金融专业英语重要概念和理论

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2024年3月16日发(作者：)

❶Economy: An economy or economic system consists of the production, distribution or trade, and consumption

of limited goods and services .

❷Finance: Finance is a field that deals with the allocation of assets and liabilities over time under conditions of

certainty and uncertainty. ( ---A key point in finance is the time value of money, which states that purchasing

power of one unit of currency can vary over time. Finance aims to price assets based on their risk level and their

expected rate of return. )

Bodies' : finance is the study of how people allocate scarce resources over time. Financial system is the

set of markets and other institutions used for financial contracting and the exchange of assets and risks.

:A financial market is a market in which people and entities can trade financial securities.

: financial market is a market in which funds are transferred from people who have an excess of

available funds to people who have a shortage.

❸Corporate finance: Corporate finance is about how toincrease the value of the firm by dealing with the

sources of funding and the capital structure of the firm.——(The primary goal of corporate finance is to maximize

or increase shareholder value.)

——or say corporate finance is a branch of finance dealing with financial decisions of firms.

❹Option: an option is a contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell

an underlying asset at a specified strike price on or before a specified date.

The seller has the corresponding obligation to fulfill the transaction – that is to sell or buy – if the buyer (owner)

"exercises" the option. The buyer pays a premium to the seller for this right. An option that conveys to the owner

the right to buy something at a specific price is referred to as a call; an option that conveys the right of the owner

to sell something at a specific price is referred to as a put.

In basic terms, the value of an option is commonly decomposed into two parts:

The first part is the intrinsic value, which is defined as the difference between the market value of the underlying

asset and the strike price of the given option.

The second part is the time value.

❺Future: a futures contract is a contract between two parties to buy or sell an asset for a price agreed upon

today (the futures price) with delivery and payment occurring at a future point, the delivery date. The buyer of the

contract is said to be "long", and the party selling the contract is said to be "short".[1]

❻APT: arbitrage pricing theory (APT) is a general theory of asset pricing that holds that the expected return of a

financial asset can be modeled as a linear function of various macro-economic factors or theoretical market

indices, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient.

The model-derived rate of return will then be used to price the asset correctly - the asset price should equal the

present value of the future cash inflow at an interest rate or discount rate calculated by APT.

❼MM theorem: The basic theorem states that the value of a firm is not affected by it's capital structure under

certain assumptions. Instead it's decided by the value of it's real assets.

Assumption: such as frictionless market,no asymmetric information.(a frictionless market is a financial market

without transaction costs.)

Consequently the Modigliani–Miller theorem is also often called the capital structure irrelevance principle.

❽CAPM: the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of

return of an asset if every investor hold the effective portfolio according to Markowitz model.

The main idea of CAPM is that if all investors only hold risk-free asset and market portfolio, there will be a linear

relation between the expected rate of return and the risks of the asset.

The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or

market risk), often represented by the quantity beta (β) in the financial industry, as well as the expected return of

the market and the expected return of a theoretical risk-free asset. CAPM ―suggests that an investor’s cost of

equity capital is determined by beta.‖

❾EMH: the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In

consequence of this, one cannot consistently achieve returns in excess of average market returns .

There are three major versions of the hypothesis: "weak", "semi-strong", and "strong". The weak form of the EMH

claims that prices on traded assets already reflect all past publicly available information. The semi-strong form of

the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect

new public information. The strong form of the EMH additionally claims that prices instantly reflect even hidden or

"insider" information.

【10】DuPont analysis: DuPont Analysis is an expression which breaks ROE (Return On Equity) into three parts

in order to analyze a company's financial condition,operating efficiency &profitability.

【 Basic formula 】

ROE = (Profit margin)*(Asset turnover)*(Equity multiplier) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)=

(Net Profit/Equity)

Profitability (measured by profit margin)

Operating efficiency (measured by asset turnover)

Financial leverage (measured by equity multiplier)

【11】asymmetric information: Asymmetric information deals with the study of decisions in transactions where

one party has more or better information than the other. This creates an imbalance of power in transactions,

which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of

this problem are adverse selection,[1] moral hazard, and information monopoly.[2]

Information asymmetry is in contrast to perfect information, which is a key assumption in neo-classical

economics.

【12】Derivative: Derivatives are financial instruments that derive their value from the prices of one or more other

assets. Their principal function is to serve as tools for managing risks associated with the underlying assets.

【13】Investment bank

An investment bank is a financial institution that assists individuals, corporations, and governments in raising

financial capital. An investment bank may also assist companies involved in mergers and acquisitions (M&A).

--Comparing the commercial bank and investment bank--

(1).They are both intermediaries between those people who have an excess of available funds and people who

have a shortage. But commercial banks are intermediaries of indirect finance and investment bank direct finance.

(2).Basic business: the basic business of commercial banks is making loans and taking deposits. Investment

banks securities underwriting business.

(3).Commercial banks do their business in money market,whereas investment bank in capital market.

【14】Open market operation: An open market operation (also known as OMO) is an activity by a central bank

to buy or sell government bonds on the open market. A central bank uses them as the primary means of

implementing monetary policy. The usual aim of open market operations is to manipulate the short-term interest

rate and the supply of base money in an economy, and thus indirectly control the total money supply, in effect

expanding money or contracting the money supply.

【15】Quantitative easing: Quantitative easing (QE) is monetary policy used by a central bank to stimulate an

economy when standard monetary policy has become ineffective.[1][2][3] A central bank implements quantitative

easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus

raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary

base.

Expansionary(扩张性的） monetary policy to stimulate the economy typically involves the central bank buying

short-term government bonds in order to lower short-term market interest r, when short-term

interest rates reach or approach zero, this method can no longer work.[14] In such circumstances monetary

authorities may then use quantitative easing to further stimulate the economy by buying assets of longer maturity

than short-term government bonds, thereby lowering longer-term interest rates further out on the yield

curve.[15][16]

【16】direct finance：Direct finance is a method of financing where borrowers borrow funds directly from the

financial market without using a third party service, such as a financial intermediary. This is different from indirect

financing where a financial intermediary takes the money from the lender against an interest rate and lends it to a

borrower against a higher interest rate. Direct financing is usually done by borrowers that sell securities and/or

shares to raise money and circumvent the high interest rate of financial intermediary(banks).[1] We may regard

transactions as direct finance, even when a financial intermediary is included, in case no asset transformation has

taken place.

【17】operating leverage means that because of fixed cost the percentage change in EBIT( earnings before

interest and taxes) is larger than the % change in sales. It can be measured by DOL( the degree of operating

leverage ) which is equal to the % change in EBIT divided by the % change in sales.

---- financial leverage: because of the fixed cost of borrowing. EPS/EBIT. Earning per share.

DFL: the degree of financial leverage.

【18】exchange rate: an exchange rate between two currencies is the rate at which one currency will be

exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency.

【19】interest rate: is the cost of borrowing funds.

【20】swap: a derivative in which two parties exchange future cash flows.

【21】warrant: a warrant is a security that entitles the holder to buy the underlying stock of the issuing company

at a fixed exercise price until the expiry date.

【22】convertible bond: a convertible bond is a type of bond that the holder can convert into a specified number

of shares of common stock in the issuing company.

【23】 Financial engineering: there is no exact definition of FE. It mainly includes three parts: the theory of

financial risk management; pricing derivatives; developing new financial product;

【24】期权定价模型

【25】PPP理论(purchasing power parity)

【26】interest parity

利率与汇率的关系

1．利率变动对汇率的影响

首先，利率政策通过影响经常项目对汇率产生影响。当利率上升时，信用紧缩，贷款减少，投资和消费减少，物价

下降，在一定程度上抑制进口，促进出口，减少外汇需求，增加外汇供给，促使外汇汇率下降，本币汇率上升。利

率下降则相反。

其次，通过影响国际资本流动间接地对汇率产生影响。当一国利率上升时，就会吸引国际资本流入，从而增加对本

币的需求和外汇的供给，使本币汇率上升、外汇汇率下降。

2．汇率变动对利率的影响也是间接地作用，主要通过影响短期资本流动而间接地对利率产生影响。

当一国货币汇率下降之后，受心理因素的影响，往往使人们产生该国货币汇率进一步下降的预期，在本币贬值预期

的作用之下，引起短期资本外逃，国内资金供应的减少将推动本币利率的上升。

1 interest rate influence exchange rate.

--- in the current account aspect: when the interest rate increases, the demand for mortgages will reduce. Thus

investment and consumption will decrease. Then the decrease in commodity price will lead to more export and

less import.& this will increase the demand for RMB, resulting in an appreciation of RMB.

---in the capital account aspect: The higher interest rate will result in more international capital inflows which will

increase the demand for RMB. Thus RMB appreciate.

2 exchange rate to interest rate

RMB depreciate, due to bad expectation, capital flow out, the money supply decrease, thus increase the interest

rate.

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