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 resultsDrawdown
DDQuick Definition
A drawdown is the decline in an account, strategy, or asset from a previous peak to a later low.
Full Definition
Drawdown is often shown as a percentage of the peak value. Maximum drawdown is the largest peak-to-trough decline within a measured period. Drawdown describes realized path risk but does not show how quickly recovery occurs or predict future losses.
Example
An account that falls from 10,000 to 8,000 before recovering experiences a 20 percent drawdown.
Also Known As
Duration
Quick Definition
Duration is a bond measure used to estimate how sensitive its price is to changes in interest rates.
Full Definition
Modified duration gives an approximate percentage price change for a one-percentage-point change in yield, assuming other factors stay constant. A bond or fund with higher duration generally moves more when market yields change, though the estimate is less exact for large rate moves or bonds with embedded options.
Example
A bond with a modified duration of 6 may fall roughly 6% if its yield rises by one percentage point.
Also Known As
Earnings Before Interest, Taxes, Depreciation, and Amortization
EBITDAQuick Definition
EBITDA is a profit measure before interest, taxes, depreciation, and amortization are deducted.
Full Definition
Analysts use EBITDA to compare operating performance before financing, tax, and selected non-cash accounting expenses. It is generally a non-GAAP measure, is not the same as cash flow, and may be calculated differently by different companies.
Example
A company with $20 million of operating profit plus $5 million of depreciation and amortization reports simple EBITDA of $25 million before adjustments.
Also Known As
Earnings Per Share
EPSQuick Definition
Earnings per share shows the portion of a company's profit attributable to each common share.
Full Definition
Basic EPS generally divides income available to common shareholders by the weighted-average common shares outstanding. Diluted EPS also reflects potential shares from instruments such as options or convertible securities, so investors should note which version is reported.
Example
Net income available to common shareholders of $10 million divided by 5 million shares produces basic EPS of $2.
Also Known As
Economic Calendar
Quick Definition
An economic calendar lists scheduled economic releases, policy events, and their expected market importance.
Full Definition
A calendar commonly shows the release time, country, indicator, previous value, consensus forecast, and actual result. Markets may react when the actual figure differs from expectations or when earlier data are revised. Release times can change, so traders should confirm them with the official publisher.
Example
A trader checks the economic calendar before the CPI release to avoid unexpected volatility.
Also Known As
Economic Indicator
Quick Definition
An economic indicator is a statistic used to describe or assess part of an economy.
Full Definition
Indicators measure areas such as prices, employment, production, spending, trade, and confidence. Traders compare new data with prior readings and expectations to judge whether the economy is changing. No single indicator gives a complete picture, and many releases are revised after their first publication.
Example
GDP growth, inflation, and the unemployment rate are widely followed economic indicators.
Also Known As
Enterprise Value
EVQuick Definition
Enterprise value estimates the total market value of a company's operating business available to all capital providers.
Full Definition
A common calculation starts with equity market capitalization, adds debt and certain other claims such as preferred stock, and subtracts cash and cash equivalents. Exact definitions vary by analyst, so enterprise value is most useful when the same method is applied consistently.
Example
A company with a $500 million market cap, $150 million of debt, and $50 million of cash has a simple enterprise value of $600 million.
Also Known As
Ether
ETHQuick Definition
Ether is the native cryptocurrency of the Ethereum network.
Full Definition
Ether is used to pay transaction fees on Ethereum and can be staked to help secure the network. It can also be transferred, traded, or used inside decentralized applications. Ethereum is the network, while ether is the asset commonly represented by ETH.
Example
The user needed a small amount of ETH to pay the gas fee for an Ethereum transaction.
Also Known As
Ethereum Virtual Machine
EVMQuick Definition
The Ethereum Virtual Machine is the execution environment that runs Ethereum smart-contract code.
Full Definition
Every Ethereum node uses the EVM rules to calculate how valid transactions change network state. Smart contracts are compiled into bytecode that the EVM can execute, with computation measured in gas. Other blockchains may implement EVM compatibility so Ethereum-style contracts and tools can work there.
Example
The Solidity contract was compiled to bytecode and executed by the EVM.
Also Known As
Ex-Dividend Date
Ex-DateQuick Definition
The ex-dividend date is the date on or after which a buyer of a security is generally not entitled to the upcoming declared dividend.
Full Definition
To receive the dividend, an investor normally must own the security before it begins trading ex-dividend under the applicable settlement rules. The market price may adjust around the dividend amount, but other market forces can make the actual price change larger or smaller.
Example
If a stock's ex-dividend date is Thursday, a purchase made on Thursday normally does not receive that declared dividend.
Also Known As
Exchange Rate
Quick Definition
An exchange rate is the price of one currency expressed in another currency.
Full Definition
An exchange rate tells you how much of the quote currency is required to obtain one unit of the base currency. Rates move as demand, interest rates, inflation expectations, trade flows, risk sentiment, and policy conditions change. A quoted rate may be a market rate, an official fixing, or a rate set under a managed currency system.
Example
An exchange rate of USD/CAD 1.3500 means one US dollar costs 1.35 Canadian dollars.
Also Known As
Exchange-Traded Fund
ETFQuick Definition
An exchange-traded fund pools investors' money in a portfolio whose shares trade on an exchange.
Full Definition
An ETF may hold stocks, bonds, or other assets and gives each shareholder a proportional interest in the portfolio. Unlike a traditional mutual fund share priced once a day, an ETF share trades throughout the trading session at market prices that may differ from its net asset value.
Example
One broad-market ETF can give an investor exposure to hundreds of companies through a single trade.
Also Known As
Exotic Currency Pair
Quick Definition
An exotic currency pair combines a widely traded currency with a currency that is less liquid or from a smaller or emerging market.
Full Definition
Exotic pairs often have wider spreads, lower market depth, and greater sensitivity to local policy, political events, and capital controls. Their trading hours and rollover costs may also differ from those of major pairs. The word exotic describes a market category and does not mean the currency is unimportant.
Example
USD/TRY is commonly treated as an exotic pair because it combines the US dollar with the Turkish lira.
Also Known As
Expense Ratio
Quick Definition
An expense ratio is the annual percentage of a fund's assets used to pay its operating expenses.
Full Definition
The ratio covers recurring fund costs such as management and administrative expenses and is deducted from fund assets. Even a small difference in expense ratios can materially affect long-term returns, and some trading or account costs may not be included.
Example
A 0.50% expense ratio costs about $5 per year for each $1,000 invested, assuming the value stays constant.
Also Known As
Expiration Date
ExpiryQuick Definition
The expiration date is the date on which a derivative contract ends or reaches its final exercise and settlement process.
Full Definition
Options lose their remaining time value as expiration approaches, and rights that are not exercised may end according to contract and broker rules. Futures positions still open near expiry may be cash-settled or enter a delivery process. Last trading day, exercise cutoff, and settlement date can be different, so contract specifications matter.
Example
A trader closes a physically delivered futures position before its last trading day to avoid delivery obligations.
Also Known As
Exponential Moving Average
EMAQuick Definition
An exponential moving average is a moving average that gives more weight to recent prices.
Full Definition
Because newer observations receive greater weight, an EMA generally reacts faster to price changes than a simple moving average of the same length. It is still based on past prices and can lag the market or produce frequent false changes in a sideways range.
Example
A 20-day EMA responds more quickly to today's price move than a 20-day simple moving average.
Also Known As
Face Value
Quick Definition
Face value is the bond principal amount that the issuer normally repays at maturity.
Full Definition
Face value is used to calculate a bond's stated coupon payments and is different from its market price. A bond may trade above face value at a premium or below it at a discount.
Example
A bond with a $1,000 face value normally returns $1,000 at maturity if the issuer pays as promised.
Also Known As
Federal Open Market Committee
FOMCQuick Definition
The Federal Open Market Committee is the Federal Reserve body that sets the stance of US monetary policy.
Full Definition
The FOMC decides the target range for the federal funds rate and directs open-market and balance-sheet policy. It includes members of the Federal Reserve Board and Reserve Bank presidents under a defined voting structure. Statements, minutes, projections, and press conferences shape expectations for future policy as well as explain current decisions.
Example
After its meeting, the FOMC announces whether it changed the federal funds target range and explains the decision.
Also Known As
Finality
Quick Definition
Finality is the level of confidence that a confirmed blockchain transaction will not be reversed.
Full Definition
Some networks provide probabilistic finality, where reversal becomes less likely as more blocks are added. Others use explicit validator votes or checkpoints to reach economic or protocol finality. Finality rules differ across blockchains, so one confirmation does not mean the same thing everywhere.
Example
The payment service waited for the network's finality condition before treating the transfer as settled.
Also Known As
Floating Exchange Rate
Quick Definition
A floating exchange rate is mainly determined by market supply and demand rather than a fixed official value.
Full Definition
The rate can move as trade, capital flows, interest expectations, inflation, and risk sentiment change. Floating does not necessarily mean the central bank never intervenes, so some systems are described as managed floats. Exchange-rate flexibility can support independent monetary policy but exposes users to currency volatility.
Example
Under a floating system, stronger demand for a country's assets can raise its currency without an official change to a fixed rate.
Also Known As
Foreign Exchange Forward
FX ForwardQuick Definition
An FX forward is an agreement to exchange two currencies on a future date at a rate fixed today.
Full Definition
An FX forward lets two parties lock in a future exchange rate for a chosen amount and date. Companies commonly use forwards to reduce uncertainty about future payments or receipts in another currency. The forward rate may differ from the spot rate mainly because of the interest-rate difference between the two currencies.
Example
An importer locks a three-month EUR/USD forward rate before an invoice becomes due.
Also Known As
Foreign Exchange Market
FXQuick Definition
The foreign exchange market is the global market where one currency is exchanged for another.
Full Definition
The foreign exchange market connects banks, companies, governments, investment firms, and individual traders that need to buy or sell currencies. Most activity takes place over the counter through a network of dealers and electronic venues rather than on one central exchange. Prices are quoted as currency pairs because every trade buys one currency and sells another.
Example
A European company may use the foreign exchange market to convert US dollar sales revenue into euros.
Also Known As
Foreign Exchange Swap
FX SwapQuick Definition
An FX swap combines one currency exchange with a reverse exchange of the same currencies on a later date.
Full Definition
The two exchange rates and settlement dates are agreed when the contract begins. A common structure exchanges currencies near term and reverses the exchange through a forward leg. Banks and companies use FX swaps to manage short-term funding, liquidity, and the timing of currency cash flows.
Example
A bank receives euros and pays dollars today, then reverses both amounts in one month at the agreed forward rate.
Also Known As
Forex Rollover
Quick Definition
Forex rollover is the process of extending an open currency position to a later value date, usually with a financing credit or charge.
Full Definition
Rolling a position avoids completing the original near-term currency delivery and replaces it with a later settlement exposure. The adjustment reflects the two currencies' interest rates, market forward points, broker terms, and applicable fees. Multi-day adjustments may occur before weekends or holidays because settlement calendars cover non-business days.
Example
A EUR/USD position kept open past the broker's rollover time receives a credit or charge and is carried to the next applicable value date.
Also Known As
Free Cash Flow
FCFQuick Definition
Free cash flow is a non-GAAP measure commonly calculated as operating cash flow minus capital expenditures.
Full Definition
It is intended to show cash remaining after funding the assets needed to operate or grow the business. Companies may define or adjust free cash flow differently, so investors should read the calculation and reconciliation rather than compare the label alone.
Example
Operating cash flow of $120 million minus $40 million of capital spending gives $80 million of simple free cash flow.
Also Known As
Free Float
Quick Definition
Free float is the portion of a company's shares considered readily available for public trading.
Full Definition
It typically excludes restricted shares and closely held strategic positions owned by insiders, governments, parent companies, or controlling shareholders. Index providers and data vendors can use different float rules, so reported free-float figures may differ.
Example
If 100 million shares are outstanding but 30 million are closely held, a simple free-float estimate is 70 million shares.
Also Known As
Fully Diluted Valuation
FDVQuick Definition
Fully diluted valuation estimates a crypto asset's value if its maximum or fully issued supply were valued at the current price.
Full Definition
A common calculation is current token price multiplied by maximum supply, although providers may use total supply when no maximum is defined. FDV helps show how future issuance could affect valuation compared with today's circulating market cap. It is hypothetical and does not represent cash invested in the project or the price at which all tokens could actually be sold.
Example
At $2 per token and a maximum supply of one billion, the simple FDV is $2 billion.
Also Known As
Futures Basis
BasisQuick Definition
Futures basis is the difference between a cash-market price and the related futures price.
Full Definition
A common convention defines basis as cash price minus futures price, but some markets or analysts reverse the subtraction, so the convention must be stated. Basis changes with location, grade, financing, storage, time, and local supply and demand. A hedge can remain exposed to basis risk even when outright market-price risk is reduced.
Example
If local cash wheat is 6.20 and the referenced future is 6.35, basis is -0.15 under the cash-minus-futures convention.
Also Known As
Futures Contract
Quick Definition
A futures contract is a standardized exchange-traded agreement to buy or sell an underlying interest under specified future terms.
Full Definition
The exchange defines the contract size, quality or reference, expiry cycle, price increment, and settlement method. A clearinghouse stands between buyers and sellers and uses margin and daily settlement to manage performance risk. Traders often close or roll positions before expiry, but some contracts can lead to cash settlement or physical delivery.
Example
Buying a December gold future creates exposure to the contract's gold price until the position is closed or settled.
Also Known As
Futures Curve
Quick Definition
A futures curve is the set of prices for contracts on the same underlying across different delivery or expiration dates.
Full Definition
The curve shows how the market prices near-term and later exposure at one point in time. An upward slope is commonly associated with contango and a downward slope with backwardation. Storage, financing, expected supply and demand, seasonality, and risk premiums can all shape it.
Example
Natural-gas contracts may show higher winter prices than summer prices because expected heating demand shapes the futures curve.