Glossary of Terms

2 and 20 A typical hedge fund management fee structure, comprising a base fee of 2% p.a. on the capital invested plus 20% of returns above an agreed threshold return.
Absorption ratio A measure of implied systemic risk. It equals the fraction of the total variance of a set of asset returns explained or “absorbed” by a fixed number of eigenvectors. The absorption ratio captures the extent to which markets are unified or tightly coupled.
ABX Asset-Backed Security Index. A credit default swap contract that pools lists of exposures to mortgage-backed securities.
ABX index A financial benchmark that measures the overall value of mortgages made to borrowers with sub-prime or weak credit.
Accrual An accounting entry to recognise an impending transaction settlement.
Accruals-based accounting An accounting method that values an asset by recognising economic events regardless of when cash transactions occur. Revenues are matched to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received), allowing current cash inflows/outflows to be combined with future expected cash inflows/outflows.
ADR American Depository Receipt – an instrument listed on a US exchange, backed by shares in a non-US exchange. See also SDR.
AIFMD Alternative Investment Fund Management Directive. An EU initiative to regulate hedge funds and other alternative investment funds.
AIMR Association for Investment Management ...

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