AIMA

This is a loan secured by collateral on which the lender has a second position behind the senior debt lender. Because of the higher risk to the subordinated debt lender, some type of additional compensation is usually necessary, typically in the form of warrants or options on the company's stock. Often, repayment can be arranged as interest only for some portion of the term of the debt.

An over-estimation of historic returns for the hedge fund industry that results from the tendency of poor-performing hedge funds to drop out of an index while strong performers continue to be tracked. The result is a sample of current funds that includes those that have been successful in the past, while many funds that underperformed are not included.

An option to enter into an interest rate swap.

Systematic risk is the level of risk that is faced by a well-diversified portfolio. It is sometimes known as “market risk” as it is the risk of the market as a whole - that is, risk factors that impact on all stocks in the economy - for example changes in interest rates or the state of the economy. It is said to be undiversifiable risk because adding more investments to a diversified portfolio will not decrease the level of this type of risk. Beta (b) is a measure of systematic risk taken on by a portfolio.

The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A's default in X market may affect Intermediary B's ability to fulfil its obligations in Markets X, Y, and Z.