A Dictionary of Finance

It is pretty obvious that you can empower women by providing more financing for female entrepreneurs, and financing technology that makes banking services accessible to women in remote places. Or by investing in the care economy, services for child and elderly care, where women carry typically the larger burden. What may be less evident is that financing parking spaces, roads and public transport...

If you like Italian mineral water, maybe you’d also enjoy an Italian hydrobond. It won’t rehydrate you or go nicely with a fettucine Alfredo, but it might be a good long-term investment and it will keep water prices under control for the consumer. “It’s a sexy name for something quite plain,” says Thomas van Gilst, head of water security and resilience at the European Investment Bank . “The idea w...

Did you know that, most likely, you are a beneficiary of structured finance? So before you go bashing opaque financing structures that you think caused the financial crisis a decade ago, please make sure you know what you are talking about – or at least give this episode a listen. Milena Messori, head of division for EIB’s intermediated finance for micro-, small- and medium-sized enterprises and K...

This would not be a complete Dictionary of Finance if we did not reference at least once Gordon Gekko’s famous line “Greed is good” from the 1987 movie “Wall Street”. So here goes: Over the past four years or so, central banks have been trying to set a greedy example to commercial banks, hoping greed is contagious and will infect them all in turn. How so? Remember that in one of our first episodes...

Wow, what a week this has been! Since Sunday, when our first episode on Bitcoin went live, the value of Bitcoin has come down from around USD 8000 to below USD 6000 and back up to almost past USD 8500 again. You may dismiss this as yet further proof of how unhinged cryptocurrencies are, the week has been pretty crazy for various assets, so don’t go jumping to conclusions yet—at least, not until yo...

Bitcoin has been all over the financial press throughout the past year or so, thanks to huge volatility (an investment of USD 100 into Bitcoin would have been worth over USD 6.5 million in December, but has since lost half of its value) so we thought we need to try to be able to sound like we know something. Just in case the topic should come up during dinner conversations. Let’s make one thing cl...

In concessional finance, loans have more advantageous terms than usual, to support a development objective Impact finance funds financially sustainable projects that have difficulty finding finance because of some perceived risk Heike Ruettgers, head of development and impact finance at the European Investment Bank , joins us on this week’s A Dictionary of Finance podcast to explain these two term...

The corporate balance sheet explained—from the reason companies make one, down to the obscure terms that appear on it.  If you’ve ever mixed up your left and right, you could just as easily mix up your assets and liabilities. One of them goes on the left-hand side of the balance sheet, while the other goes on the right. Which one goes where? Okay, the assets are on the left. But you’ll find t...

If you’ve wondered what a naked short sale is, here is the long and short of a practice that’s often looked at askance by financial traders: short selling.   Sandeep Dhawan came on A Dictionary of Finance podcast to talk about shorts. He explained how naked short sales work, as well as how covered shorts work, and mentioned that short sales are often seen as somewhat immoral, even though they...

Equity and bond markets collectively are known as the capital markets. The capital markets are mechanisms for raising capital, transforming savings productively into investments, so that companies can produce goods and services for the economy. We get the low-down on how the capital markets work, in a discussion that lays out exactly how technology has changed the traditional image of a bunch of t...

Collateral is more than just a fairly good Tom Cruise movie. It’s also a Jamie Foxx movie… Actually, what we’re really talking about on our podcast this week is financial collateral. This kind of collateral has become more and more important since the financial crisis, because it reduces the risk to lenders that they’ll never get their money back. Peter Balaz came on the podcast A Dictionary of Fi...

We asked two experts, How do economists use economic models? The answer: to project current data into the future. Lots and lots of data. Economic models help economists understand how things work by reflecting things that can’t be observed directly and by projecting forward Natacha Valla and Georg Weiers came on the podcast to talk about how economists use models—as well as to give us specifi...

Investment has been neglected in Europe since the financial crisis a decade ago, according to the European Investment Bank’s annual Investment Survey. But what effect does that really have? To answer that, first we back up and ask: What is investment? Why does it need to keep increasing? Investment is the acquisition of goods that are used in the production of other goods and services. Those goods...

Climate change is a vital issue for the future of the world, and climate finance is key to confronting it. You get the lowdown on this supremely important subject on the European Investment Bank ’s podcast A Dictionary of Finance this week. We interview Nancy Saich, senior technical advisor in the EIB’s Environment, Climate and Social Office, and Martin Berg, investment officer in the Infrastructu...

Green bonds ensure that an investment addresses climate change, the degradation of environmental systems, or biodiversity loss. When Aldo Romani developed the first Climate Awareness Bond ten years ago for the European Investment Bank , he wanted small investors to be able to participate, so a commitment of as little as EUR 100 could buy a piece of that issue. Now the green bond market is USD 200...

How to turn nature from a charity case into a sustainable asset class. Environmental finance uses financial tools for the good of the environment, working to determine the right price for the use of environmental resources and who should pay for them   What if we extended our outlook from the next quarterly results to the next few centuries? We would most likely find that the true cost of nat...

Quasi-equity and hybrids raise financing for different kinds of companies without diluting their equity holders. How does that work? Quasi-equity is a contingent and participating loan, meaning that its profits are contingent on the success of the company and that it participates in the risk and the potential upside. A corporate hybrid bond has characteristics of equity and debt, so that some of t...

Smart city finance is based on an integrated smart city plan, in which a range of technological innovations are used to create a better city to live in. At least, that’s what smart city finance should be about. Sometimes cities think they’re smart, because they’re using lots of technology. But they aren’t truly smart until they create an overall vision for the smart city. Smart cities go beyond th...

  The DIGITAL ECONOMY consists of all the transactions carried out over digital infrastructure or using digital technologies, including e-commerce. In fact, anything with an “e-” in front of it is part of the digital economy. It’s not just Facebook and Amazon, but even traditional companies that are part of the digital economy. The FOURTH INDUSTRIAL REVOLUTION represents the shift in business to a...

If you wanted your money to help society, you used to be limited to giving it to charity or refusing to invest in “sin” businesses, like gambling. But companies are figuring out ways to make good deeds profitable with an investment approach called impact investing. Allar and Matt are joined on the podcast by Uli Grabenwarter of the European Investment Fund , who explains how considering the benefi...

Ahh, Switzerland – the land of cheese, chocolate, and… banking regulation? While you may not associate the alpine nation with strict rules on financial institutions, if you come across speakers of Financese, you will hear about the Basel committee. From what we gather, the Basel rules have become the agreed way of doing things. What things, you might ask? Risk management things mostly: measuring c...

On this week’s episode of ‘A Dictionary of Finance’ , Matt and Allar learn about credit stories and equity stories. As it turns out, these stories are a little different from your average bedtime fare – in fact, it is critical that bankers and other financiers not fall asleep while you tell them your story! We find out that (we’re simplifying here) pension fund managers are more likely to enjoy a...

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...