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Our Glossary

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Index Measure of development – whether the trend of the consumer goods prices (price index of consumer goods) or the trend of the rates on the securities markets. Today, almost everything in the money and capital markets is measured and the development of values monitored (the “Big Mac Index” has been monitoring since 1986 the “Big Mac” prices in 100 countries worldwide, which converted into the US dollar measure the purchasing power of the respective currencies). The diversity of the indices allows comparing various selected markets and market segments to each other.
Index Certificates Securities whose underlying assets are some of the indices. Their prices exactly replicate the trend of the underlying index. Important is the consumption ratio determining the relation of the price to the index value. It is usually indicated by a decimal fraction – e.g. 1:10. In this case, if the index value were for example 1500 points, the certificate price would be CZK 150 (if the certificate were traded in the CZK).
Index Funds Mutual funds that invest in investment instruments linked to a particular index. The fluctuations of the prices of the share certificates of these funds and their long-term performance generally follow the selected index. These funds are very popular for their transparency and attractive profitability.
Industry Risk Is the risk of price changes of investment instruments within a decline of a particular sector as a whole.
Inflation An economic phenomenon referring to the general growth in the price level. It reduces the purchasing power of money. It is measured by the consumer price index.
Inflation Risk Affects the real yield of investment instruments. High inflation may cause the investor to reach a smaller or negative real yield.
Initial Public Offering (IPO) Sometimes also the primary issue. It represents the first public (stock exchange) offering of shares aimed at obtaining new capital for the issuer. It is a relatively demanding process and the issuers use the services of an underwriting firm.
International Securities Identification Number (ISIN) A 12-character alpha-numerical code assigned to an issue of securities made up of letters and numbers. It is used to accurately identify the security.
Investment Certificates Investment certificates are securities traded both on the stock exchange and over the counter whose price is based on the development of the underlying asset. This asset may be stock exchange indices, shares, commodities, interest, currencies, etc. Unlike other securities, such as shares, funds, interest rates or currencies, their prices are not based on supply and demand for the particular investment certificate, but exactly on the development of the underlying asset for which the certificate was issued. Here, there are rules that exactly define the value to be received by the certificate holder in the case of a movement of the underlying asset at the given moment of time. In all certificates (derivatives) it is necessary to take into account the risks of investment instruments of derivative type, the risks arising from the underlying asset and the credit risk / (certificate) issuer risk – in case of the issuer’s bankruptcy, there may be a loss of all funds invested regardless of the current developments on the market. Currency Risk – Some certificates may be issued in another currency than that required by the investor. Terminology Risk – Although these securities have been traded for many years, it still might not be unambiguously clear from the name of the certificate which type of certificate is concerned. Liquidity Risk (see also SPREAD) – the owner of the certificate can sell it anytime and need not wait for its maturity, but the price may be extremely disadvantageous at the given moment.
Investment Company The founder and manager (administrator) of funds. It is subject to special regulation pursuant to Act No. 189/2004 Coll., on collective investment, and is subject to the supervision of the Czech National Bank. Its activities are also inspected by the depositary and the auditor.


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