📚 MiroMint Financial Glossary

Trading systems that execute orders based on pre-programmed instructions, taking into account variables such as time, price, volume, and mathematical models. These systems execute trades at speeds and frequencies impossible for humans.

A measure of the active return on an investment, comparing its performance relative to a benchmark index. An alpha of 1.0 means the asset outperformed its benchmark by 1%. Positive alpha is the goal of active portfolio management and quantitative trading strategies.

A technical analysis indicator that measures market volatility by decomposing the entire range of an asset price for that period. A higher ATR suggests higher volatility, which is useful for setting stop-loss orders and sizing positions.

A coefficient measuring the systematic sensitivity of an asset’s returns relative to the broader market (such as the S&P 500 index). A Beta of 1.0 indicates correlation with the market; a Beta above 1.0 indicates higher volatility, and below 1.0 indicates lower volatility.

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). Narrow spreads suggest high liquidity, whereas wide spreads indicate lower trading volume and higher transaction friction.

A technical indicator consisting of a middle simple moving average and two standard deviation bands plotted above and below it. The bands expand during periods of high volatility and contract during low volatility, signaling overbought or oversold conditions.

A financial model that calculates the theoretically appropriate required rate of return of an asset, incorporating its systematic risk (Beta) and the expected returns of the market and risk-free assets.

A fundamental leverage ratio calculated by dividing a company’s total liabilities by its shareholder equity. It evaluates the degree to which a company is financing its operations through debt versus wholly owned funds.

An option Greek measuring the expected change in option premium for a $1 change in the underlying stock price. For example, a Delta of 0.60 means the option price rises by $0.60 when the stock rises by $1. It also serves as a proxy for the probability of expiring In-the-Money.

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is expressed as a percentage and calculated by dividing annual dividends per share by the price per share.

A fundamental metric calculated by dividing a company’s net profit by its total outstanding common shares. EPS serves as an indicator of a company’s profitability and is the denominator of the P/E ratio.

A type of moving average that places a greater weight and significance on the most recent data points. EMAs react faster to price changes than Simple Moving Averages (SMAs), helping traders identify short-term trend reversals.

A quantitative investment strategy that targets specific drivers of return (factors) such as Value, Momentum, Quality, Size, or Low Volatility to achieve long-term market outperformance.

An asset pricing model developed by Eugene Fama and Kenneth French that expands on the CAPM by adding size risk (Small Minus Big) and value risk (High Minus Low) factors to market risk factors.

The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike GAAP earnings, FCF represents the actual deployable cash available for dividends, acquisitions, or debt reduction.

An option Greek that measures the rate of change in Delta for a $1 change in the underlying stock price. High Gamma means Delta is highly sensitive to price action, which is common in short-dated options near the strike price.

A company whose revenue and earnings are expected to grow at a faster rate than the market average. These stocks usually command higher P/E ratios and reinvest earnings rather than paying dividends.

A metric representing the market’s consensus expectation of future volatility for a stock, derived from its option premiums. High IV increases option premiums by adding time value (extrinsic value).

The total market value of a company’s outstanding common shares. Calculated by multiplying outstanding shares by the current market price per share. It divides companies into Large-cap, Mid-cap, and Small-cap classifications.

A trend-following momentum indicator that shows the relationship between two moving averages of an asset’s price. Typically calculated by subtracting the 26-day EMA from the 12-day EMA, plotted alongside a 9-day signal line.

An AI subfield used in quantitative finance to analyze text sources (financial news, SEC reports, earnings transcripts). NLP models convert qualitative text into quantitative sentiment signals.

Mathematical risk variables (Delta, Gamma, Theta, Vega) that measure how sensitive an options contract price is to changes in stock price, volatility, and time to expiration.

An options strategy involving the simultaneous purchase and sale of multiple option contracts of the same class (Calls or Puts) on the same underlying stock, designed to limit risk and define returns.

A fundamental valuation multiple calculated by dividing stock price by Earnings Per Share (EPS). It indicates how many dollars an investor must pay to claim $1 of the company’s net profit.

A valuation ratio calculated by dividing a stock’s P/E ratio by its expected earnings growth rate. A PEG below 1.0 indicates that a stock is cheap relative to its growth potential.

The study of financial markets using mathematical, statistical, and numerical models. Quants look for empirical anomalies to build automated trading algorithms and manage systematic risk.

A technical momentum oscillator measuring the speed and change of price movements on a scale from 0 to 100. Traditionally, values above 70 indicate overbought conditions, while values below 30 indicate oversold conditions.

The algorithmic evaluation of text data to classify the emotional tone (positive, negative, neutral) surrounding a stock, helping quantitative models assess market sentiment changes.

A risk-adjusted performance metric calculated by dividing a portfolio’s excess return (above the risk-free rate) by the standard deviation of its returns. A higher Sharpe ratio indicates better returns per unit of volatility.

The Cyclically Adjusted Price-to-Earnings ratio. A valuation multiple that uses real EPS over a 10-year period, adjusted for inflation, to smooth out economic cycles and assess long-term market valuations.

An arithmetic moving average calculated by adding the closing prices of a security over a set number of periods (e.g. 50 or 200 days) and dividing by the number of periods.

A variation of the Sharpe ratio that differentiates harmful volatility from total volatility by dividing excess return by the downside semi-deviation. It only penalizes negative volatility.

The market-wide risk inherent to the entire financial system (inflation, interest rates, macro downturns) that cannot be diversified away. It is measured by Beta.

An option Greek measuring the rate of time decay of an options premium. Theta is expressed as a negative number, representing how much value the option loses each day as expiration approaches.

Idiosyncratic, company-specific risks (e.g., product failures, management changes) that can be eliminated or neutralized through proper portfolio diversification.

A stock that appears cheap based on low valuation metrics like P/E ratios, but is actually in structural decay, leading to declining earnings and lower stock prices.

An option Greek measuring the sensitivity of an option premium to changes in the underlying stock’s Implied Volatility (IV). A Vega of 0.15 means the option price rises by $0.15 for every 1% increase in IV.