Financial Terminology for Dummies

Hey! this thread is for making about 5 words/day, of Financial words, their meaning and examples related to them.

Feel free to explain, come with own examples, joke and roleplay. Just be sure to use the word or it's relatives.

My motivation for starting this thread is to get a more clear view and understanding what different key players, traders and people in the financial world mean when they use certain words.
It would be a bit more fun to describe stuff and explain it, than opening a dictionary and grind that for hours!

Rules: 1) Only one word per post! 2) Let someone else reply the antonym 3) Understanding is the main goal

So let me start with the word:

Appreciate
Increase in the value of an asset.

Example: The pound appreciated in value compared to the dollar. The appreciation is due to everyone exchanging their cash dollar into other currencies at the airport.
Now there is plenty of dollar around but nobody wants it. The cashiers at the airport tries to give away dollars for any other currency, cause they have a lack of the other currencies in cash. They will pay many dollars for other currencies, or they will be out of business due to lack of supply.

Antonym: To be determined..

Dealer
Buys assets from clients and sells to their clients. They make the market.
Dealers profit when they buy from impatient sellers at low prices and sell to impatient buyers at high prices.
Traders can be considered dealers if they have an large impact.
Dealers are passive traders, they trade when other traders want to trade, they must stay away from trades made by informed traders and bluffers or they will lose.

Example: Dealer Ryan lost some money, cause he got involved in dealing a market with alot of informed traders. Thus he was unable to profit in the long-term from the market he was making.
Dealer Cassandra is a profitable dealer, cause she has contact with the newspapers and makes them write article to BUY(!) when she wants to sell her securities which she bought from clients at a low price. And makes them write SELL(!) when she wants to buy the securities at a low price. This makes sure she is always profitable, since she is good at marketing.

Antonym: To be determined..

Extra: List of dealers who filed with the SEC:
https://www.sec.gov/help/foiadocsbdfoia
swap dealers: https://www.sec.gov/tm/List-of-SBS-D...S-Participants

Liquidity aggregator
An party who deals with several investment banks to aggregate their quotes into the market .
It allows market participiants to simultaneously see the stream of different quotes from different liquidity providers.
These quotes are then provided to brokers, which then delivers brokers quotes to their customers.
It gathers buy and sell orders in this way. They are resellers of investment bank liquidity.
Their latency of service has to be very low.
Offers best bid and best offer, which is the thinnest side of liquidity.
Investment banks and prime of primes(institutional customers) all have different volumes and quotes. The brokers take on the risk by offering this liquidity, on which a liquidity aggregator provides them with quotes.

Examples of liquidity aggregators: Qnx, hotspot, fxall, Reuters.

Antonym: TBD.

Confirmation bias
An tendency to pay more attention to information that confirms what we already believe in, and to ignore data that is contradictive to that belief.

Example: When an opinion is formed, the human understanding draws all things else to support and agree with it.
Thus when one thinks the dollar might go down, one searches more for reasons and evidence to support that idea, while one puts less or no effort in researching why it might go up.

In a social setting one is more likely to talk/discuss with people of similiar opinion and thus reinforcing the view. While avoiding discussion with people with a contradicting view. Even harder can be the discussion with a person with an ambiguous view, as it is a state of uncertainty and confusion.

Fundamental value
The true value of an instrument. The expected value of all present and future benefits and costs associated with holding the instrument. This is the value all would agree upon if all information were known about the future and the present.
As this is not the case, the opinion about where the true value is may differ.

Example: The fundamental value of the japanese yen began to decline, this due to widely known environmental issues of dumping radioactive waste materials into the ocean. The japanese fishing industry couldn’t tackle the problem of having a reputation of selling contaminated fish. Thus one major sector in Japan’s economy crashed, sending the yen to the depths of the ocean..

Carry Trade

This is your homework today. Find out what "carry trade" means and fill in the blanks. Especially before spreading nonsense in the news section Knowledge is power.

You still haven't done your homework. Here is another one:

Debasement Trade

Learn what it is, so that you won't make any more silly comments and embarass yourself. I'm just trying to compensate for your lack of macroeconomic understanding.

Deposit Box/Safe Box

Google what these are and how they are used, i'm embarrassed that you don't even know how a bank safe works. I thought you didn't know how the economics work, but at this point you don't even know how real life works.

Hi Nordling,
It seems like the "homework" is piling up! Since nobody is answering, let me help you clear one:
Carry Trade It's basically borrowing a currency with a low interest rate (like JPY) to invest in a currency with a higher interest rate (like USD or AUD), pocketing the difference.
Example: Back in the day, everyone was doing the Yen Carry Trade because BoJ kept rates at rock bottom. It works great until the exchange rate shifts suddenly and wipes out the interest gains—the classic "up the stairs, down the elevator" scenario.
Anyway, this thread was supposed to be fun, let's not make it feel like a boring classroom. What's the next word?