The 70 words you need to know for banking interviews

If you’re aiming for a job in financial services, and especially one in investment banking, then you need to learn a lot of jargon.

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More than most industries, finance is full of technical terms and slang. Of course, you’ll pick up a lot of it as you go through your career – especially the more technical parts of it – but to start that career, you’ll improve your odds significantly by showing your interviewer that you’re already familiar with it.

This is a non-exhaustive list of things you’ll definitely want to know. 

Advisory: Part of the investment banking division. Similar to and including M&A services, but with slightly more emphasis on providing advice, and less on providing finance. Often the main or only business line of specialized boutiques, where the term also includes restructuring services.

Analyst: The most junior rank in a bank. At this point, you’re basically on a graduate program – expect to move up to associate by your second or third year. “Analyst” is also a general term for the credit and equity researchers that the bank employs, and is used independent of rank or job title.

Artificial Intelligence (AI): A very broad term but generally refers to human-type intelligence that can be provided by a computer program or machine. AI as a discipline has been consistently researched since the 1950s, but emerged in the public consciousness in late 2022 with the release of ChatGPT, powered by OpenAI’s GPT3.5 model.

Agentic AI: AI systems that can do things, rather than just chatbots. While a chatbot just answers questions and then waits for your reply, an "agent" can be handed a goal, break it into steps, and use software tools to carry those steps out.

Associate: The second most junior rank in a bank. Associates are either promoted from an analyst program or recruited directly from a business school’s MBA program. Expect to be promoted out of associate rank after about three years in the role.

Back-office: The staff who are responsible for settlement, administrative tasks, and maintaining IT systems. Some back-office jobs, particularly in IT development, can be very well paid, but in general they do not earn as much as the front office.

Bank: As a general definition, a corporation that takes customers’ (individuals and other corporates) deposits and lends the money in its custody to other customers. In an investment banking context, it’s any institution which provides investment banking services – which includes, for instance, boutique banks, that do not take customer deposits (and therefore are not really banks at all).

Bloomberg: A company that specializes in market intelligence. Its best-known product is the Bloomberg Terminal, a computer program that allows access to information (such as pricing) on pretty much any financial instrument you could possibly imagine. It is also known for its news service, Bloomberg News.

Bond: A loan made to a government or company that has been split up to be traded on the market. Bonds are made up of small payments throughout its life (known as coupons) plus the final, full payment on the value (principal). To give an example: the US government borrows $100m for ten years. That loan is split into a million $100 bonds. Those bonds all pay a small coupon until the ten years are up, at which point the government pays back the $100 on each bond. These are the bread and butter of a Debt Capital Markets (DCM) team.

Boutique [bank]: A small, independent investment bank that offers a range of services usually limited to M&A advisory or restructuring. Many of the larger boutiques also provide asset management services.

Brokerage: A company which matches buyers and sellers of securities, making money either out of charging a percentage commission, or out of the spread.

Bulge Bracket: A non-official term referring to the biggest investment banks in the world. These do not have to be deposit-taking, necessarily. There are eight banks generally recognized as being in the bulge bracket, of which five are in America and three are in Europe: JPMorgan, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Barclays, Deutsche Bank, and UBS. Other banks such as BNP Paribas, Societe Generale, and Wells Fargo are occasionally included.

Buy-side: These are investment firms that acquire corporations or bonds as part of their regular business. Includes private equity firms, hedge funds, and asset managers, among others. Contrasted with the “sell-side”, which is only involved in investment banking business.

Capital Markets: The part of the investment banking division which is responsible for helping corporate clients to raise money from the bond and equity (capital) markets. Capital markets bankers need to gather feedback from investors, decide on the price of securities and liaise with sales & trading to get the securities sold.

Cash market: As opposed to “derivatives market”, the cash market is that in which “underlying” securities are bought and sold, rather than derivative claims on them. Not to be confused with the “money market”.

Compliance: The middle-office team responsible for ensuring that other parts of the bank comply with all relevant laws and regulations. Compliance officers are responsible for arranging training, monitoring activity, and providing advice to employees.

Corporate finance: The team within a company/business/corporation that deals with finance. This means day-to-day budgeting and accounting, as well as liaising with investment banks to both raise capital and assist/execute a merger or acquisition.

Coverage: A team in an investment bank specializing in a particular sector, such as technology or healthcare. These teams often work across both advisory and capital markets.

Credit: In FICC divisions, “credit” refers to fixed income products other than government bonds and money market instruments, where the credit risk of the issuer is a major driver of the value of the security.

DCM: Debt Capital Markets.

Discounted Cash Flow (DCF): DCF is a method of valuing an asset (such as a company) based on the cash it is expected to generate in the future. The principle is that a dollar today is worth more than a dollar in ten years’ time, so each year's projected cash flow is "discounted" back to what it's worth today, using a rate that reflects how risky those cash flows are. Add all those present values together and you have an estimate of what the business is worth.

Derivatives: Contracts between two parties which agree to exchange an amount of money based on something else. Most often, the “something else” (known as “the underlying”) is a securities price, so you have “equity derivatives” based on share prices and “rates derivatives” based on interest rates. This isn’t necessarily the case, though; there are “weather derivatives” which pay out based on average temperature or rainfall, and “credit derivatives” which pay out when a company defaults.

Director: The rank between Vice President and Managing Director. Directors will generally have significant management responsibility or be expected to look after clients of their own.

Distribution: The final stage of a capital markets transaction, coming after underwriting. This is the stage in which the securities are sold to investors.

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. A rough proxy for a company's operating profit and cash generation, found by stripping out financing costs, tax, and the accounting charges of ageing assets. It underpins many of the valuation calculations used in M&A.

ECM: Equity Capital Markets.

Equities: Shares; securities which represent part-ownership in a company. In an investment bank, the word on its own refers to part of the sales & trading division, which will generally trade equity derivatives as well as cash equities, and may include the research and prime brokerage operations as well.

Execution: The activity of actually making a transaction happen once it has been agreed with the client. In sales & trading, this means finding a buyer to match the seller (or vice versa) at the best price possible. In the IBD, it means carrying out the legal and administrative work to make the deal happen, and potentially conducting meetings to ensure that it has support from investors.

FICC: Fixed Income, Currencies and Commodities. One of the two main parts of a sales & trading division, and responsible for trading all instruments which aren’t equities or equity derivatives.

FIG: Financial Institutions Group, usually one of the largest teams within an investment banking division. FIG teams concentrate on providing capital markets and advisory services to other banks and insurance companies.

Flow [Trading]: Within sales and trading, this refers to trading that is done at high capacity and with high frequency, usually in an automated manner on an exchange. The price of transactions is publicly disclosed. Because humans aren't involved and flow trades involve machines, spreads are usually very tight. Most simple products, like equities, are traded in this way.

Front-office: Refers to banking staff who either make decisions on applying the firm’s capital or have direct contact with clients. Front office jobs are usually (but not always) best paid, and often require regulatory authorization.

Generative AI (GenAI): A form of artificial intelligence that generates media (in a general sense) such as text, image, video, or sound. 

Hedge Fund: An investment fund marketed only to other institutional investors and very rich individuals. Hedge funds typically charge higher fees than retail mutual funds and have fewer restrictions on their investment strategies.

Institutional investor: A pension fund, mutual fund, hedge fund or sovereign wealth fund, investing in securities. These are the normal clients of a sales & trading desk.

Investment Banking Division (IBD): This is one of the two main divisions in an investment bank. As opposed to sales & trading, IBD is concerned with providing financial solutions to issuers of securities rather than to investors. It is often further divided into capital markets and M&A/advisory. Note that “investment banking” is also often used as a generic term that includes sales & trading, so it’s important to understand which context someone is using it in.

IPO: An Initial Public Offering. The sale for the first time of a company’s shares to the general public on a stock exchange. IPOs are run by the Equity Capital Markets team in an investment bank, and they can be extremely profitable transactions.

Large Language Model (LLM): A language model is a program that mimics the human brain’s creation of language. An LLM is simply a huge version of that and is taught via machine learning by vast swathes of internet data. LLMs are the foundation of most modern AI systems, such as ChatGPT, Claude, and Gemini.

Leveraged Buyout (LBO): The acquisition of a company using a large sum of borrowed money (the leverage) with the target's own assets and cash flows used as security for that debt. The appeal is that debt magnifies returns; put in less of your own equity, and a successful sale a few years later produces a far bigger percentage gain. This is the signature move of private equity firms.

Machine Learning (ML): The method by which a computer program “learns”. Machine learning is the method by which a program takes wide swathes of text and learns to analyze patterns; it uses that pattern recognition for unrelated tasks. Machine learning is the foundation of LLM “intelligence” - the more machine learning that can be completed, the more “intelligent” a program is. 

M&A: Mergers and Acquisitions. Bankers working in an investment banking division who provide advice to companies on taking over and buying other companies, either on an agreed or hostile basis. This includes strategic advice on the actual deal, advice on the valuation of targets, and the arranging of financing for the deal.

Market Making: A service provided by banks, among others, in which they act as intermediaries between buyers and sellers in a market. The act of connecting the two sides of a transaction is “market making”; the term “market maker” refers to the firms that do this as their primary business venture. These are usually electronic firms such as Jane Street.

Managing Director: Usually shortened to MD, this is almost always the most senior “regular” rank in an investment bank. MDs are generally expected to be able to originate deals and generate revenue for their bank.

Middle-office: Complicated. Generally, refers to better-paid and more senior support roles. Compliance and risk management staff would be considered middle office, as would senior prime brokerage staff who had contact with clients as well as managing admin tasks.

Money market: The market for short term fixed income securities, used by banks and industrial companies to smooth out differences in the timing of their incoming and outgoing payments. The best example of these are 3-month treasury bills, known as T-bills.

Natural Language Processing (NLP): The skill of a computer in being able to read or hear “natural” language as produced by a human being and being able to understand it. Chatbots speak and can be spoken to due to NLP – they can understand not just meaning but subtext, tone, and regionalisms.

Origination: In investment banking generally and particularly in capital markets, the process of persuading a client to carry out a transaction with your bank.

Over the counter [Trading]: Usually called OTC trading. Within sales and trading, this refers to trading that is done off an exchange, usually directly between buyers and sellers, with a dealer often acting as an intermediary. OTC trades don't have price transparency - the parties conducting the trades often have to settle a price between themselves. Because of this, they can be complicated, and dealers can make more money facilitating the sale because the spread between the price paid by the buyer and the seller is often comparatively high. Complex derivatives and high yield bonds are traded this way. 

Primary/Secondary: The first time securities are sold to the public, this is the “primary” market. Trading in them afterwards is “secondary”. The distinction roughly matches that between capital markets and sales & trading internally within banks. If a company sells shares without raising new capital (for example, because the founder wants to reduce their stake) this is also considered a “secondary” issue.

Prime brokerage: Not to be confused with “brokerage”. Prime brokerage teams within banks provide services to hedge funds, such as looking after their settlement and back-office functions and providing financing to them.

Private Credit: A fast-growing part of the lending ecosystem, in which non-bank financial institutions (NBFIs), rather than banks or public markets, lend to companies. Because they don't take customer deposits, NBFIs aren't bound by the same capital rules as banks, which allows them to lend to riskier borrowers and structure loans more flexibly. Private credit strategies include direct lending, mezzanine capital, distressed debt, and asset-backed finance, among others. 

Private equity: Investment funds which buy whole companies or large ownership stakes in specifically negotiated deals rather than shares quoted on a stock exchange. The term includes venture capital (VC), which is focused on new companies and startups, as well as financial sponsors and leveraged buyout (LBO) firms which are focused on taking over existing companies to be sold later on for a profit.

Quant: Short for “quantitative”, this refers to a specialist in applied mathematics working on securities practices. There are “front office quants”, who aim to design profitable trading systems, “middle office quants” who design systems for efficient execution of trades and “risk management quants” who measure probabilities of loss.

Rates: In FICC divisions, “rates” is the opposite of “credit” – it refers to bonds and derivatives where the value is driven by expectations about interest rates and credit risk can largely be ignored.

Research: The team within sales & trading responsible for valuing securities and issuing recommendations to investors as to whether to buy or sell them. As well as company experts, research divisions will usually employ economic forecasters and “strategists” who attempt to forecast the bond and equity markets as a whole.

Risk Management: The division responsible for measuring the bank’s exposure to risks based on the securities it holds and the loans it has extended, and setting limits on them.

Sales & Trading: One side of the most important divide in an investment bank. S&T divisions, sometimes called “Global Markets”, deal with brokerage activities. Research divisions are generally within sales & trading, as is prime brokerage. Sales & trading is generally further divided into Equities and FICC.

Securities: Tradeable claims on future payments. Includes shares (equities), bonds (fixed income) or derivatives of all flavours.

Securitization: The process of buying a large number of smaller loans (mortgages or credit card debts, for example) and bundling them into a Special Purpose Vehicle (SPV) which then issues bonds to the public, effectively transforming the loans into securities.

Sell-side: People who work for investment banks, speaking to clients on the buy side.

Settlement: The activity of making sure that records are updated, and payments are sent to the right place after a securities transaction has been carried out.

SPAC: A Special Purpose Acquisition Company. These are listed companies that have no actual activity, whose duty it is to merge with a normal, existing, private business – thereby allowing the normal company to be listed on a stock exchange, without the faff of an IPO. This technique is often used by financial sponsors. SPAC teams cross the boundary between capital markets and M&A.

SPV: A Special Purpose Vehicle. A “brass plate” company formed by a bank in order to be the legal owner of some assets. An SPV generally has no staff or operations of its own. SPVs are a key building block in Structuring and in Securitization.

Spread: The difference between the price quoted by a brokerage to buy securities (the bid) and the price quoted to sell the same securities (the ask). Buying at the bid and selling at the ask is how brokerages make money. The word “spread” can also refer to the difference between two interest rates.

Structuring: Designing complex securities (usually involving derivatives) to achieve particular goals for either the investor or the issuer – these can include specific tax treatment, particular mixtures of risk and reward, or the bundling up of small loans into a larger security which can be publicly traded. This activity crosses the divide between investment banking and sales & trading and might be found on either side depending on how a bank is organized.

Syndicate: A specialist team within Capital Markets which handles communication and relationships with other banks in transactions which involve a large number of investment banks – usually to fund a large bond issuance or stock offering.

Treasury: The United States Treasury, which acts as the finance department of the United States Government. It is best known for issuing Treasuries, which are US government debt instruments. These include T-bills (up to one year maturity), T-notes (up to ten years maturity), and T-bonds (up to thirty years maturity). US government debt is the single largest debt market in the world.

Underwriting: The practice of buying securities from the issuer, then distributing them to the public. During an underwriting, the bank is at risk because it is holding the securities and so is exposed to movements in their value; it takes a fee to compensate for this. Underwriting is one of the activities managed by capital markets teams.

VP: Vice President – the rank above Associate and below Director. VPs usually have five to seven years’ experience and are the most junior of management titles.

Yield Curve: The market-priced relative yield of government bonds of various ages (known as maturities). US treasuries are typically used as the baseline bonds. The move in relative price of the yield curve reflects investor sentiment in the United States’ economic future, especially in relation to anticipated changes in interest rates.

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