Implied Volatility
The value of the price or rate
volatility variable that would equate current option price and fair value. Alternatively,
the value of the volatility variable that buyers and sellers appear to accept
when the market price of an option is determined. Implied volatility is
calculated by using the market price of an option as the fair value in an
option model and calculating (by iteration) the volatility level consistent
with that option price.
Income Distribution
Distribution of income of a
mutual fund to its unit holders, in proportion to the number of units held.
Independent directors
Independent directors are directors
who apart from receiving director’s remuneration do not have any other material
pecuniary relationship or
transactions with the company, its promoters, its management or its
subsidiaries, which in the judgement of the board may affect their independence
of judgement
Indexed asset
An indexed asset has coupon and
principal payments that are adjusted upward in response to increase in price
level. This adjustment is intended to compensate lenders for the decline in
purchasing power of loan repayments.
Index Fund
A mutual fund which invests in a
portfolio of shares that matches identically the constituents of a well known
stock market index. Hence changes in the value of the fund mirror changes in
the index itself.
Index futures
Futures contract based on an index,
the underlying asset being the index, are known as Index Futures Contracts. For
example, futures contract on NIFTY Index and BSE-30 Index. These contracts
derive their value from the value of the underlying index.
Index option contracts
The options contracts, which are
based on some index, are known as Index options contract. The buyer of Index
Option Contracts has only the right but not the obligation to buy / sell the
underlying index on expiry. Index Option Contracts are generally European Style
options i.e. they can be exercised / assigned only on the expiry date.
Index Trusts
Trust funds in which investment
strategy involves mirroring particular share market or fixed interest market
index.
Indian Depository Receipt
A receipt, evidencing an
underlying foreign security, issued in India by a foreign company which has
entered into an agreement with the issuer and depository, custodian and
depository or underwriters and depository, in accordance with the terms of
prospectus or letter of offer, as may be prescribed.
Initial margin
The initial amount which
customers have to put in before taking up a futures contract to guarantee the
transaction.
Initial Public Offering (IPO)
The first public issue by a
public limited company.
Inside Quote (U.S.)
The highest bid and lowest ask
prices among all the competing market makers in a security i.e. the best bid
and offer prices.
Insider
Any person who, is or was
connected with the company or is deemed to have been connected with the
company, and who is reasonably expected to have access, connection, to
unpublished price sensitive information in respect of securities of a company,
or who has received or has had access to such unpublished price sensitive
information
Insider trading
Practice of corporate agents
buying or selling their corporation’s securities without disclosing to the
public significant information which is known to them but which has not yet
affected the price.
Institutional Investors
Organizations those invest,
including insurance companies, depository institutions, pension funds,
investment companies, and endowment funds.
Institutionalization
The gradual domination of
financial markets by institutional investors, as opposed to individual
investors. This process has occurred throughout the industrialized world.
Interdelivery spread
The purchase of one delivery month of a given futures
contract and simultaneous sale of another delivery month of the same contract
on the same exchange. Also called intramarket spread.
In-the-Money
A call option is said be in the money when it has a strike
price below the current price of the underlying commodity or security on which
the option has been written. Likewise when a put option has a strike price
above the current price it is said to be in-the-money.
Intangible Assets
An item of value whose true worth
is hard or almost impossible to determine such as goodwill reputation, patents
and so on.
Interest rate agreement
An agreement whereby one party,
for an upfront premium, agrees to compensate the other at specific time periods
if a designated interest rate (the reference rate) is different from a
predetermined level (the strike rate).
Interest rate cap
Also called an interest rate ceiling, an interest rate
agreement in which payments are made when the reference rate exceeds the strike
rate.
Interest rate differential
The difference between the existing rate of interest and
the rate for the term remaining, multiplied by the principal outstanding and
the balance of the term.
Interest rate forward contracts
Nonstandardised, non listed agreements typically bought and
sold by individuals or corporations that are often connected by ongoing
business relations.
Interest rate futures
Financial futures that are considered to be primarily
sensitive to interest rate movements.
Interest rate hedges
Position designed to restrict
losses that would occur from specific interest rate movements.
Interest rate swap
Contract in which two parties agree to swap interest
payments for a predetermined period of time – traded in the OTC market.
Interest Rate Risk
The risk that movements in the interest rates may lead to a
change in expected return.
Interim Dividend
A dividend payment made during the course of a company’s
financial year. Interim dividend, unlike the final dividend, does not have to
be agreed in a general meeting.
Internal Rate of Return (IRR)
The rate at which future cash flows must be discounted in order
to equal the cash cost of the investment.
Investment banker
Financial conglomerate which conducts a full range of
investment related activities from advising clients on securities issues,
acquisitions and disposal of businesses, arranging and underwriting new
securities, distributing the securities etc.
Investment Company
A corporation, trust or
partnership that invests pooled unit holder/shareholder money in securities
appropriate to the organization’s objective. Mutual funds, close–ended funds
and unit investment trusts are the three types of investment companies.
Investment Objective
The goal that an investor and
mutual fund pursue together, e.g. current income, long term capital growth etc.
Investment Profit
Profit which results from the
difference between the purchase and selling prices of a security. Trading
profit is short term while investment profit is medium or long term.
ISIN
ISIN (International Securities
Identification Number)A unique identification number allotted for each security
in the depository system by SEBI.
ISO 15022
Common messaging standard adopted
for electronic trades under Straight through Processing (STP) system
Issuer
