Glossary - G

Gamma
The rate of change of an option delta with respect to changes in the underlying asset price. A second order sensitivity.

Gaussian distribution
See normal distribution

Gearing
Most commonly used to describe the level of company debts compared to its equity capital. The gearing ration expresses this as a percentage. Therefore, a company with a gearing ratio of 60% has levels of borrowing equal to 60% of its equity capital. It shows at a glance how much a company is borrowing and allow you to measure that against your own risk criteria. For investment trusts, borrowings can boost the return on capital and income via the ability to make additional investments. Also known as leverage, particularly in the US.

In relation to derivatives such as warrants and contracts for difference, gearing refers to the extent to which movements in ordinary share prices are exaggerated by the derivative. The degree of this increased exposure is called gearing.

Gilt-edged securities / gilts
Market term for UK Government bonds. Gilts offer investors fixed annual interest and the certainty of repayment. They can’t be cashed before maturity, but are readily traded on the stock market. They are dealt in nominal value form and prices are quoted in pounds per 100 nominal. Gilt prices go up and down.

Good till cancelled order (GTC)
An order that remains valid until executed or cancelled by the client, subject to a maximum time period.

Greenshoe
A clause within the underwriting agreement that provides for additional securities to be issued above the original issue size if demand exists.

Gross
An amount before deduction of tax or commissions.

Gross roll-up
Investments which grow without tax being deducted until a chargeable event.

Group investment
An investment held or to be held in the name of more than one person.

Growth and income fund
A fund that seeks earnings growth as well as income. These funds invest mainly in the ordinary shares of companies with both a history of capital gains and a record of consistent dividend payments.

Growth shares
An established company in a dynamic sector that produces higher than average growth in profits year after year.

Guaranteed minimum pension (GMP)
Some occupational pension schemes contract out of the State Earnings Related Pension scheme by providing equivalent benefits. These benefits are known as GMP.