Term Definition
AAA rating The highest possible rating assigned to the bonds of an issuer by credit rating agencies.
Active management An approach to investing whereby capital is allocated according to the judgment of the investor or fund manager(s). The active investor aims to beat the returns from the stockmarket or specified index/sector, rather than to match them.
Bond A loan, usually taken out by a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the loan is repaid.
Bond yield This refers to the interest received from a bond and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.
Credit rating An independent assessment of a borrower's ability to repay its debts. A high rating indicates that the credit rating agency considers the issuer to be at low risk of default; likewise, a low rating indicates high risk of default. Standard & Poors, Fitch and Moody’s are the three most prominent credit rating agencies.
Current account  The difference between the value of the exports and imports of a country, from trade in goods and services.
Fiscal policy Government policy on taxation, spending and borrowing.
Fiscal stimulus Government financial policy that increases the budget deficit, or reduces the budget surplus. This is often achieved by reducing taxation or increasing government spending.
Gilt Bonds issued by the UK government.
Government bond Bonds issued by governments.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier. There are two inflation indices in the UK – the Retail Prices Index (RPI) and the Consumer Prices Index (CPI).
Monetary stimulus When central banks lower interest rates or buy securities on the open market to increase the money in circulation. Also referred to as monetary easing.
Sovereign In this context, a synonym for government.
Real interest rate The interest rate, adjusted for changes in prices in an economy.