CAGR (Compound Annual Growth Rate)
The year by year growth rate applied to an investment or any other part of a company's activities over a multiple-year period. The formula for calculating CAGR is (Current Value/Base Value)^(1/no.of years).

Call option (purchase option)
An option contract that gives the holder the right to buy a certain quantity of an underlying asset from the writer of the option, at a specified price (the strike price) up to a specified date (the expiration date).

Capital Asset Pricing Model (CAPM)
Model making it possible to determine the "opportunity cost" or the amount of income for the business period necessary to remunerate the cost of capital.

Capital gain
Profit on the sale of securities, either through dividends or the selling of securities.

Capital market
The market for trading long-term debt instruments (those that mature in more than one year).

Captive
Term generically referring to "networks" or companies that operate in the exclusive interest of their parent company or group.

Cash flow
Indicator for the assessment of the financial situation of a company and share valuation. Cash flow is net income plus depreciation and amortization.

Cash flow hedge
Coverage against exposure to variability in cash flows traceable to a particular risk.

Cash management
A banking service that, in addition to making available to businesses a whole set of information on the status of relations entertained with the bank, provides an operative tool allowing businesses to execute transfers of funds, thus leading to more efficient treasury management.

Categories of financial instruments provided for by IAS 39
Activity of negotiation which includes the following: assets purchased for short-term sale or part of portfolios of instruments managed jointly for the purpose of realising profits in the short-term, and assets that the entity decides in any case to reckon at fair value with variation in value entered under the Profit and Loss Account; assets held full term, non-derivative assets with a fixed term and payments that are fixed or determinable, concerning which there is a real intention and capacity to hold them full term; credits and loans, non-derivative assets with fixed or determinable payments not quoted on the active market; assets available for sale, specifically designated as such, or others not falling under the previous typologies.

CDO - Collateralised Debt Obligation
Securities issued within the framework of securitisation transactions, guaranteed by underlying assets in the form of credits, securities or other financial assets.

Central bank
A country's main bank whose responsibilities include the issue of currency, the administration of monetary policy, open market operations, and engaging in transactions designed to facilitate business interactions.

Collective assessment of performing credits
With reference to a homogeneous group of financial assets with a steady performance, the collective assessment defines the degree of credit risk potentially associated with the same, even though it is not yet possible to identify it with a specific position.

Commercial paper
Short-term notes issued in order to collect funds from third-party underwriters as an alternative to other forms of indebtedness.

Confidi
Collective Loan Guarantee Consortia.

Consensus
The forecast for a given company, taken in aggregate, for all analysts who follow that company.

CONSOB (Commissione Nazionale per le Società e la Borsa)
Italian Securities and Exchange Commission, founded in 1974.

Consumer credit
Short-term loans to the consumers for the purchase of goods.

Core Business
Primary area of business constituting the focal point of a company's strategies and policies.

Core Tier 1 ratio
Indicates the ratio of basic (Tier 1) assets, not including preference shares, to total weighted-risk assets. Preference shares are innovative capital instruments normally issued by foreign subsidiaries and included in the basic assets if they have characteristics guaranteeing the capital stability of the banks. The Tier 1 ratio is the same ratio that, in the numerator, includes the preference shares.

Corporate
Segment of customers corresponding to medium- and large-sized firms (mid-corporate, large corporate).

Corporate bonds
Debt obligations issued by companies.

Corporate governance
The manner in which an organisation is governed and how it deals with the various interests of its customers, shareholders, employees and society at large.

Corporate Social Responsibility
The Green Book of the European Commission "Promoting a European framework for Corporate Social Responsibility" defines corporate social responsibility as the "voluntary integration of corporate social and environmental concerns in their commercial operations and in their relations with the parties concerned. [...] To be socially responsible - the Green Book states - does not only mean to fully meet the applicable juridical obligations but also to go beyond this by investing in human capital, in the environment and in the relations with the related parties".

Cost/income ratio
A measure used to analyse management efficiency. It is equal to total operating expenses divided by total revenues.

Country risk
The risk that a foreign government will not fulfil its obligations, due to political and/or financial events in the given country.

Covered bond
Special bank bond that, in addition to the guarantee of the issuing bank, can also benefit from the guarantee of a portfolio of mortgage loans or other high-quality loans granted for the purpose to a special vehicle company.

Credit default swap/option
Contract under which one party transfers to another the credit risk of a loan or security, against payment of a premium, at such a time when some event has caused a downgrading of the debtor's credit rating (in the case of an option, the right must be exercised by the purchaser).

Credit derivatives
Derivative contracts that cause the transfer of credit risks. These products allow investors to perform arbitrage and/or hedging on the credit market mainly by means of instruments other than cash, to acquire credit exposures diversified in their maturity and intensity, to modify the risk profile of a portfolio and to separate credit risks from other market risks.

Credit enhancement
Techniques and instruments used by issuers to improve the rating of their issues (constitution of sureties, granter of cash credit lines, etc.).

Credit/emerging markets (Funds)
Funds that invest in securities with credit risk exposure, inasmuch as issued by financial or corporate issuers located in emerging countries.

Credit-linked notes
Similar to bonds issued by the protection buyer or a vehicle company whose holders (protection sellers) - in exchange for a yield equal to the yield of a bond with the same maturity plus the premium received for credit risk hedging - take the risk of losing (in whole or in part) the maturing capital and the related flow of interest, upon occurrence of a specific event.

Credit risk
The risk that the borrower will not be able to pay its debts.

Credit spread option
Contract under which the protection buyer reserves the right, against payment of a premium, to collect from the protection seller a sum depending on the positive difference between the market spread and that fixed in the contract, applied to the notional value of the security.

CreditVaR
Value that indicates an unexpected loss in connection with a credits portfolio at a time of confidence in a given period. The CreditVaR is assessed through distribution of the values of the losses and represents the difference between the average distribution value and the value corresponding to a certain percentile (usually 99.9%), which reflects the Bank's degree of willingness to take risks.

Cross-selling
Activity designed to increase customer loyalty through the sale of integrated products and services to them.

CR01
Referred to a credit portfolio, it indicates the value variation it would undergo as a consequence of an increase of 1 basis point of the credit spreads.

Default
Failure to make timely payment of interest or principal on a debt security.

Deficit
An excess of liabilities over assets, of losses over profits, or of expenditure over income.

Delta-Gamma-Vega (DGV VaR)
Parametric model for calculation of the VaR, able to assess risk factors having both a linear and non-linear trend.

Derivatives
Financial instruments, including futures, options and swaps, whose value is based on an underlying asset, index or reference rate.

Desk
It generally refers to an operating unit where a particular activity is mainly carried on.

Directional (Funds)
Funds that invest in financial instruments that profit from market movements of a directional type, sometimes tied to analyses of a macroeconomic type.

Disclosure
The revelation of a fact or a condition in a report or other financial document. The same term is used to indicate banking confidentiality under certain circumstances established by law.

Dividend
That part of a company's profits after tax which is distributed to shareholders.

Dividend yield
The yield a company pays out to its shareholders in the form of dividends. It is calculated by dividing the amount of dividends paid per share over the course of a year by the stock price.

Domestic Currency Swap
Contract settled in euros, whose economic effect is equal to that of a time purchase or sale of a foreign currency in exchange for domestic currency. As it falls due, the differential between the time exchange as per the contract and the current cash exchange is settled in euros.

Due diligence
Process carried out by accountants and lawyers when a company is about to acquire another. It involves verifying a company's liabilities and financial performance.

Duration
Constitutes an indicator of interest rate risk a security or securities portfolio is subject to. In its most frequent form, it is calculated as a weighted average of the due dates of interest and principal payments associated with a security.

Dynamics of provision
Sum of deposits in a current account (free current accounts and bank drafts), returnable deposits upon prior notice (free savings deposits), time deposits (time savings deposits, certificates of deposit), repo agreements and bonds (including subordinate loans). Each technical form, with the exception of bonds, is shown for clientele residing in Italy, except for the central Administration, in euros and other currencies of reference. Bonds refer to the overall value of the documents of debt, independently of the place of residence and sector of the holder.

Top