Investing Glossary: A

accredited investor: An individual with net worth of more than $1 million (alone or jointly with a spouse) or with income of $200,000 in each of the past two years and with a reasonable expectation of the same level of income in the current year. Certain higher-risk investments are often restricted to accredited investors.

alpha: A risk-adjusted measure of performance. Alpha measures the portion of an investment’s return attributable to the security’s inherent values (for example, earnings growth) rather than to overall market movements.

arbitrage: A trading technique that takes advantage of price discrepancies when the same security, currency, or commodity is traded on different markets.

at the money: A condition that is met when an option’s strike price is the same as the prevailing price for the underlying stock. For example, if stock ABC is trading at $125 and the option’s strike price is also $125, then the option is at the money.

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