CA Samveg Jain
INVESTMENT
BANKING
Terminologies
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1. Mergers and Acquisitions (M&A):
The process of combining two companies through
either a merger (voluntary combination) or
acquisition (purchase of one company by another).
2. IPO (Initial Public Offering):
The first sale of a company's stock to the public,
making it publicly traded.
3. Equity Capital Markets (ECM):
A division of investment banking that deals with
equity financing, including IPOs and follow-on
offerings.
4. Debt Capital Markets (DCM):
A division of investment banking that handles debt
financing for clients, such as issuing bonds.
5. Private Equity (PE):
Investments in private companies, often involving
buyouts and later-stage funding.
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6. Venture Capital (VC):
Investments in startups and early-stage companies
with high growth potential.
7. Underwriting:
The process of assessing risk and pricing securities
before offering them to investors.
8. Due Diligence:
Thorough research and analysis conducted before a
financial transaction to assess its risks and benefits.
9. Leveraged Buyout (LBO):
Acquisition of a company using a significant
amount of borrowed money, with the assets of the
acquired company often used as collateral.
10. Valuation:
Determining the fair market value of a company,
often using various financial models.
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11. EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization):
A measure of a company's operating performance.
12. Enterprise Value (EV):
The total value of a company, including its equity,
debt, and other obligations.
13. Financial Modeling:
Creating mathematical representations of a
company's financial performance to make
projections and assess potential deals.
14. Pitch Book:
A presentation prepared for potential clients or
investors to outline investment opportunities or
advisory services.
15. Lender of Last Resort:
A central bank or institution that provides
emergency funding to financial institutions in
times of crisis.
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16. Arbitrage:
Taking advantage of price differences in different
markets to make a profit.
17. Diversification:
Spreading investments across various assets or asset
classes to reduce risk.
18. Risk Management:
The process of identifying, assessing, and
mitigating risks associated with investment
decisions.
19. Asset Allocation:
Deciding how to distribute investments among
different asset classes (e.g., stocks, bonds, real
estate).
20. Hedge Fund:
An investment fund that uses various strategies to
generate returns, often with higher risk and return
potential.
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21. Bull Market:
A period of rising stock prices and optimism in the
market.
22. Bear Market:
A period of declining stock prices and pessimism in
the market.
23. Initial Margin:
The minimum amount of collateral required to
enter into a futures or options contract.
24. Liquidity:
The ease with which an asset can be bought or sold
without affecting its price.
25. High-Frequency Trading (HFT):
A trading strategy that relies on computer
algorithms and high-speed data to execute orders
quickly.
26. Dividend Yield:
The annual dividend income of a stock as a
percentage of its current market price.
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27. Bond Yield:
The annual return on a bond, taking into account
its interest payments and current market price.
28. Junk Bonds:
High-risk, high-yield bonds issued by companies
with lower credit ratings.
29. Credit Rating:
A rating assigned to a company or bond to assess its
creditworthiness.
30. Investment Grade:
Bonds with a high credit rating, indicating lower
risk.
31. Capital Adequacy Ratio:
A measure of a bank's financial health, comparing
its capital to its risk-weighted assets.
32. Net Asset Value (NAV):
The per-share value of a mutual fund or investment
trust.
33. 401(k):
A retirement savings plan in the United States,
often with employer contributions.
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34. Volatility:
The degree of variation in the price of an asset over
time, indicating risk.
35. Capital Market:
A financial market where long-term securities are
bought and sold.
36. Primary Market:
The market where new securities are issued and
sold to initial investors.
37. Secondary Market:
The market where existing securities are bought
and sold among investors.
38. Investment Banking Analyst:
A junior-level role in investment banking,
responsible for financial modeling and research.
39. Investment Banking Associate:
A mid-level role in investment banking, involved
in deal execution and client relationships.
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40. Investment Banking Vice President:
A senior-level role in investment banking,
responsible for managing client relationships and
deal teams.
41. Proprietary Trading:
Trading for a firm's own account to generate
profits.
42. Investment Thesis:
A statement outlining the rationale behind an
investment decision.
43. Mezzanine Financing:
A hybrid form of financing that combines debt and
equity.
44. Reverse Merger:
A process in which a private company goes public
by merging with a public shell company.
45. Letter of Intent (LOI):
A document outlining the key terms of a proposed
transaction.
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46. Syndicate:
A group of underwriters responsible for
distributing and selling securities to investors.
47. Pitchbook:
A marketing document created by investment
bankers to pitch their services to potential clients.
48. Recapitalization:
The restructuring of a company's capital structure,
often involving changes in debt and equity.
49. Covenant:
A legally binding agreement in a loan or bond
contract that specifies certain conditions or
restrictions.
50. Fairness Opinion:
A professional assessment of the fairness of a
transaction's terms to all parties involved.
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