall in the target currency can quickly erase the interest earned. Carry trades may unwind sharply when risk appetite falls or expected central-bank policy changes.
Example
A trader borrows a low-yielding currency and buys a higher-yielding currency, while accepting the risk that the exchange rate moves against the position.
Also Known As
Currency Depreciation
Quick Definition
Currency depreciation is a decrease in a currency's value relative to another currency under a market-based exchange rate.
Full Definition
Depreciation can raise the domestic cost of imports and make exports cheaper for foreign buyers, although pass-through varies. The term is generally used for market-driven declines, while devaluation often refers to an official reduction in a fixed rate. The quoted pair must be identified because one currency's depreciation is the other's appreciation.
Example
If GBP/USD falls from 1.30 to 1.20, the pound has depreciated against the US dollar.
Also Known As
Currency Intervention
FX InterventionQuick Definition
Currency intervention is an official action in the foreign exchange market intended to influence a currency's value or trading conditions.
Full Definition
A central bank or government may buy one currency and sell another, sometimes together with other authorities. Intervention can be sterilized to offset its effect on domestic liquidity or unsterilized so the monetary base also changes. Its effect depends on size, credibility, coordination, market conditions, and whether broader policy supports the objective.
Example
A central bank sells foreign reserves and buys its own currency to slow a rapid depreciation.
Also Known As
Currency Pair
Quick Definition
A currency pair shows the value of one currency measured in another currency.
Full Definition
A foreign exchange price is written with two currency codes, such as EUR/USD. The first currency is the base currency and the second is the quote currency. A rising EUR/USD price means one euro buys more US dollars than before.
Example
If EUR/USD is 1.1200, one euro is worth 1.12 US dollars.
Also Known As
Currency Peg
PegQuick Definition
A currency peg is an exchange-rate arrangement that keeps a currency at or near a stated value against another currency or basket.
Full Definition
The monetary authority may use reserves, interest rates, market intervention, or legal controls to maintain the chosen rate or band. A peg can reduce exchange-rate uncertainty but limits some monetary-policy flexibility. Pressure can build if the maintained rate conflicts with inflation, capital flows, or available reserves.
Example
A central bank may promise to exchange its currency within a narrow band around a fixed US dollar rate.
Also Known As
Current Yield
Quick Definition
Current yield is a bond's annual coupon payment divided by its current market price.
Full Definition
Current yield measures annual coupon income relative to what the investor pays today. It does not include the gain or loss from the bond moving toward face value, reinvestment of payments, or the effect of holding until maturity.
Example
A bond paying $50 annually and trading at $950 has a current yield of about 5.26%.
Also Known As
Custodial Wallet
Quick Definition
A custodial wallet is an arrangement in which a third party controls the private keys for a user's crypto assets.
Full Definition
The provider handles key storage and usually lets the user access an account with conventional login credentials. This may simplify recovery and trading, but the user depends on the custodian's security, solvency, policies, and withdrawal access. The legal treatment of assets held by a custodian can vary.
Example
Coins left in an exchange account are commonly controlled through the exchange's custodial system.
Also Known As
Data Revision
Quick Definition
A data revision is an official change to a previously published economic estimate when newer or more complete information becomes available.
Full Definition
Early releases often rely on partial surveys, estimates, or preliminary seasonal factors. Statistical agencies revise them according to published schedules and may also make larger annual or benchmark revisions. Traders should examine revisions because they can strengthen or reverse the message from the latest headline.
Example
Last month's payroll gain is revised from 150,000 to 90,000 when additional employer reports arrive.
Also Known As
Dealer
Quick Definition
A dealer buys and sells securities for its own account as a business.
Full Definition
Unlike a broker acting as a customer's agent, a dealer is the principal on the other side of a transaction. A dealer may hold inventory and earn from the difference between its buying and selling prices, while taking the risk that prices move against that inventory.
Example
A bond dealer may buy a bond into inventory and later sell it to another investor at a quoted price.
Also Known As
Decentralized Application
dAppQuick Definition
A decentralized application is an application that uses blockchain smart contracts for important parts of its logic or state.
Full Definition
A dApp often combines a normal web or mobile interface with onchain contracts. Users may connect a wallet and sign transactions instead of creating a traditional account. Decentralization exists on a spectrum because the interface, data services, governance, and contract controls may still depend on particular operators.
Example
The user connected a wallet to a lending dApp and supplied tokens through its smart contract.
Also Known As
Decentralized Autonomous Organization
DAOQuick Definition
A decentralized autonomous organization is a blockchain-coordinated group that uses shared rules and governance to manage decisions or resources.
Full Definition
Members may use tokens or other credentials to submit proposals, vote, and control a treasury through smart contracts. Real DAOs vary widely in decentralization because developers, delegates, multisignature signers, or large holders may retain substantial power. The word autonomous does not mean the organization has no people, legal obligations, or operational dependencies.
Example
The DAO voted to use part of its treasury to fund a new developer grant program.
Also Known As
Decentralized Exchange
DEXQuick Definition
A decentralized exchange is a blockchain protocol that lets users trade crypto assets through smart contracts.
Full Definition
A DEX commonly allows users to keep control of their wallets while submitting swaps onchain. Some DEXs use automated market makers, while others use order books or different matching systems. The underlying protocol may be decentralized even if a popular website used to access it has a central operator.
Example
The trader connected a self-custody wallet to a DEX and swapped ETH for a stablecoin.
Also Known As
Decentralized Finance
DeFiQuick Definition
Decentralized finance is a group of blockchain-based financial applications that operate mainly through smart contracts.
Full Definition
DeFi protocols can support trading, lending, borrowing, payments, derivatives, and asset management without using a conventional intermediary for every action. Users often interact directly from a wallet, and activity may be publicly visible onchain. DeFi still carries smart-contract, oracle, liquidity, governance, market, and regulatory risks.
Example
A user supplied stablecoins to a DeFi lending market and earned interest paid by borrowers.
Also Known As
Deflation
Quick Definition
Deflation is a sustained decline in the general price level across an economy.
Full Definition
Deflation is different from disinflation, which means inflation remains positive but slows. Persistent deflation can increase the real burden of debt and encourage delayed spending if people expect lower prices later. A temporary fall in one category, such as energy, does not by itself establish economy-wide deflation.
Example
If a broad consumer price index is lower than a year earlier for an extended period, the economy may be experiencing deflation.
Also Known As
Derivative
Quick Definition
A derivative is a financial contract whose value is linked to an underlying asset, rate, index, or event.
Full Definition
Futures, forwards, options, and swaps are common derivatives. They can be used to transfer or manage price risk, gain market exposure, or speculate, often with less initial cash than the full underlying value. Their risks depend on contract terms, leverage, liquidity, settlement, and the creditworthiness of relevant counterparties or clearing arrangements.
Example
A crude-oil futures contract is a derivative because its value is linked to the price of crude oil.
Also Known As
Diversification
Quick Definition
Diversification means spreading investments across different assets to reduce dependence on any single holding.
Full Definition
A diversified portfolio may include different companies, industries, asset types, or regions whose returns do not move exactly together. Diversification can reduce company-specific risk, but it cannot guarantee a profit or remove the risk of a broad market decline.
Example
Owning shares across healthcare, technology, utilities, and bonds is more diversified than holding one stock.
Also Known As
Dividend
Quick Definition
A dividend is a distribution a company or fund makes to its shareholders.
Full Definition
Dividends are often paid in cash but may also be paid in additional shares or other property. A company's board decides whether to declare a dividend, and common-stock dividends can be reduced or stopped.
Example
An investor holding 100 shares receives $50 when the company pays a $0.50 dividend per share.
Also Known As
Dividend Yield
Quick Definition
Dividend yield is the annual dividend per share divided by the current share price.
Full Definition
It expresses dividend income as a percentage of the price paid, before taxes and other costs. A high yield can result from a falling share price and does not guarantee that future dividends will continue.
Example
A stock paying $2 annually and trading at $50 has a 4% dividend yield.
Also Known As
Dovish
Quick Definition
Dovish describes a policy view that places relatively greater emphasis on supporting growth or employment through easier monetary conditions.
Full Definition
A dovish message may favor lower rates, earlier rate cuts, asset purchases, or greater patience with temporary inflation. The term describes tone relative to expectations and does not mean policymakers ignore inflation. A statement can also contain both hawkish and dovish elements.
Example
A policymaker who emphasizes weakening employment and the possibility of rate cuts is viewed as dovish.