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Financial Vocabulary


a measure of difference for interval and ratio variables between the observed value and the mean. Deviations are known as errors or residuals: deviations from the population mean are errors, while deviations from the sample mean are residuals. One of the features of the mean is that the sum of the deviations across the entire set of all observations is always zero, corresponding to the fact that the average deviation is zero.
Standard deviation
the frequently used measure of dispersion: it uses squared deviations, and has desirable properties, but is not robust. In statistics, standard deviation is a simple measure of the variability or dispersion of a data set. A low standard deviation indicates that all of the data points are very close to the same value (the mean), while high standard deviation indicates that the data are “spread out” over a large range of values. In finance, the standard deviation on the rate of return on an investment is a measure of the risk. For whole population, standard deviation σ = sqrt( sum ( x(i) - avg(x) ) / n ); for a sample of the population, sample standard deviation s = sqrt( sum ( x(i) - avg(x) ) / (n - 1) )
Average deviation
average absolute deviation, the sum of absolute values of the deviations divided by the number of observations.

Direct Market Access
Direct Strategy Access. Accessing broker's trading strategy in algorithmic trading system.

Profit and Loss.

the probability that an investment's actual return will be different than expected (unexpected variability or volatility of return), can be greater or less than the expected return. This includes the possibility of losing some or all of the original investment. Some regard a calculation of the standard deviation of the historical returns or average returns of a specific investment as providing some historical measure of risk. Insurance is a risk-reducing investment in which the buyer pays a small fixed amount to be protected from a potential large loss. Gambling is a risk-increasing investment, wherein money on hand is risked for a possible large return, but with the possibility of losing it all. Purchasing a lottery ticket is a very risky investment with a high chance of no return and a small chance of a very high return. In contrast, putting money in a bank at a defined rate of interest is a risk-averse action that gives a guaranteed return of a small gain and precludes other investments with possibly higher gain.

buying or selling a financial instrument specifically to reduce or cancel out the risk in another investment.
increasing measurable risk and exposing the investor to catastrophic loss in pursuit of very high windfalls that increase expected value.

the difference between estimated transaction costs and the amount actually paid. Usually it's measured using initial mid price as the difference between the average execution price and the initial midpoint of the bid and the offer for a given quantity to be executed.

basis points per share
currency units per share. Examples of currency units: cent for USD, yen for JPY.