Here are Finance  dictionary terms beginning with C

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Cable   a term used by dealers to describe the pound in terms of the dollar on the foreign exchange market. The rate is quote as dollars per pound.

Call Back Feature  a clause giving the issuer of a security the right to redeem the security prior to maturity.

Call Money  money lent by banks to other banks/security houses that can be recalled at noon each day.

Call Option  the right but not the obligation to buy a security/commodity/asset at a predetermined price.

Cap  an agreement between a borrower and a lender to set an upper limit to the interest rate payable on a loan.

Capex stand for capital expenditure which represents investment by a company in new fixed assets such as building and machinery and information technology.

Capital Adequacy  the amount of capital needed by a financial institution to cover potential losses.

Capital Adequacy Ratio  a ratio of a bank’s capital to its weighted risk adjusted assets.

Capital Asset Pricing Model (CAPM)  a model that is used to determine the expected rate of return on a security, based on its risk characteristics as measured by its beta.

Capital gains refers to the profit made from buying a security such as shares at one price and selling them at a higher price. Capital gains are normally subject to taxation.

Capitalization  the market capitalization of a company is the number of shares times the price per share.

Capital Markets  the markets where economic agents such as governments and firms raise capital for more than a year and where such financial securities are traded, such as the equity and bond markets.

Carry Trade is a foreign exchange trading strategy whereby a speculator borrows funds in a low interest rate currency and places the funds in a high interest rate currency. If the high interest rate currency appreciates or depreciates by less than the interest rate differential then the trade will be profitable. However, if the high interest rate currency depreciates by an amount greater than the interest rate differential then the trade will be loss making.

CBOE  Chicago Board Option’s Exchange.

CBOT  Chicago Board of Trade.

Certificate of Deposit  a certificate which certifies that a deposit of a certain amount has been made at a bank and specifying the interest to be paid, usually issued by a commercial bank. Can be used as collateral for a loan.

Chapter 11 bankruptcy  a US term whereby a company in severe financial distress can apply be placed under court supervision. This provides it some protection from its creditors while the company is restructured.

Chapter 7 liquidation a US term referring to the process of  liquidation of a company under US bankruptcy law. A chapter 7 filing normally results in the company ceasing trading and its assets being sold off and creditors dealt with by an appointed Trustee.

Cheapest to Deliver Bond  a bond whose price is the cheapest to deliver in fulfillment of a bond futures contract upon expiry.

Chinese Wall  a barrier put in place within a financial institution to prevent conflicts of interest within the institution.

Chooser Option  an option where the holder has the choice whether it is a put or call option at a given point of time.

Clean Price  the price of a bond excluding the accrued interest since the last coupon payment.

Clearing House  a central body that clears and guarantees futures and options contracts and monitors the positions of parties to the contracts.

CME  Chicago Mercantile Exchange.

Collar  a contractural limit within which the interest rate on a loan or the exchange rate on a contract may lie, e.g. 8%–10% or $1.25/C=1 to $1.30//C=1. As such it is a combination of a Cap and a Floor.

Collateral - real assets or financial securites which as pledged by a borrower against a loan. This makes the laon safe for the lender and therefore generally lowers the required rate of interest. A loan secured against assets is referred to as a secured loan.

Common equity total shareholders’ equity minus preferred equity.

Commercial Bank  a bank that is primarily involved in the traditional line of banking that is taking in deposits and making loans.

Common Stock  an American term for ordinary shares which confer ownership rights of the company and entitle the owner to voting rights and a share of the profits. However, as an owner the stockholder is last in line if the company is liquidated.

Convertible Bond  a bond that can be converted into either shares or some other asset at some point.

Corporate Bond  a bond issued by a company.

Counterparty Risk  the risk that a counterparty to a contract will fail to settle the contract.

Coupon  the rate of interest payable on a bond when issued. Usually paid semi-annually.

Credit default swap (CDS) A credit derivative with a payout which is triggered by a “credit event” typically a default. CDS payout involves either “physical” or cash settlement. With “physical settlement” the protection seller buys a defaulted reference asset from the protection buyer at its face value. With “cash settlement” the protection seller pays the protection buyer an amount equal to the difference between the face value of the reference asset face and the current secondary market price of the defaulted asset.

Credit derivative  a financial contract under which an agent buys or sells risk protection against the credit risk associated with a specific reference entity (or entities). For a periodic fee, the protection seller agrees to make a contingent payment to the buyer on the occurrence of a credit event (usually default in the case of a credit default swap)

Credit Derivative  a derivative whose price is determined by the credit risk of economic agents.

Credit Rating  an assessment of a company’s credit worthiness, that is, its ability to repay its debt. The two main credit rating agencies are Moody’s and Standard and Poors.

Credit Score a number assigned to an individual which predicts the likelihood of a default on a loan or mortgage by the individual. When determining the score a variety of factors are considered including past default record, record of paying debt on time, present debt levels and other factors. A higher score is associated with a lower probability of default.

Cross Rate  the rate of exchange between two currencies implied by their exchange rates vis-à-vis a third currency, e.g. $1.80/£1 and $1.20/€1 implies a cross rate of €1.50/£1.

Cumulative Dividend  a limitation placed upon a company, ensuring the payment of preferred dividends before making distributions to common shareholders. If a company fails to make a dividend payment to a preferred shareholder with a cumulative dividend, the company is required to catch up the payment before any other payments can be made to common shareholders.

Currency Option  an option that gives the holder the right but not the obligation to buy/sell a particular currency at a predetermined rate at a given point in time.

Currency Swap  a swap that involves the two parties exchanging cash flows in two different currencies.

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