CFA® glossary: W

8 terms beginning with W.

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Wash trading

Buying and selling the same security with no real change of ownership, so trading appears where there is none. It is transaction-based manipulation because its only purpose is to mislead others about interest in it. Where it appears →

Waterfall

The order in which cash is paid out or losses absorbed. In a private fund: capital back first, then a preferred return, a catch-up and the profit split; in a securitisation, senior tranches are paid first. Where it appears →

Weak form

The hypothesis that prices already reflect all past prices and trading volumes, so technical analysis cannot earn abnormal returns. The least demanding form of market efficiency.

Weighted average cost

An inventory method that gives every unit sold and every unit left the same average cost of the goods available. Its profit and inventory figures fall between those of FIFO and LIFO. Where it appears →

Weighted average cost of capital

The blended return a firm must earn to satisfy everyone who funded it. A single rate, and using it for everything subsidises the risky projects. Where it appears →

Whistle-blowing

Reporting an employer's wrongdoing to authorities or others outside the firm. Under the Standards it overrides the duty of loyalty only when it protects clients or market integrity, not for personal gain.

Willingness to take risk

The psychological half of risk tolerance, read from what a client says and above all from how they behaved in past losses. It can be educated, but not overridden. Where it appears →

Working capital

The current assets and current liabilities a business runs on. Profitable firms still fail when the gap between paying and being paid is not funded. Where it appears →