Preparation for Interview

Often asked terms from NOMURA

Asset and Liability Management (ALM): the practice of managing risks that arise due
to mismatches between assets and liabilities of the financial institution.
Bond: an instrument of indebtedness of the bond issuer to the holders. It is a debt
security, under which the issuer owes the holders a debt and, depending on the terms of
the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a
later date, termed the maturity date
CAGR: Compound Annual Growth Rate the year-over-year percentage growth rate of
an investment over a specified period of time
Capex: Acronym meaning Capital Expenditures, that are funds used by a company to
acquire or upgrade physical assets such as property, industrial buildings or equipment.
This type of outlay is made by companies to maintain or increase the scope of their
operations
D&A: Acronym meaning Depreciation and Amortization, a category of expenditure by
which a company gradually records the loss in value of a tangible (Depreciation) and
Intangible (Amortization) asset
Deleveraging: Reduction of the leverage ratio, or the percentage of debt in the balance
sheet of a single economic entity, such as a household or a firm.
Discount rate: The interest rate used in discounted cash flow analysis to determine the
present value of future cash flows. The discount rate takes into account the time value of
money (the idea that money available now is worth more than the same amount of
money available in the future because it could be earning interest) and the risk or
uncertainty of the anticipated future cash flows (which might be less than expected).
EBITDA: Acronym meaning Earnings Before Interest, Taxes, Depreciation and
Amortization
EBIT: Acronym meaning Earnings Before Interest and Taxes
ETF: Exchange traded funds. An exchange traded fund is an investment fund traded on
stock exchanges, just like stocks. An ETF holds assets such as stocks, commodities or
bonds, and trades close to its net asset value over the course of the trading day.
EV: Enterprise Value Equal to Equity Value plus Net Debt (or minus Net Cash)
FCF: Free Cash Flow Measure of cash generation used in fundamental valuation of a
business. Equal to EBIT x (1 - tax rate) + depreciation and amortisation - changes in
working capital - capex
Forward interest rates: An interest rate that is specified now for a loan that will occur
at a specified future date. As with current interest rates, forward interest rates include a

term structure that shows the different forward rates offered to loans of different
maturities.
Hedge: an investment made in order to reduce the risk of adverse price movements in a
security, by taking an offsetting position in a related security, such as options or short
sales.
LTM: Acronym meaning Last Twelve Months
IRR: Acronym meaning internal rate of return. The IRR corresponds to the rate of return
on an investment. The IRR of a project is the discount rate that will give it a net present
value of zero
Market Cap: Market capitalisation or market cap is a value of a corporation as
determined by the market price of its common stock (shares). It is calculated by
multiplying the number of outstanding shares by the current market price of the share
Market liquidity: an asset's ability to be sold without causing a significant movement in
the price and with minimum loss of value.
Opex: Acronym meaning Operating Expenditures, a category of expenditure that a
business incurs as a result of performing its normal business operations
Payout ratio: The amount of earnings paid out in dividends to shareholders
Shareholder loan: an instrument used to distribute cash to shareholders while
minimising a companys tax liability. Not typically included within net debt
Swap: highly liquid financial derivative instruments in which two parties agree to
exchange interest rate cash flows, based on a specified notional amount from a fixed rate
to a floating rate (or vice versa) or from one floating rate to another.
Swaption: An option granting its owner the right but not the obligation to enter into an
underlying interest rate swap. A payer swaption gives the owner of the swaption the right
to enter into a swap where they pay the fixed leg and receive the floating leg. A receiver
swaption gives the owner of the swaption the right to enter into a swap in which they will
receive the fixed leg, and pay the floating leg.
Ultimate forward rate (UFR): the theoretical forward interest rate to which forward
rates converge.
Yield to maturity: Discount rate at which the sum of all future cash flows from the bond
(coupons and principal) is equal to the price of the bond.

consumer discretionary
A category of industries, made up of companies which deal with products or services that
are not necessities. The degree of spending and amount of consumption of these
products and services varies depending upon the individual. These
industries include automobiles, high-end clothing, restaurants, hotels, and luxury goods.

What does this mean priced to perfection?

It's a point where the stock prices have rallied ahead of future earnings, thus if a
company says anything that points to slower growth (the stock price not only takes a hit
but gets completely crushed).
Fintch

Media, retail and transport are just three of the many sectors significantly disrupted
by technological shifts. Banking, on the other hand, has remained relatively
untouched. Regulatory barriers have largely kept banking in the status quo. Central
banks have maintained a vice-like grip on payment systems; however, technological
advancements are beginning to undermine the nature of these payment structures.
Much of the demand for new, more flexible financial products is being driven
by so called millennials. As consumers, we have grown accustomed to cutting
out the middle man. Services such as Uber, Airbnb and Kickstarter have all
disrupted their sectors, bringing consumers together, bypassing traditional
gatekeepers. It is in this spirit that we have seen the explosion of FinTech
adoption over the course of the last few years.

According to a recent report from EY, consumers are attracted to FinTech by the
more attractive rates they provide compared to traditional lenders. The ease of
access to different products and services and a better online experience were
further drivers. The simplicity involved in using FinTech products and services was
generally the most attractive feature, according to EY.
FinTech could also have an enormous impact on the revenues of banks themselves.
A recent report by Santander InnoVentures, the Spanish banks FinTech investment
fund, suggested that the blockchain (the virtually unhackable technology that
underpins all transactions conducted via Bitcoin) could save lenders up to $20bn a
year in settlement, regulatory and cross-border payment costs. However, while the
blockchain could cut down considerably on red tape, the existence of such a system
does pose a threat to traditional banks, which could be left with outdated and
unpopular legacy systems if the blockchain and other FinTech developments truly
take off and become mainstream.
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Advantages

FinTech companies will have the upper hand when it comes to building better
services for users.
FinTech firms and tech giants will try to unbundle financial services and pick
the cherries out of the cake, focusing on high-margin, highly scalable

product and service areas, while leaving the commoditised or low margin
services to banks,
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Apple Pay