Here are Finance dictionary Terms beginning with B.

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Backfill bias a process of adding a new fund or company to an index and then back calculating its returns on the index. Since added funds or companies are generally successful, this normally has the effect of artificially raising the returns on the index. Backfill bias can lead to the overstating of returns,

Back Office  part of a financial institution that deals with accounting, settlement, record maintenance etc.

Backwardation  when one market maker’s selling (offer) price rate is less than another’s buy (bid) price, this means there is an arbitrage opportunity. In normal market conditions the selling price is above the bid price.

Balance Sheet  an accounting statement of a company’s assets and liabilities and net worth.

Bancassurance  a French term used to describe banks involved in the selling of insurance products along with traditional deposit and lending services.

Bank for International Settlements (BIS)  Based in Basle and is known as the central banker’s bank since it specializes in central banking issues and the stability of the financial system.

Bankruptcy  a situation where an individual or company is unable to repay its debts.

Barrier Option  an option whose payoff depends upon whether or not the underlying asset price has passed a particular point.

Basis Point  one hundredth of one per cent, i.e. 0.01%, e.g. 5 basis points = 0.05%.

Basis Risk  the risk that a particular hedging strategy will not work as well as intended since the futures/options positions and cash market may not move to exactly offset the hedged risk.

Basel I Accord a 1988 global accord requiring ,major banks to hold minimum amounts of Tier 1 and Tier 2 capital equal to 8% of their risk adjusted

Basel II  a 2004 comprehensive revision of the Basel I  Accord. Pillar I of the accord covers the minimum capital adequacy standards for banks. Pillar II focuses on enhancing the supervisory review process. Pillar III encourages market discipline through increased disclosure of banks’ financial condition.

Bear  an expression that describes a pessimist that thinks that the prices of shares/bonds or other securities/assets will fall in price.

Bear Market  a market in which security prices fall by a substantial amount. In the US a fall in the S&P 500 or Dow Jones by 20% or more is often classified as a bear market.

Bearer Bond  a bond whose coupon and principal is payable to whoever is in possession, there is no central register of the bond’s ownership.

Benchmark Bond  usually a government bond the interest upon which provides a benchmark to measure the performance of other bonds such as corporate bonds. For international comparisons the yield on 10 year government bonds is often used.

Beta  a measure of a security’s sensitivity to market movements or systematic risk. A share with a beta of 1 tends to move by a similar percentage to the market. While one with a beta of 2 tends to move up or down twice as much as the market over time.

Bid-Ask Spread  the amount by which the ask rate exceeds the bid rate, e.g. a bid rate of £10 and ask rate of £11 implies a bid-ask spread of £1.

Bid Rate  a dealer’s rate at which the dealer buys a security, e.g. bank deposit, bonds, foreign exchange, shares – it will be lower than the offer (ask or selling) rate.

Big Bang  a term used to describe the deregulation of the UK stock exchange in October 1986.

Bill of Exchange  a signed promise to pay by the receiver of goods/services to the supplier a certain sum of money. The supplier may sell the bills at a discount to a third party.

Black–Scholes formula  a model used to price a European call option premium which was published in 1973 by Fisher Black and Myron Scholes.

Blue Chip  a term used to describe the shares of a well known and well regarded company. The company will have a good track record.

Bond  a security issued by a borrower in return for funds which has longer than 1 year to maturity. The issuer agrees to pay the bond buyer a series of cash flows over the life of the bond.

Book Value  the net asset value of a company, that is, the value of tangible assets less intangible assets and less liabilities.

Bretton Woods  a fixed but adjustable exchange rate system agreed at Bretton Woods in 1944 in which major currencies were pegged to the US dollar ± 1% either side of an assigned central parity. Also set up the International Monetary Fund and the World Bank.

Broker  an agent (individual or firm) that buys/sells securities on behalf of a client in return for a fee.

Bubble  a term used to describe fast dramatic price rises of shares or something else that is likely to prove unsustainable.

Bull  an expression that describes an optimist that thinks that the prices of shares/bonds or other securities assets will rise in price.

Bull Market  a market which experiences strong sustained price rises.

Bulldog  a bond issued by a foreign entity on the UK market in pounds.

Bund  A German government bond

Buy and Hold   a passive investment strategy in which one buys shares etc and holds onto them through market fluctuations in the belief that they will perform well in the long term.

Buy side is that part of the finance industry that purchases large amounts of stocks, bonds and money market securities. This includes mutual funds, pension funds, hedge funds, insurance comapnaies and private equity. Analysts recommend securities for purchase to traders and fund managers.

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