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Balance of Payments
The accounts of a country’s trade with other countries. If imports are greater than exports there is a deficit; and if exports are greater than imports there is a surplus.
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Bank of England
The UK’s central bank which undertakes overall monetary policy and determines interest rates.
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Bargain
Another word for a transaction or deal. It does not imply that a particularly favourable price was obtained.
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Basis Point
A change in the interest rate of one hundredth of one per cent (0.01%). One basis point is written as 0.01 when 1.0 represents 1%.
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Bear
An investor who has a negative view on the market.
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Bear Spread
The purchase of an option with a higher stake price and corresponding sale of an option from the same expiry month with a lower strike price. The strategy may be undertaken using either puts or calls when expecting a fall in the price of an underlying security.
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Bearer security (Bearer Bond)
Securities for which there is no register of beneficial ownership. For certificated bearer securities, the certificate itself is proof of ownership. Dividends (for shares) and interest (bonds) are collected by clipping the coupons from the certificate and sending them to the paying agent.
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Benchmark Bond
A bond whose terms set a standard for the market. The benchmark usually has the greatest liquidity, the highest turnover and is usually the most frequently quoted.
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Beneficial owner
The person entitled to the benefit derived from a trust property, e.g., the income or the capital.
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Beneficiary
The person entitled to the benefit derived from a trust property, e.g., the income or the capital.
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Bid Offer Spread
The difference between quoted bid and offer prices.
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Bid Price
It is the price (up to a specified quantity of shares) at which market makers are prepared to buy stock and therefore the price at which investors usually sell stock.
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Blue Chip
Originally an American expression, to denote the shares of companies which are well established, usually large and highly regarded.
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Bonds
A certificate of debt, generally long-term, under the terms of which an issuer contracts, inter alia, to pay the holder a fixed principal amount on a stated future date and, usually, a series of interest payments during its life.
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Bondwashing
Selling a bond cum dividend and then repurchasing it ex dividend in order to convert the coupon element of the bond’s price into a capital gain, rather than receiving the coupon as income. The tax treatment of this process differs in various jurisdictions.
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Bonus Issue (Capitalisation Issue)
A free issue of shares to existing shareholders. The number of shares received depends on the size of the holding prior to the issue. For instance, holders could be allocated one bonus share for every five held.
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Broker/ Dealer
Firm that operates in dual capacity in the securities marketplace: as principal trading for its own account and as broker representing clients on the market.
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Broking
The activity of representing a client as agent and charging commission for doing so.
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Bull
An investor who has a positive view of the market and believes prices will rise.
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Bull Spread
The purchase of an option with a lower price and the corresponding sale of an option from the same expiry month with a higher strike price. The strategy may be undertaken when expecting a rise in the price of the underlying security.
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Bulldogs
A bond denominated in sterling, issued on behalf of a non-resident borrower and listed on the LSE.
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Bullet
A term for a bond with no call or put options. All outstanding stock is repayable on a single known maturity date.