Documentation > Glossary U


Glossary U

The financial world is full of jargon - i.e. strange words no-one understands. Here we try to explain some of the many technical terms.

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U

Underlying Security

The stock, bond, index, or other financial instrument upon which a derivative such as an option is based. It is the underlying security that is subject to being bought or sold upon exercise of the option.

Under-Fitting

Not properly explaining the known data or facts. An inadequate model.

Upgrades/Downgrades

Analysts make buy/hold/sell recommendations for the stocks they follow. An upgrade is a change from a sell to a hold or buy, or from a hold to a buy. A downgrade is a change from a buy to a hold or sell, or from a hold to a sell.

Since most analysts recommendations are of the BUY variety, and there is always pressure on them to keep 'talking the happy talk', whenever there is a downgrade it is very likely to trigger a sizeable reaction; experienced investors having already taken account of these customs will tend to panic, as e.g. HOLD in analyst-speak actually means SELL and so on. If an analyst ever makes a SELL recommendation, chances are the company is about to go bust.

Bond rating agencies, e.g. Standard & Poor also rate corporate bonds along a sliding scale which measures the credit-worthiness of the company; downgrades of a company's bonds can also trigger a violent reaction, e.g. lots of investment funds are only allowed to buy bonds of a specific quality, if there is a downgrade, then a lot of automatic selling is triggered. Downgrades can therefore cause a cascade effect, with serious consequences.

User Interfaces and Software Design

  • Too many choices will confuse the user.
  • People communicate verbally.
  • People understand visually.
  • Mathematical equations are a private language for efficient communication between scientists; never expose the general public to an equation.
  • If you show it, anyone can understand it.
  • If it is interactive, people will learn faster.
  • No normal person ever reads the manual.
  • If it needs a manual, then it is too complicated.
  • Invalid choices should be made impossible.

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