Glossary Of Trading

Index (pl. Indices/Indexes)

The measure of a group of data, assets or services. An index is an intangible asset and cannot be invested in. Instead, options, ETFs and other instruments that track its performance can be traded upon. Stock indexes follow the performance of the top or main companies traded on a country’s stock exchange; economic indexes follow a sector (construction, retail….), an economic activity such as inflation, employment and reserves, and a sentiment index presents the results of a poll.

Inflation

The rise in prices for goods and services, resulting in the deterioration of a currency’s purchasing power.

Initial Margin

The margin required by a trader to open a position.

Instrument

A trade-able financial asset. These include currency pairs, documented proof of ownership or interest (shares), and bonded agreements to buy or sell (usually) debt. They can be cash-bound (securities, bonds, bills, shares, loans and deposits), or instruments whose value is based upon the value of an underlying asset (futures, options, swaps and forwards).

Interbank Rate

The interest rate between banks. The major one, Libor, the London Interbank Offered Rate, is estimated by the rates offered by the major banks in London, and is expected to be abandoned in 2021, while the Euribor, published by the European Money Markets Institute, refers to banks in the Eurozone.

Interest

The cost of accessing money not owned.

Investment

An asset (usually money or work) provided to another in expectation of receiving a cash return or benefit in exchange.