Glossary

Markets, macro, crypto and Islamic finance terms in plain language.

Basis point: One hundredth of a percentage point. A move from 4.00% to 4.25% is 25 basis points.
Bond yield: The annual return a bond pays relative to its current price. When the price falls, the yield rises, and the reverse.
Breadth: How many stocks take part in a market move. A rally led by a handful of giants is narrow; one led by most stocks is broad.
Central bank: The institution that manages a currency and sets short-term interest rates, for example the Federal Reserve or the European Central Bank.
CPI (Consumer Price Index): A measure of the average change in prices paid by consumers for a basket of goods and services. The most watched gauge of inflation.
DXY (US Dollar Index): An index tracking the dollar against a basket of six major currencies, with the euro as the largest weight.
ETF flows: The net amount of money moving into or out of an exchange-traded fund, calculated from creations and redemptions of its shares.
Federal funds rate: The interest rate US banks charge each other for overnight loans. It is the Federal Reserve's main policy rate.
Funding rate: A periodic payment between long and short traders in perpetual crypto futures that keeps the contract price close to spot.
Gharar: Excessive uncertainty or ambiguity in a contract. Islamic finance generally avoids contracts with gharar about price, subject or delivery.
Halal screening: A filter that checks whether a company's business activities and financial ratios meet Sharia-compliance standards.
Hedge: A position taken to reduce the risk of another position, such as buying protection against a fall in a portfolio.
Ijara: An Islamic lease contract in which the owner of an asset gives another party the right to use it in return for rent.
Inflation: The rate at which the general level of prices rises, reducing what each unit of currency can buy.
Liquidity: How easily an asset can be bought or sold without moving its price much.
Market capitalisation: The total market value of a company's shares: share price multiplied by shares outstanding.
Mudarabah: A partnership in which one party provides capital and the other provides expertise. Profits are shared by agreed ratios; losses of capital fall on the capital provider.
Murabaha: A sale in which the seller discloses the cost of an asset and adds an agreed profit margin, often paid in instalments.
Musharakah: A joint venture in which all partners contribute capital and share profits by agreement and losses in proportion to their contribution.
Open interest: The total number of outstanding derivative contracts, such as futures, that have not been settled.
Purification: Donating the small share of income from a compliant investment that comes from impermissible sources, as practised in Sharia-compliant investing.
Quantitative tightening (QT): When a central bank shrinks its balance sheet by letting bonds mature without replacing them, or by selling them.
Real yield: A bond yield after subtracting expected inflation. It measures the return in purchasing-power terms.
Recession: A significant, broad and sustained fall in economic activity, often shown by two or more quarters of falling output.
Riba: Interest or any predetermined excess charged on a loan. It is prohibited in Islamic finance.
Spread: The difference between two prices or yields, for example between corporate and government bonds, or between a bid and an ask.
Sukuk: Islamic financial certificates that represent ownership of assets, usufruct or a business venture, with returns linked to those assets rather than to interest.
Takaful: Cooperative insurance in which participants contribute to a shared pool that pays members who suffer a covered loss.
Volatility: How much and how fast a price moves. Higher volatility means larger swings in both directions.
Yield curve: A chart of bond yields across different maturities. Its shape is read as a signal of expectations for growth and interest rates.

Educational content, not investment advice. Definitions are simplified. For Islamic finance rulings, consult a qualified Sharia scholar.

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