Financial Dictionary

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Idiosyncratic Risk

A risk that affect some number of assets due to price change of specific security. This unsystematic risk can be partly avoided by diversification.

Illegal Dividend

Declared dividend which is calculated in the manner that does not comply with state laws or corporation’s charter.

Illiquid

A security or an asset that can’t be easily and fast converted in cash (think real estate, de-listed shares, and collectibles). Illiquid also refers to companies that cannot meet its debt obligations or daily operational needs with current cash-flow.

Imbalance of Orders

A situation on the market when there are too many buy orders apropos sell orders, or vice versa. Usually a situation when company achieves strong business results everybody put buy orders. In order to prevent massive price swings, trade can be temporarily delayed or halted. Imbalance of orders is also called Order Imbalance.

Immediate Payment Annuity

A contract purchased with one payment, which starts to pay out immediately. These annuity contacts are usually purchased at retirement age.

Immunization

A strategy of minimizing risks of future interests rate impact on the value of the company. The immunization strategy is managed by holding the liabilities and assets of equal duration period.

Impaired Credit

This means that the borrower’s credit rating is devaluated, and therefore the lender will usually reduce the amount of credits offered.

Impairment

The situation when the company’s total assets are less the par value of all issued stocks. Impairment also refers to reduction of company stated capital due to losses and distributions.

Imperfect Market

Refers to the situation on the market when not all financial information is available to all of the investors and also buyers and sellers are not matched immediately. There is now such thing as perfect market; it only exists as an ideal which all countries try to constitute.

Implied Volatility

A predicted volatility level of the security underlying an option. Due to fact that Implied Volatility depends on market price, date of maturity, strike price and interest rate, in the period of bearish market this volatility grows and decreases in the period of bullish market. Implied Volatility is used in different option pricing models, Black-Scholes […]

Imputed Interest

Interest considered to be paid, for tax purposes by the IRS, even if now interest was paid actually. This is a calculation of the interest that is to be paid, but have not been paid yet, and is important for securities sold below face value and discount bonds.

In Kind Payment

A payment which is made in goods and services rather than in cash. For example, using securities as a deposit instead of cash for retirement savings plan.

In Sympathy

Changes in the price of one security due to changes in a price of another security.

In The Money

A situation in which strike price of a call option is lower than the market price of underlying security, or, if the strike price of a put option is greater than the market price of underlying security. In this case, it is said that option has “intrinsic value.”

In the Tank

An adjective, referring to something with very poor performance and is mostly used for low performance securities.

Incentive Stock Option

An employee stock option that provides tax benefits for the holder, but only if the holder holds it for a longer period of time which implies higher risk rate. In order to receive these tax benefits, employee must not sell the option at least two years after the option is granted and at least one […]

Inchoate

Refers to something that is not finished, or something that begun recently.

Income Bond

A very rare type of dept security, which promises to pay only its face value to the investor. Any interest is paid only if the issuer has enough earnings to pay for the coupons.

Income Exclusion Rule

Refers to IRS policy to exclude income on tax-excused investments, child supports, insurance benefits and welfare payments from total taxable income.

Income Fund

A mutual fund which seeks for steady income, rather than in volatile growth stocks with high risk rate. Income Funds invest in securities that pay dividends or interests, often in blue chip stocks.

Income Property

Real estate bought or owned solely for the purposes of generating income through renting or price appreciation. Can be residential or commercial.