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Financial Glossary – U

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Ultra-Short Bond Fund – a type of bond fund that solely invests in fixed-income instruments that have very short-term maturities of no longer than a year.

Unemployment – occurs when people don’t have jobs and are seeking work. The unemployment rate is calculated by dividing the total number of unemployed by the number of people in the labor force. Unemployment can also mean unemployment benefit.

Unemployment Trap – when people are disuaded from taking a new job because their loss of unemployment benefits would leave them worse off. In other words, a situation in which your current standard of living, as an unemployed person on welfare, is better than it would be if you took a low-paying job. Unskilled workers and young adults are more likely to find themselves stuck in the unemployment trap.

Underlying Asset – a security (such as a stock) on which a derivative is based – determining its price.

Underground Economy – the part of the economy that the authorities know nothing about. People who work in the underground economy, also called the black economy, the informal sector, and the shadow economy, do not declare their income – they pay no tax on what they earn; this is illegal.

Underwriting – the process of determining whether a customer is eligible to receive capital from corporations and governments that issue securities.

Unsecured Loan – a loan with no security (collateral) or guarantor tied to it. The lender risks losing all its money if the borrower defaults. Also known as unsecured debt.

Usury – the act of loaning money at exorbitant interest rates. The term may be used as a moral condemnation of the act, or to inform about an illegally high interest rate. Originally, hundreds of years ago in the English language, ‘usury’ just meant lending money and charging interest, regardless of whether it was exorbitant or reasonable. Some countries have legislation to protect borrowers from abusive lenders.

Utility – in economics the word refers to how much pleasure or satisfaction we derive when we consume a product or service, or experience an event. In business, a utility company generates, transmits and/or distributes utilities – electricity, gas or water. Utility may mean a computer program that improves the efficiency of an IT system. In patent law, the utility of a product refers to how useful it is – if an invention is not useful, it is virtually impossible to get it patented.