Bachelor's thesis (Turku University of Applied Sciences) Degree Program in Business Management

parties subject to the agreement have to make all the payments even in the 
case of bankruptcy (
investopedia.com
). 
Potential future exposure (PFE) 
– being one of the techniques used to evaluate 
exposure to counter-party or default risk, PFE is an effective way to establish 
the probability of encountering a credit risk in a certain investment method 
(Wikipedia on “PFE”). 
Preference Shares 
– also known as preferred stock (US), give their holders an 
advantage of fixed dividends and dividend payment priorities (Casu, Girardone 
and Molyneux, 2006, p. 491). 
Risk-weighted assets (RWA) 
– the concept of RWA focuses on the idea that 
establishing the level of required capital reserves of a particular bank should be 
a dynamic process, implemented in accordance with the amount of assets in 
bank’s portfolio that are subject to a particular risk.
In other words, necessary capital buffers are allocated to support every financial 
asset on the basis of its potential risk exposure (
investopedia.com
).  
Securities 
– are mostly known as a legal “claim on some future flow of income”, 
for instance, shares, bills and bonds (Ball, 2011, p. 2).

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Appendix 1 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
Securitization 
– is a process through which investors can combine various 
securities and financial instruments in order to create new ones. Basically, it 
allows combining securities in an investment pool, parts of which could later 
serve and be traded as separate financial instruments.
The bonuses of securitization result from its ability to minimize exposure to 
certain risks (e.g. market risk) and the high liquidity value that newly created 
financial instruments bring to the market (
investopedia.com
).  
Solidity 
– is in a way a synonym to the concept of capital adequacy, as it 
accounts to the amount of equity funds in relation to bank’s assets. The main 
difference being the fact that solid
ity indicates the amount to which bank’s 
equity capital finances its assets (
investopedia.com
).  
Stress testing 
– a method that allows estimating probable negative effects of a 
certain phenomenon under extreme conditions on a portfolio of assets 
(
investopedia.com
).
Unlisted securities 
– are securities that are commonly traded through the OTC 
market and not the stock exchanges.
Unrealised loss 
– is a loss resulting from a price devaluation of a particular 
financial instrument that investor does not immediately sell, rather decides to 
withhold for a certain time period, hoping that the price will change again 
– in 
his favour. 

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Appendix 2 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev