Here are Economics Terms beginning with I

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Immunization  a hedging strategy that matches the duration of assets and liabilities and so minimizes the impact of interest rate changes on net worth.

Implied Volatility  the volatility that is expected in the market implicit from the option premium.

Indenture  the terms associated with a bond contract. For example, the coupon to be paid, conversion rights, call back features etc.

Index  usually refers to a stock index like FTSE 100, S&P500, CAC40, Dax etc.

Index Arbitrage  a strategy which aims to make a profit at any significant departure of stock exchange futures prices from their theoretical values. It involves selling futures and buying shares if the futures premium is too big and buying futures and selling shares if the futures premium is too small. It may involve the use of programme trades.

Interbank Market  the market which deals with bank lending and borrowing with other banks.

Initial Margin  the initial deposit required by an Exchange/Broker when opening a futures contract or writing an option contract.

Insider Trading  the buying or selling of a security by someone who has access to privileged information not publicly available. In most countries such trading is illegal.

Insurance  the business of collecting premiums so that policy holders can claim money if they suffer losses when insured.

Institutional investor  a bank, insurance company, pension fund, mutual fund, hedge fund, or other financial intermediary that invests funds on behalf of its clients or on its own behalf.

International Banking Facility (IBF)  a facility whereby an institution based in the US can make short-term deposits/loans in dollars in the United States without the need to meet regulatory requirements or hold reserves. This enables US banks to compete with Eurobanks but they can only conduct business with foreign residents not US residents.

In the Money Option  an option that would have some intrinsic value if exercised immediately. For a call option the current price of the underlying is above the strike price. For a put option the current price of the underlying is below the strike price.

Intrinsic Value  the value that would be realized if an option were exercised immediately. For a call option the intrinsic value is the amount by which the current price of the underlying exceeds the exercise price. For a put option the intrinsic value is the amount by which the current price of the underlying is below the strike price.

Inverted Yield Curve  a yield curve that has a negative slope, that is short-term interest rates are higher than long-term interest rates.

Investment Banking  that part of banking that deals with corporations and high end securities. For example, new equity issues (IPOs), rights issues, bond issues, mergers and acquisitions, fund management, investment management etc.

Investment Grade  a bond that has a credit rating of BBB (Standard and Poor’s) or Baa (Moody’s) or better.

Investment Trust/Company  a company that holds stakes in the form of shares in other companies. It can engage in takeovers, breakups and falls under company law.

LBO see leveraged buyout

IPO  Initial Public Offering, an American term used to describe the floating of a company on the stockmarket for the first time.

IPMA  International Primary Markets Association, oversees Eurobond issues.

Issuer  an entity, e.g. company or government that sells a security to raise funds.

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