RealFi Glossary

is data sourced from non-traditional sources and used in financial analysis and decision-making processes. This data includes social media posts, satellite imagery, and other unconventional data points, providing insights beyond traditional data sets.

is a measure of the real rate of return earned on an investment, taking into account the effect of compounding interest. The APY is used to compare annual interest between financial products.

is a record or ledger of all the assets owned by an individual or organisation. This record includes details about the value, type, and performance of each asset.

is a financial metric that indicates the extent to which a company’s assets can cover its debts. This ratio helps in assessing a company’s financial health and leverage.

is the income return on an investment, expressed as a percentage of the asset’s cost or current market value. Asset yield is used to measure the profitability of an investment.

is a financial statement that summarises a company’s assets, liabilities, and shareholders’ equity at a specific point in time. The balance sheet provides a snapshot of the company’s financial condition.

is a decentralised, digital ledger technology that records transactions across multiple computers. Blockchain supports security, transparency, and immutability of data.

is the financial assets or resources that businesses use to fund their operations and growth. Capital can include funds, machinery, buildings, and other investments.

is the interest payment that a bondholder receives from the bond’s issuer. The coupon is typically paid semi-annually or annually.

is a measurement of a company’s ability to pay interest on its debt from its earnings. High coupon coverage indicates strong financial health.

are the methods and software used to assess borrowers’ creditworthiness. These tools analyse financial data to evaluate lending risks .

is the difference between the demand for credit and the actual supply available in the market. This credit gap highlights underserved segments in the financial market.

is an evaluation of a borrower’s creditworthiness, issued by credit rating agencies. A higher credit rating indicates lower risk for lenders and investors.

is the likelihood of loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. Managing credit risk is crucial for financial institutions.

is the set of activities and processes to identify, assess, and mitigate the risk of borrower default. Effective credit risk management ensures financial stability and minimises losses.

is an amount of money borrowed by one party from another. Debt typically involves repayment terms and interest, and it can be classified as short-term or long-term.

is a financial ratio that compares a company’s total debt to its earnings before interest, taxes, depreciation, and amortisation (EBITDA). This ratio indicates the company’s ability to service its debt.

are financial systems built on blockchain technology that operate without traditional intermediaries like banks. DeFi aims to create more open and transparent financial services.

is the failure to make timely payments on a loan or other financial obligation. Delinquency can lead to penalties and damage to the borrower’s credit rating.

are the strategies to reduce investment risk in less developed markets. These can include diversifying investments, political risk insurance, and other measures.

are regions with economies that are progressing towards becoming more advanced. Investing in developing markets can offer high growth potential but also carries higher risks.

are organisations that provide capital to support development projects in developing countries. DFIs aim to promote economic growth and social progress.

are assets that exist in digital form, such as cryptocurrencies, digital tokens, and digital representations of real-world assets. Digital assets are increasingly used for investment and transactions.

is platforms and services that offer loans online. This market leverages technology to streamline the lending process and reach a broader audience.

is a measurement of the sensitivity of a bond’s price to changes in interest rates. A higher duration indicates greater price volatility in response to interest rate changes.

is a measurement of a company’s overall financial performance and profitability.

is the increase in the production of goods and services in an economy over time. Sustained economic growth is a key indicator of a country’s prosperity.

is the uncertainties and potential financial losses associated with investing in emerging markets. This risk can stem from political instability, currency fluctuations, and other factors.

are economies transitioning from developing to developed status. These markets offer investment opportunities with higher potential returns but present higher risks.

are the individuals or entities that receive funds from a lending institution. Assessing the creditworthiness of end borrowers is crucial for lenders.

is the state of being equal, especially in status, rights, and opportunities. Promoting equality ensures fair treatment and access to resources for all individuals.

is the spread of financial exposures across various assets, sectors, or geographies. Effective exposure distribution helps in managing risk.

is a term referring to a specific benefit or profit derived from an investment or activity. Faida emphasises the positive outcomes of financial decisions.

are private wealth management firms that serve high-net-worth individuals or families. These institutions manage investments, tax planning, and other financial services.

is the creation of simulations of financial scenarios to predict future performance. This technique helps in strategic planning and decision-making.

are contracts that represent a financial asset to one party and a liability to another. Examples include stocks, bonds, and derivatives.

is a mathematical representation of a company’s financial performance. Financial models are used for forecasting, valuation, and decision-making.

are the profits or losses generated from investments. Evaluating financial returns is essential for assessing the success of investment strategies.

are official records of a company’s financial activities. These statements include the balance sheet, income statement, and cash flow statement.

are companies that use technology to offer financial services, particularly lending. These fintech lenders often provide faster and more efficient services than traditional banks.

are investments that provide regular interest payments, such as bonds. Fixed income securities are considered lower risk compared to equities.

are non-profit organisations that provide funding and support for charitable activities. These foundations aim to address social, educational, and environmental issues.

is securing gains by deceptive practices. Financial institutions implement measures to detect and prevent fraud.

are smaller, less accessible markets that are in the early stages of economic development. Investing in frontier markets carries higher risk and potentially higher returns.

are professionals responsible for managing investment portfolios. Fund managers make decisions about buying and selling assets to achieve investment objectives.

is an organisation dedicated to increasing the scale and effectiveness of impact investing. GIIN provides resources and support for impact investors.

is the total income generated from an investment before expenses. Gross yield is expressed as a percentage of the investment’s cost or market value.

is a country with a high gross national income per capita. These economies typically have advanced infrastructure and high standards of living.

are the set of metrics used to measure the social and environmental impact of investments. KPIs help in assessing the effectiveness of impact investment strategies.

is the evaluation of an investment’s or project’s effects on social and environmental factors. This analysis helps in understanding the broader impact of financial decisions.

are collections of investments that aim to generate positive social and environmental outcomes. These portfolios balance financial returns with impact goals.

is an investment strategy that seeks to generate positive social and environmental impact alongside financial returns. Impact investment aims to address global challenges.

are systems and software used to track and assess the social and environmental impact of investments. These tools help in ensuring accountability and transparency.

are organisations that invest large sums of money on behalf of others. Examples include pension funds, insurance companies, and mutual funds.

are non-physical assets with inherent value, such as patents, trademarks, and goodwill. These assets are crucial for a company’s long-term success.

is a financial ratio that measures a company’s ability to pay interest on its debt from its earnings. High interest cover indicates strong financial health.

are individuals or institutions that allocate capital with the expectation of receiving financial returns. Investors play a crucial role in funding businesses and projects.

is a system developed by the Global Impact Investing Network (GIIN) for measuring, managing, and optimising impact. Iris+ provides standardised metrics for impact investing.

is a type of debt that has lower priority for repayment compared to senior debt. In case of liquidation, junior debt holders are paid after senior debt holders.

are financial entities that lend to individuals and businesses. These institutions include banks, credit unions, and online lenders.

are financial obligations or debts owed by an individual or company. Liabilities can include loans, accounts payable, and mortgages.

is the ease with which an asset can be converted into cash without affecting its market price. High liquidity indicates that an asset can be quickly sold.

is a detailed record of all loans within a portfolio, including information on borrowers, loan terms, and performance. Loan tapes are used for analysis and reporting.

is debt that is due for repayment in more than one year. Long term debt is often used to finance major investments and capital expenditures.

is a country with a low gross national income per capita. These economies often face challenges such as poverty and limited access to resources.

are financial reports prepared for internal use by a company’s management. These accounts provide insights into the company’s financial performance and help in decision-making.

are the quantifiable financial gains or losses from an investment. These returns are essential for evaluating investment performance.

is debt that is due for repayment within one to five years. This type of debt is used for financing intermediate financial needs.

is a hybrid form of financing that combines debt and equity features. Mezzanine finance is typically used to fund business expansions and acquisitions.

are businesses vital for economic growth and employment, especially in developing and emerging markets.

are small businesses with minimal employees and capital. These micro-enterprises often operate in informal sectors and play a crucial role in local economies.

is the provision of small loans and financial services to individuals and small businesses that lack access to traditional banking. Microfinance aims to support economic development and reduce poverty.

is a country with a gross national income per capita between low and high income thresholds. These economies are characterised by moderate economic development and growth potential.

is a measure used to assess the risk of loan portfolios. PaR indicates the percentage of loans at risk of default.

is non-bank lending to private companies. Private credit provides flexible financing options for businesses and can offer higher returns for investors.

are investment prospects in the private credit market. These opportunities include direct lending, distressed debt, and other private financing options.

is debt that involves loans made to non-publicly traded private companies. Private debt can include direct lending, mezzanine financing, and other forms of non-bank credit.

are investment funds that focus on providing private credit to businesses. These funds offer investors exposure to private debt opportunities.

are markets involving investments in non-publicly traded assets, such as private equity and private debt. These markets offer unique opportunities for investors seeking alternative investments.

are loans provided by private lenders with a fixed repayment schedule. These loans are used for various business purposes, including expansion and capital investments.

are markets where securities are traded on public exchanges, such as stock markets. Public markets offer liquidity and transparency for investors.

are tangible assets, such as real estate, commodities, and infrastructure, that have intrinsic value. Investing in real world assets provides diversification and stability.

is a financial ratio that measures the profitability of a company relative to its total assets. ROA indicates how efficiently a company is using its assets to generate earnings.

is a type of debt backed by collateral, reducing the lender’s risk. If the borrower defaults, the lender can seize the collateral to recover the debt.

is debt that takes priority over other types of debt in case of liquidation. Senior debt holders are paid first before other creditors.

is debt that is due for repayment within one year. Short term debt is often used for working capital needs and immediate financial requirements.

are investments made with the intention of generating positive social outcomes alongside financial returns. These investments focus on addressing social challenges.

is a type of cryptocurrency pegged to a stable asset, such as a fiat currency or commodity. Stablecoins aim to reduce price volatility and provide stability in digital transactions.

is investing in companies and projects that prioritise environmental, social, and governance (ESG) factors. Sustainable investment aims to generate long-term positive impact.

are physical assets that have intrinsic value, such as property, equipment, and inventory. These assets are essential for a company’s operations and growth.

is the concept that money available now is worth more than the same amount in the future due to its earning potential. This principle is fundamental in finance and investing.

is the ability to track and verify the social and environmental outcomes of an investment. Traceable impact ensures accountability and transparency in impact investing.

is a portion or segment of a financial instrument, such as a loan or mortgage-backed security. Tranches are often structured with varying levels of risk and return.

is a statistical tool used to predict the likelihood of changes in credit ratings over time. This matrix helps in assessing the credit risk of financial portfolios.

is the clear and open communication of potential risks associated with an investment. Transparent risk management ensures that investors are fully informed about potential uncertainties.

are regions where a significant portion of the population lacks access to traditional banking services. Enhancing financial inclusion in underbanked economies is crucial for economic development.

is debt that is not backed by collateral. Lenders of unsecured debt rely on the borrower’s creditworthiness for repayment, making it riskier than secured debt.

is the third generation of the internet, which focuses on decentralisation, blockchain technology, and user control over data. Web3 aims to create a more open and user-centric internet.

is the proportion of loans that a lender has written off as uncollectible, expressed as a percentage of total loans. This ratio is used to assess the quality of a loan portfolio.

is the income return on an investment, typically expressed as an annual percentage. Yield is a key measure for investors to evaluate the profitability of their investments