Glossary of terms
Attempts to achieve a portfolio return higher than that commensurate one with the risk, either by forecasting general market trends or by identifying specific market sectors or financial instruments with price deviations.
One hundredth of a percentage point – a unit used to measure changes in interest rates.
Shares characterized by significantly higher reputation and average trading volume.
A type of interest-bearing long-term securities issued by governments, local authorities, banks, other financial institutions and companies. Bonds are a form of long-term loans used by the issuer.
A natural person who, under a contract with an investment intermediary, directly enters into transactions in securities for the investment intermediary's own account or on behalf of its clients on or outside a regulated market for financial instruments.
Securities issued in the country conferring rights derived from the ones attached to other underlying securities, where the rights attached to the underlying securities are exercised for the benefit of the holders of the derivative securities.
A system for trading government securities issued by the Ministry of Finance and offered to primary dealers of government securities, organized by the BNB. Primary dealers may be commercial banks and investment intermediaries. Buyers may submit competitive and non-competitive bids, ranked in accordance with the auction rules.
A market on which long-term financial instruments – shares, bonds, compensatory instruments, etc. – are exchanged.
An institution whose principal activities consist of maintaining a centralized register of financial instruments, recording transactions in book-entry financial instruments, clearing, settlement, securities lending, etc. In Bulgaria, this activity is carried out by the Central Depository S.A. - it opens and maintains such accounts.
A commercial security issued by a bank against a fixed-term cash deposit.
Mutual set-off of reciprocal claims of the parties to transactions in financial instruments.
An enterprise organized as an investment company, contractual fund or unit trust investing in financial instruments funds raised through a public offering of shares or units, operating on the principle of risk diversification and, at the request of shareholders or unit holders, redeeming its shares or units at a price based on the net asset value.
A derivative financial instrument representing the right to receive, or the obligation to pay, the difference between the market value of a specified number of securities or other financial instruments and the price fixed in advance in the contract.
A bond that may, at the holder's option, be converted into a specified number of ordinary shares of the issuing company.
A bond issued by a company. Maturity is the term a bond is issued for. The maturity date is the date the issuer repays the principal (nominal value) to the bondholder on.
Interest paid on a bond.
A person who buys and sells financial instruments and/or foreign currency for their own account.
Securities issued on the basis of securities of an issuer registered in another country and conferring the right to exercise the rights associated with the underlying securities upon their holders.
Management, pursuant to an agreement concluded with a client, of an individual portfolio comprising financial instruments, at the manager's own discretion and without specific instructions from the client. Discretionary portfolio management is carried out by licensed investment intermediaries using the services of investment consultants.
The inclusion of different types of assets in a portfolio in order to reduce risk and improve the portfolio's investment performance. For example, a portfolio may include bonds issued by different issuers, with different maturities and different credit ratings.
A portion of the profit after tax, determined by the competent body of the company, distributed among shareholders.
Duration measures the sensitivity of the price of a fixed-income asset (bond). It is determined as the weighted average term to maturity of the bond's cash flows. Generally, the longer the time to maturity, the greater the duration and price volatility, while the higher the coupon, the lower the duration and, consequently, the price volatility.
The sum of the nominal values of the shares issued by the joint-stock company.
International bonds denominated in a currency different from that of the issuer. For example, Bulgaria issues eurobonds denominated in euros and US dollars.
A security (bond) that pays a specified, fixed cash flow over a given period of time.
A bond whose coupon interest rate is adjusted periodically in accordance with a specified market interest rate.
A non-standardized contract between two parties to buy or sell an asset on a specified future date at a price agreed in advance. Unlike a futures contract, a forward contract is traded over the counter and its contractual terms are not standardized between the two parties. Under this type of instrument, each party is exposed to the counterparty credit risk of the other party to the contract.
Price quotations for forward transactions indicating what value a financial instrument or commodity will have after a specified period of time. These take into account the costs associated with storing the asset, possible changes in its supply and demand, etc.
A standardized financial instrument traded on regulated financial markets that expresses the right and obligation to purchase or sell a specified quantity of an asset (securities, a market indicator or a commodity) at a predetermined price on a specified date.
Bonds issued by the Ministry of Finance to finance/fund the budget. They may be short-term, medium-term or long-term. Short-term securities have a maturity of up to one year, medium-term securities have a maturity of between 1 and 5 years, and long-term securities have a maturity of more than 5 years. On the primary market, government securities are acquired through auctions organized by the BNB.
A method of reducing risk by entering into forward transactions so that an existing risk arising from a previously concluded transaction or an existing position is avoided or minimized in exchange for payment of the agreed hedging cost.
An offering of newly issued financial instruments to a broad range of investors.
The provision of advice through oral statements, documents or by other means concerning the value of such instruments or an assessment of whether to invest in financial instruments, including an assessment concerning the type, positions and price of the instruments the subject of the investment, with the exception of advice provided through publications addressed to an unspecified group of persons.
A joint-stock company investing funds raised through a public offering of shares in financial instruments.
A natural person who, under a contract with an investment intermediary, management company and/or investment company, performs investment analyses and provides advice concerning financial instruments.
A person who, as a regular business activity, provides investment services and/or performs investment activities.
The person liable under financial instruments issued by them.
A company having its capital is divided into shares.
Also known as the leverage effect. The use of borrowed capital with the aim of increasing the rate of return. The use of leverage involves taking on additional risk, as it increases not only potential profit but also potential loss. Typical leveraged instruments include options, futures and margin trading.
An order to buy or sell a specified quantity of a financial asset when a specified price is reached. A specific period during which the order remains active may also be set.
Liquidity indicates how quickly an asset can be sold and converted into cash. More liquid assets are generally considered safer because an investor can dispose of them more quickly when necessary. Money market instruments and so-called blue chips (shares characterized by significantly higher average trading volume) are highly liquid.
The smallest indivisible quantity of units of a particular asset (currency, shares, bonds, etc.) that is traded.
A joint-stock company managing the activities of a collective investment scheme, including investment management, administration of units/shares, and marketing, legal and accounting services related to asset management.
Margin trading is carried out using borrowed capital. The client opens a margin account with a broker, who lends the client funds for trading. The borrowed capital is usually provided at a specified ratio to the deposited funds, for example 1:10. This means that with an account of EUR 1,000, a client may open a position worth EUR 10,000.
The market value of the equity capital of a public company at a given point in time. It is calculated by multiplying the number of shares issued by their current market price.
A person who maintains a permanent presence in financial markets for the purpose of trading for their own account by purchasing and selling financial instruments using their own funds at prices determined by them.
One or more persons who manage and/or organize the operation of a regulated market. The market operator may itself be the regulated market.
An order to buy or sell a given financial instrument at the best available counterparty price at the time of execution.
The monetary amount for which an asset may be sold at the time of valuation in an arm's-length transaction between informed, independent and willing buyers and sellers.
The remaining period until the maturity of a financial instrument or obligation.
A measure indicating the relative change in the price of a bond resulting from a change in interest rates.
A market where short-term financial instruments are traded. They have a maturity of less than one year and are generally used for borrowing liquidity.
Instruments normally traded on the money market that are liquid and whose value can be accurately determined at any time.
Securities issued by banks on the basis of their portfolios of loans secured by one or more first-ranking mortgages in favor of the banks over real estate (mortgage loans).
Segregated assets established for the purpose of collective investment in financial instruments using funds raised through a public offering of units, based on the principle of risk diversification and managed by a management company.
The total value of all assets in the portfolio of a collective investment scheme, less all liabilities.
A transaction in which the opposite of an existing transaction is carried out for the purpose of closing it.
An option represents a right, but not an obligation, to buy or sell a given asset at a fixed price by a specified date (maturity). Call options confer the right to buy, while put options confer the right to sell. The exercise price, also called the “strike price”, is the fixed price the underlying asset may be bought or sold at.
The management of investment portfolios, as mandated by clients, carried out at the discretion of the investment intermediary for each individual client and their investment portfolios, which include one or more financial instruments.
Shares representing a class of ownership that has a preferential position compared with ordinary shareholders with respect to the assets and profits of the issuing joint-stock company. Preferred shares are usually non-voting but receive dividends before ordinary shares. In some cases, preferred shares carry the right to a preferential dividend.
A market on which initial public offerings take place.
A document containing detailed information about the issuer of a financial instrument and about the issue itself.
A joint-stock company with a registered issue of securities intended for trading on a regulated market or whose securities are traded on such a market.
1. Determination of the price (rate) of financial instruments achieved on the market;
2. Official publication of exchange quotations for securities, foreign currencies and commodities.
A multilateral system operated and/or managed by a market operator bringing together or facilitating the bringing together of the interests of multiple third parties in order for them to buy and sell financial instruments.
An agreement involving a commitment to conduct a reverse transaction. A transaction where one party sells (buys) a financial instrument and simultaneously undertakes to purchase (sell) it back after a specified period at a predetermined price.
Securities conferring the right to subscribe for a specified number of shares in connection with a decision to increase the capital of a public company.
The possibility of obtaining a return on an investment different from the expected return. This includes the probability of losing part or all of the invested funds.
Expected return exceeding that of risk-free securities. The premium represents compensation for the risk of an investment.
An asset with a certain future rate of return; short-term government securities are generally considered to be such assets.
Trading over extremely short time intervals. Positions are held for several minutes with the aim of generating quick profits.
A market where subsequent trading in financial instruments takes place following their initial sale upon issuance.
Transferable rights registered with a depository institution (book-entry securities) or documents embodying transferable rights (certificated securities), which may be traded on the capital market, such as shares, bonds, government securities, rights, etc.
The performance of obligations arising from a transaction in financial instruments, involving delivery of the financial instruments into the possession of the buyer and the corresponding payment to the seller.
A person who holds shares in a joint-stock company.
A joint-stock company registered under the Special Investment Purpose Companies Act further investing funds raised through the issuance of securities in real estate or receivables.
A person who generally assumes higher investment risk with the aim of obtaining a higher return. The instruments traded are usually highly leveraged and positions are held for a relatively short period.
The current value of an asset, as opposed to the price under a futures, forward or option contract.
The difference between the bid price and the ask price of a given financial instrument.
Securities issued by joint-stock companies that certify the holder’s ownership interest in the company’s share capital. They entitle the holder to receive dividends, to vote at the general meeting of shareholders, and to receive a liquidation share.
A type of order that is executed when the market price of the traded financial instrument reaches a predetermined market price. It is generally used to limit a potential loss on open positions.
An unconditional and irrevocable declaration of intent to acquire securities in the process of issuance and to pay their issue price.
The latest European regulatory framework to date governing the establishment and offering of collective investment schemes, including mutual funds and exchange-traded funds. UCITS enable the cross-border marketing of a product already registered on a European stock exchange. Almost all ETFs are structured to comply with UCITS regulations.
A security representing the right to subscribe for a specified number of securities at a predetermined or determinable issue price until the expiry of a specified period.
A graph of yield to maturity as a function of the time remaining until maturity.
A measure of the average rate of return that may be obtained from a bond if it is held until its maturity date.