Capital Markets Glossary O to S: Plain-English Definitions

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Finance is full of terms that sound simple until you have to use them. This page is a plain-English glossary for Capital Markets, covering entries such as Open offer, Option-adjusted spread (OAS), Oracle, Original issue discount (OID), Output floor, each with a short definition and a pointer to the part of the volume where it is explained.

Keep it open while you read, or use it to settle an argument about what a term really means. Every entry is written to stand on its own, with no jargon left undefined, and the part number beside it tells you where to read more. Use it as a quick reference whenever a term trips you up.

A sample of the entries (88 terms on the full page)

Open offer — Under SEBI’s Takeover Regulations, the mandatory offer to buy at least 26% more of a listed company’s shares that an acquirer must make on reaching 25% of the voting rights or acquiring control (Part 2.10).

Output floor — The Basel III rule that risk-weighted assets from internal models cannot fall below 72.5% of the standardized figure (Part 9.5).

Payment stablecoin — Under the GENIUS Act, a token its issuer must redeem for a fixed amount of money, backed 1:1 by cash and short Treasuries and paying holders no interest (Part 11.4).

Performance share unit — An equity award whose number of vesting shares depends on results, such as relative TSR or multi-year earnings, often from 0% to 200% of target (Part 7.4).

Portfolio insurance — A dynamic hedging strategy that imitates a put option by selling stock index futures as prices fall and buying them back as prices rise; it amplified selling on October 19, 1987 (Part 10.8).

Present value — The value today of a future cash flow, CF ÷ (1 + r)ⁿ (Part 1.2).

Promoter — In India, the founding family, group or parent that controls a listed company and is named as such in its filings (Part 7 India Lens).

Proxy fight — A contest in which a shareholder nominates its own director candidates and solicits other holders’ votes against the board’s slate (Part 7.7).

Qualified purchaser — An individual with at least $5 million of investments; the only investors a section 3(c)(7) fund may accept (Part 8.1).

Real estate investment trust (REIT) — A company that owns or finances real estate and avoids corporate income tax by meeting asset, income and ownership tests and distributing at least 90% of its taxable income (Part 8.5).

Related-party transaction — A deal between a company and a director, executive officer, major shareholder, their family or entities they control; it needs independent approval and disclosure because the conflicted side could set the price (Part 7.8).

Restatement — A revision of previously issued financial statements to correct a material error, which resets the base for any valuation or credit analysis.

Return smoothing — The tendency of appraisal- or model-marked assets to report returns that blend in past values, understating volatility and correlation (Part 8.1).

Rule 10b5-1 plan — A written plan to trade a company’s stock on preset terms, adopted in good faith without MNPI; directors and officers face a 90-to-120-day cooling-off before the first trade (Part 9.1).

Section 338(h)(10) election — A joint US tax election that treats a purchase of a target’s stock as a purchase of its assets, giving the buyer a stepped-up tax basis; available for S corporations and members of corporate groups (Part 2.2).

Sensitivity table — A grid showing one model’s output across ranges of two inputs, such as WACC and terminal growth; distinct from a football field, which compares methods (Part 1.3).

Smart contract — Code stored on a blockchain that executes agreed rules automatically when conditions are met (Part 11.3).

Special purpose entity — A separate legal entity set up for a narrow purpose such as holding assets or debt; Enron kept entities off its balance sheet that did not meet the criteria to stay unconsolidated (Part 6.3, 6.8).

Spread duration — The approximate percentage price change of a bond for a one-percentage-point change in its credit spread, holding Treasury yields fixed (Part 3.3, Part 3.6).

Standard deviation — The square root of variance, measuring dispersion in the original units; applied to returns it is called volatility.

Stock-based compensation — Pay in shares or options, expensed at grant-date fair value under ASC 718. It costs no cash but is paid by shareholders through dilution or offsetting buybacks (Part 6.1).

Supplier finance — Also called reverse factoring: a bank pays a company’s suppliers early and the company repays the bank later. It can act like borrowing while sitting in trade payables (Part 6.3).