Jargon Buster

Are you puzzled by investment language?

Our jargon buster gives clear and concise definitions and explanations of investment terminology.

To view the definitions please select the relevant letter below. Or alternatively search to find the definition and explanation you are looking for.

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OEIC

Open ended investment company. A collective investment scheme structured as a limited company in which investors can buy and sell shares on an ongoing basis

Offer price

See ask price

Open ended funds

Pooled funds in which the number of units varies according to the number of investors wishing to buy or sell units in the fund

Open position

In the context of exchange-traded derivatives this means a position that is exposed to price movements

Optimisation

The creation of a portfolio which will give you the highest expected total return for a given set of forecasts and estimated risks

Optimiser

A computer programme that generates an efficient frontier, given particular input assumptions

Option

The buyer of an option typically acquires the right but not the obligation to buy or sell a particular asset in the future at an agreed price

Option-adjusted spread

A measure of the difference between the yield available on a given bond and that on otherwise comparable risk-free bonds, allowing for any options embedded in the bond

Ordinary shares

Securities which represent an ownership interest in a company. If the company has also issued preference shares, both have ownership rights. Called common stock in the US.

Out-of-the-money

For a call option, when the market price of the underlying asset is below the exercise price. For a put option, when the exercise price is below the market price

Outperformance

The return on a fund in excess of the benchmark return

Over-the-counter (OTC)

A derivatives contract is OTC when it is arranged between two parties privately rather than being traded on an exchange

Overweight

Exposure to a given asset or asset class greater than that implied by its weight within a market index or benchmark Against which the portfolio is measured. Investment managers may take overweight positions in shares or sectors they expect to outperform in order to add value to the portfolio

Jargon Buster is intended to assist in the understanding of some of the many technical terms that frequently appear in the pensions world. The definitions are intended as a guide only.

Jargon Buster is provided by Blackrock for visitors to www.napf.co.uk