How the Trading Floor Really Works

Glossary

1 in 20—Chapter 12: Many value at risk (VaR) calculations are done based on a 95% confidence level, which means that the amount calculated is the maximum amount that should be lost in 19 out of 20 days. One out of 20 is the 5% chance that losses will be higher.

2 and 20—Chapter 2: This is a reference to typical hedge fund fees, which are a 2% management fee and a 20% performance fee.

Active investor—Chapter 2: When an investor is known for investing in financial products with a short time horizon such as days or weeks, an investor is considered a more active investor. A day trader is the most extreme of active investors.

Advisory agreement—Chapter 3: This is a formal legal agreement between a bank (generally the corporate finance department) ...