Page 15 - PRIAA Glossary

BEAR MARKET
A period of time over which security prices fall precipitously across a market or markets, often following a securities price bubble. There is no specific time frame, percentage in decrease or one index that determines when a bear market can officially be identified. A bear market also does not automatically result in losses across the board, as some derivatives favour a bear market, such as buying a put option.
BENCHMARK
A marker of the performance of the market, either broad in range, such as the S&P 500 stock index, or sector-specific, such as the NYSE Energy Index. Many funds will either aim to follow a benchmark, such as a passive exchange-traded fund (ETF), or beat a specific benchmark. Benchmarks
have the following attributes: 1) transparent and 2) knowable in advance.
BERMUDA OPTION
An option that can be exercised on a number of specific dates during the term of the transaction.
BETA
A number describing the correlated volatility of an asset
in relation to the volatility of the benchmark to which the asset is being compared. This benchmark is generally the overall financial market and is often estimated via the use of representative indices, such as the S&P 500. A beta of more than 1 indicates that the stock is more volatile than the market and a beta of less than 1 indicates that the stock is less volatile than the market.
BID PRICE
The price at which a trader or market maker is willing to buy a specific security. The bid price will always be less than the ask price to ensure there is a spread which is profitable.
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