A Dictionary of Finance

Do not pass Go. Do not collect $200. And do not play Monopoly, if you want to learn about finance. Instead, play a game that Vincent Thunus, head of regulation and best banking practice at the European Investment Bank developed to teach interested high-school students in Luxembourg about what kinds of risks banks (and thereby, its shareholders and clients) may face, and what banks need to do to ma...

A Dictionary of Finance discovers that venture capitalists aim to make their money through innovative companies that ‘disrupt’ the way things have been done before. Venture capital is risk capital that finances innovation. Risk capital is used to finance innovative companies that a typical bank would think too risky. If you want to set up a bakery, your local bank will probably be able to predict...

Financial engineers don’t wear hard hats, even though some of the stuff they figure out is so complicated it might at first feel like a punch in the head. Don’t worry. Our expert explains how financial engineers work, in terms that anyone can understand. Financial engineering is the application of mathematics to financial questions, typically using computer models. Thomas Ribarits, who heads the E...

In this episode of ‘ A Dictionary of Finance’ podcast we invited Per-Erik Eriksson, head of inclusive finance at the European Investment Fund , and Hannah Siedek, impact microfinance investment officer at the European Investment Bank , to explain to us what microfinance is. We hear stories from sub-Saharan Africa, where Hannah used to work, about borrowers who, barefoot, would be intimidated by th...

We invited European Investment Bank lawyers Maria Cerrato, Tom Nguyen, Kinga Soltész and Matthias Brzezinski together again to reveal some of the legal ruses used when things don’t quite go as planned. We learn what harmless-sounding phrases like ‘to the best of my knowledge after due inquiry’ really mean. And what ‘the data room’ is - a place, typically, with no natural light, a place in which no...

A PPP is a public-private partnership. It delivers long-term infrastructure through the private sector. The public sector pays, but only when the infrastructure is available to the public and maintained to the standard set out in the contract. Gabriel García Márquez, the great Colombian writer, said that everyone has three lives: a public life, a private life, and a secret life. The same is true o...

An event that carries risk can generate harm or a loss. A certain level of risk has to be accepted by, for example, a bank, in order to generate profit. Risk is calculated by assessing the probability that a borrower will default on its repayments. Did you ever take a calculated risk? Whether you were at the top of a ski slope or invading Yakutsk in a game of “Risk,” you probably have done so. But...

First: a shout-out to our 7 listeners in Mongolia! Our statistics show we really do have listeners all over the world, and we’re very excited about each one. In this week’s episode, we went on a quest to find the most incredible sounding legal terms that we hear lawyers use in the European Investment Bank , and challenged the lawyers to explain them in a way that wouldn’t make one snooze at a gard...

We’ve all learned about economies of scale in school (and if you were absent that day, this podcast will provide a quick recap on this, as well). So why is everyone talking about financing the small guys, the SME-s, instead? And it’s not just talk either: the European Investment Bank Group is investing a lot of money in SME’s. In this episode of A Dictionary of Finance podcast, Matt and Allar chal...

Interest rates—you’ve certainly paid them. But why did you pay the particular interest rate you had to pay? Who figures that out, and how? That calculation is related to a lot of other stuff. To the inflation rate—whatever that is. To economic growth—however that comes about. Maybe even to the employment rate—don’t even get me started on the Phillips Curve, which is supposed to show the relationsh...

Allar and Matt uncover the imaginative names for fast-growing new companies, from unicorns to gazelles, dragons and…cockroaches. A unicorn is a privately held company with a valuation of more than USD 1 billion When a company sells shares to the public, it’s called a dragon if it’s worth more than the entire size of the venture capital fund that first invested in it If you like fairy stories, you’...

Allar and Matt examine the two main ways companies raise money: equity and debt. You'll hear an awful lot about a fictional hairdresser and discover that Allar is really keen on free stuff. But, look, don't worry, the main thing is to learn about equity and debt. So here you go: Equity is often described as “shares,” because you own a share of a company. Potentially you risk all you paid...

What do you think of when you hear the word "Bank?" A basketball bank shot by Michael Jordan? The Bank station on the London Underground where the announcer calls out “Mind the Gap,” or a game of Monopoly? Okay, you probably think of the place where you keep your money. But could you really say what banks do? Banks are central to the economy and to politics. You can’t understand any important poli...