Glossary - F

Face value
Value of a bond to be paid out at maturity. Also known as par value. Can also apply to the value on the face of a share, although this bears very little relationship to the market price at which a share is bought and sold.

Fallen angels
Issuers who were investment grade at the time of launch but have now been downgraded below investment grade.

Fee
An amount paid up front, quarterly or semi annually in arrears to compensate the buyer of risk. The fee takes into account the specific default on the reference obligation and is linked to the credit spread on the reference obligation. Also known as premium.

Fill or kill
Type of order which is either completed or rejected in full.

Final dividend
The dividend paid by a company after the end of its financial year, recommended by the directors but authorised by the shareholders at the company’s AGM.

Financial Services and Markets Act 2000
Legislation that came into effect in December 2001 that imposes regulations on who is allowed to conduct investment business and how it is conducted.

Financial Services Authority (FSA)
Agency designated by the Treasury to regulate the UK financial industry. Introduced in 1997 to take over from the Securities Investment Board and the Self Regulating Organisations (SROs).

Financial year
The official tax year. This is dated from 6th April to 5th April the following year in the UK.

Firm order
Verbal or written order to buy or sell a security that is not subject to cancellation.

Fixed asset
Tangible property used in the operations of a business, but not expected to be consumed or converted into cash in the ordinary course of events.

Fixed interest loan
Loans issued by a company, the Government (gilts) or a local authority, where the amount of interest to be paid each year is set on issue.

Fixed interest securities
See bond

Float / flotation
When a company has its shares quoted on the stock market for the first time.

Floating Rate Note (FRN)
A debt security with a variable interest rate. FRNs are normally benchmarked to a reference rate such as LIBOR. Also known as a floater.

Floor
The lowest acceptable limit as restricted by controlling parties. Opposite to a cap.

Floortion
An option on a floor. The purchaser has the right, but not the obligation, to enter into a floor at a predetermined rate on a predetermined date. A type of compound option.  

Foreign dividends
These securities can pay their dividends in a variety of combinations dependent on the underlying company, the country of origin and the taxation agreement between the country of origin and the UK. For this reason, the associated tax credit may be subject to withholding tax from the country of issue at a variety of rates.

Forward pricing
The pricing of a unit trust after the sale and purchase orders of the day have been received and the funds have been revalued.

Forward rate agreement (FRA)
An interest rate contract in which buyer and seller agree to exchange the difference between the current interest rate and a pre-agreed fixed rate, struck on the date of execution of the FRA contract. At maturity, if rates have risen, the purchaser of the FRA receives the difference in rates from the seller. If they have fallen, the seller receives the difference from the buyer. The buyer of an FRA fixes a future borrowing cost while the seller fixes the rate of return on a future deposit.

FRN
See floating rate note

Front-end load
See initial charge

FSA
See Financial Services Authority

FTSE 100
The Financial Times Stock Exchange 100 Index. Tracks the largest companies by market capitalisation and is the best known indicator of share values on the London Stock Exchange.

FTSE 250
The next 250 companies after the FTSE 100 by market capitalisation.

Fully paid shares
When the total amount payable in relation to the new shares has been paid to the company. Applies to new issues.

Fund(s)
A generic term used to describe pooled money of individual investors that has been committed to a stock or bond market under the management of an investment professional. They offer the advantage of spreading risk as they invest in a large number of securities at any one time. Examples include unit trusts and OEICs.

Fund of funds
See umbrella fund.

Fund manager
An individual or company that invests money on behalf of clients.

Fund objective
A fund manager's stated goal for your investment.

Fund size
Total value of assets under management in a fund, listed as millions of the currency that the fund prices are quoted on.

Fungible
Occurs when an existing issue is reopened – that is, additional securities are issued – and the new securities are interchangeable with the existing securities.

Futures
A futures contract is a legal agreement to make or take delivery of a specified quantity of a commodity, share or index at an agreed price and delivery date. Unlike an option, which does not impose any obligation, a futures contract commits the user to buy or sell the item in question when the delivery date arrives.

FX forward
An obligation to buy or sell a currency at an agreed price on an agreed date. The forward or future price is decided by adjusting the spot or current price to account for changes in interest rates. It can help you plan exchange requirements ahead of time and gain more competitive exchange rates, as well as hedge your risk to adverse movement in the foreign exchange market.

FX spot
The exchange of one currency against another at an agreed rate, settlement of which will take place two business days later.