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金程教育 WWW
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Bloomberg Financial Glossary
A
Fifth letter of a Nasdaq stock symbol specifying Class A shares
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ADB
See: Adjusted Debit Balance
ADR
See: American Depository Receipt
ADS
See: American Depository Share
AE
The two-character ISO 3166 country code for UNITED ARAB EMIRATES
...
GFEDU
...
AEX
See: Amsterdam Exchange
AFA
The ISO 4217 currency code for Afghan Afghani
...
AFM
See: Amman Financial Market
AG
The two-character ISO 3166 country code for ANTIGUA AND BARBUDAAG
...
AIBD
Association of International Bond Dealers
AL
The two-character ISO 3166 country code for ALBANIA
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ALT
Alternative Trading System
...
S
...
AM
The two-character ISO 3166 country code for ARMENIA
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AMEX
See: American Stock Exchange
AMPS
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See: Auction Market Preferred Stock
AN
The two-character ISO 3166 country code for NETHERLANDS ANTILLES
...
AO
The two-character ISO 3166 country code for ANGOLA
...
AOS
See: Automated Order System
APR
See: Annual Percentage Rate
APT
See: Arbitrage Pricing Theory
APT
See: Automated Pit Trading
APV
See: Adjusted Present Value
APY
See: Annual Percentage Yield
AR
See: Auto-Regressive
ARCH
See: Auto-Regressive Conditional Heteroskedasticity
AQ
The two-character ISO 3166 country code for ANTARCTICA
...
GFEDU
...
ARS
The ISO 4217 currency code for Argentinan Peso
...
ASE
See: Athens Stock Exchange
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ATP
See: Arbitrage Trading Program
ATS
The ISO 4217 currency code for Austrian Schilling
...
AUD
The ISO 4217 currency code for Australian Dollar currency
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AWG
The ISO 4217 currency code for Aruban Guilder
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AZM
The ISO 4217 currency code for Azerbaijani Manat
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Abandonment
Controlling party giving up rights to property voluntarily
...
ABC agreement
A contract between an employee and a brokerage firm outlining the rights of the firm
purchasing an NYSE membership for that employee
...
See: Fixed
charge coverage ratio
...
In context of taxation, notion that tax rates should be determined according to income
or wealth
...
In other words, abnormal returns are above those predicted by the market
movement alone
...
Above par
See: Par
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GFEDU
...
Absolute form of purchasing power parity
A theory that prices of products of two different countries should be equal when
measured by a common currency
...
"
Absolute Physical Life
The period of use after which an asset has deteriorated to such an extent that it can no
longer be used
...
Absorbed
Used in context of general equities
...
The market has reached the absorption point when
further assimilation is impossible without an adjustment in price
...
Abusive tax shelter
A limited partnership that the IRS judges to be claiming tax deductions illegally
...
Acceleration clause
A contract stating that the unpaid balance becomes due and payable if specific actions
transpire, such as failure to make interests payments on time
...
Accelerated cost recovery system (ACRS), which is a depreciation
schedule allowed for tax purposes, is one such example
...
The drawee assumes responsibility as the acceptor
and for payment at maturity
...
Accommodative monetary policy
Federal Reserve System policy to increase the amount of money available to banks for
lending
...
Account
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In the context of bookkeeping, refers to the ledger pages upon which various assets,
liabilities, income, and expenses are represented
...
In the context of
securities, the relationship between a client and a broker/dealer firm allowing the firm's
employee to be the client's buying and selling agent
...
Account Ad Valorem Duty
An imported merchandise tax expressed as a percentage
...
Account executive
The brokerage firm employee who handles stock orders for clients
...
Account Party
Party who applies to open a bank for the issuance of a letter of credit
...
Account statement
In the context of banking, refers to a summary of all balances
...
See also: Option agreement
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The opinion may be unqualified or qualified
...
Accounting earnings
Earnings of a firm as reported on its income statement
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Accounting insolvency
Total liabilities exceed total assets
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Accounting liquidity
The ease and quickness with which assets can be converted to cash
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Accounts receivable
Money owed by customers
...
See: Factoring
...
Accredited investor
Refers to an individual whose net worth, or joint net worth with a spouse, exceeds
$1,000,000; or whose individual income exceeded $200,000 or whose joint income with
a spouse exceeded $300,000 in each of the 2 most recent years and can be expected to
meet that income in the current year
...
Accretion (of a discount)
In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in
anticipation of receipt of par at maturity
...
It ignores the timing of the cash flows
associated with revenues and expenses
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Antithesis of cash basis accounting
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The amount of accrued interest is added to the remaining principal of the bond and is paid
at maturity
...
Accrued discount
Interest that accumulates on savings bonds from the date of purchase until the date of
redemption or final maturity, whichever comes first
...
Series G, H, HH, and K are current-income bonds, and the semiannual interest
paid to their holders is not included in accrued discount
...
Interest that has accumulated between the most
recent payment and the sale of a bond or other fixed-income security
...
(If a bondholder receives $40 in coupon payments per bond semiannually and
sells the bond one-quarter of the way into the coupon period, the buyer pays the seller
$10 as the latter's proportion of interest earned
...
Accumulate
Broker/analyst recommendation that could mean slightly different things depending on
the broker/analyst
...
A buy recommendation, but not an urgent buy
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Related: Projected benefit obligation
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See: Cumulative preferred stock
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Accumulation
In the context of corporate finance, refers to profits that are added to the capital base of the
company rather than paid out as dividends
...
In the context of investments, refers to the purchase by an institutional broker of a large
number of shares over a period of time in order to avoid pushing the price of that share up
...
Accumulation area
A price range within which a buyer accumulates shares of a stock
...
Acid test ratio
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and
prepaid items to current liabilities
...
e
...
Acquiree
A firm that is being acquired
...
Acquisition
When a firm buys another firm
...
In the context of investments, refers to price plus brokerage commissions, of a security, or
the sales charge applied to load funds
...
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets
...
Across the board
Movement or trend in the stock market that affects almost all stocks in all sectors to move
in the same direction
...
GFEDU
...
Act of state doctrine
This doctrine says that a nation is sovereign within its own borders, and its domestic
actions may not be questioned in the courts of another nation
...
Active account
Refers to a brokerage account in which many transactions occur
...
Active bond crowd
Refers to members of the bond department of the NYSE who trade the most bonds
...
Active box
Securities that are held in safekeeping and are available as collateral for securing brokers'
loans or customers' margin positions
...
Active income
Income from an active business as opposed to passive investment income according to the
U
...
tax code
...
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek better
performance than a buy and hold portfolio
...
Active Return
Return relative to a benchmark
...
Active Risk
The risk (annualized standard deviation) of the active return
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Actual market
Used in context of general equities
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Antithesis of Subject market
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Cash commodity, physical asset
...
As a technical measure of market breadth, the steepness of the AD line
indicates whether a strong bull or bear market is under way
...
Additional hedge
A protection against borrower fallout risk in the mortgage pipeline
...
Adjustable rate
Applies mainly to convertible securities
...
Typically, such
issues have a set floor or ceiling, called caps and collars that limits the adjustment
...
The interest rate is adjusted at each interval to a
rate equivalent to the index value plus a predetermined spread, or margin, over the index,
usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps
...
Related:
Average daily balance method, previous balance method, past due balance method
...
GFEDU
...
Account
actions such as any stock splits that have occurred since the initial purchase must be
accounted for
...
Adjusted exercise price
Term used in options on Ginnie Mae (Government National Mortgage Association) contracts
...
For example, if the standard GNMA mortgage has an 9% yield, the price of
GNMA pools with 13% mortgages in them is altered so that the investor receives the same
yield
...
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity (present value of
unlevered cash flows), plus the present value of any financing decisions (levered cash flows)
...
This analysis is often used
for highly leveraged transactions such as a leveraged buyout
...
Administrative pricing rules
IRS rules used to allocate income on export sales to a foreign sales corporation
...
Advance commitment
A promise to sell an asset before the seller has lined up purchase of the asset
...
Advance Computerized Execution System (ACES)
Refers to the Advance Computerized Execution System, run by Nasdaq
...
GFEDU
...
Securities are designated as specified for automatic execution
...
Advance refunding
In the context of municipal bonds, refers to the sale of new bonds (the refunding issue) before
the first call date of old bonds (the issue to be refunded)
...
See:
Refunding escrow deposits
...
Adverse opinion
An independent auditor's opinion expressing that a firm's financial statements do not
reflect the company's position accurately
...
Adverse selection
Refers to a situation in which sellers have relevant information that buyers lack (or vice
versa) about some aspect of product quality
...
Advisory letter
A newsletter offering financial advice to its readers
...
This affidavit is required before a Bond of Indemnity can be issued and the securities
replaced
...
See: Subsidiaries, parent company
...
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Affiliated person
An individual who possesses enough influence and control in a corporation as to be able
to alter the actions of the corporation
...
Affordability index
An index that measures the financial ability of consumers to purchase a home
...
After-hours dealing or trading
Securities trading after regular trading hours on organized exchanges
...
After-tax basis
The comparison basis used to analyze the net after-tax returns on a corporate taxable
bond and a municipal tax-free bond
...
After-tax real rate of return
The after-tax rate of return minus the inflation rate
...
Aged fail
An account between two broker/dealers that remains intact after 30 days after the
settlement date
...
Agencies
See: Federal agency securities
...
GFEDU
...
Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no
financial risk personally or as a firm, and charging a commission for the service
...
Antithesis of principal
...
Agency bank
A form of organization commonly used by foreign banks to enter the US market
...
It is also the financial institution that issues ADRs to the general market
...
Agency cost view
The argument that specifies that the various agency costs create a complex environment
in which total agency costs are at a minimum with some, but less than 100%, debt
financing
...
Agency incentive arrangement
A means of compensating the broker of a program trade using benchmark prices for issues to
be traded in determining commissions or fees
...
Agency problem
Conflicts of interest among stockholders, bondholders, and managers
...
S
...
Such agencies were created to reduce borrowing costs for certain sectors of the economy,
such as agriculture
...
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Agent
The decision-maker in a principal-agent relationship
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The option
premium is excluded in the aggregate exercise price
...
Aggregation
Process in corporate financial planning whereby the smaller investment proposals of each
of the firm's operational units are aggregated and effectively treated as a whole
...
Aggressive growth mutual fund
A mutual fund designed for maximum capital appreciation that places its money in
companies with high growth rates
...
For a customer it means working to buy or sell one's
stock, with an emphasis on execution over price
...
Aging schedule
A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60
days, and 60-90 days), which is used to determine if customer payments are keeping
close to schedule
...
The contract outlines the payment schedule on the settlement date
...
Agreement corporation
Corporation chartered by a state to engage in international banking: so named because
the corporation enters into an "agreement" with the Fed's Board of Governors that it will
limit its activities to those permitted and Edge Act Corporation
...
GFEDU
...
Ahead of you
Used for listed equity securities
...
See: Behind, matched orders, priority,
stock ahead
...
Air Freight Consolidator
An air freight carrier that does not own or operate its own aircraft but ships its cargo with
actual equipment operating carriers
...
Air pocket stock
A stock whose price drops precipitously, often on the unexpected news of poor results
...
All equity rate
The discount rate that reflects only the business risks of a project, distinct from the effects of
financing
...
All-in-rate
Rate used in charging customers for accepting banker's acceptances, consisting of the
discount interest rate plus the commission
...
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All or none order (AON)
Used in context of general equities
...
Unlike an FOK order, an AON order is not to be treated as cancelled if not
executed as soon as it is represented in the trading crowd, but instead remains alive until
executed or cancelled
...
AON orders are not shown on the specialist's book because they cannot be traded in pieces
...
See: FOK order
...
All-or-none underwriting
An arrangement whereby a security issue is cancelled if the underwriter is unable to resell the
entire issue
...
Allied member
A partner or stockholder of a firm that is a member of the NYSE, the partner or stockholder
is not personally a member of the NYSE
...
Allocation-of-income rules
US tax provisions that define how income and deductions are to be allocated between
domestic source and foreign source income
...
Allotment
The number of securities assigned to each of the participants in an underwriting syndicate
...
An alpha is usually generated by regressing the
security or mutual fund's excess return on the S&P 500 excess return
...
The alpha is the intercept
...
GFEDU
...
During the same time the market excess return is 9%
...
0 (twice as risky as the S&P 500)
...
The actual excess return is 20%
...
Alpha is also known as the Jensen Index
...
Alpha equation
Regression usually run over 36-60 months of data: Return-Treasury bill= alpha + beta
(S&P 500 - Treasury bill) + error
...
Note that the benchmark does
not necessarily have to be the S&P 500
...
Alphabet stock
Categories of common stock of a corporation associated with a particular subsidiary
resulting from acquisitions and restructuring
...
See also: Tracking stocks
...
Many hedge funds pursue strategies that are
uncommon relative to mutual funds
...
Alternative Minimum Tax (AMT)
A federal tax aimed at ensuring that wealthy individuals, estates, trusts, and corporations
pay a minimal level income tax
...
Alternative mortgage
Variations of mortgage instruments such as adjustable-rate and variable-rate mortgages,
graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations
...
Order giving a broker a choice between two courses
of action, either to buy or sell, never both
...
An example is a combination buy limit/buy stop order, where the buy
limit is below the current market and the buy stop is above
...
If the order is for an amount
of more than one unit of trading, the number of units executed determines the amount
of the alternative order to be treated as cancelled
...
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American Association of Individual Investors (AAII)
A not-for-profit organization to educate individual investors about stocks, bonds, mutual
funds, and other financial instruments
...
One ADR may represent a
portion of a foreign share, one share or a bundle of shares of a foreign corporation
...
ADRs are subject to the same currency, political,
and economic risks as the underlying foreign share
...
American depository shares (ADS) are a similar form of certification
...
American Depository Receipt Ratio
The number of ordinary shares into which an ADR can be converted
...
American option
An option that may be exercised at any time up to and including the expiration date
...
The certificates represent claims to foreign equities
...
The bulk of trading on AMEX consists of index options
(computer technology index, institutional index, major market index) and shares of small
to medium-sized companies are predominant
...
American-style option
An option contract that can be exercised at any time between the date of purchase and the
expiration date
...
Amman Financial Market (AFM)
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Established in 1976, the AFM is the only stock exchange in Jordan
...
Amortization
The repayment of a loan by installments
...
Amortizing interest rate swap
Swap in which the principal or notional amount rises (falls) as interest rates rise (decline)
...
Coins sold by the Bureau of the Mint at premium prices are not included; uncirculated
coin sets sold at face value plus handling charge are included
...
AEX-Data
Services is the operating company responsible for the dissemination of data from the
Amsterdam Exchange via its integrated Mercury 2000 system
...
In-house message system entered and displayed
through Quotron A page
...
Most specialize in a specific
industry
...
Andean Pact
A regional trade pact that includes Venezuela, Colombia, Ecuador, Peru, and Bolivia
...
Antithesis to fallen angel
...
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Angels
Individuals providing venture capital
...
Announcement date
Date on which particular news concerning a given company is announced to the public
...
Annual basis
The technique in statistics of taking a figure covering a period of less than one year and
extrapolating it to cover a full one year period
...
Annual effective yield
See: Annual percentage yield
...
Annual fund operating expenses
For investment companies, the management fee and "other expenses," including the
expenses for maintaining shareholder records, providing shareholders with financial
statements, and providing custodial and accounting services
...
Annual percentage rate (APR)
The periodic rate times the number of periods in a year
...
Annual percentage yield (APY)
The effective, or true, annual rate of return
...
The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year
...
68% (1
...
Annual rate of return
There are many ways of calculating the annual rate of return
...
This is often called the annual percentage rate (APR)
...
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Annual renewable term insurance
See: Term insurance
...
It includes a description of
the firm's operations, as well as balance sheet, income statement, and cash flow statement
information
...
A more detailed
version is called a 10-K
...
5% in one month, the annualized gain for that stock over a
twelve month period is 121
...
Compounded over the 12 month period, the gain
is (1
...
6%
...
Annualizing
See: Annual basis
...
Annuitant
An individual who receives benefits from an annuity
...
The payments may be a fixed amount, for a fixed period of time, or for a lifetime
...
Annuity certain
An annuity that pays a specific amount on a monthly basis for a set amount of time
...
Annuity factor
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Present value of $1 paid for each of t periods
...
Annuity starting date
The date when an annuitant starts receiving payments from an annuity
...
Anticipation
Paying what is owed before it is due (usually to save interest charges)
...
g
...
Anti-Persistence
In R/S Analysis, an anti-persistent time series reverses itself more often than a random
series would
...
Also called pink noise, or 1/f noise
...
Antigreenmail
Greenmail refers to the agreement between a large shareholder and a company in which
the shareholder agrees to sell his stock back to the company, usually at a premium, in
exchange for the promise not to seek control of the company for a specified period of
time
...
There are some states
that have antigreenmail laws
...
Any-interest-date
A call provision in a municipal bond indenture that establishes the right of redemption for the
issuer on any interest payment due date
...
Takeover bid in which the acquirer offers to pay a set price for
all outstanding shares of the target company, or any part thereof; contrasts with two-tier bid
...
GFEDU
...
Antithesis of an all-or-none order (AON)
...
The ratio of alpha to residual standard
deviation
...
Appreciation
Increase in the value of an asset
...
Approved list
A list of equities and other investments that a financial institution or mutual fund is approved
to make
...
APS
Auction Preferred Stock
...
Arbitrage
The simultaneous buying and selling of a security at two different prices in two different
markets, resulting in profits without risk
...
Perfectly efficient markets seldom exist, but, arbitrage opportunities are
often precluded because of transactions costs
...
Lower-rate refunding issue proceeds are
invested in Treasuries until the first call date of the higher-rate issue
...
Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by Stephen Ross and
based purely on arbitrage arguments
...
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Arbitrage Trading Program (ATP)
See: Program trading
...
The Arbitrageur profits by
simultaneously purchasing and selling these securities to take advantage of pricing
differentials (spreads) created by market conditions
...
Are you open?
Used in context of general equities
...
Arithmetic average (mean)
Arithmetic mean return
...
Arizona Stock Exchange
A single price auction exchange for equity trading that allows anonymous buyers and
sellers to trade at low transaction costs
...
Arms index
Also known as a TRading INdex (TRIN)
...
This, in turn, is divided by
the advancing volume divided by the declining volume
...
e
...
Hence, a value less than 1
...
0 indicate bearish demand
...
Around us
Used in context of general equities
...
Arrearage
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In the context of investments, refers to the amount by which interest on bonds or dividends on
cumulative preferred stock is due and unpaid
...
Artificial currency
A currency substitute, e
...
, special drawing rights (SDRs)
...
See: Neural Networks, Fuzzy Logic,
and Genetic Algorithms
...
Antithesis of descending tops
...
The most
prominent members are China, Japan, and Korea
...
Asian dollar market
Asian banks that collect deposits and make loans denominated in US dollars
...
Ask
This is the quoted ask, or the lowest price an investor will accept to sell a stock
...
Asked price
In context of general equities, price at which a security or commodity is offered for sale on
an exchange or in the OTC Market
...
Usually a seller (buyer) looking to aggressively sell
(buy) stock, usually asking for a capital commitment from an investment bank
...
GFEDU
...
Zero-coupon four-year bonds repayable at
face value plus the percentage increase by which the Australian stock index of all
ordinaries (common stocks) rises above a predefined level during the given period
...
Assessed valuation
The value assigned to property by a municipality for the purpose of tax assessment
...
Asset
Any possession that has value in an exchange
...
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the major
classes of assets in which it may invest
...
Asset-backed security
A security that is collateralized by loans, leases, receivables, or installment contracts on
personal property, not real estate
...
Asset classes
Categories of assets, such as stocks, bonds, real estate, and foreign securities
...
Asset Depreciation Range System
A range of depreciable lives the IRS allows for particular classes of assets
...
GFEDU
...
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another defaulting
borrower
...
Also called surplus management
...
Asset play
A company with assets that are not believed to be accurately reflected in its stock price,
making it an attractive buy or play
...
Related:
Capital asset pricing model and arbitrage pricing theory
...
Company A calculates that the net selling of
the assets and paying off the debt, will leave the raider with assets that are worth more
than what it paid for company B
...
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing assets and
expropriate value from the debtholders
...
Asset turnover
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The ratio of net sales to total assets
...
A company is undervalued in the market when asset value exceeds market
value
...
Assets-in-place
Property in which a firm has already invested
...
Assignment
The receipt of an exercise notice by an options writer that requires the writer to sell (in the
case of a call) or purchase (in the case of a put) the underlying security at the specified strike
price
...
Assimilation
The public absorption of a new issue of stocks once the stock has been completely sold by
underwriter
...
Association of Southeast Asian Nations (ASEAN)
A loose economic and geopolitical affiliation that includes Singapore, Brunei, Malaysia,
Thailand, the Philippines, Indonesia, and Vietnam
...
Assumed interest rate
Rate of interest used by an insurance company to calculate the payout on an annuity contract
...
ASX Derivatives and Options Market (ASXD)
Options market trading options on more than 50 of Australia's and New Zealand's leading
companies
...
GFEDU
...
Asymmetric taxes
When participants in a transaction have different net tax rates
...
Asymmetry
A lack of equivalence between two things, such as the unequal tax treatment of interest
expense and dividend payments
...
Paramount terms used to differentiate an offering
...
In an offering, the trading syntax followed is
"Quantity-at-Price"; in a bid, the syntax followed is "Price-for-Quantity
...
Greek language only
...
See: Par
...
Frequently used in the context of claiming
tax deductions
...
See: Value at risk
...
See: MOC Order
...
If the execution cannot be made under this condition,
the order is to be treated as cancelled
...
At the figure
In context of general equities, at the whole integer price (excluding the fraction) closest
to the side of the market (bid/ask) being discussed
...
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At the full
Used in context of general equities
...
At the market
See: Market order
...
For example, if xyz stock is trading at 54, then the xyz 54 option is at
the money
...
Attractor
In non-linear dynamic series, an attractor defines the equilibrium level of the system
...
Attribute bias
The tendency of stocks preferred by the dividend discount model to share certain equity
attributes such as low price-earnings ratios, high dividend yield, high book value ratio, or
membership in a particular industry sector
...
Auction Market Preferred Stock (AMPS)
A type of Dutch Auction Preferred Stock (A Merrill Lynch product)
...
Auction rate preferred stock (ARPS)
Floating-rate preferred stock, whose dividend is adjusted every seven weeks through a
Dutch auction
...
See: accountant's opinion
...
GFEDU
...
Auditor's certificate
See: Accountant's opinion
...
Aunt Millie
An unsophisticated investor
...
Autarky
Absence of a cross-border trade in models of international trade
...
Indications
transmit small, medium, and large sizes only, with occasional limits mentioned
...
Both "indications" and "supers" can
be only seen by customers (institutional subscribers to Autex)
...
See: Expunge, size
...
Authority bond
A bond issued by a government agency or a corporation created to manage a
revenue-producing public enterprise
...
Authorized shares
Number of shares authorized for issuance by a firm's corporate charter
...
GFEDU
...
Sometimes called
serial correlation
...
Automated Clearing House (ACH)
A collection of 32 regional electronic interbank networks used to process transactions
electronically with a guaranteed one-day bank collection float
...
Automated Export System
Electronic filing of Shippers Export Declaration (SEDs)with US Customs prior to
departure
...
See: Round lot, GTC orders
...
APT is used to extend the trading day for the
major futures contracts as well as to provide a daytime trading environment for
non-floor trading products
...
Other terms sometimes used to
describe such terminals are customer-bank communications terminal (CBCT) and
remote service unit (RSU)Groups of banks sometimes share ATM
...
Distributes proxy material to beneficial owners, tabulates the returned proxies, and
provides the Corporation or its tabulator compiled reports of the tabulation results
...
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Automatic exercise
A protection procedure whereby the Options Clearing Corporation attempts to protect the
holder of an expiring in-the-money option by automatically exercising the option on behalf
of the holder
...
Automatic funds transfer
A transfer of funds from one account or investment vehicle to another using electronic or
telecommunications technology
...
A mutual fund,
for example, automatically withdraw a pre determined specified amount from the
investor's bank account on a regular basis
...
Automatic stay
The restricting of liabilityholders from collection efforts related to collateral seizure
...
Automatic transfer service (ATS) account
A depositor's saving account from which funds may be transferred automatically to the
same depositor's checking account to cover a check written or to maintain a minimum
balance
...
Autoquote
Autoquote indicative prices are generated for many of the financial options contracts
traded at LIFFE using standard mathematical models as derived by Black and Scholes and
Cox, Ross, Rubinstein
...
Autoquotes indicate where a series may trade, given the current level of
the underlying instrument
...
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Auto-Regressive (AR)
A stationary stochastic process where the current value of the time series is related to the
past p values, where p is any integer, is called an AR(p) process
...
An AR(1) process has an
infinite memory
...
ARCH processes have frequency distributions which have high peaks at the
mean and fat-tails, much like fractal distributions
...
See: Fractal Distributions
...
Available on the way in
In context of general equities, stock is available to new customer as trade initiated by
another customer is about to be consummated (on the exchange floor)
...
See: Open
...
This gives a guarantee and is
abstracted from the performance of the underlying trade contract: Article 31 of the 1930
Geneva Convention of the Bills Of Exchange states that the aval can be written on the bill
itself or on an allonge
...
Avalizor
An institution or person who gives the aval
...
One good example is the widely quoted Dow Jones
Industrial Average, which adds the current prices of the 30 DJIA stocks, and divides the
results by a predetermined number, the divisor
...
Average (across-day) measures
An estimation of price that uses the average or representative price of a large number of
trades
...
GFEDU
...
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total amount of credit extended per dollar
of daily sales (average AR/sales 365)
...
Average cost of capital
A firm's required payout to bondholders and stockholders expressed as a percentage of
capital contributed to the firm
...
Average daily balance
A method for calculating interest in which the balance owed each day by a customer is
divided by the number of days
...
Average discount rate
Purchasers tender their competitive bids on a discount rate basis
...
Average down
A strategy used by investors to reduce the average cost of shares, in which the investor
purchases more shares with a fixed amount of capital as the price of the shares decrease
...
Average equity
A customer's average daily balance in a trading account at a brokerage firm
...
The average number of years that each
dollar of unpaid principal due on the mortgage remains outstanding
...
Average maturity
The average time to maturity of securities held by a mutual fund
...
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested
...
GFEDU
...
Average up
A strategy used by investors to lower the overall cost of shares by buying as many shares
with a given amount of capital in an increasing market
...
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...
Away
A trade, quote, or market that does not originate with the dealer in question, e
...
, "the bid
is 98-10 away from me
...
Antithesis of in-line
...
Trading away from us signifies that stock is bought and/or sold with institutions using
other trading firms
...
See: Outside of you
...
Involvement in a security, whether through a position,
order, or inquiry
...
B2B
An Internet strategy of dealing directly with businesses, rather than consumers, i
...
business to (2) business
...
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BAM
The ISO 4217 currency code for Bosnia & Herzegovinan Convertible Mark
...
BBD
The ISO 4217 currency code for Barbadan Dollar
...
BDT
The ISO 4217 currency code for Bangladeshi Taka currency
...
BHD
The ISO 4217 currency code for Bahrainian Dinar
...
BF
The two-character ISO 3166 country code for BURKINA FASO
...
BGL
The ISO 4217 currency code for Bulgarian Lev
...
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BI
The two-character ISO 3166 country code for BURUNDI
...
BIPS
See: Basis point
...
BM
The two-character ISO 3166 country code for BERMUDA
...
BN
The two-character ISO 3166 country code for BRUNEI DARUSSALAM
...
BO
The two-character ISO 3166 country code for BOLIVIA
...
BPS
See: Basis point
...
GFEDU
...
BRL
The ISO 4217 currency code for Brazilian Real
...
BSD
The ISO 4217 currency code for Bahamas Dollar
...
BTM
See: Book to market
...
BV
The two-character ISO 3166 country code for BOUVET ISLAND
...
BWP
The ISO 4217 currency code for Botswanan Pula
...
BYB
The ISO 4217 currency code for Belarus Rouble
...
BZD
The ISO 4217 currency code for Belize Dollar
...
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Back away
In the context of general equities, to withdraw from a previously declared interest,
indication, or transaction; broker-dealer's failure, as a market maker in a given security, to
make good on a bid/offer for the minimum quantity
...
Back months
In the context of futures and options trading, refers to the months of contracts with expiration
dates farthest away
...
Back office
Brokerage house clerical operations that support, but do not include, the trading of stocks
and other securities
...
Back on the
In the context of general equities, permanently canceledorder/interest in a stock by a
customer
...
Back taxes
Due taxes that have not been paid on time
...
(2) An investor who
swaps out of one security into another of shorter current maturity is said to back up
...
"
Backdating
In the context of mutual funds, a feature allowing fundholders to use an earlier date on a
letter of intent to invest in a mutual fund in exchange for a reduced sales charge, e
...
Giving
retroactive value to purchases from the earlier date
...
Back-end
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4%
to 6%
...
The commission decreases, the
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longer the investor holds the shares
...
Back-to-back financing
An intercompany loan channeled through a bank
...
Backup line
A commercial paper issuer's bank line of credit covering maturing notes if, for some reason,
selling new notes to cover the maturing notes is not possible
...
The issuer pays a commitment fee to the bank
...
This may occur when the costs of storing the product until
eventual delivery are effectively subtracted from the price today
...
Bad debt
A debt that is written off and deemed uncollectible
...
Bad title
Title to property that does not distinctly confer ownership, usually in the context of real
estate
...
Bailing out
In the context of securities, refers to selling a security or commodity quickly, regardless of
the price
...
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Also refers to relieving an individual, corporation, or government entity in financial
trouble
...
Baker Plan
A plan by former U
...
Treasury Secretary James Baker under which 15 principal
middle-income debtor countries (the Baker 15) would undertake growth-oriented
structural reforms, to be supported by increased financing from the World Bank and
continued lending from commercial banks
...
Balance of
Net flow of goods (exports minus imports) between two countries
...
Balance sheet
Also called the statement of financial condition, it is a summary of a company's assets,
liabilities, and owners' equity
...
Balance
Total assets = Total liabilities + Total stockholders' equity
...
See: budget
...
The same as a balanced mutual
fund
...
GFEDU
...
The same as a balanced
fund
...
Balloon maturity
Any large principal payment due at maturity for a bond or loan with or without a sinking fund
requirement
...
Ballot
The document distributed at the annual meeting to shareholders of record who wish to
vote their shares in person
...
Bank
Notes issued by states and municipalities to obtain interim financing for projects that will
eventually be funded long term through the sale of a bond issue
...
Bank discount basis
A convention used for quoting bids and offers for Treasury bills in terms of annualized yield,
based on a 360-day year
...
Bank holding company
A company that owns or has controlling interest in two or more banks and/or other bank
holding companies
...
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Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which serves as a forum for
monetary cooperation among several European central banks, the Bank of Japan, and
the US Federal Reserve System
...
Bank
Interest guaranteed by the bank in a portfolio over a specific time frame with a specific yield
...
Bank Letter of Credit Policy
Standards allowing banks to confirm letters of credit by foreign banks supporting the
purchase of US exports
...
Notes are,
in effect a promise to pay the bearer on demand the amount stated on the face of the
note
...
e
...
Bank regulation
The formulationand issuance by authorized agencies of specific rules or regulations,
under govering law, for the conduct and structure of banking
...
e
...
Since the cash reserve a bank keeps on
hand is only a small fraction of its depoits, a large number of withdrawals in a short
period of time can deplete available cash and force the bank to close and possibly go out
of business
...
Bank wire
A computer message system linking major banks
...
g
...
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Banker's
A short-term credit investment created by a nonfinancial firm and guaranteed by a bank
as to payment
...
These instruments have been a popular investment for money market funds
...
Banking Delay
Time required for processing and clearing a check through the banking system
...
Bankruptcy
Inability to pay debts
...
Bankruptcy
The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt
financing
...
Also referred to as default
or insolvency risk
...
Bar
Slang for one million dollars
...
Barefoot pilgrim
A slang term for an unsophisticated investor who has lost everything on the stock market
...
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Bargain-purchase-price option
Gives the lessee the option to purchase the asset at a price below fair market value when the
lease expires
...
The Dow Jones Industrial Average
is an example of a stock market barometer
...
It is commonly used
by institutional investors applying performance attribution analysis to evaluate their money
managers' performance
...
These are exotic options
...
The discrepancy between high-rated top-grade bonds
and low-rated bond yields establishes a measure that is indicative of investor confidence
...
Base
A technical analysis tool
...
The
merging of the support level and resistance level
...
Currency in which gains or losses from operating
an international portfolio are measured
...
Base market
A group of securities, average market price at a specific time
...
Base period
A particular period of time used for comparative purposes when measuring economic
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data
...
Related: Value at risk
...
Bank-based corporate governance system
Organization of a supervisory board so that it is dominated by bankers and corporate
insiders
...
Basic balance
In a balance of payments, the basic balance is the net balance of the combination of the
current account and the capital account
...
Basic IRR rule
Accept the project if IRR is higher than the discount rate; reject the project if it is lower
than the discount rate
...
Basis
The price an investor pays for a security plus any out-of-pocket expenses
...
Also, for a futures
contract, the difference between the cash price and the futures price observed in the
market
...
Each
percentage point of yield in bonds equals 100 basis points
...
An interest rate of 5% is 50 basis points higher than an interest rate of
4
...
Sometimes referred to as BPS, BIPS, and pronounced "Bips"
Basis price
Price expressed in terms of yield to maturity or annual rate of return
...
Hedging substitutes basis
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risk for price risk
...
Group of stocks that is formed with the intention of either
being bought or sold all at once, usually to perform index arbitrage or a hedging program
...
The basket option buyer purchases the right, but not the obligation, to
receive designated currencies in exchange for a base currency, either at the prevailing
foreign exchange market rate or at a prearranged rate of exchange
...
Basket trades
Related: Program trades
...
BDS Statistic
A statistic based upon the correlation integral which examines the probability that a
purely random system could have the same scaling properties as the system under study
...
Boston
This system permits the automatic execution of trades based on the current stock prices on
the consolidated markets at any of the US securities exchanges
...
A bear market is a
prolonged period of falling stock prices, usually by 20% or more
...
Bear CD
A bear CD pays the holder a fraction of any fall in a given market index
...
Hostile takeover attempt in which the acquirer offers an
exceptionally large premium over the market value of the acquiree's share so as to as to
squeeze (hug) the target into acceptance
...
GFEDU
...
For a prolonged period, usually falling
by 20% or more
...
The investors pocket the
difference between the initial price and the new, lower price after this maneuver
...
Bear spread
Applies to derivative products
...
Bear trap
The predicament facing short sellers when a bear market reverses its trend and becomes
bullish
...
Bearer bond
Bonds that are not registered on the books of the issuer
...
Bearer form
Describes issue form of security not registered on the issuing corporation's books, and
therefore payable to its bearer
...
Bearer share
Security not registered on the books of the issuing corporation and thus payable to
possessor of the shares
...
Dividends are payable
upon presentation of dividend coupons, which are dated or numbered
...
Bearish
Words used to describe investor attitude
...
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Before-tax contributions
The portion of an employee's salary contributed to a retirement plan before federal
income taxes are deducted; this reduces the individual's gross income for federal tax
purposes
...
Beggar-thy-neighbor
An international trade policy of competitive devaluations and increased protective
barriers that one country institutes to gain at the expense of its trading partners
...
Devaluation can also reduce a nation's
imports
...
Behind
Used for listed equity securities
...
Antithesis of ahead of you
...
Bellwether
Related: Benchmark issues
...
Benchmark
The performance of a predetermined set of securities, used for comparison purposes
...
Benchmark error
Use of an inappropriate proxy for the true market portfolio
...
It is also tied to the yield to maturity offered on the
comparable-maturity Treasury security that was most recently issued (on-the-run)
...
GFEDU
...
In the secondary market, the
benchmark issue is the most recently auctioned Treasury issues for each maturity
...
1) Behind; 2) Lower in price
...
A beneficial owner of stock
is any person or entity with sole or shared power to vote or dispose of the stock
...
Beneficial ownership
Often used in risk arbitrage
...
(Abused through the illegal use of a parking violation
...
Bequest
Property left to an heir under the terms of a will
...
M
...
assigns to insurance companies based on the company's ability to
meet its obligations to its policyholders
...
As opposed
to a guaranteed or fixed-price sale, in which the underwriter agrees to sell a specific
number of shares (and holds any unsold shares in its own account if necessary)
...
Beta
The measure of an asset's risk in relation to the market (for example, the S&P500) or to
an alternative benchmark or factors
...
5, will
have move, on average, 1
...
[More precisely, that stock's excess
return (over and above a short-term money market rate) is expected to move 1
...
] According to asset pricing theory, beta represents the type
of risk, systematic risk, that cannot be diversified away
...
GFEDU
...
e
...
Also, note that the beta is a
measure of comovement, not volatility
...
Beta equation
The market beta of a security is determined as follows: Regress excess returns of stock y on
excess returns of the market
...
Define n as number of
observation numbers
...
x = rate of return for the S&P 500 index
y = rate of return for the security
...
Bid
The price a potential buyer is willing to pay for a security
...
In trading, we have the bid-ask spread which is the difference between what
buyers are willing to pay and what sellers are asking for in terms of price
...
Bid from another dealer exists at the same (listed) or
higher (OTC) price
...
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Bid price
This is the quoted bid, or the highest price an investor is willing to pay to buy a security
...
Related: Ask, offer
...
Bid wanted
Used in the context of general equities
...
Bidder
A firm or person that wants to buy a firm or security
...
In the context of general equities, aggressive willingness to purchase a security at a
premium to the inside market
...
Bidding up
Moving the bid price higher
...
A bifurcation cascade is often called the period doubling
route to chaos because the transition from an orderly system to a chaotic system often
occurs when the number of possible solutions begins increasing, doubling each time
...
Big Bang
The term applied to the liberalization in 1986 of the London Stock Exchange (LSE) when
trading was automated
...
Also known as The Exchange
...
GFEDU
...
Founded in 1792, the NYSE is the
oldest exchange in the United States, and the largest
...
Big picture
To highlight trading interest due to the size of the trade
...
See Rainmaker
...
Bill of exchange
General term for a document demanding payment
...
It is the exporter's
receipt for the goods as well as proof that goods have been or will be received
...
Binder
An amount of money paid to indicate good faith in a transaction before the transaction is
completed
...
Bi-weekly
A mortgage loan on which interest and principal payments are made every half-month (total
of 26 payments) as opposed to monthly payments
...
Black Friday
A precipitous drop in a financial market
...
Black market
An illegal market
...
GFEDU
...
On Monday, October 27, 1997, the Dow dropped
554 points
...
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments
...
Developed by Fischer Black and Myron Scholes in 1973
...
Blank check
An initial public offering by a company whose business activities are undefined and
therefore peculative
...
While it can be used to enable a company to meet
changing financial needs, its most important use is to implement poison pills or to
prevent takeover by placement of this stock with friendly investors
...
Blanket
A secured loan that gives the lender a lien against all the borrower's inventories
...
Blanket
A recommendation by a brokerage firm sent to all its customers advising that they buy
or sell a particular stock regardless of investment objectives or portfolio size
...
GFEDU
...
Blind trust
A trust in which a fiduciary third party has total discretion to make investments on behalf of
a beneficiary while the beneficiary is uninformed about the holdings of the trust
...
Block
Large quantity of stock or large dollar amount of bonds held or traded
...
Block call
In the context of general equities, conference meeting during which customer
indications and orders, along with the traders' own buy/sell preferences, are conveyed to
the entire organization
...
Block house
Brokerage firms that help to find potential buyers or sellers of large block trades
...
Block trade
A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or at a total market value of $200,000 or more
...
See: Dealer, market maker, principal
...
Blocked currency
A currency that is not freely convertible to other currencies due to exchange controls
...
GFEDU
...
Blow-off top
A steep and rapid increase in price followed by a steep and rapid drop
...
Blowout
The rapid sale of all shares in a new securities offering
...
Blue list
Daily financial publication featuring bonds offered for sale by dealers and banks that
represent billions of dollars in par value
...
bluelist
...
Blue-chip
Used in the context of general equities
...
Company
renowned for the quality and wide acceptance of its products or services,and for its
ability to make money and pay dividends
...
Blue chip stocks
Common stock of well-known companies with a history of growth and dividend payments
...
Bo Derek stock
High quality stock
...
Board of
Individuals elected by the shareholders of a corporation who carry out certain tasks
established in the charter
...
Board room
A room at a brokerage firm where its clients can watch an electronic board displaying
stock prices and transactions
...
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Bogey
The return an investment manager is compared to for performance evaluation
...
Boilerplate
Standard terms and conditions
...
Hence, the bands will widen if the most
recent data is more volatile
...
Bolsa
Spanish for stock exchange
...
Bolsa de Valores de Rio
Brazil's second-largest stock exchange
...
Bolt
Used for listed equity securities
...
Bombay Stock Exchange (BSE)
See: National Stock Exchange; Mumbai stock exchange
...
The US government,
local governments, water districts, companies and many other types of institutions sell
bonds
...
The seller of the bond
agrees to repay the principal amount of the loan at a specified time
...
Bond agreement
A contract for privately placed debt
...
GFEDU
...
Bond broker
A broker on the floor of an exchange who trades bonds
...
Bond Buyer's municipal bond index
A municipal bond price tracking index published daily by the Bond Buyer
...
Bond covenant
A contractual provision in a bond indenture
...
Bond crowd
Members of the stock exchange who transact bond orders on the floor of the exchange
...
The antithesis of
a bond premium, which prevails when the market price of a bond is higher than its face value
...
Bond-equivalent basis
The method used for computing the bond-equivalent yield
...
Differs from annual effective yield
...
Bond indenture
Contract that sets forth the promises of a corporate bond issuer and the rights of investors
...
GFEDU
...
Bond
An international trade association of broker/dealers and banks in US government and
federal agency securities, municipal securities, mortgage-backed securities, and money market
securities
...
Bond of Indemnity
An insurance policy that indemnifies the corporation, the shareholder and the Transfer
Agent against any and all claims arising from the replacement by the Transfer Agent of
certificates lost or stolen
...
A price of 80 means that the bond is selling at 80% of its
face or par value
...
Bond premium
See: Bond discount
Bond rating
A rating based on the possibility of default by a bond issuer
...
See: Rating, investment grade
...
The ratio is calculated
by dividing the total bonds due after one year by that same figure plus all other equity
...
Bond swap
The sale of one bond issue and purchase of another bond issue simultaneously
...
Bond value
With respect to convertible bonds, the value the security would have if it were not
convertible
...
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Bondholder
The firm often has stockholders and bondholders
...
BONDPAR
A system that monitors and evaluates the performance of a fixed income portfolio, as well
as the individual securities held in the portfolio
...
Bonds Enabling Annual Retirement Savings (BEARS)
Holders of BEARS receive the face value of bonds underlying call option, which are exercised by
CUBS (an acronym for Calls Underwritten by Swanbrook)
...
Bon voyage
See: Greenmail
...
Book
A banker or trader's positions
...
Also called ledger cash
...
A high ratio means is often interpreted
as a value stock (the market is valuing equity relatively cheaply compared to book value)
...
Value managers often form portfolios of
securities with high book to market values
...
Book runner
The managing underwriter for a new issue
...
Book to bill
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The book-to-bill ratio is the ratio of orders taken (booked) to products shipped and bills
sent (billed)
...
This ratio is of significant interest to
investors/ traders in the high-technology sector
...
A company's
book value might be higher or lower than its market value
...
Book value per
share should not be thought of as an indicator of economic worth, since it reflects
accounting valuation (and not necessarily market valuation)
...
Periodic statements of ownership are issued instead
of certificates
...
In the case of other securities where a book-entry has developed, certificates
reside in a central clearinghouse or by another agent
...
Bootstrap
Term used to describe the start-up of a company with very little capital
...
Borrow
To obtain or receive money on loan with the promise or understanding that it will be
repaid
...
Borrower fallout
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In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
closed will elect to withdraw from the contract
...
Antithesis of SL, meaning sold
...
Also used in the context of
securities to refer to the lowest market price of a security during a specific time-frame
...
Bottom-up
A management style that de-emphasizes the significance of economic and market cycles,
focusing instead on the analysis of individual stocks
...
Bounce
A check returned by a bank because it is not payable, usually because of insufficient
funds
...
Bourse
French for a stock market
...
Antithesis of financial supermarket
...
Alternatively, a quotation machine or battery
march
...
One spread is established using put options and the other is
established using calls
...
put
bear spread) or both credit spreads (call bear spread vs
...
Break-Even
Point--the stock price (or prices) at which a particular strategy neither makes nor loses
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money
...
A "dynamic" break-even point is one that changes as time passes
...
g
...
Bracket creep
The gradual movement into higher tax brackets when incomes increase as a result of
inflation
...
Branch
An operation in a foreign country incorporated in the home country
...
Also the number of independent forecasts available per year
...
Breadth
In the context of general equities, percentage of stocks participating in a particular market
move
...
See: A/D line
...
Related: Crash
...
Change one's offering or bid prices to move to a
more realistic, tight level where execution is more feasible
...
Break-even
An analysis of the level of sales at which a project would make zero profit
...
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Break-even payment rate
The prepayment rate of an MBS coupon that will produce the same cash flow yield (CFY)
as that of a predetermined benchmark MBS coupon
...
Break-even point
Refers to the price at which a transaction produces neither a gain nor a loss
...
Long calls and short uncovered calls: strike price plus premium
...
Long puts and short uncovered puts: strike price minus premium
...
Short covered call: purchase price minus premium
...
Short put covered by short stock: short sale price of underlying stock plus premium
...
Break-even time
Related: Premium payback period
...
Breakout
A rise in a security's price above a resistance level (commonly its previous high price) or a
drop below a level of support (commonly the former lowest price
...
Can be used by technical analysts as a buy
or sell indicator
...
See: Letter of intent; right of accumulation
...
Breeden, Douglas T
...
Chairman of Smith Breeden Associates
...
GFEDU
...
Bridge financing
Interim financing of one sort or another used to solidify a position until more permanent
financing is arranged
...
"
British clearers
The large clearing banks that dominate deposit taking and short-term lending in the
domestic sterling market
...
See also: Narrow-Based
...
Broad tape
An expanded version of the ticker tape, which is displayed on a screen in the board room of
a brokerage firm and shows constantly updated financial information and news
...
Prevented from executing a trade (committed to upstairs)
due to exchange priority rules excluding one's order (e
...
, higher bid/lower offer on floor,
market order to satisfy)
...
Either a floor broker
who executes orders on the floor of the exchange, or an upstairs broker who handles retail
customers and their orders
...
A "broker" who specializes in stocks, bonds,
commodities, or options acts as an agent and must be registered with the exchange where
the securities are traded
...
Broker-dealer
Any person, other than a bank, engaged in the business of buying or selling securities on
its own behalf or for others
...
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Broker loan
Related: Call money rate
...
A broker CD features a higher
interest rate, usually 1% higher, and is FDIC insured and do not usually have commissions
...
Brokers' loans
Money brorowed by brokers from banks for uses such as financing specialists's
inventories of stock, financing the underwriting of new issues of corporate and municipal
securities, and financing customer margin accounts
...
Also
called "Over the Chinese wall"
...
Bubble theory
Security prices sometimes move wildly above their true values, or the price falls sharply
until the "bubble bursts
...
Budget authority
Broad responsibility by Congress that government agencies have the power to spend
federal funds
...
For example,
it may stipulate that a given agency must spend within a specific year, number of years,
or any time in the future
...
The
period of time during which Congress makes funds available may be specified as
one-year, multiple years or no year
...
Authority may also be classified as current or permanent
...
GFEDU
...
Budget deficit
The amount by which government spending exceeds government revenues
...
Bucket shop
An illegal brokerage firm that accepts customer orders but does not attain immediate
executions
...
Alternatively, the broker may never fill the customer's order but keep
the money
...
Budget surplus
The amount by which government revenues exceed government pending
...
Build a book
In the context of general equities, develop customer orders to gather demand/supply in
order to make a bid or an offer
...
The builder uses cash to buy down the mortgage rate to a
lower level than the prevailing market loan rate for some period of time
...
Bulge
A short-lived stock price increase
...
Bulge bracket
A tier of firms in an underwriting syndicate that have the highest participation level
...
Bull
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An investor who thinks the market will rise
...
Bull-bear bond
Bond whose principal repayment is linked to the price of another security
...
Bull CD
A bull CD pays its holder a specified percentage of the increase in return on a specified
marketindex while guaranteeing a minimum rate of return
...
Bull spread
A spread strategy in which an investor buys an out-of-the-money put option, financing it by
selling an out-of-the money call option on the same underlying security
...
Bulldog market
The foreign market in the United Kingdom
...
Related:
Window contract
...
Bullet strategy
A fixed income strategy in which a portfolio is constructed so that the maturity's of its
securities are highly concentrated at one point on the yield curve
...
Some examples include the American eagle and the Canadian maple leaf
...
Bullish
Words used to describe investor attitudes
...
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Bump-up CD
A certificate of deposit granting the owner the right to increase its yield one time for the
remaining term of the CD
...
Bunching
Describes the act of traders combining round-lot orders for execution at the same time
...
Also used to refer to the pattern on the ticker tape when a series of trades for a
security appear consecutively
...
Bureau of Labor Statistics (BLS)
A reserch agency of the U
...
Department of Labor; it compiles statistics on hours of work,
average hourly earnings, employment and unemployment, consumer prices and many
other variables
...
Burnout
Depletion of a tax shelter's benefits
...
Business
See: Merger
Business Combination laws
These laws impose a moratorium on certain kinds of transactions (e
...
, asset sales,
mergers) between a large shareholder and the firm for a period usually ranging between
three and five years after the shareholder's stake passes a pre-specified (minority)
threshold
...
S
...
Business cycle
Repetitive cycles of economic expansion and recession
...
Business day
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A day in which financial markets are open for trading
...
Business risk
The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses
...
Busted convertible
Related: Fixed income equivalent
...
Convertible bond
selling essentially as a straight bond
...
Bust-up takeover
A leveraged buyout in which the buyer sells off the assets of the target_company to repay the
debt that financed the takeover
...
Butterfly shift
A nonparallel shift in the yield curve involving the height of the curve
...
Complex option strategy that involves selling two calls and
buying two calls on the same or different markets, with several maturity dates
...
The payoff diagram resembles the shape of a butterfly
...
Buy-and-hold strategy
A passive investment strategy with no active buying and selling of stocks from the time
the portfolio is created until the end of the investment horizon
...
GFEDU
...
Buy the book
An order, typically from a large institutional investor to a broker to purchase all the shares
available at the market from the specialist and other brokers and dealers at the current offer
price
...
Buydown
A lump sum payment made to the creditor by the borrower or by a third party to reduce
the amount of some or all of the consumer's periodic payments to repay the
indebtedness
...
Related: Evening up, liquidation
...
Related: Sell limit order
...
(If limit, then the
buy cannot occur above the limit, regardless of tick
...
Investors believe that the price has hit bottom and will trend upward
...
Buy on close
Buying at the end of the trading session at a price within the closing range
...
Buy on opening
Buying at the beginning of a trading session at a price within the opening range
...
GFEDU
...
Buy-side analyst
A financial analyst employed by a nonbrokerage firm, typically one of the larger money
management firms that purchases securities on its own account
...
Once the security
has broken through that price, the order is then treated as a market order
...
"Buy them
Used for listed equity securities
...
Buy write
See also Covered Call
...
See: Short covering, stock buyback
...
The purchase of corporate bonds by the issuing company at a discount in the open
market
...
When a firm elects to repurchase
some of the shares trading in the market
...
During the early
part of the loan, portions of these payments are provided by a third party to reduce the
borrower's monthly payments
...
Antithesis of
seller's_market
...
Indicates that at a given time (usually before the
opening of a stock/market or at expiration time), there are more buyers/sellers in the
marketplace, usually with market orders
...
Buying climax
A rapid rise in the price of a stock resulting from heavy buying, which usually creates the
market condition for a rapid fall in the price
...
GFEDU
...
Buying power
The amount of money available to buy securities, determined by adding the total cash
held in brokerage accounts and the amount that could be spent if securities were margined
to the limit
...
A leveraged buy
out is effected with borrowed money
...
Bylaw Amendment Limitations
These provisions limit shareholders' ability to amend the governing documents of the
corporation
...
Bypass trust
An irrevocable trust that is designed to pay trust income (and principal, if needed) to an
individual's spouse for the duration of the spouse's lifetime
...
C
Fifth letter of a Nasdaq stock descriptor specifying that issue is exempt from Nasdaq
listing requirements for a temporary period
...
CAD
The ISO 4217 currency code for Canada Dollar
...
CAGR
See: Compound Annual Growth Rate
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CAMPS
See: Cumulative Auction Market Preferred Stocks
CAPM
See: Capital asset pricing model
CAPS
See: Convertible adjustable preferred stock
CARs
See: Certificates of Automobile Receivables
CARDs
See: Certificates of Amortized Revolving Debt
CATS
See: Certificate of Accrual on Treasury Securities (CATS)
CAX
The ISO 4217 currency code for Canadian Cent
...
CBO
See: Collateralized Bond Obligation
...
CD
See: Certificate of deposit
CD
The two-character ISO 3166 country code for CONGO, THE DEMOCRATIC REPUBLIC OF
...
GFEDU
...
CFAT
Cash flow after taxes
...
CH
The two-character ISO 3166 country code for SWITZERLAND
...
CHIPS
See: Clearing House Interbank Payments System
CI
The two-character ISO 3166 country code for COTE D'IVOIRE
...
GFEDU
...
CL
The two-character ISO 3166 country code for CHILE
...
CLP
The ISO 4217 currency code for Chilean Peso
...
CMBS
See: Commercial Mortgage Backed Securities
CME
See: Chicago Mercantile Exchange
CML
See: Capital market line
CMO
See: Collateralized mortgage obligation
CN
The two-character ISO 3166 country code for CHINA
...
CO
The two-character ISO 3166 country code for COLOMBIA
...
CPT
See: Carriage Paid To
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CR
The two-character ISO 3166 country code for COSTA RICA
...
CRC
The ISO 4217 currency code for Costa Rican Colon
...
Also refers to Commodity Trading Advisor
...
CUP
The ISO 4217 currency code for Cuban Peso
...
CVE
The ISO 4217 currency code for Cape Verde Islands Escudo
...
CY
The two-character ISO 3166 country code for CYPRUS
...
CZ
The two-character ISO 3166 country code for CZECH REPUBLIC
...
Cabinet crowd
NYSE members who trade bonds with a low daily traded volume
...
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Cabinet security
A stock or bond listed on a major exchange with low daily traded volume
...
S
...
CAC 40 index
A broad-based index of common stocks composed of 40 of the 100 largest companies listed
on the forward segment of the official list of the Paris Bourse
...
Calendar
List of new issues scheduled to come to market shortly
...
Calendar spread
Applies to derivative products
...
Calendar Straddle or Combination
See Calendar Spread
...
Call
A date before maturity, specified at issuance, when the issuer of a bond may retire part of
the bond for a specified call price
...
Call
A loan repayable on demand
...
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Call loan rate
See: Call money rate
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance margin
loans to investors
...
Call
An option contract that gives its holder the right (but not the obligation) to purchase a
specified number of shares of the underlying stock at the given strike price, on or before the
expiration date of the contract
...
Call
Premium in price above the par value of a bond or share of preferred stock that must be paid
to holders to redeem the bond or share of preferred stock before its scheduled maturity date
...
Call protection
A feature of some callable bonds that establishes an initial period when the bonds may not
be called
...
Call
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision
...
The
writer therefore becomes the fixed-rate receiver/floating-ratepayer
...
Callable
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Applies mainly to convertible securities
...
Bonds are usually called when interest rates fall
so significantly that the issuer can save money by issuing new bonds at lower rates
...
Option: Call or put option exercised against the stockholder
...
Cumulative Auction Market Preferred
Stands for Cumulative Auction Market Preferred Stocks, Oppenheimer & Company's
Dutch Auction preferred stock product
...
Formerly
known
as
the
Canadian
Over-the-Counter Automated Trading System (COATS), the CDN became a subsidiary of
the Toronto Stock Exchange in 1991
...
"Can get $xxx"
Refers to over-the-counter trading
...
Usually a standard markdown (1/8) from $xxx is applied to this price in bidding the seller
for its stock
...
Cancel
To void an order to buy or sell from (1) the floor, or (2) the trader/salesperson's scope
...
Canceled Certificates
Before the issuance of a new certificate, the old certificate is presented to the Transfer
Agent and is canceled
...
GFEDU
...
e
...
"Cannot complete"
In the context of general equities, inability to finish an order on a principal or agency basis,
given prevailing price instructions and/or market conditions
...
Capacity
Credit grantors' measurement of a person's ability to repay loans
...
Usually, a decrease in this percentage signals an economic slowdown, while
an increase signals economic expansion
...
Capital account
Net result of public and private international investment and lending activities
...
Capital appreciation
See: Capital growth
Capital appreciation fund
See: Aggressive growth fund
Capital asset
A long-term asset, such as land or a building, not purchased or sold in the normal course
of business
...
The CAPM asserts that the only risk
that is priced by rational investors is systematic risk, because that risk cannot be
eliminated by diversification
...
GFEDU
...
Theory was invented by William Sharpe (1964) and John Lintner
(1965)
...
Capital budgeting
The process of choosing the firm's long-term capital assets
...
Excess cash in a CBA can be invested in a money
market fund or an insured money market deposit account without losing access to the money
...
Capital flight
The transfer of capital abroad in response to fears of political risk
...
Capital gain
When a stock is sold for a profit, the capital gain is the difference between the net sales
price of the securities and their net cost, or original basis
...
Capital gains distribution
A distribution to the shareholders of a mutual fund out of profits from selling stocks or bonds,
that is subject to capital gains taxes for the shareholders
...
A long-term capital gain, which is
achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20%
(taxpayers in 28% tax bracket) and 10% (taxpayers in 15% tax bracket)
...
Capital gains yield
The price change portion of a stock's return
...
GFEDU
...
g
...
Capital growth
The increase in an asset's market price
...
Capital-intensive
Used to describe industries that require large investments in capital assets to produce their
goods, such as the automobile industry
...
Capital International Indexes
Market indexes maintained by Morgan Stanley that track major stock markets worldwide
...
Capital lease
A lease obligation that has to be capitalized on the balance sheet
...
Capital market
The market for trading long-term debt instruments (those that mature in more than one
year)
...
See: Efficient market hypothesis
...
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio
...
Defined by the capital
asset pricing model
...
GFEDU
...
Capital requirements
Financing required for the operation of a business, composed of long-term and working
capital plus fixed assets
...
Antithesis of income shares
...
The number and the value of issued shares are usually shown, together with the number
of shares authorized, in the capital accounts section of the balance sheet
...
Capital structure
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the
ratio of debt to equity and the mixture of short and long maturities
...
Capital turnover
Calculated by dividing annual sales by average stockholder equity (net worth)
...
Low capital
turnover generally corresponds to high profit margins
...
Capitalization method
A method of constructing a replicating portfolio in which the manager purchases a number
of the most highly capitalized names in the stock index in proportion to their capitalization
...
Capitalization ratios
Also called financial leverage ratios, these ratios compare debt to total capitalization and
thus reflect the extent to which a corporation is trading on its equity
...
GFEDU
...
Capitalization table
A table showing the capitalization of a firm, which typically includes the amount of capital
obtained from each source - long-term debt and common equity - and the respective
capitalization ratios
...
The stocks with the largest
market values have the heavist weighting in the index
...
Capitalized
Recorded in asset accounts and then depreciated or amortized, as is appropriate for
expenditures for items with useful lives longer than one year
...
Capped-Style Option
A capped option is an option with an established profit cap or cap price
...
A capped option is automatically exercised when
the underlying security closes at or above (for a call) or at or below (for a put) the
Option's cap price
...
Caput
An exotic option
...
That is, you purchase the
option to buy a put option at a particular price on or before the expiriation date
...
g
...
" Derived from the fact that quantities of the
product specified in a contract once corresponded closely to the capacity of a railroad car
...
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Cargo
Goods being transported
...
The seller is also responsible for providing cargo insurance at minimum
coverage against the buyer's risk of loss or damage to the goods during transport
...
This term may be used for any mode of transport
...
The risk of loss or damage is transferred from the seller to the buyer when
the goods have been delivered into the carrier's custody
...
Carrot equity
British slang for an equity investment with the added benefit of an opportunity to purchase
more equity if the company reaches certain financial goals
...
Basel Accord
Agreement concluded among country representatives in 1988 in Switzerland to develop
standardized risk-based capital requirements for banks across countries
...
Carrying charge
The fee a broker charges for carrying securities on credit, such as on a margin account
...
Carrying value
Book value
...
The
United States has laws prohibiting cartels
...
GFEDU
...
Usually includes bank accounts and marketable securities, such as
government bonds and banker's acceptances
...
g
...
Cash account
A brokerage account that settles transactions on a cash-rather than credit-basis
...
Used in evaluating
the risk of a project or firm
...
Cash asset ratio
Cash and marketable securities divided by current liabilities
...
Cashed-Based
Refering to an option or future that is settled in cash when exercised or assigned
...
Cash basis
Refers to the accounting method that recognizes revenues and expenses when cash is
actually received or paid out
...
Usually includes bank accounts and marketable securities, such as
government bonds and Banker's Acceptances
...
g
...
Cash budget
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
expected cash and loan balances
...
Combination of a long position in a stock/index/commodity
and short position in the underlying futures, which entails a cost of carry on the long position
...
Cash conversion cycle
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The length of time between a firm's purchase of inventory and the receipt of cash from
accounts receivable
...
Or, a
company or division of a company that generates a steady and significant amount of free
cash flow
...
In net working
capital management, it can be thought of as the operating cycle less the accounts payable
payment period
...
Cash delivery
The provision of some futures contracts that requires not delivery of underlying assets but
settlement according to the cash value of the asset
...
Cash dividend
A dividend paid in cash to a company's shareholders
...
A cash distribution may include capital gains and
return of capital in addition to the dividend
...
Cash-equivalent items
Examples include Treasury bills and Banker's Acceptances
...
Sometimes called cash earnings
...
Cash flow after interest and
Net income plus depreciation
...
GFEDU
...
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the number of common
shares outstanding
...
Cash flow matching
Also called dedicating a portfolio, this is an alternative to multiperiod immunization that calls
for the manager to match the maturity of each element in the liability stream, working
backward from the last liability to assure all required cash flows
...
Cash flow time line
Line depicting the operating activities and cash flows for a firm over a particular period
...
Cash In Lieu (CIL)
In a typical exchange offer, "old" shares of the target company are exchanged for "new
shares"
...
Also known as money market instruments or cash
reserves
...
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Cash management bill
Very short-maturity bills that the Treasury occasionally sells because its cash balances are
down and it needs money for a few days
...
Related: Derivative markets
...
Proposal, either hostile or friendly, to acquire a target
company through the payment of cash for the stock of the target
...
Cash-on-cash return
A method used to find the return on investments when there is no active secondary market
...
See:
Current yield or yield to maturity
...
Cash-out Laws
These laws enable shareholders to sell their stakes to a "controllin" shareholder at a
price based on the highest price of recently acquired shares
...
A few states have these laws
...
Cash position
The percentage of a mutual fund's assets invested in short-term reserves, such as US Treasury
bills or other money market instruments
...
See: Spot price
...
Cash reserves
See: Cash investments
Cash sale/settlement
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Transaction in which a contract is settled on the same day as the trade date, or the next
day if the trade occurs after 2:30 p
...
EST and the parties agree to this procedure
...
See: Settlement date
...
Cash settlement contracts
Futures contracts such as stock index futures that settle for cash and do not involve delivery of
the underlying
...
Cash transaction
A transaction in which exchange is immediate in the form of cash, unlike a forward
contract (which calls for future delivery of an asset at an agreed-upon price)
...
This balance
is posted to the cash account in the ledger
...
Cashout
Occurs when a firm runs out of cash and cannot readily sell marketable securities
...
Casualty loss
A financial loss caused by damage, destruction, or loss of property as a result of an
unexpected or unusual event
...
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Cats and dogs
Speculative stocks with short histories of sales, earnings, and dividend payments
...
Cease-and-desist order
An order issued after notice and opportunity for hearing, requiring a depository instition,
a holding company or a depository institution official to terminate unlawful, unsafe or
unsound banking practices
...
Cede & Co
...
CEDEL
A centralized clearing system for Eurobonds
...
Central bank
A country's main bank whose responsibilities include the issue of currency, the
administration of monetary policy, open market operations, and engaging in transactions
designed to facilitate healthy business interactions
...
Central bank intervention
The buying or selling of currency, foreign or domestic, by central banks in order to
influence market conditions or exchange rate movements
...
See: Normal Distribution
...
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Cents per share
The amount of a mutual fund's dividend or capital gains distributions that a shareholder will
receive for each share owned
...
Certainty equivalent
An amount that would be accepted today (risk free) in lieu of a chance to receive a
possibly higher, but uncertain, amount
...
For example, a particular investor might trade an uncertain expected 4%
active return with 6% risk, for a certain active return of 1
...
Certificate
A formal document used to record a fact and used as proof of the fact, such as stock
certificates, that evidence ownership of stock in a corporation
...
Certificate of deposit (CD)
Also called a time deposit this is a certificate issued by a bank or thrift that indicates a
specified sum of money has been deposited
...
The duration can be up to five years
...
Certificates of Amortized Revolving Debt (CARD)
Pass-through securities backed by credit card receivables
...
Certificateless municipals
Municipal bonds with one certificate which is valid for the entire issue, and having no
individual certificates, easing transactions
...
Certified check
A bank guaranteed check for which funds are immediately withdrawn, and for which the
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bank is legally liable
...
Certified financial
Financial statements that include an accountant's opinion
...
Chair of the board
Highest-ranking member of a Board of Directors, who presides over its meetings and who
is often the most powerful officer of a corporation
...
A
chaotic system must have a fractal dimension, and exhibit sensitive dependence on initial
conditions
...
Chapter 7 Proceedings
Provisions of the Bankruptcy Reform Act under which the debtor firm's assets are liquidated
by a court because reorganization would fail to establish a profitable business
...
Changes in financial
Sources of funds provided from operations that alter a company's cash flow position:
depreciation, deferred taxes, other sources, and capital expenditures
...
The slope of the regression line is a security's beta
...
For a given
characteristic, it is the minimum risk portfolio, with portfolio characteristic equal to 1
...
It is the minimum risk
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beta = 1 portfolio
...
A charitable lead
trust by contrast allows the charity to receive income during the grantor's life, and the
remaining income to pass to designated family members upon the grantor's death
...
This might take the form of a supermajority vote requirement for charter or
bylaw amendments, total elimination of the ability of shareholders to amend the bylaws,
or the ability of directors beyond the provisions of state law to amend the bylaws without
shareholder approval
...
Chartists
A technical analyst who charts the patterns of stocks, bonds, and commodities to find trends in
patterns of trading used to advise clients
...
Chasing the market
Purchasing a security at a higher price than expected because prices are rapidly climbing,
or selling a security at a lower level when prices are quickly falling
...
Chatter
See: Whipsawed
Chattel Mortgage
A loan agreement that grants to the lender a lien on property other than real estate
...
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Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a seller of
a futures contract can earn by buying an issue and then delivering it at the settlement date
...
Check clearing
The movement of a check from the depository institution at which it was deposited back
to the institution on which it was written; the movement of funds in the opposite
direction and the corresponding credit and debit to the involved accounts
...
Checking the market
Searching for bid and offer prices from market makers to find the best deal
...
Primary place stock options, foreign currency options, and index options (S&P
100, 500, and OTC 250 index)
Chicago Board of Trade (CBOT)
The second largest futures exchange in the US, and was a pioneer in the development of
financial futures and options
...
Founded in 1898 as a not-for-profit corporation, in November 2000 CME became
the first U
...
financial exchange to demutualize and become a shareholder-owned
corporation
...
CME
has four major product areas based on interest rates (including Eurodollar futures, the
world's most actively traded futures contract), stock indexes (such as the (S&P 500 and
Nasdaq-100 futures), foreign exchange and commodities
...
Chief Executive Officer (CEO)
A title held often by the Chairperson of the Board, or the president
...
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Chief Financial Officer (CFO)
The officer of a firm is responsible for handling the financial affairs of a company
...
Chinese hedge
Applies mainly to convertible securities
...
Antithesis of set-up
...
This barrier is erected to prevent the sharing of inside information that bankers are likely
to have
...
Locked market in London terminology
...
Cincinnati Stock Exchange (CSE)
Stock exchange based in Cincinnati that is the only fully automated stock exchange in the US
It has no trading floor, but handles all members' transactions using computers
...
The customer circled has basically made a commitment to
purchase the issue if it is available at an agreed-upon price
...
Circuit breakers
Measures instituted by exchanges to stop trading temporarily when the market has fallen by
a certain percentage in a specified period
...
Circus swap
A fixed-rate currency swap against floating US dollar LIBOR payments
...
GFEDU
...
City code on takeovers and mergers
See: Dawn raid
Claim dilution
A decrease in the likelihood that one or more of a firm's claimants will be fully repaid,
including time value of money considerations
...
Class
In the case of derivative products, options of the same type-put or call-with the same
underlying security
...
In general, refers to a category of assets such as: domestic
equity, fixed income, etc
...
Class of Options
Option contracts of the smae type (call or put) and Style (American, European or Capped)
that cover the same underlying security
...
Since only part of the board can be replaced each
year, an outsider who gains control of a corporation may have to wait a few years before
being able to gain control of the board
...
Sometimes known as a delay provision
...
The specific features of each class, which are set out in the charter and bylaws,
usually give certain advantages to the Class A shares, such as increased voting power
...
Also called foul bill of
lading and are the opposite of clean bills of lading
...
GFEDU
...
Natural
...
Clean Bill of Lading
A bill of lading bearing no findings of damage or shortage
...
Clean price
Bond price excluding accrued interest
...
Clean up
In the context of general equities, purchase/sale of all the remaining supply of stock, or
the last piece of a block, in a trade-leaving a net zero position
...
Often preceded by "subject to
...
A trade that does not clear is said to fail
...
Clear a position
To eliminate a long or short position, leaving no ownership or obligation
...
This is usually checked through a title search by a title
company
...
GFEDU
...
Clearing House Automated Payments System (CHAPS)
A computerized clearing system for sterling funds that began operations in 1984
...
Clearing House Electronic Subregister System (CHESS)
CHESS is the automatic transfer and settlement system for the majority of Australian
Stock Exchange (ASX) listed securities
...
Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value payments operated by a group of
major banks
...
A clearing organization is also charged
with the proper conduct of delivery procedures and the adequate financing of the entire
operation
...
Each clearing member must also be a member of the
exchange
...
All trades of a non-clearing member must be registered with, and
eventually settled through, a clearing member
...
Clone fund
A new fund set up in a fund family to emulate another successful fund
...
Sometimes used to refer to
closing price
...
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Close a position
In the context of general equities, eliminate an investment from one's portfolio, by either
selling a long position or covering a short position
...
Most real estate and automobile loans are closed-end
agreements
...
Closed corporation
A corporation whose shares are owned by just a few people, having no public market
...
Antithesis of an
open-end management company
...
A publicly traded fund sold on stock exchanges or over the counter that may
trade above or below its net asset value
...
Closed-end management
An investment company that has only a set number of shares of the mutual fund that it
manages, and does not create new shares if demand increases
...
Closed-end mortgage
Mortgage against which no additional debt may be issued
...
Closed out
Position that is liquidated when the client does not meet a margin call or cover a short sale
...
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Closely held company
A company who has a small group of controlling shareholders
...
It is difficult or impossible to wage a proxy battle for any
closely-held firm
...
Closing price
Price of the last transaction of a particular stock completed during a day's trading session on
an exchange
...
Closing quote
The last bid and offer prices of a particular stock at the close of a day's trading session on an
exchange
...
The high and low prices, or bids and offers, recorded during the
period designated as the official close
...
Closing sale
A transaction in which the seller's intention is to reduce or eliminate a long position in a
stock, or a given series of options
...
A positive closing tick indicates "buying at the close", or a bullish market ;
a negative closing tick indicates "selling at the close," or a bearish market
...
Closing transaction
Applies to derivative products
...
Antithesis of opening transaction
...
See: bad title
...
GFEDU
...
Cluster analysis has
identified groupings such as growth, cyclical, stable, and energy stocks
...
CMO cash_flows are derived from the difference
between the rates paid by the mortgage loan holders and the lower, shorter-term rates
paid to CMO investors
...
A co-agent does
not maintain security holder records, but is used to facilitate the transfer of stock in a
geographic region not easily accessible to the issuer or its principal transfer agent
...
COD transaction
See: Delivery versus payment
Code of procedure
The guide of the National Association of Securities Dealers used to adjudicate complaints filed
against NASD members
...
Also known as R-square
...
Coffee, Sugar & Cocoa Exchange
The New York-based commodity exchange trading futures and options
...
Cofinancing agreements
Joint participation of the World Bank and other agencies or lenders in providing funds to
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developing countries
...
Depending on combinations of
these two factors, the market can be in one of four states: random walk, unstable
transition, chaos, or coherence
...
Coinsurance effect
Refers to the fact that the merger of two firms lessens the probability of default on either
firm's debt
...
Collar
An upper and lower limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate
mortgage (ARM)
...
Collateral trust bonds
A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes,
bonds, or other financial asset as security
...
Collateralized Bond Obligation
Investment-grade bonds backed by a collection of junk bonds with different levels of risk,
called tiers, that are determined by the quality of junk bond involved
...
Collateralized mortgage obligation
A security backed by a pool of pass-through rates , structured so that there are several classes
of bondholders with varying maturities, called tranches
...
Related: mortgage pass-through security
...
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Collection
The presentation of a negotiable instrument for payment, or the conversion of any accounts
receivable into cash
...
Collection fractions
The percentage of a given month's sales collected during the month of sale and each
month following the month of sale
...
Collection ratio
The ratio of a company's accounts receivable to its average daily sales, which gives the
average number of days it takes the company to convert receivables into cash
...
Colombo Stock Exchange
Established in 1984, the only public stock exchange of Sri Lanka
...
Comanager
A bank that ranks just below a lead manager in a syndicated Eurocredit or international bond
issue
...
Combination
Applies to derivative products
...
See: Straddle
...
GFEDU
...
Combination order
See: Alternative order
Combination matching
Also called horizon-matching, a variation of multiperiod immunization and cash flow-matching
in which a portfolio is created that is always duration-matched and also cash-matched in
the first few years
...
Related: Straddle
Combined financial statement
A financial statement that merges the assets, liabilities, net worth, and operating figures of
two or more affiliated companies
...
Come in
In the context of general equities, a fall in price
...
Antithesis of going into the trade
...
Antithesis of the close
...
Formerly known as the
Commodity Exchange, COMEX is the leading US market for metals futures and options
trading
...
Commercial bank
Bank that offers broad range of deposit accounts, including checking, savings and time
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deposits and extends loans to individuals and business
...
Commercial draft
Demand for payment
...
Commercial invoice
Bill for merchandise sold
...
Commercial loan
A short-term loan, typically 90 days, used by a company to finance seasonal working
capital needs
...
Commercial property includes multi-family, retail, office, etc
...
, that need to be understood when valuing these instruments
...
The maturity of commercial
paper is typically less than 270 days; the most common maturity range is 30 to 50 days or
less
...
Commercial risk
The risk that a foreign debtor will be unable to pay its debts because of business events,
such as bankruptcy
...
This process is referred to as rehypothecation, which is the use of
customers' collateral to secure their loans
...
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Commission
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or
their dollar value
...
Full service brokers offer advice
and usually have a staff of analysts who follow specific industries
...
Also known as a
round-turn
...
Commission house
A firm that buys and sells futures contracts for customer accounts
...
Commission-only compensation
Payment to a financial adviser's of only commissions on investments purchased when the client
implements the recommended financial plan
...
Related:
Open interest
...
Often used in risk arbitrage
...
K
...
The payment is typically 0
...
25%
for each week thereafter, and a final 0
...
Committee on Uniform Securities Identification Procedures
(CUSIP)
Committee that assigns identifying numbers and codes for all securities
...
Commodities Exchange Center (CEC)
The location of five New York futures exchanges: Commodity Exchange, Inc
...
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Commodity
A commodity is food, metal, or another fixed physical substance that investors buy or
sell, usually via futures contracts
...
Commodity Bundle
One unit of the collection of the complete set of goods produced and sold in the world
market
...
High values mean a potential future correction
(downward movement in underlying asset) and low values potentially forecast a rally
...
Commodity futures contract
An agreement to buy a specific amount of a commodity at a specified price on a particular
date in the future, allowing a producer to guarantee the price of a product or raw
material used in production
...
Commodity indices
Indices measuring the price and performance of physical commodities, often by the price
of futures contracts for the commodities that are listed on commodity exchanges
...
Commodity Research Bureau
Produces a popular price index of 17 commodities which is often used to track
inflationary trends in the economy
...
The trades are often intraday trades
...
Common-base-year analysis
The representing of accounting information over multiple years as percentages of
amounts in an initial year
...
GFEDU
...
As of January 1991
common codes replaced the earlier separate CEDEL and Euroclear codes
...
According to multiple factor risk models,
the common factors determine correlations between asset returns
...
Common market
An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services
...
The
common shares usually entitle the shareholders to vote at shareholders meetings
...
Common-size analysis
The representing of balance sheet items as percentages of assets and of income statement
items as percentages of sales
...
For example, all items in each year's income statement could be presented as a percentage
of net sales
...
Common shares let an investor
vote on such matters as the election of directors
...
Units
of
ownership
of
a
public
corporation
with
junior
status
to
the
claims
of
secured/unsecured creditors, bondholders and preferred shareholders in the event of
liquidation
...
Common stock fund
A mutual fund investing only in common stock
...
GFEDU
...
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained earnings
...
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings (cash
flow per share), and equity (book value per share) of a firm
...
Companion bonds
A class of a Collateralized Mortgage Obligation (CMO) whose principal is paid off first when the
underlying mortgages are prepaid due to falling interest rates
...
Company
A proprietorship, partnership, corporation, or other form of enterprise that engages in
business
...
Company-specific risk
Related: Unsystematic risk
Comparative advantage
Theory suggesting that specialization by countries can increase worldwide production
...
Comparative statements
Financial statements for different periods, that allow the comparison of figures to
illustrate trends in a company's performance
...
GFEDU
...
Comparison universe
A group of money managers of similar investment style used to assess relative
performance of a portfolio manager
...
Compensation
Arrangement under which the delivery of goods to a party is paid for by buying back a
certain amount of the product from the recipient of the goods
...
Competence
Sufficient ability or fitness for one's needs
...
Competition
Intra- or intermarket rivalry between or among businesses trying to obtain a larger piece
of the same market share
...
Situation whereby another OTC market maker has transacted
with investment bank at the stated market level before the bid/offer has been made
...
Competitive bidders are usually financial institutions
...
Competitive offering
An offering of securities through competitive bidding
...
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Complete capital market
A market in which there is a distinctive marketable security for each and every possible
outcome
...
Completion bonding
Insurance that a construction contract will be completed successfully
...
Completion undertaking
An undertaking either (1) to complete a project so that it meets certain specified
performance criteria on or before a certain specified date, or (2) to repay project debt if
the completion test cannot be met
...
Compliance department
A department in all organized stock exchanges to ensure that all companies, traders, and
brokerage firms comply with Securities and Exchange Commission and exchange rules and
regulations
...
Compound Annual Growth Rate
Best defined by example
...
489%
...
05x1
...
4 which is what you end up with at
the end of year two
...
4/100) -1]= 0
...
489%
...
If we had three compounding periods we would take the cubic root
(power of 1/3)
...
If we had invested at exactly 6
...
06489x1
...
4
...
The example is directed to a return - but
CAGR could be applied to earnings growth, GDP growth, etc
...
GFEDU
...
Compound option
Option on an option
...
For example, interest
earned in one period earns additional interest during each subsequent time period
...
For example, quarterly compounding has
a compounding frequency of 4
...
Comprehensive due diligence investigation
The investigation of a firm's business in conjunction with a securities offering to
determine whether the firm's business and financial situation and its prospects are
adequately disclosed in the prospectus for the offering
...
Sometimes
referred to as the contoller (which means the same thing)
...
Computerized market timing system
A computer system that compiles large amounts of trading data in search of patterns and
trends to make buy and sell recommendations
...
If the curve falls
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above the straight line, it is called convexity
...
Concentration Banks
A small number of large banks a firm contracts with to periodically collect the firm's
deposit balances from a group of smaller banks
...
Concession
The per-share or per-bond compensation of a selling group for participating in a corporate
underwriting
...
Conditional call
Applies mainly to convertible securities
...
Conditional call options
A protective guarantee that, in the event a high yield bond is called, the issuing corporation
will replace the bond with a noncallable bond of the same life and terms as the bond that is
being called
...
Condor
Applies to derivative products
...
The payoff diagram
takes the shape of a bird
...
GFEDU
...
Confidence indicator
A measure of investors' faith in the economy and the securities market
...
Confidence letter
Statement by an investment bank that it is highly confident that the financing for its
client/acquirer's takeover can and will be obtained
...
Confidence level
In risk analysis, the degree of assurance that a specified failure rate is not exceeded
...
"Go to the floor and check with the specialist or floor
broker that my previously active order has been canceled and was not executed"
...
Confirmation
The written statement that follows any "trade" in the securities markets
...
It spells out settlement date, terms, commission,
etc
...
This additional confirmation is in addition to the
obligation of the bank which issued the letter of credit
...
Conflict between bondholders and stockholders
Bondholders and stockholders may have interests in a corporation that conflict
...
Protective
covenants in bond documents work to resolve these conflicts
...
Conglomerate
A firm engaged in two or more unrelated businesses
...
GFEDU
...
Consensus forecast
The mean of all financial analysts' forecasts for a company
...
Consignment
Transfer of goods to a seller while title to the merchandise is retained by the owner
...
Popular in Great Britain
...
The consol payment divided by yield to maturity is the price of the
bond
...
Consolidated mortgage bond
A bond that covers several units of property, sometimes refinancing mortgages on the
properties
...
Combined ticker tapes of the NYSE and the curb
...
Network B does the same for AMEX-listed securities and also reports on securities listed
on regional stock exchanges
...
Consolidated tax return
A tax return combining the reports of affiliated companies, that are at least 80% owned
by a parent company
...
Consolidation loan
A loan that is used to combine and finance payments on other loans
...
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Consortium banks
A merchant banking subsidiary set up by several banks that may or may not be of the same
nationality
...
Constant-dollar plan
Method of purchasing securities by investing a fixed amount of money at set intervals
...
Constant dollars
Dollars of a base year used as a general measure of purchasing power
...
Constant ratio plan
Maintaining a predetermined ratio between stock and fixed income investments through
regular adjustments of distribution of funds into different investments
...
Constant yield method
Allocation of annual interest on a zero-coupon security for income tax use
...
Constructive receipt
The date a taxpayer receives dividends or other income, for use in the determination of
taxes
...
It shows the transaction details and origin of the goods
...
The Council, with 30 members who
represent a broad range of consumer and creditor interests, advises the Federal Reserve
Board on the exercise of its responsibilities under the Consumer Credit Protection Act
and on other matters on which the Board seeks its advice
...
GFEDU
...
Also called retail
credit
...
See: Truth in lending
...
Consumer durables
Consumer products that are expected to last three years or more, such as an automobile
or a home appliance
...
Consumer interest
Interest paid on consumer loans; e
...
, interest on credit cards and retail purchases
...
The US Department of Labor publishes the CPI every
month
...
For example, under usual conditions we
might observe a certain level of correlation of market returns
...
Some examples are the
conjectured contagion in East Asian markets beginning in July 1997 when the Thai
currency devalued and the impact across many emerging markets of the Russian default
...
It is complicated because correlation's are known to change through time,
for example, see Erb, Harvey and Viskanta's article in the 1994 Financial Analysts
Journal
...
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Contango
A market condition in which futures prices are higher in the distant delivery months
...
Contingency order
In the context of general equities, order to buy one security, if the trader can sell another,
usually given that certain price limits or conditions reach a certain level
...
Contingent claim
A claim that can be made only if one or more specified outcomes occur
...
Contingent immunization
An arrangement in which the money manager pursues an active bond portfolio strategy until
an adverse investment experience drives the then-available potential return down to the
safety net level
...
Contingent order
An order which can be executed only if another event occurs; i
...
"sell Oct 45 call 7-1/4
with stock 52 or lower"
...
Contingent Voting Power
Enables preferred stockholders to vote when the company fails to satisfy the agreement
between itself and the preferred stockholders
...
Interest is earned constantly, and at each instant, the interest that
accrues immediately begins earning interest on itself
...
GFEDU
...
Continuous random variable
A random value that can take any fractional value within specified ranges, as contrasted
with a discrete variable
...
Contract
A term of reference describing a unit of trading for a financial or commodity future
...
Contract month
The month in which futures contracts may be satisfied by making or accepting a delivery
...
Contractual Intermediary
Holder of an indirect claim in through a legal agreement that specifies that the individual
must make periodic, fixed payments to the intermediary in exchange for the right to
receive payments from the intermediary in the future
...
Contramarket stock
In the context of general equities, stock that tends to go against the trend of the market
as a whole, such as a commodities-related stock or one in an industry out of favor with
investors in a bull market
...
There are two possible reasons this strategy might
work
...
The second reason has to do
with overreaction
...
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Contrarian investing
Ignoring market trends by buying securities that the investor considers undervalued and
out of favor with other investors
...
Contributions may be deductible
or nondeductible, depending on the type of account
...
Control
50% of the outstanding votes plus one vote
...
Control parameters
In a nonlinear dynamic system, the coefficient of the order parameter; the determinant of
the influence of the order parameter on the total system
...
Control person
See: Affiliated person
Control-share Acquisition Laws
See Supermajority
...
Controlled commodities
Commodities regulated by the Commodities Exchange Act of 1936 in order to prevent
fraud and manipulation in commodities futures markets
...
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Controlled foreign corporation (CFC)
A foreign corporation whose voting stock is more than 50% owned by US stockholders,
each of whom owns at least 10% of the voting power
...
Sometimes
referred to as the comptroller (which means the same thing)
...
Convention statement
An annual statement filed by a life insurance company in each state where it does
business in compliance with that state's regulations
...
Conventional mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage
...
Conventional pass-throughs
Also called private-label pass-throughs, any mortgage pass-through security not guaranteed by
government agencies
...
Conventional project
A project with a negative initial cash flow (cash outflow), which is expected to be followed
by one or more future positive cash flows (cash inflows)
...
Interest rate risk may or may not be hedged
...
At the start, the contract price is higher because of time value
...
Conversion
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In the context of securities, refers to the exchange of a convertible security such as a bond
into stock
...
Conversion factors
Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contract
...
Conversion parity
See: Market conversion price
Conversion parity price
Related: Market conversion price
Conversion parity/value
Applies mainly to convertible securities
...
Par value + conversion ratio
...
Conversion Period
The time period during which an investor can exchange a convertible security for common
stock
...
Conversion price
Applies mainly to convertible securities
...
Conversion ratio
Applies mainly to convertible securities
...
GFEDU
...
It is determined at the time of issue and is expressed either as
a ratio or as a conversion price from which the ratio can be figured by dividing the par value
of the convertible by the conversion price
...
Also called parity value
...
Convertibility
The ability to exchange a currency without government restrictions or controls
...
They can be
exchanged at par value for common stock or cash after the next period's dividend rates are
revealed
...
This form of investing is far from
riskless and requires constant monitoring
...
Convertible eurobond
A eurobond that can be converted into another asset, often through exercise of attached
warrants
...
Convertible 100
Goldman Sachs index of the 100 convertibles of greatest institutional importance
...
Convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder
...
GFEDU
...
Convertible price
The contractually specified price per share at which a convertible security can be converted
into shares of common stock
...
Convex
Curved, as in the shape of the outside of a circle
...
Convexity
Property that a curve is above a straight line connecting two end points
...
Cook the books
To deliberately falsify the financial statements of a company
...
Cooling-off period
The period of time between the filing of a preliminary prospectus with the Securities and
Exchange Commission and the actual public offering of the securities
...
Examples are agriculture cooperatives that
assist farmers in selling their products more efficiently and apartment buildings owned
by the residents who have full control of the property
...
It features electronic trading of stocks, bonds,
futures, and options
...
Core competence
Primary area of expertise
...
Primary areas of specialty
...
An
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illegal practice
...
The C corporation pays federal
and state income taxes on earnings
...
Essentially, the C corporations' earnings are taxed twice
...
Corporate acquisition
The acquisition of one firm by another firm
...
Corporate charter
A legal document creating a corporation
...
Corporate finance
One of the three areas of the discipline of finance
...
Corporate financial management
The application of financial principles within a corporation to create and maintain value
through decision-making and proper resource management
...
Corporate financing committee
A committee of the NASD that reviews underwriters' SEC-required documents to ensure
that proposed markups are fair and in the public interest
...
Corporate processing float
The time that elapses between receipt of payment from a customer and the deposit of
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the customer's check in the firm's bank account; the time required to process customer
payments
...
Reasons for
repurchase include putting idle cash to use, raising EPS, creating support for a stock price,
increasing internal control (shark repellant), or stock for ESOP or pension plans
...
m
...
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to maturity that
the quoted premium or discount bond would generate
...
Corporation
A legal entity that is separate and distinct from its owners
...
Corpus
See: Principal
Correction
Reverse movement, usually downward, in the price of an individual stock, bond, commodity,
or index
...
Antithesis of a technical rally
...
Correlation
Statistical measure of the degree to which the movements of two variables
(stock/option/convertible prices or returns) are related
...
Correlation coefficient
A standardized statistical measure of the dependence of two random variables, defined as
the covariance divided by the standard deviations of two variables
...
GFEDU
...
White noise will fill its space since its
components are uncorrelated, and its correlation dimension is equal to whatever
dimension it is placed in
...
Correlation Integral
The probability that two points are within a certain distance from one another
...
Correspondent
A financial organization that performs services (acts as an intermediary) in a market for
another organization that does not have access to that market
...
cosigner
A term referring to a person, other than the principal borrower, who signs for a loan
...
Cost
The opposite of revenue
...
A cash cost means that cash is given up today to the
purchase
...
Cost and Freight (CFR)
Seller is responsible for the payment of freight to carry goods to a named destination, as
agreed with the buyer
...
Cost basis
The original price of an asset, used to determine capital gains
...
Also called
the profitability index
...
GFEDU
...
Cost of carry
Out-of-pocket costs incurred while an investor has an investment position
...
Related: Net financing cost
...
Futures contracts trade in a "cost-of-carry market" where
the underlying commodity can be stored, insured, and converted into the future easily and
inexpensively
...
Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of charge but
agree to pay all operating and financing charges of the project
...
Cost of funds
Interest rate associated with borrowing money
...
Cost of lease financing
A lease's internal rate of return
...
Cost Insurance and Freight (CIF)
Seller is responsible for the payment of freight to carry goods to a named destination, as
agreed with the buyer
...
This term should be used with ocean shipments only, as the point where risk
and responsibility pass from seller to buyer is the rail of the carrying vessel
...
GFEDU
...
"The price I must pay to obtain the securities you wish
to buy is [$]"
...
Antithesis of can get
...
Cost-push inflation
Inflation caused by rising prices, usually from increased raw material or labor costs that
push up the costs of production
...
Cost records
The records maintained by an investor of the prices at which securities transactions are made,
so that capital gains can be computed
...
This time period is based on
classification of the depreciable life of an asset
...
Countercyclical stocks
Stocks whose price tends to rise when the economy is in recession or the market is bearish,
and vice versa
...
Counterpart items
In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account
...
Counterparties
The parties to an interest rate swap
...
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Counterparty risk
The risk that the other party to an agreement will default
...
Counterpurchase
Exchange of goods between two parties under two distinct contracts expressed in
monetary terms
...
These
percentages serve as an indicator of a fund's diversification and its vulnerability to
fluctuations in foreign financial markets or currency exchange rates
...
Country diversification
Investment of a global or international portfolio's assets in securities of various countries
...
Country financial risk
Centers around the ability of a national economy to generate enough foreign exchange to
meet payments of interest and principal on its foreign debt
...
Credit quality
A measure of a bond issuer's ability to repay interest and principal in a timely manner
...
Coupon
The periodic interest payment made to the bondholders during the life of the bond
...
GFEDU
...
Coupon-equivalent rate
See: Equivalent bond yield
Coupon equivalent yield
True interest cost expressed on the basis of a 365-day year
...
The desk then decides whether to buy or sell certain issues (coupons)
in order to add or withdraw reserves
...
Coupon rate
In bonds, notes, or other fixed income securities, the stated percentage rate of interest,
usually paid twice a year
...
A positive
covariance implies that one variable is above (below) its mean value when the other
variable is above (below) its mean value
...
Cover
The purchase of a contract to offset a previously established short position
...
That is, a short call is
covered if the underlying stock is owned, and a short put is covered (for margin purposes)
if the underlying stock is also short in the account
...
A short put is covered if there is also a long
put in the account with a striking price equal to or greater than the striking price of the
short put
...
GFEDU
...
In actually, this is not
a "covered" strategy because asignment on the short put would require purchase of stock
on margin
...
Covered Straddle Write
The term used to describe the strategy in which an investor owns the underlying security
and also writes a straddle on that security
...
Coverage
See: Fixed-charge coverage
Coverage initiated
Usually refers to the fact that analysts begin following a particular security
...
Coverage ratios
Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed-charge
coverage ratio
...
Covered calls generally limit the risk the writer
takes because the stock does not have to be bought at the market price, if the holder of
that option decides to exercise it
...
See:
Covered or hedge option strategies
...
Covered interest arbitrage
Occurs when a portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges the resulting foreign exchange risk by selling the proceeds of the
investment forward for dollars
...
GFEDU
...
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the underlying stock,
designed so that one position will help offset any unfavorable price movement in the other,
including covered call writing and protective put buying
...
Antithesis of naked option
...
Covered put
A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option
...
In the event
that the holder of the put option decides to exercise the option, the writer's risk is more
limited than it would be on an uncovered or naked put option
...
Covering
Using forward currency contracts to predetermine the domestic currency amount of an
expected future foreign receipt or payment
...
See: Consumer Price Index
...
Cram-down deal
A merger in which stockholders are forced to accept undesirable terms, such as junk bonds
instead of cash or equity, due to the absence of any better alternatives
...
The last great crash was in 1929
...
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Crawling peg
An automatic system for revising the exchange rate
...
The par value is revised regularly
according to a formula determined by the authorities
...
Credit
Money loaned
...
Related: Default risk
...
Credit bureau
An agency that researches the credit history of consumers so that creditors can make
decisions about granting of loans
...
Credit history
A record of how a person has borrowed and repaid debt
...
Credit insurance
Insurance against abnormal losses due to unpaid accounts receivable
...
The manager would
purchase such a note to hedge against possible down grades, or loan defaults that would
guarantee payment into the portfolio of the manager even if moneys on referenced
assets are reduced
...
GFEDU
...
Credit Policy Delay
The period between the sale of goods for a credit and the payment for those goods
...
Credit Rating Agencies
Firms that compile information on and issue public credit ratings for a large number of
companies
...
Credit Terms
The conditions under which credit will be extended to a customer
...
Covered position
Use of an option in a trading strategy in the underlying asset is already owned
...
Rating agencies assign letter designations such as
AAA, AA, and so forth
...
Credit risk
The risk that an issuer of debt securities or a borrower may default on its obligations, or that
the payment may not be made on a negotiable instrument
...
Credit scoring
A statistical technique that combines several financial characteristics to form a single
score to represent a customer's creditworthiness
...
Difference in the value of two options, when the value of
the one sold exceeds the value of the one bought
...
" Antithesis
of a debit spread Related: Quality spread
...
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Credit watch
A warning by a bond rating firm indicating that a company's credit rating may change after
the current review is concluded
...
Creditor
Lender of money
...
Creditworthiness
Eligibility of an individual or firm to borrow money
...
CREST
CREST is CrestCo's real-time settlement system for UK and Irish shares and other
corporate securities
...
Crisp Sets
The fuzzy set term for traditional set theory
...
Critical Levels
Values of control parameters where the nature of a nonlinear dynamic system changes
...
An
example is the straw that breaks the camel's back
...
Cross-border factoring
Concluding a transaction by a network of factors across borders
...
GFEDU
...
Cross-border risk
Describes the volatility of returns on international investments caused by events
associated with a particular country as opposed to events associated solely with a
particular economic or financial agent
...
Cross hedging
Applies to derivative products
...
Use of a hedging instrument different from the security being
hedged
...
Cross-holdings
The holding by one corporation of shares in another firm
...
Ignoring cross-holdings leads to
double-counting
...
Foreign exchange rate
between two currencies other than the US dollar, the currency in which most exchanges
are usually quoted
...
Cross-Sectional Ratio Analysis
A method of analysis that compares a firm's ratios with some chosen industry benchmark
...
Cross-sectional approach
A statistical methodology applied to a set of firms at a particular time
...
Corporations' or governments' equity share ownership in
another corporation's shares
...
GFEDU
...
Crossed market
In the context of general equities, happens when the inside market consists of a highest
bid price that is higher than the lowest offer price
...
Crossed trade
The prohibited practice of offsetting buy and sell orders without recording the trade on the
exchange, thus not allowing other traders to take advantage of a more favorable price
...
Crowd trading
Used for listed equity securities
...
Includes
specialists, floor traders, odd-lot dealers, and other brokers as well as smaller groups with
specialized functions
...
Crowding out
Heavy federal borrowing that drives interest rates up and prevents businesses and
consumers from borrowing when they would like to
...
Often used in risk arbitrage
...
See: Scorched earth policy
...
Stocks are usually "cum dividend" for trades made on or before the fifth trading day
preceding the record date, when the register of eligible holders is closed for that
dividend period
...
Cum rights
With rights
...
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Cumulative dividend feature
A requirement that any missed preferred or preference stock dividends be paid in full before
any common dividend payment is made
...
Related: Non-cumulative preferred stock
...
Cumulative total return
The actual performance of a fund over a particular period
...
The C
...
A
...
52 rule
...
The Curb
Used for listed equity securities
...
Currency
Money
...
Appreciation
occurs when, because of a change in exchange rates, a unit of one currency buys more
units of another currency
...
Currency basket
The value of a portfolio of specific amounts of individual currencies, used as the basis for
setting the market value of another currency
...
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Currency Board
Entity charged with maintaining the value of a local currency with respect to some other
specified currency
...
Currency depreciation
A decline in the value of one currency relative to another currency
...
Currency devaluation
A deliberate downward adjustment in the official exchange rates established, or pegged,
by a government against a specified standard, such as another currency or gold
...
Exposure to a
diversified currency portfolio typically entails less exchange rate risk than if all the portfolio
exposure were in a single foreign currency
...
Currency futures contract
Contract specifying a standard volume of a particular currency to be exchanged on a
specific settlement date
...
Currency hedge
Applies mainly to international equities
...
e
...
Currency in circulation
Paper money, coins, and demand deposits that constitute all the money circulating in the
economy
...
GFEDU
...
Currency put option
Contract that gives the holder the right to sell a particular currency at a specified price
(exchange rate) within a specified period of time
...
Currency overvaluation
Applies mainly to international equities: (1) consideration that a currency is overvalued
if private demand for the currency at the going exchange rate is less than total private
supply (i
...
, central banks are buying up the difference, supporting the value of the
currency through foreign exchange intervention); (2) currency value exceeding purchasing
power parity
...
Currency risk
Related: Exchange rate risk
Currency selection
Asset allocation in which the investor chooses among investments denominated in
different currencies
...
Current account
Net flow of goods, services, and unilateral transactions (gifts) between countries
...
Current account balance calculations exclude transactions in
financial assets and liabilities
...
Current coupon
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A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk
...
Current-coupon issues
Related: Benchmark issues
Current income
Money that is routinely received from investments in the form of dividends, interest, and
other income sources
...
Interest is not included in the accrued
discount
...
Trading is more active in current
issues than in off-the-run issues
...
Current market value
The value of a client's portfolio at today's market price, as listed in a brokerage statement
...
Current/noncurrent method
The translation of all of a foreign subsidiary's current assets and liabilities into home
currency at the current exchange rate while noncurrent assets and liabilities are translated
at the historical exchange rate; that is, the rate in effect at the time the asset was acquired
or the liability incurred
...
Current rate method
The translation of all foreign currency balance sheet and income statement items at the
current exchange rate
...
GFEDU
...
Determined by dividing current assets by current
liabilities
...
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
the transaction
...
Current yield
For bonds or notes, the coupon rate divided by the market price of the bond
...
Cushion bonds
High-coupon bonds that sell at only at a moderate premium because they are callable at a
price below that at which a comparable noncallable bond would sell
...
Cushion theory
The theory that a stock with many short positions taken in it will rise, because these positions
must be covered by the stock
...
See: Committee on Uniform Securities Identification Procedures
...
Custodian
Either (1) a bank, agent, trust company, or other organization responsible for
safeguarding financial assets, or (2) the individual who oversees the mutual fund assets of a
minor's custodial account
...
Bank or other financial institution that keeps
custody of stock certificates and other assets of a mutual fund, individual, or corporate client
...
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"Customer picking prices"
Customer is firm on price and has set the price at which to transact
...
Customers' net debit balance
The total amount of credit given by NYSE member firms to finance customers purchasing
securities
...
Customs Broker
An individual or firm licensed by customs authorities to enter and clear imported goods
through customs
...
Customs union
An agreement by two or more countries to erect a common external tariff and to abolish
restrictions on trade among members
...
See: Escheat
...
Cycles
A full orbital period
...
Examples are housing, automobiles, and paper
...
D
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Fifth letter of a NASDAQ stock symbol specifying that it is a new issue, such as the result
of a reverse split
...
DE
The two-character ISO 3166 country code for GERMANY
...
DEQ
Abbreviation for the Incoterm "Delivered Ex Quay
...
"
DDM
See: Discounted Dividend Model
DISC
See: Domestic International Sales Corporation
DITM
See: Deep in the money
DJ
The two-character ISO 3166 country code for DJIBOUTI
...
DK
The two-character ISO 3166 country code for DENMARK
...
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DM
The two-character ISO 3166 country code for DOMINICA
...
DOP
The ISO 4217 currency code for Dominican Republic Peso
...
DRP
See: Dividend Reinvestment Plan
DTC
See: Depository Transfer Check
DTC
See: Depository Trust Company
DTCC
See: Depository Trust and Clearing Corporation
DZ
The two-character ISO 3166 country code for ALGERIA
...
Daily price limit
The level at which many commodity, futures, and options markets are allowed to rise or
fall in a day
...
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Daisy chain
Manipulation of the market by traders to create the illusion of active volume to attract
investors
...
Used in the context of stocks to refer to the date trading begins
on a new stock issued to the public
...
Date of record
Date on which holders of record in a firm's stock ledger are designated as the recipients
of either dividends or stock rights
...
Dates convention
Treating cash flows as being received on exact dates-date 0, date 1, and so forth-as
opposed to the end-of-year convention
...
Dawn raid
A term of British origin used to describe the purchase of all available shares of a target
company at the market's open by a raider
...
Day of deposit to day of withdrawal account
A bank account that pays interest according to the number of days that the money is
actually on deposit
...
Upon the delivery of the
securities, a day loan becomes a regular broker call loan for which securities serve as collateral
...
GFEDU
...
All orders are
day orders unless otherwise specified
...
Day trade
Also known as a "daylight trade
...
Day trading
Establishing and liquidating the same position or positions within one day's trading
...
Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory
...
De facto
Existing in actual fact although not by official recognition
...
Deal flow
In investment banking, the rate at which new deals are referred to a brokerage firm
...
Dealing desk (Trading desk)
Personnel at an international bank who trade spot and forward foreign exchange
...
Individual or firm acting as a principal in a
securities transaction
...
Antithesis of broker
...
Dealer loan
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Overnight, collateralized loan from a money market bank made to a dealer financing his
position by borrowing
...
Dealer options
Over-the-counter options, such as those offered by government and mortgage-backed securities
dealers
...
Dear money
British term for tight money
...
The policyholder will
repay the loans while alive or with the benefits from the insurance policy upon death
...
Death Valley Curve
In venture capital, refers to the period before a new company starts generating revenues,
when it is difficult for the company to raise money
...
g
...
A
debenture is documented in an indenture
...
Compare subordinated debenture bond
and collateral trust bonds
...
Debenture
stock differs from a debenture in that it has the status of equity, not debt, in liquidation
...
A debit transaction is one which the net
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cost is greater than the net sale proceeds
...
Debit balance
The amount that is owed to a broker by a margin customer for loans the customer uses to
buy securities
...
A debit card may be machine reable, allowing for the activation of an automated teller
machine or other automated payments equipment
...
Difference in the value of two options, when the value of
the option bought exceeds the value of the one sold
...
"
Antithesis of a credit spread
...
Debt bomb
A default on debt and obligations by a major financial institution that disrupts the stability
of the economic system
...
The amount a firm can borrow up to the point where the firm value no
longer increases
...
Firms that do a lot of leasing are curtailed
in their debt capacity
...
Compares assets provided by creditors to assets provided by
shareholders
...
Debt-for-equity swap
A swap agreement to exchange equity/returns for debt returns or the converse over a
prearranged length of time
...
GFEDU
...
Debt leverage
Amplification of the return earned on equity when an investment or firm is financed partially
with borrowed money
...
Debt limitation
A bond covenant that restricts the firm's ability to incur additional indebtedness in some
way
...
Debt outstanding
Obligations incurred by the Treasury subject to the statutory limit set by Congress
...
Beginning with the Second Liberty Loan Act of 1917, the nature of the limitation was
modified until, in 1941, it developed into an overall limit on the outstanding Federal debt
...
The debt subject to limitation includes most of the Treasury's public debt except
securities issued to the Federal Financing Bank, upon which there is a limitation of $15
billion, and certain categories of older debt (totaling approximately $595 million as of
February 1991)
...
Debt relief
Reducing the principal and/or interest payments on Less developed country loans
...
See: Sinking fund
...
Debt service
Interest payment plus repayments of principal to creditors (retirement of debt)
...
GFEDU
...
Debt-service coverage ratio
Earnings before interest and income taxes, divided by interest expense plus the quantity of
principal repayments divided by one minus the tax rate
...
Debt swap
A set of transactions in which a firm buys a country's dollar bank debt at a discount and
swaps this debt with the central bank for local currency that it can use to acquire local
equity
...
Debtholder
See: Bondholder
Debtor
Borrower of money
...
Debtor-in-possession financing
New debt obtained by a firm during the Chapter 11 bankruptcy process, Federal
Bankruptcy Rule 4001 (c)(1)
...
Decile rank
Performance over time, rated on a scale of 1-10
...
Decimal trading
The quotation and trading of stock or bond prices in decimals, as opposed to the quotation
of in fractions
...
Decision Break-Point
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A type of sensitivity analysis that indicates the value at which a key variable will result in
a negative NPV for an investment project
...
Declaration date
The date on which a firm's directors meet and announce the date and amount of the next
dividend
...
Dedicated capital
Total par value (number of shares issued, multiplied by the par value of each share)
...
Dedicating a portfolio
Related: Cash flow matching
Dedication strategy
Refers to multiperiod cash-flow matching
...
Deduction
An expense that is allowable as a reduction of gross taxable income by the IRS e
...
,
charity donations
...
Deed of trust
See: Indenture
Deep-discount bond
A bond issued with a very low coupon or no coupon that sell at a price far below par value
...
Deep in/out of the money
A call option with an exercise price substantially below the underlying stock's market price
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(deep in the money) or substantially above the market price (deep out of the money)
...
Often substantially below is defined as more than one strike price below (for
calls)/above (for puts) the current value of the underlying security
...
Default premium
A differential in promised yield that compensates the investor for the risk inherent in
purchasing a corporate bond that entails some risk of default
...
Also referred to as credit risk (as gauged by commercial rating companies)
...
Both the borrower's debt and the offsetting cash or bonds are removed from the balance
sheet
...
This is necessary to facilitate netting, and
reduce counterparty risk exposure
...
Defensive securities
Low-risk stocks or bonds that will provide a predictable and safe return on an investor's
money
...
Deferred annuities
Tax-advantaged life insurance products
...
Deferred call
A provision that prohibits the company from calling the bond before a certain date
...
Deferred charge
An expenditure treated as an asset that carries forward until it becomes pertinent to the
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business at hand, e
...
, advance rent payment
...
Deferred equity
A common term for convertible bonds, which recognizes their equity component and the
expectation that the bond will ultimately be converted into shares of common stock
...
Deferred interest bond
A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting
interest earned over the life of the bond
...
Deferred nominal life Annuity
A monthly fixed-dollar payment beginning at retirement age
...
Deferred payment annuity
An annuity that stipulates payments be made to the annuitant at a later date, such as
when the annuitant reaches a certain age
...
Amount allocated during the
period to cover tax liabilities that have not yet been paid
...
Deficit
An excess of liabilities over assets, of losses over profits, or of expenditure over income
...
Defined asset fund
A unit investment trust consisting of a fixed portfolio of securities, including blue chips, REITs,
or high-yielding stocks on a major exchange such as the NYSE or FTSE
...
GFEDU
...
The pension obligations are effectively the debt obligation of the plan sponsor
...
Related: Defined benefit plan
Deflation
Decline in the prices of goods and services
...
Deflator
A
statistical
factor
used
to
convert
current
dollar
purchasing
power
into
inflation-adjusted purchasing power
...
Delayed issuance pool
Refers to mortgage backed securities (MBS) that at the time of issuance were collateralized by
seasoned loans originated prior to the MBS pool issue date
...
Such an imbalance is likely to follow on the heels of a significant event
such as a takeover offer
...
Delayed settlement/delivery
In the context of general equities, transaction in which a contract is settled in excess of
five full business days
...
See: Dividend play, settlement
...
Delisting
Removal of a company's security from listing on an exchange because the firm has not
abided by specific regulations
...
Deliverable bills
The Treasury bills that fulfill a set of guidelines set forth by the exchange on which the bills
are traded
...
GFEDU
...
Delivered at Frontier (DAF)
Seller must supply the goods at his or her own risk and expense delivered to a named
place (usually a border location) by a specified time
...
This is normally is used with rail, truck, or multi-modal shipments
...
The seller is responsible for importation, payment of duty, and on
carriage to the location agreed upon with the buyer
...
The seller bears all the costs and risk except for import duties and
other customs clearance costs
...
The seller must bear all costs
and risks associated in bringing the goods to the named port of destination
...
Since unloading costs are included the ocean freight charged by most ship lines
...
Delivered Ex Quay (DEQ)
seller fulfills the contract obligations to deliver when the goods are made available to the
buyer at the wharf of the destination port
...
" If "Duty Paid" is specified, the seller is responsible for all risks and costs,
including duty, to the wharf of the destination port
...
Since unloading costs are included in the ocean
freight charged by most ship lines
...
Delivery
The tender and receipt of an actual commodity or financial instrument in settlement of a futures
contract
...
Delivery notice
The written notice given by the seller of its intention to make delivery against an open,
short futures position on a particular date
...
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Delivery options
The options available to the seller of an interest rate futures contract, including the quality
option, the timing option, and the wild card option
...
Delivery points
Locations designated by futures exchanges at which the financial instrument or commodity
covered by a futures contract may be delivered in fulfillment of such a contract
...
Delivery versus payment
A transaction in which the buyer's payment for securities is due at the time of delivery
(usually to a bank acting as agent for the buyer) upon receipt of the securities
...
Delta
The ratio of the change in price of a call option to the change in price of the underlying stock
...
Applies to derivative products
...
For a call option, a
delta of 0
...
As options near expiration, in-the-money call option contracts approach a delta of 1
...
See: hedge ratio, neutral hedge
...
Delta hedge
A dynamic hedging strategy using options that calls for constant adjustment of the number
of options used, as a function of the delta of the option
...
Delta Spread
A ratio spread that is established as a neutral position by utilizing the deltas of the options
involved
...
See also Ratio Spread and Delta
...
GFEDU
...
Demand line of credit
A bank line of credit that enables a customer to borrow on a daily or on-demand basis
...
Demand master notes
Short-term securities that are repayable immediately upon the holder's demand
...
Related:
Cost-push inflation
...
Denomination
Corresponds to the face value of currency units, coins, and securities
...
Deposit insurance
See: FDIC: Federal Deposit Insurance Corporation
Depositary
An agent appointed for a Tender or Exchange Offer who accepts certificates from
shareholders, processes them and assures that the appropriate cash or new securities are
properly remitted to the tendering party
...
This
includes commercial banks, savings and loan associations, savings banks and credit
unions
...
For
example, NOW accounts, credit union share drafts and other services similar to checking
accounts may be offered by thrift institutions
...
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Depository preferred
Device enabling an issuer to circumvent an arbitrary corporate limit on the number of
preferred shares issuable
...
Depository receipt
See: ADR American Depository Receipt
Depository transfer check (DTC)
Check made out directly by a local bank to a particular firm or person
...
It accepts deposits of over 2
million equity and debt securities issues (valued at $23 trillion) from over 65 countries
for custody, executes book-entry deliveries (valued at over $116 trillion in 2000) records
book-entry pledges of those securities, and processes related income distributions
...
Depository Trust and Clearing Corporation (DTCC)
The Depository Trust and Clearing Corporation (DTCC), through its subsidiaries,
provides post-trade clearance, settlement, custody and information services for equities,
corporate and municipal debt, money market instruments, American depositary receipts,
exchange-traded funds, unit investment trusts, mutual funds, insurance products and
other securities The National Securities Clearing Corporation (NSCC) subsidiary, which
acts as a central counterparty (CCP), provides trade guarantee, netting and risk
management services for equity and debt ransactions from all U
...
stock exchanges and
markets, valued at $105 trillion in 2000
...
S
...
DTC serves as a major
clearinghouse for institutional post-trade settlement, and in 2000, processed book-entry
deliveries valued at more than $116 trillion
...
Depreciate
To allocate the purchase cost of an asset over its life
...
g
...
In terms of finance: The process of amortization of fixed assets (equipment) to spread the
cost over the depreciable life of the assets
...
GFEDU
...
Amount allocated during the
period to amortize the cost of acquiring long-term assets over the useful life of the assets
...
Depressed market
Market in which supply overwhelms demand, leading to weak and lower prices
...
Depression
Period when excess aggregate supply overwhelms aggregate demand, resulting in
falling prices, unemployment problems, and economic contraction
...
Derivative
A financial contract whose value is based on, or "derived" from, a traditional security
(such as a stock or bond), an asset (such as a commodity), or a market index
...
Derivative markets
Markets for derivative instruments
...
Descending tops
A chart pattern which in which each successive peak in a security's price is lower than the
preceding peak over a period of time
...
Descriptor
A variable describing assets, used as an element of a risk index
...
GFEDU
...
Designated order turnaround system (DOT)
Computerized order entry system that allows orders to buy or sell large baskets of stock to
be transmitted immediately to the specialist on the exchange, where execution will occur
quickly, depending on the basket size
...
See: AOS
...
Detachable warrant
A warrant entitles the holder to buy a given number of shares of stock at a stipulated price
...
Determinism
Fully ordained in advance
...
Deterministic models
Liability-matching models that assume that the liability payments and the asset cash flows
are known with certainty
...
Detrend
To remove the general drift, tendency, or bent of a set of statistical data as related to
time
...
Deutsche Börse
Germany's major securities market, including the Frankfurt Stock Exchange
...
It has four subsidiaries: Deutsche Börse Clearing AG, Deutsche Börse Systems AG,
Frankfurter Wertpapierbörse (FWB), and the derivatives market, EUREX Deutschland
(formerly the Deutsche Terminbörse )
...
Often initiated by a government announcement
...
GFEDU
...
For example, two puts or two calls in the
same stock
...
Dialing and smiling
See: Cold calling
Dialing for dollars
A term used to describe the practice of cold calling, but which has negative implications as
it is frequently applied to salespeople selling speculative or fraudulent investments
...
Diff
Short version of Euro rate differential, which is a Chicago Mercantile Exchange Futures
contract that is founded on the interest rate spread between the U
...
dollar and the British
pound, the German mark, or the Japanese yen
...
Difference from S&P
A mutual fund's return minus the change in the Standard & Poor's 500 index for the same
time period
...
00 means the fund return is 5 percentage points less than
the gain in the S&P, while 0
...
Differential
A small charge, typically 1/8 point, added to the purchase price and subtracted from the
selling price by the dealer for odd-lot quantities
...
Differential swap
Swap between two LIBOR rates of interest, e
...
, yen LIBOR for dollar LIBOR Payments
are in one currency
...
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Digits deleted
Designation on securities exchange tape meaning that because the tape has been
delayed, some digits have been dropped (e
...
, 26 1/2 becomes 6 1/2)
...
Dilution protection
Standard provision that changes the conversion ratio in the case of a stock dividend or
extraordinary distribution to avoid dilution of a convertible bondholder's potential equity
position
...
Dilutive effect
Result of a transaction that decreases earnings per common share (EPS)
...
Analysts often advise investors to
buy on dips, meaning to buy when a price is momentarily weak
...
Direct Claim
A financial claim issued by a deficit unit to acquire funds for investment in real assets
...
Direct deposit
A method of payment which electronically credits your checking or savings account
...
Direct estimate method
A method of cash budgeting based on detailed estimates of cash receipts and cash
disbursements category by category
...
Direct investment
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The purchase of a controlling interest in a company or at least enough interest to have
enough influence to direct the course of the company
...
Direct overhead
A fraction of overhead costs devoted to the manufacturing sector of a firm to cover
expenses such as rent and utilities
...
Direct participation program
An investment program enabling investors to directly participate in the cash_flow and tax
benefits of the partnership invested in by the investor, typically a form of passive
investment
...
Direct Purchase Plan
A plan that enables interested first-time individual investors to purchase a company's
stock directly from the company or without the direct intervention of a broker
...
No need for shareholders to hold on to physical certificates
...
Direct Registration System
A system that allows shareholders to hold stock in book-entry form registered in their name
on the books of the company
...
Shareholders have the option to sell shares either
through the company (or its transfer agent) or through a broker
...
Direct rollover
Movement of tax-deferred retirement plan money from one qualified plan or custodian to
another
...
GFEDU
...
Direct search market
Buyers and sellers seek each other directly and transact directly
...
Direct terms
The price of a unit of foreign currency in domestic currency terms, such as $
...
See: Indirect terms
...
Director Exception
A proxy or ballot that withholds its votes from one or more, but not all, individuals on the
slate of nominated directors
...
These provisions allow directors to consider
constituencies other than shareholders when considering a merger
...
This provision
provides boards of directors with legal basis for rejecting a takeover that would have
been beneficial to shareholders
...
Directorship
Used in the context of general equities
...
Contrast to restricted
...
Dirty price
Bond price including accrued interest, i
...
, the price paid by the bond buyer
...
Disability income insurance
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An insurance policy that insures a worker in the event of an occupational mishap resulting
in disability
...
Disbursement float
A decrease in book cash but no immediate change in bank cash, generated by checks
written by the firm
...
Discharge of lien
An order terminating a lien on property
...
Disclosure
A company's release of all information pertaining to the company's business activity,
regardless of how that information may influence investors
...
Discount
Convertible: Difference between gross parity and a given convertible price
...
Antithesis of premium
...
Straight equity: Price lower than that of the last sale or inside market
...
The arbitrageur may either buy a call at a discount and
simultaneously sell the underlying security (basic call arbitrage) or maybuy a put at a
discount and simultaneously buy the underlying security (basic put arbitrage)
...
Discount bond
Debt sold for less than its principal value
...
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Discount broker
A brokerage house featuring relatively low commission rates in comparison to a full-service
broker
...
Discount Interest
Interest at a beginning of the loan
...
Discount payment
The difference between the face value and the price paid for a security
...
Discount rate
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is
temporarily short of funds
...
Discount securities
Non-interest-bearing money market instruments that are issued at a discount and redeemed
at maturity for full face value, e
...
, US Treasury bills
...
Discount yield
The yield or annual interest rate on a security sold to an investor at a discount
...
To calculate the discount
yield: (discount divided by the face value of the security) multiplied by the (number of days
in the year divided by the number of days to maturity)
...
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values
...
GFEDU
...
Discounted payback
The length of time needed to recoup the present value of an investment
...
Discounted in/by market
Unannounced information that is widely accepted or anticipated, and hence is already
taken into account in the pricing of the security/ market (e
...
, poor earnings)
...
Discounting is opposite to compounding
...
Discrepancy
Any deviation from the conditions stipulated in a letter of credit
...
Discrete compounding
Compounding the time value of money for separate time intervals
...
Discrete variable
Variable like 1, 2, 3
...
Discretion
Freedom given to the floor broker by an investor to use his judgment regarding the
execution of an order
...
Discretion can also be unlimited, as in the case of a market-not-held
order
...
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Discretionary account
Accounts over which an individual or organization, other than the person in whose name
the account is carried, exercises trading authority or control
...
Discretionary income
The amount of income a consumer has available after purchasing essentials such as food
and shelter
...
Discretionary Proposition
A proposal on a proxy card that brokers can cast in favor of management if they have not
yet heard from the beneficial holder ten days before the annual meeting
...
Discretionary trust
In the context of mutual funds, refers to a mutual fund or unit trust whose management
decides on the best way to use the assets without restriction to a specific type of security
...
Discriminate
A statistical process that links the probability of default to a specified set of financial ratios
...
Disinflation
A decrease in the rate of inflation
...
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Disinvestment
A reduction in capital investment reflected by a decrease in capital goods and a company's
decision not to replace depleted capital goods
...
Distress sale
The selling of assets under adverse conditions, e
...
, an investor may have to sell securities
to cover a margin call
...
In the context of
hedge funds, a style of management that focuses on securities of companies that have
declared bankruptcy and may be undergoing reorganization
...
Distributed
As new Treasury issues in dealers' hands are said to be distributed
...
Distribution
Selling a large lot of a security in such a way that the security price is not heavily
influenced
...
See: Accumulation area
...
Distribution by coupon
Classification of a portfolio's securities according to coupon rate—the interest rate that an issuer
promises to pay, expressed as an annual percentage of face value
...
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Distribution by issuer
Classification of a portfolio's holdings by type of issuer or type of instrument
...
In general, the higher the concentration of longer-maturity
issues, the more a portfolio's share price will fluctuate in response to changes in interest
rates
...
Distribution plan
A mutual fund's plan to charge distribution costs such as advertising to the investors of the
fund
...
Distribution stock
A small amount of a specific stock that forms part of a larger block of stock that is sold
small amount by small amount so as not to disrupt the stock's market price
...
May include dividends from earnings, capital
gains from sale of portfolio holdings and return of capital
...
Funds are required to distribute capital gains (if
any) to shareholders at least once per year
...
Divergence
When two or more averages or indexes fail to show confirming trends
...
Diversified investment company
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An investment vehicle such as a mutual fund that invests in an assortment of securities
...
Dividend
A portion of a company's profit paid to common and preferred shareholders
...
Dividend Discount Return
The rate of return which equates the present value of future expected dividends with the current
market price of a security
...
Dividend capture
See: Dividend rollover plan
Dividend clawback
An arrangement under which sponsors of a project agree to contribute as equity any prior
dividends received from the project to the extent necessary to cover any cash deficiencies
...
Such a
preference may be based on comparable tax situations
...
Usually a Transfer Agent is also the Dividend Disbursing Agent
...
Dividend distribution
See: Dividend income
Dividend growth model
An approach that assumes dividends grow at a constant rate in perpetuity
...
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Dividend income
Distribution of earnings to shareholders that may be in the form of cash, stock, or property
...
Also known as a dividend distribution
...
Dividend Order
A letter or form signed by the shareholder instructing a corporation to issue and forward
dividend and/or interest payments to a specific person or entity other than the registered
owner, such as a bank or broker
...
Dividend policy
Standards by which a firm determines the amount of money it will pay as dividends
...
Dividend record
S&P publication stating companies' payment histories and corporate policies
...
Some plans provide for the purchase of additional shares at a
discount to market price
...
The DRP is usually administered by
the company without charges to the holder
...
Dividend rights
A shareholder's rights to receive per-share dividends identical to those other shareholders
receive
...
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Dividend trade roll/play
Used for listed equity securities
...
Predicated on the 80% current exemption that some
corporations receive on dividend income
...
Assumes fund was purchased a year ago
...
Dividend yield (Stocks)
Indicated yield represents annual dividends divided by current stock price
...
Dividends per share
Dividend paid for the past 12 months divided by the number of common shares outstanding,
as reported by a company
...
Dividends-received deduction
A corporate tax deduction on income allowed by company A that is in ownership of shares
of company B and receives dividends on the shares of company B
...
Deutsche Terminborse (DTB)
Formerly the German financial futures and options market
...
Divisor
Used in construction of stock indices
...
Now suppose you want to replace one of the stocks
with another stock (reshuffling happens)
...
So the total value of the index is 110 after the swapping
...
So, what people do is to change the divisor
...
10
...
1 is now exactly
100 - which is where we began from
...
GFEDU
...
Dependent variable
Term used in regression analysis to represent the element or condition that is dependent on
values of one or more other variables
...
Direct Loan Program
Fixed-rate loans offered by the Ex-Im Bank directly to the foreign buyer to purchase US
capital equipment and services
...
Do Not Increase (DNI)
A restriction that an investor places on a good til' canceled order to prevent an order increase
in the case of a stock dividend or stock split
...
A "do not reduce order"
applies only to ordinary cash dividends, and not stock dividends or rights
...
Documentary Collection
A service provided by banks to sellers in obtaining payments
...
Documentary collections
Trade transactions handled on a draft basis
...
Such paper is also
referred to as L
...
C
...
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Documents against
Shipping documents held by the buyer's bank until the buyer has accepted (signed) the
draft
...
Dogs of the Dow
T 10 stocks of the 30 on the Dow Jones Industrial Average with the most depressed
prices and consequently the highest yields
...
Dollar bears
Traders who capitalize on a falling dollar by buying other foreign currencies directly
...
Not to be confused with
"US Dollar" bonds, a common term of reference in the Eurobond market
...
The money
required to finance the import purchases removes dollars from the importing nation
...
Dollar price of a bond
Percentage of face value at which a bond is quoted
...
Dollar roll
Similar to the reverse repurchase agreement-a simultaneous agreement to sell a security
held in a portfolio with purchase of a similar security at a future date at an agreed-upon
price
...
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Dollar shortage
Results when a nation importing US goods cannot pay for them without the aid of the
United States
...
Domestic bonds
Bonds issued and traded within the internal market of a country and denominated in the
currency of that country
...
Domestic International Sales Corporation (DISC)
A US corporation that receives a tax incentive for export activities
...
Compare external market and foreign market
...
Donor
One who gives property or assets to someone else through the vehicle of a trust
...
If stock prices are rising, do not sell
...
" A Street expression used whenever one party lacks knowledge of
a trade or receives conflicting instructions from the other party
...
Unlike
the conventional auction with one auctioneer and many buyers, double auction markets
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consist of many sellers and many buyers
...
Double-barreled
Describes backing of the principal and interest of a smaller municipal revenue bond the large
municipal entity
...
Double-declining-balance depreciation method (DDB)
An accounting methodology in which depreciation is accelerated to twice the rate of
annual depreciation by the straight-line method
...
Double dip
Used for listed equity securities
...
Double-dip lease
A cross-border lease in which the different rules of the lessor's and lessee's countries let both
parties be treated as the owner of the leased equipment for tax purposes
...
Double-tax agreement
Agreement between two countries that taxes paid abroad can be offset against domestic
taxes levied on foreign dividends
...
Double top
A term used in technical analysis to refer to the rise of a stock's price, a drop, and then a
rise back to the same level as the original rise
...
GFEDU
...
For example, an investor with
confidence in ABC buys 1000 shares at $100 and another 1000 shares when the price
declines to $90
...
Doubling option
A sinking fund provision that may allow repurchase of twice the required number of bonds
at the sinking fund call price
...
Dow Jones Industrial Average
The best known US index of stocks
...
The Dow, as it is called, is a barometer of how shares of the largest US
companies are performing
...
Dow Theory
Used in the context of general equities
...
Down round
Refers to a round of venture capital financing that is raised at a lower firm valuation than
the previous round
...
Down-and-out option
Barrier option that expires if asset price hits a predetermined price level
...
Downside Protection
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Generally used in connection with covered call writing, this is the cushion against loss, in
case of a price decline by the underlying security, that is afforded by the written call
option
...
Downside risk
The risk that a security will decline in value including the implications of risk
...
Downstream
The transfer of corporate activity from the larger parent to the smaller subsidiary
...
On U
...
stock exchanges, you cannot sell a stock short on
a downtick
...
Draining reserves
Federal Reserve System's course of action to tighten the money supply by (1) raising a
bank's minimum reserve requirements, (2) selling bonds in the open market, (3) raising the
rate at which banks borrow from the Fed
...
Draw a call
In the context of general equities, provoking a customer indication/inquiry/order by up or
doing large amount of the volume in a stock
...
Drawee
The party who is directed to pay as specified in a draft
...
GFEDU
...
Drayage
A trucking company freight charge for the pick up or delivery of an ocean container
...
See: Window dressing
Drip feed
The continual investment of capital in a small and growing company as the company needs
it, rather than investing a lump sum at the company's inception
...
In the usual model, the venture capitalist (VC) is involved in
management and monitoring of the startup
...
Drop
Refers to over-the-counter trading
...
Drop, The
In a dollar roll transaction, the difference between the sale price of a mortgage-backed
pass-through, and its repurchase price on a future date at a predetermined price
...
Drop-dead fee
A term of British origin referring to fee that must be paid if a deal falls through because
of financing issues
...
Dual banking
Describes United States custom in which a bank is chartered by the state or federal
government
...
GFEDU
...
Dual listing
Listing of a security on more than one exchange, thus increasing the competition for bid and
offer prices, the liquidity of the securities, and the length time the stock can be traded daily
(if listed on both the east and west coasts
...
Dual-purpose fund
A closed-end fund consisting of two classes of shares
...
Dual syndicate equity offering
An international equity placement that splits the offering is split into two branches domestic and foreign - and each grantee is handled by a separate lead manager
...
Due bill
An instrument evidencing the obligation of a seller to deliver securities sold to the buyer
...
Due date
Date on which a debt must be paid
...
Offers are often made contingent
upon resolution of the due diligence process
...
Due-on-sale clause
A mortgage contract clause stipulating that the borrower to pay off the full remaining
principal on a mortgage if the mortgaged property is sold before the mortgage is paid off
...
Offering large amounts of stock with little or no
concern for price or market effect
...
GFEDU
...
If the second proxy bears a more recent date
than the first proxy, and has a different voting pattern, the second proxy will override the
first
...
Basket of stocks that imitates the price movement of
another set of securities (e
...
, S&P 500 index)
...
Durable merchandise
Goods that have a relatively lengthy life (television sets, radios, etc
...
Duration
A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in
interest rates
...
Dutch auction
Auction in which the lowest price necessary to sell the entire offering becomes the price at
which all securities offered are sold
...
Often used in risk arbitrage
...
In a corporate repurchase, a range of prices is set by the company
within which shareholders are invited to tender their shares
...
e
...
The price paid is that at which the amount stated to be purchased
can be sold
...
Dutch Auction Preferred Stock
A form of adjustable-rate preferred stock in which the dividend is ascertained in a Dutch
Auction process by corporate bidders every seven weeks
...
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Dwarfs
Fannie mae issued mortgage-backed securities pool that have an original maturity of 15 years
...
This is as opposed to an analysis made at
expiration of the options used in the strategy
...
A dynamic follow-up action is one that will change as either the
security price changes or the option price changes or time passes
...
Dynamic hedging
A strategy that involves rebalancing hedge positions as market conditions change; a
strategy that seeks to insure the value of a portfolio using a synthetic put option
...
Also called System Noise
...
Dynamical Systems
A system of equations where the output of one equation is part of the input for another
...
Non-linear
simultaneous equations are nonlinear dynamical systems
...
EAFE index
See: European Australian and Far East index
EASD
See: European Association of Securities Dealers
EBIAT
See: Earnings Before Interest after Taxes
EBIT
See: Earnings Before Interest and Taxes
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EBITD
See: Earnings Before Interest, Taxes and Depreciation
EBITDA
See: Earnings Before Interest, Taxes, Depreciation, and Amortization
EBT
See: Earnings Before Taxes
EC
The two-character ISO 3166 country code for ECUADOR
...
Defined under Rule 11Ac1- 1(a)(8) under the U
...
Securities Exchange Act of 1933
...
EDGAR Electronic Data Gathering, Analysis and Retrieval System
The system through which companies electronically file reports and registration
statements with the SEC
...
The filings can then be accessed by the public through the SEC's Web site on
the Internet
...
EG
The two-character ISO 3166 country code for EGYPT
...
ECU
See: European Currency Unit
EDI
See: Electronic Data Interchange
EE
The two-character ISO 3166 country code for ESTONIA
...
GFEDU
...
EM
See: Effective margin
EMS
See: European Monetary System
EOE
See: European Options Exchange
EOQ
See: Economic Order Quantity
ER
The two-character ISO 3166 country code for ERITREA
...
ESOP
See: Employee Stock Ownership Plan
ESP
The ISO 4217 currency code for the Spanish Peseta
...
ETB
The ISO 4217 currency code for the Ethiopian Birr
...
EUREX
The European derivatives exchange formed in 1998 by a merger of the Deutsche
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Terminborse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX)
...
Each way
A broker's commission from his or her involvement on both the purchase and the sale side
of a security
...
Early withdrawal
See: Premature distribution
Early withdrawal penalty
Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws
money before the agreed-upon maturity date
...
Earned income
Compensation earned from employment, which includes wages, salary, tips, and
compensation
...
Earned surplus
See: Retained earnings
Earnest money
Money given to a seller by a buyer to demonstrate the buyer's good faith
...
Earning asset
An asset that generates income, e
...
, income from rental property
...
GFEDU
...
Earnings
Net income for the company during a period
...
In other words, operating and nonoperating profit before the
deduction of interest plus cash income taxes
...
Earnings before interest and, taxes (EBIT)
A financial measure defined as revenues less cost of goods sold and selling, general, and
administrative expenses
...
Earnings before interest, taxes, and depreciation (EBITD)
A financial measure defined as revenues less cost of goods sold and selling, general, and
administrative expenses
...
Depreciation expenses are not included in the costs
...
In other words, operating and nonoperating profit before the
deduction of interest and income taxes
...
Earnings before taxes (EBT)
A financial measure defined as revenues less cost of goods sold and selling, general, and
administrative expenses
...
Earnings momentum
An increase in the earnings per share growth rate from one reporting period to the next
...
If a company earning $2
million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share
...
The one-year (historical or trailing) EPS growth rate is
calculated as the percentage change in earnings per share
...
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Earnings-price ratio
See: Earnings yield
Earnings response
A measure of relation of stock returns to earnings surprises around the time of corporate
earnings announcements
...
Earnings surprises
Positive or negative differences from the consensus forecast of earnings by institutions such
as First Call or IBES Negative earnings surprises generally have a greater adverse effect
on stock prices than a reciprocal positive earnings surprise
...
The inverse of the price-earnings ratio
...
The end result is shown in percentage terms
...
Easy money
See: Tight money
Eating stock
When an underwriter can't find buyers for a stock and therefore has to buy them for his
own account
...
Econometrics
The quantitative science of predicting the economy
...
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Economic defeasance
See: In-substance defeasance
Economic dependence
When the costs and/or revenues of one project depend on those of another
...
Economic exposure
The extent to which the value of a firm will change because of an exchange rate change
...
Usually refers to real
GDP growth
...
Economic income
Cash flow plus change in present value
...
Economic Life
The time period over which an asset's NPV is maximized
...
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs
...
Economic risk
In project financing, the risk that the project's output will not be salable at a price that
will cover the project's operating and maintenance costs and its debt service requirements
...
GFEDU
...
g
...
Economic surplus
For any entity, the difference between the market value of all its assets and the market
value of its liabilities
...
Economic value added (EVA)
A method of performance evaluation that adjusts accounting performance for investors'
required return on investment
...
Given the risk of the division's business line would have
...
This description is trade marketed by Stern-Stewart
...
See also: Macroeconomics; microeconomics; Keynesian economics,
monetarism, and supply-side economics
...
Economies of scale
The decrease in the marginal cost of production as a firm's extent of operations expands
...
Economies of vertical
Produced by achieving lower operating costs by owning all components of production
and sometimes sales outlets rather than contracting for companies in the outside
marketplace
...
Edge Act corporation
Corporation chartered by the Federal Reserve to engage in international banking
...
GFEDU
...
Named after Senator Walter Edge of
New Jersey, who sponsored the original legislation to permit formation of such
organizations
...
Edge corporations
Specialized banking institutions, authorized and chartered by the Federal Reserve Board of
Governors in the U
...
, that are allowed to engage in transactions of a foreign or
international character
...
Foreign banks operating in the US are permitted to organize and own an edge
corporation
...
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of compounding
...
Effective call price
The strike price in a market redemption provision plus the accrued interest to the redemption
date
...
Effective date
In an interest rate swap, the date the swap begins accruing interest
...
Effective duration
The duration calculated using the approximate duration formula for a bond with an
embedded option, reflecting the expected change in the cash flow caused by the option
...
Effective Interest Rate
The annual rate at which an investment grows in value when interest is credited more
often than once a year
...
GFEDU
...
Effective net worth
Net worth plus subordinated debt
...
Effective sale
A sale based on the most recent round-lot price, which determines the price of the next
odd lot
...
Effective spread
The gross underwriting spread adjusted for the impact that a common stock offering's
announcement has on the firm's share price
...
It is calculated
by dividing the total tax paid by taxable income
...
Efficiency
The degree and speed with which a market accurately incorporates information into prices
...
Efficient diversification
The organizing principle of modern portfolio theory, which maintains that any risk-averse
investor will search for the highest expected return for any particular level of portfolio risk
...
Pioneered by Harry Markowitz
...
GFEDU
...
Efficient Market Hypothesis
States that all relevant information is fully and immediately reflected in a security's market
price, thereby assuming that an investor will obtain an equilibrium rate of return
...
Three forms of efficient market
hypothesis exist: weak form (stock prices reflect all information on past prices), semistrong
form (stock prices reflect all publicly available information), and strong form (stock prices
reflect all relevant information including insider information)
...
Efficient portfolio
A portfolio that provides the greatest expected return for a given level of risk (i
...
, standard
deviation), or, equivalently, the lowest risk for a given expected return
...
Efficient surface
In mean variance skewness analysis, the set of portfolios that result from investors'
preference for higher means, lower variance and higher (positive) skewness
...
Eighth[-ed]
Used in the context of general equities
...
Either/or facility
An agreement permitting a bank customer to borrow either domestic dollars from the
bank's head office or Eurodollars from one of its foreign branches
...
See: Alternative order
...
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Elasticity of demand and supply
The degree of buyers' responsiveness to price changes
...
A large value (greater
than 1) of elasticity indicates sensitivity of demand to price, e
...
, luxury goods
...
g
...
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
option's underlying stock
...
Electronic data interchange (EDI)
The direct exchange of information electronically, from one firm's computer to another
firm's computer in a structured format
...
Electronic funds transfer (EFT)
Transfer of funds electronically rather than by check or cash
...
Electronic Funds Transfer Systems
A variety of systems and technologies for transferring funds (money) electronically
rather than by check
...
Electronic Queriable Carrier
A transporter of goods which allows tracking of goods in transit electronically using a
waybill number such as United Parcel, Federal Express, etc
...
Eleven bond index
An index based on the average yield of 11 municipal bonds that mature in 20 years and
carry an average AA rating
...
Eligible bankers' acceptances
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In the BA market, an acceptance may be referred to as eligible because it is acceptable
by the Fed as collateral at the discount window and/or because the accepting bank can sell
it without incurring a reserve requirement
...
Robert Prechter is a
famous Elliott Wave theorist
...
Embedded option
An option that is part of the structure of a bond that gives either the bondholder or the issuer
the right to take some action against the other party, as opposed to a bare option, which
trades separately from any underlying security
...
Emergency Home Finance Act of 1970
The federal legislation creating the Federal Home Loan Mortgage Corporation, a partially
government-run program initiated to stimulate the development of a secondary mortgage
market and expand mortgages available to veterans and other groups
...
The service is no longer available
...
Emerging Markets Free index (EMF)
A Morgan Stanley Capital International index created to track stock markets in selected emerging
markets that are open to foreign investment like Argentina, Chile, Jordan, Malaysia, Mexico,
Philippines, and Thailand
...
Emerging markets funds tend to be more
volatile than domestic stock funds due to currency fluctuation and political instability
...
GFEDU
...
Employee contribution
An employee's own deposit to a company retirement plan
...
Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis
...
Employee Stock Purchase Plan (ESPP)
A plan usually linked to a Corporation's payroll deduction system allowing employees to
purchase shares at a discount from current market value
...
Employment rate
The percentage of the labor force that is employed
...
See also: Unemployment rate
...
Encumbered
A property owned by one party on which a second party reserves the right to make a
valid claim, e
...
, a bank's holding of a home mortgage encumbers property
...
Under the end-of-year convention, the present is time 0, the end of year 1 occurs one
year hence; and so on
...
Converse of exogenous
...
GFEDU
...
Related: Exogenous variable
...
Endowment
Gift of money or property to a specified institution for a specified purpose
...
The investment income may be used for the
operation of the institution and for capital expenditures
...
g
...
Enhanced indexing
Also called indexing-plus, an indexing strategy whose objective is to exceed or replicate the
total return performance of some predetermined index
...
Enterprise
A business firm
...
Often the value of assets that are non-core are excluded the final calculation
...
Entropy
The level of disorder in a system
...
The investors are trying to support
and profit from opportunities related to the environmental movement
...
GFEDU
...
See: Equal shares swap
...
Equal shares swap
Applies mainly to convertible securities
...
See equal dollar swap
...
Equilibrium
The stable state of the system
...
Equilibrium exchange
Exchange rate at which demand for a currency is equal to the supply of the currency in the
economy
...
Since the CML represents the expected return
offered to compensate for a perceived level of risk, each point on the line is a balanced
market condition, or equilibrium
...
The equation of the CML is defined
by the capital asset pricing model
...
Equilibrium rate of interest
The interest rate that clears the market
...
Equipment leasing partnership
A limited partnership that receives income and tax benefits such as depreciation costs by
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purchasing equipment and leasing it to other parties
...
When the last of the certificates has been repaid, title and ownership of the asset
transfers to the lessee
...
Equity
Ownership interest in a firm
...
In real estate, dollar difference
between what a property could be sold for and debts claimed against it
...
Equity is also shorthand for stock market investments
...
Equity claim
Also called a residual claim; a claim to a share of earnings after debt obligations have been
satisfied
...
Equity contribution agreement
An agreement to contribute equity to a project under certain specified conditions
...
Equity funding
An investment consisting of a life insurance policy and a mutual fund
...
Equity kicker
Stock warrants issued attached to privately placed bonds
...
GFEDU
...
Equity-linked policies
Related: Variable life
Equity market
Related: stock market
Equity multiplier
Total assets divided by total common stockholders' equity; the total assets per dollar of
stockholders' equity
...
Typically
one option equals 100 shares of stock
...
Antithesis of a Mortgage REIT
...
Related: Interest rate
swap
...
Equivalent annual annuity
The amount per year for some number of years that has a present value equal to a given
amount
...
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment
...
Equivalent bond yield
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Annual yield on a short-term, noninterest-bearing security calculated for comparison to
yields quoted on coupon securities
...
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax yield as
a tax-exempt issue
...
Escalator clause
Provision in a contract allowing cost increases to be passed on
...
Escheat
Reversion of monies or securities to the state in which the securityholder was last known
to reside, when no claim by the securityholder has been made after a certain period of
time fixed by state law
...
Escheat Period
The period of elapsed time required by applicable state law for property to be presumed
abandoned
...
Escheatment laws require mutual funds to turn over uncashed or returned check dollars
and/or client account fund shares if the owner cannot be located within a length of time
determined by each state
...
Escrow receipt
A document provided by a bank in options trading to guarantee that the underlying security
is on deposit and available for potential delivery
...
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Essential purpose (or function) bond
See: Public purpose bond
Estate planning
The preparation of a plan to carry out an individual's wishes as to the administration and
disposition of his/her property before or after his/her death
...
Estimated tax
Tax to be paid quarterly on income that is not subject to withholding tax, including
self-employed income, investment income, alimony, rent, and capital gains
...
Ethics
Standards of conduct or moral judgment
...
Euro
Originally for a deposit outside one's home country but in the home country currency
...
Euro CDs
CDs issued by a US bank branch or foreign bank located outside the US Almost all Euro
CDs are issued in London
...
Euro lines
Lines of credit granted by banks (foreign or foreign branches of US banks) for
Eurocurrencies
...
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Eurobank
A bank that regularly accepts foreign currency-denominated deposits and makes foreign
currency loans
...
Euroclear
The Euroclear group is the world's largest settlement system for domestic and
international securities transactions, covering both bonds and equities for financial
institutions located in over 80 countries
...
Eurocredit market
Comprises banks that accept deposits and provide loans in large denominations and in a
variety of currencies
...
Eurocredits
Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers
...
A Eurodollar
is a Certificate of Deposit in US dollars in some other country (though mainly traded in
London)
...
Eurocurrency deposit
A short-term fixed-rate time deposit denominated in a currency other than the local
currency (i
...
, US dollars deposited in a London bank)
...
Eurodollar
Refers to a certificate of deposit in US dollars in a bank that is not located in the US Most of
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the Eurodollar deposits are in London banks, but Eurodeposits may be anywhere other
than the US Similarly, a Euroyen or Euro DM deposit represents a CD in yen or DM
outside Japan and Germany, respectively
...
S
...
Eurodollar certificate of deposit
A certificate of deposit paying interest and principal in dollars, but issued by a bank outside the
United States, usually in Europe
...
That is, securities initially sold to investors
simultaneously in several national markets by an international syndicate
...
Euro-medium term note (Euro-MTN)
A nonunderwritten Euronote issued directly to the market
...
Most Euro-MTN maturities are
under five years
...
NM
Created on March 1, 1996, Euro
...
Euro
...
NM Belgium)
...
Euroyen bonds
Eurobonds denominated in Japanese yen
...
European Association of Securities Dealers Automated Quotation
(EASDAQ)
European equivalent of Nasdaq
...
The 11 countries are: Austria, Belgium, Finland, France,
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Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain
...
See also: Euro
...
European Exercise
A feature of an option that stipulates that the option may only be exercised at its
expiration
...
European Monetary System (EMS)
A system adopted by European Community members with the aim of promoting stability
by limiting exchange-rate fluctuations
...
The EMS comprised three principal
elements: the European Currency Unit (ECU), the monetary unit used in EC transactions;
the Exchange Rate Mechanism, ERM, whereby those member states taking part agreed to
maintain currency fluctuations within certain agreed limits; and the European Monetary
Cooperation Fund, which issues the ECU and oversees the ERM
...
European option
Option that may be exercised only at the expiration date
...
European Options Exchange (EOE)
Now AEX-Optiebeurs
...
European-style exercise
A method of exercising options contracts in which the buyer can exercise the contract on the
last day before expiration
...
European terms
A foreign exchange quotation that states the foreign currency price of one US dollar
...
GFEDU
...
It was known as the European Community until
January 1, 1994 and currently comprises 15 European countries
...
Evaluation period
The time interval over which funds assess a money manager's performance
...
Event anomalies
Occurrences such as earnings surprises or stock splits that seem to present opportunity
to generate abnormal returns for those trading on the news
...
Event risk
The risk that the ability of an issuer to make interest and principal payments will change
because of rare, discontinuous, and very large, unanticipated changes in the market
environment such as (1) a natural or industrial accident or some regulatory change or (2)
a takeover, or corporate restructuring
...
Events of default
Contractually specified events that allow lenders to demand immediate repayment of a
debt
...
Evergreen funding
A British term referring to the gradual injection of capital into a new or existing enterprise
...
GFEDU
...
The buyer bears the cost and risk in transporting the goods from the
seller's premises to destination
...
S
...
Ex-all
The sale of a security without the privileges associated with the security such as dividends,
voting rights, or warrants
...
Ex ante value
The forecasted rate of return
...
Exceptional Return
Residual return plus benchmark timing return
...
Excess accumulation
The amount of a required minimum distribution that an IRA holder fails to remove from an
IRA in a timely manner
...
Excess contribution
The amount by which an IRA contribution exceeds the allowable limits
...
Excess reserves
Amount of reserves held by an institution in excess of its reserve requirement and
required clearing balance
...
Exchange Ratio
The number of new shares in an acquiring firm that are timed for each outstanding share of
an acquired firm
...
" The buyer of shares when they are quoted
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ex-dividend is not entitled to receive a declared dividend
...
Antithesis of cum dividend (with dividend)
...
The date set by the NYSE (and generally
followed on other US exchanges) is currently two business days before the record date
...
Executor
An individual or trust institution nominated in a will and appointed by a court to settle the
estate of a deceased person
...
As the majority of bonds are
issued with legal opinions
...
S
...
Ex-pit transaction
The purchase of commodities off the exchange's floor
...
Ex-rights date
The date on which a share of common stock begins trading ex-rights
...
The buyer of shares during this time period does is not entitled to the dividend
...
Exact interest
Interest paid based on the basis of a 365-day/year schedule by a bank or other financial
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institution as opposed to a 360-day basis (ordinary interest)
...
Exact matching
A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exactly equal to cash outflows that are being financed by
investment
...
Excepted rate of inflation
The public's exceptations for inflation
...
Excess kurtosis
Kurtosis measures the "fatness" of the tails of a distribution
...
Fat tails means there is a higher
than normal probability of big positive and negative returns realizations
...
Excess profits tax
Additional federal taxes placed on the earnings of a business, used only in time of national
emergency such as war
...
Excess return on the market portfolio
Difference between the return on the market portfolio and the riskless rate
...
Sometimes confused with abnormal
returns, returns in excess of those required by some asset pricing model
...
Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock
Exchange (AMEX), and National Association of Securities Dealers Automatic Quotation System
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(Nasdaq)
...
Also known as the Big Board, where more
than 2000 common and preferred stocks are traded
...
It is located on Wall Street in New York
City
...
Exchange controls
Government restrictions on the purchase of foreign currencies by domestic citizens or on
the purchase of the local domestic currency by foreigners
...
A broker bunches
a large number of buy orders and sells the block all at once
...
Exchange fund
Investment vehicle introduced in 1999 that appeals to wealthy investors with large
holdings in a single stock who want to diversify without paying capital gains taxes
...
Exchange members
See: Member firm; seat
Exchange offer
An offer by a firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock
...
Exchange rate
The price of one country's currency expressed in another country's currency
...
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Exchange rate risk
Also called currency risk; the risk that an investment's value will change because of
currency exchange rates
...
Exchange of stock
Acquisition of another company by purchase of its stock in exchange for cash or shares
...
A basket of stocks similar to an index mutual fund
...
The ETF can be
traded within the day, they can be shorted, purchased on margin and there even exists
options on some ETFs
...
Means the issuer, if so stated, may substitute a
convertible debenture for an existing convertible preferred with identical terms
...
This would make the debenture
less attractive if the interest tax-deductibility is lost
...
Bond or preferred stock that may be
exchangeable into the common stock of a different public corporation
...
Excise tax
Federal or state tax placed on the sale or manufacture of a commodity, typically a luxury
item e
...
, alcohol
...
Exclusive
In the context of general equities, having sole possession of the customer order/indication;
not in competition with other dealers
...
GFEDU
...
Once a trade is executed, it is
reported by a Confirmation Report; settlement (payment and transfer of ownership)
occurs in the US between one (mutual funds) and five (stocks) days after an order is
executed
...
S
...
In France, for example
settlements are only once per month
...
Exempt securities
Instruments exempt from the registration requirements of the Securities Act of 1933 or the
margin requirements of the SEC Act of 1934
...
Exemption
Direct reductions from gross income allowed by the IRS
...
Exercise limit
Cap on the number of option contracts of any one class of contract that can be exercised
within a five-day period contract
...
Exercise notice
A broker's notification a client want to exercise a right to buy or sell (depending on the type
of contract) the underlying security of the option contract
...
Exercise settlement amount
The difference between the exercise price fo the option and the exercise settlement
value of the index on the day an exercise notice is tendered, multiplied by the index
multiplier
...
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Exercising the option
The act of buying or selling the underlying asset via the option contract
...
Exim bank
See: Export-Import Bank
Exit fee
See: Back-end load
Exogenous
Describes facts outside the control of the firm
...
Exogenous variable
A variable whose value is determined outside the model in which it is used
...
For example,
a Caput is a call option on a put option
...
Expectations hypothesis theories
Theories of the term structure of interest rates, which include the pure expectations theory;
the liquidity theory of the term structure, and the preferred habitat theory
...
These three theories differ, however, on whether other factors also affect forward rates,
and how
...
Expected dividend yield
Total amount of dividends received during the life of a futures contract or total dividends
received for holding a particular stock one year
...
Expected future cash flows
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Projected future cash flows associated with an asset
...
Also called the expected
return
...
Expected return equals some risk-free rate (generally the prevailing U
...
Treasury note or bond rate) plus a risk premium (the difference between the historic market
return, based upon a well diversified index such as the S&P 500 and the historic US
Treasury bond) multiplied by the assets beta
...
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be proportional to beta
...
See: Capital asset pricing model
...
It differs from the current spot rate primarily by the extent to
which inflation expectations in the two currencies differ
...
Also known as the mean value
...
Expense ratio
The percentage of the assets that are spent to run a mutual fund (as of the last annual
statement)
...
The expense ratio does not include
brokerage costs for trading the portfolio, although these are reported as a percentage of
assets to the SEC by the funds in a Statement of Additional Information (SAI)
...
Neither the expense ratio nor the SAI includes the
transactions costs of spreads, normally incurred in unlisted securities and foreign stocks
...
The expense ratio is
often termed an Operating Expense Ratio (OER)
...
GFEDU
...
Experience rating
A technique insurance companies use to determine the correct price of a policy premium
...
Expiration cycle
Dates on which options on a particular security expire
...
At any time,
an option has contracts with four expiration dates outstanding: two in near-term months and
two in far-term months
...
Expiration date
The last day (in the case of American-style) or the only day (in the case of European-style)
on which an option may be exercised
...
If Friday is a
holiday, the last trading day will be the preceding Thursday
...
Technically, the expiration time is currently 5:00PM on the expiration date, but public
holders of option contracts must indicate their desire to exercise no later than 5:30PM on
the business day preceding the expiration date
...
See also
Expiration Date
...
Explicit tax
A tax specifically collected by a government; includes income, withholding, property,
sales, and value-added taxes and tariffs
...
Often a proposed term sheet, might explode or be null and void
in a fixed period set to negotiate the final contract
...
S
...
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Export-import
The US federal government agency that extends trade credits to US companies to
facilitate the financing of US exports
...
Export management
A foreign or domestic company that acts as a sales agent and distributor for domestic
exporters in international markets
...
Normally, EMC's work on a
commission basis and do not take title to the goods they export
...
Export Trading Company (ETC)
A company serving as the export department of other firms
...
Exports
Goods or services sold to parties in foreign countries
...
Expost average rate of return
The historical mean percentage an asset has yielded
...
Any government has the right
to seize such property, according to international law, if prompt and adequate
compensation is given
...
Remove any trace of an Auto indication's existence
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at any time
...
Extendable bond
Bond whose maturity can be extended at the option of the lender or issuer
...
Extension
Voluntary arrangements to restructure a firm's debt, under which the payment date is
postponed
...
Extension swap
Extending maturity through a swap, e
...
selling a 2-year note and buying one with a
slightly longer current maturity
...
External funds
Funds originating from a source outside the corporation to increase cash flow and to aid in
expansion efforts, e
...
, bank loan or bond offering
...
A mechanism for trading securities that at issuance (1) are offered
simultaneously to investors in a number of countries and (2) are issued outside the
jurisdiction of any single country
...
Extinguish
Retire or pay off debt
...
Extraordinary call
Early redemption of a revenue bond because the revenue source paying the interest on the
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bond has been eliminated or has disappeared
...
g
...
Results are often presented with and without
these items
...
Extra or special dividends
A dividend that is paid in addition to a firm's established or expected quarterly dividend
...
Extrapolative statistical models
Models that apply a formula to historical data and project results for a future period
...
F
Fifth letter of a Nasdaq stock symbol specifying that the issue is a foreign company
...
FASB
See: Financial Accounting Standards Board
FCA
Abbreviation for the Free Carrier
FCIA
See: Foreign Credit Insurance Association
FCM
See: Futures commission merchant
FDI
See: Foreign direct investment
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FDIC
See: Federal Deposit Insurance Corporation
FFO
See: Funds from operations
FIRREA
See: Financial Institutions Reform, Recovery and Enforcement Act of 1989
FI
The two-character ISO 3166 country code for FINLAND
...
FJ
The two-character ISO 3166 country code for FIJI
...
FK
The two-character ISO 3166 country code for FALKLAND ISLANDS (MALVINAS)
...
FO
The two-character ISO 3166 country code for FAROE ISLANDS
...
FPA
Abbreviation for the insurance term Free of Particular Average
FR
The two-character ISO 3166 country code for FRANCE
...
GFEDU
...
FRN
See: Floating-rate note
FSC
See: Foreign Sales Corporation
Face-amount certificate
A debt security issued by face amount
...
Face value
See: Par value
Facilitation
The process of providing a market for a security
...
Listed options
may be used to offset part of the risk assumed by the trader who is facilitation the large
block order
...
Factor
A financial institution that buys a firm's accounts receivable and collects the accounts
...
Factor model
A way of decomposing the forces that influence a security's rate of return into common and
firm-specific influences
...
0 on one factor and a beta of zero
on any other factors
...
We decompose asset returns into a
common factor component, based on the asset's exposures to common factors times the
factor returns, and a specific return
...
GFEDU
...
Fade
Refers to over-the-counter trading
...
Fail
A deal is said to fail if on the settlement date either the seller does not deliver securities in
proper form or the buyer does not to deliver funds in proper form
...
Fair game
An investment prospect that has a zero risk premium
...
Also referred to as market price
...
Also called the theoretical futures price, which
equals the spot price continuously compounded at the cost of carry rate for some time interval
...
They typically require a bidder to pay to all
shareholders the highest price paid to any during a specified period of time before the
commencement of a tender offer and do not apply if the deal is approved by the board
of directors or a supermajority of the target's shareholders
...
A majority of states have fair price laws
...
Utilities then use these profits to pay investors and provide service
upgrades to their customers
...
Also called the
theoretical futures price, which equals the spot price continuously compounded at the cost of carry
rate for some time interval
...
GFEDU
...
Fairness opinion
An investment banker's professional opinion as to the price an acquiring firm is offering in a
takeover or merger
...
Fall out of bed
A sudden drop in a stock's price resulting from failed or poor business deals gone bad or
falling through
...
Fallout risk
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
originated are set at the same time the sale terms are established
...
Fama, Eugene F
...
Developer of the Efficient Markets
Hypothesis
...
Far month
Used in the context of option or futures to refer to the trading month of the contract that is
farthest away
...
Farther out; farther in
Used in the context of options to refer to the relative length of option contract maturities
...
8
U
...
accounting standard that requires US firms to translate their foreign affiliates'
accounts by the temporal method; that is reporting gains and losses from currency
fluctuations in current income
...
52 in 1981
...
GFEDU
...
52
The US accounting standard that replaced FASB No
...
US companies are required to
translate foreign accounts in terms of the current rate and report the changes from
currency fluctuations in a cumulative translation adjustment account in the equity section
of the balance sheet
...
Favorable Balance of Trade
The value of a nation's exports in excess of the value of its imports
...
Feasible portfolio
A portfolio that an investor can construct, given the assets available
...
Feasible target payout ratios
Payout ratios that are consistent with the level of excess funds available to make cash
dividend payments
...
Federal Advisory Council (FAC)
Advisory group made up of one representative (in most cases a banker) from each of the
12 Federal Reserve districts
...
Federal agency bond
Fixed-income security issued by a government agency such as FNMA
...
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Federal Agricultural Mortgage Corporation (Farmer Mac)
A federal agency chartered in 1988 to provide a secondary market for farm mortgage loans
...
g
...
Federal deficit (surplus)
When federal government expenditures are exceeded by federal government revenue
...
See: Federal Farm Credit System
...
See: Federal Farm Credit Bank
...
Federal Financing Bank
A federal institution that lends to a wide array of federal credit agencies funds it obtains by
borrowing from the US Treasury
...
Also, excess reserves lent by banks to each other
...
Federal funds rate
The interest rate that banks with excess reserves at a Federal Reserve district bank charge
other banks that need overnight loans
...
The most sensitive indicator of the direction of interest rates,
since it is set daily by the market, unlike the prime rate and the discount rate
...
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Federal Home Loan Banks
The institutions that regulate and lend to savings and loan associations
...
Federal Home Loan Mortgage Corporation (FHLMC)
See: Freddie Mac
Federal Housing Administration (FHA)
Federally sponsored agency chartered in 1934 whose stock is currently owned by savings
institutions across the United States
...
Federal Housing Finance Board (FHFB)
US government agency chartered in 1989 to assume the responsibilities formerly held
by the Federal Home Loan Bank system
...
Federal intrafund transactions
Intrabudgetary transactions in which payments and receipts both occur within the same
Federal fund group
...
Federal margin call
A broker's demand upon a customer for cash, or securities needed to satisfy the required
Regulation T down payment for a purchase or short sale of securities
...
S
...
This
agency also grants freight forwarder licenses
...
Known by the nickname Fannie
Mae, it packages mortgages backed by the Federal Housing Administration, but also sells
some nongovernment-backed mortgages
...
GFEDU
...
Federal Reserve Act of 1913
Federal legislation that established the Federal Reserve System
...
Federal Reserve District (Reserve district or district)
One of the twelve geographic regions served by a Federal Reserve Bank
...
Federal Reserve float
Float is checkbook money that appears on the books of both the check writer (the payor)
and the check receiver (the payee) while a check is being processed
...
To promote
efficiency in the payments system and provide certainly about the date that deposited
funds will become available to the receiving depository institutions (and the payee), the
Federal Reserve credits the reserve accounts of banks that deposit check according to a
fixed schedule
...
Therefore, the accounts of some banks may be credited before the Federal Reserve is
able to collect payment from other banks, resulting in Federal Reserve float
...
They represent money owed by the government to the public
...
The
Federal Reserve note is the only class of currency currently issued
...
C
...
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Federal Savings and Loan Association
An institution chartered by the federal government whose primary function is to collect
savings deposits and to provide mortgage loans
...
Fedwire
A wire transfer system for high-value payments operated by the Federal Reserve System
...
Fee-and-commission compensation
See: Fee-based compensation
Fee-based compensation
Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets
under management, for a financial plan
...
Fee-only compensation
Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets
under management, for a financial plan
...
This is much like
a public address system where the microphone is placed next to the speakers generating
feedback as the signal is looped through the PA system
...
Fiat money
Nonconvertible paper money
...
GFEDU
...
Fictitious credit exists after the proceeds from a short
sale are accounted for with respect to the margin requirement
...
Fidelity bond
See: Blanket fidelity bond
Fiduciary
One who must act for the benefit of another party
...
FIFO
See: First in, first out
Figure
Refers to details about price including the bid and ofter
...
Fill
The price at which an order is executed
...
A market or
limited price order that is to be executed in its entirety as soon as it is represented in the
trading crowd, and, if not so executed, is to be treated as canceled
...
Equivalent to AON and IOC simultaneously
...
Finance
A discipline concerned with determining value and making decisions
...
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Finance charge
The total cost of credit a customer must pay on a consumer loan, including interest
...
Financial Accounting Standards Board (FASB)
Board composed of independent members who create and interpret Generally Accepted
Accounting Principles (GAAP)
...
Financial analysis
Analysis of a company's financial statement, often by financial analysts
...
Professionals who analyze financial
statements, interview corporate executives, and attend trade shows, in order to write
reports recommending either purchasing, selling, or holding various stocks
...
Financial control
The management of a firm's costs and expenses in relation to budgeted amounts
...
Financial distress costs
Legal and administrative costs of liquidation or reorganization
...
Financial engineering
Combining or carving up existing instruments to create new financial products
...
Financial guarantee insurance
Insurance created to cover losses from specified financial transactions
...
GFEDU
...
Financial institution
An enterprise such as a bank whose primary business and function is to collect money
from the public and invest it in financial assets such as stocks and bonds
...
Financial Institutions Reform, Recovery and Enforcement Act of
1989 (FIRREA)
Legislation that established the Office of Thrift Supervision, which was created in the
wake of the savings and loan crisis of the late 1980s
...
Financial lease
Long-term, noncancellable rental agreement
...
Financial leverage is measured by the
ratio of debt to debt plus equity
...
Financial leverage ratios
Common ratios are debt divided by equity a debt divided by the sum of debt plus equity
...
Financial market
An organized institutional structure or mechanism for creating and exchanging financial
assets
...
Financial objectives
Goals related to returns that a firm will strive to accomplish during the period covered by
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its financial plan
...
Financial planner
An investment professional who assists individuals with long- and short-term financial
goals
...
Planning includes
attempting to make optimal decisions, projecting the consequences of these decisions
for the firm in the form of a financial plan, and then comparing future performance
against that plan
...
Financial position
The account status of a firm's or individual's assets, liabilities, and equity positions as reflected
on its financial statement
...
Financial price risk
The chance there will be unexpected changes in a financial price, including currency
(foreign exchange) risk, interest rate risk, and commodity price risk
...
Financial pyramid
A risk structure that spreads investor's risks across low-, medium-, and high-risk vehicles
...
At the top of the pyramid are a few high-risk ventures that have
a modest chance of success
...
Ratios help analysts
interpret financial statements by focusing on specific relationships
...
GFEDU
...
Also referred to as the additional risk that a firm's stockholder bears when the firm uses
debt and equity
...
Financial statement
A report of basic accounting data that helps investors understand a firm's financial history
and activities
...
Financial strategy
Practices a firm adopts to pursue its financial objectives
...
Financial structure differs from capital structure in that
capital structure accounts for long-term debt and equity only
...
Financial tables
Tables found in newspapers listing prices, dividends, yields, price-earnings ratios, trading
volume, and other important data on stocks, bonds, mutual funds, and futures contracts
...
K
...
See: Footsie (FTSE) (pronounced footsie)
...
Financing decisions
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Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet,
such as a decision to issue bonds
...
Financing Cost Savings
A source of competitive advantage that depends on access to low cost sources of capital
...
FINEX
The financial futures and options division of the New York Cotton Exchange (NYCE), with
a trading floor in Dublin, FINEX Europe, creating a 24-hour market in most FINEX
contracts
...
See: Fill
...
Firewall
The legal barrier between banking and broker/dealer operations within a financial institution
created to prevent the exchange of inside information
...
Also, a synonym for company
...
Firm commitment underwriting
An underwriting in which an investment banking firm commits to buy and sell an entire
issue of stock and assumes all financial responsibility for any unsold shares
...
See: Actual market
...
GFEDU
...
Firm quote
A definite price on a round-lot bid or offer declared by a market maker on a given security and
not identified as a nominal quotation (therefore is not negotiable)
...
Market news by contrast affects many firms
...
First board
The Chicago Board of Trade's established dates for delivery on futures contracts
...
), the start of the cash flow cycle for the cash
flow window
...
First In, First Out (FIFO)
An accounting method for valuing the cost of goods sold that uses the cost of the oldest
item in inventory first
...
First mortgage
A type of mortgage that through a lien gives precedence to the lender of the first mortgage
over all other lenders in case of default
...
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First-pass regression
A time series regression to estimate the betas of securities portfolios
...
Fiscal agency agreement
An alternative to a bond trust deed
...
Fiscal agency services
Services performed by the Federal Reserve Banks for the U
...
government
...
S
...
Fiscal policy
Government spending and taxing for the specific purpose of stabilizing the economy
...
The fiscal year serves as a period of reference for the company and
does not necessarily correspond to the calendar year
...
Fisher effect
A theory that nominal interest rates in two or more countries should be equal to the
required real rate of return to investors plus compensation for the expected amount of
inflation in each country
...
Also referred to as portfolio separation theorem
...
Fitch sheet
Used in the context of general equities
...
GFEDU
...
Five Cs of credit
Five characteristics that are used to form a judgment about a customer's
creditworthiness: character, capacity, capital, collateral, and conditions
...
Five percent rule
A rule of the National Association of Securities Dealers providing ethical guidelines for spreads
created by market makers and commissions charged by brokers
...
See:
Gold fixing
...
Tangible fixed assets include real estate, plant, and equipment
...
Fixed asset turnover ratio
The ratio of sales to fixed assets
...
Fixed benefits
Payments to a beneficiary that are paid in fixed preset amounts and are not variable
...
Fixed cost
A cost that is fixed in total for a given period of time and for given production levels
...
GFEDU
...
Fixed-dollar obligations
Conventional bonds for which the coupon rate is set at a fixed percentage of the par value
...
g
...
Fixed exchange rate
A country's decision to tie the value of its currency to another country's currency, gold (or
another commodity), or a basket of currencies
...
Fixed income equivalent
Also called a busted convertible
...
Fixed income instruments
Assets that pay a fixed dollar amount, such as bonds and preferred stock
...
Fixed-income securities
Investments that have specific interest rates, such as bonds
...
Fixed price basis
An offering of securities at a fixed price
...
Fixed rate
A traditional approach to determining the finance charge payable on an extension of
credit
...
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Fixed-rate loan
A loan whose rate is fixed for the life of the loan
...
Fixed-term reverse mortgage
A mortgage in which the lending institution provides payments to a homeowner for a fixed
number of years
...
Flag
A pattern reflecting price fluctuations within a narrow range, generating a rectangular area
on a graph both prior to and after sharp rises or declines
...
Flat
Convertibles: Earning interest on the date of payment only
...
Clean
...
Equities: To execute without commission or markup
...
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest
...
Flat price risk
Taking a position either long or short that does not involve spreading
...
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Flat tax
A tax which is levied at the same rate on all levels of income
...
Flat trades
A bond in default trades flat; that is, the price quoted covers both principal and unpaid
accrued interest
...
Flattening of the yield curve
A change in the yield curve when the spread between the yield on long-term and short-term
Treasuries has decreased
...
FLEX Options
Exchange traded equity or index options, where the investor can specify within certain
limits, the terms of the options, such as exercise price Expiration date, exercise type, and
settlement calculation
...
Flexible expenses
Expenses for an individual or corporation that can be adjusted or completely dispessed
with, e
...
, luxury goods
...
Flight to quality
The tendency of investors to move toward safer investments (often government bonds)
during periods of high economic uncertainty
...
Flip side
In the context of general equities, opposite side to a proposition or position (buy, if sell
is the proposition and vice versa)
...
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Float
Currency: Exchange rate policy that does not limit the range of the market rate
...
A stock's volatility
is inversely correlated to its float
...
g
...
25%
...
Floating exchange rate
A country's decision to allow its currency value to change freely
...
The currency value is determined by trading in
the foreign exchange market
...
Also called foreign-exchange market intervention
...
Floating-rate contract
An guaranteed investment instrument whose interest payment is tied to some variable
(floating) interest rate benchmark, such as a specific-maturity Treasury yield
...
Floating-rate payer
In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in
exchange for a fixed-rate payment
...
Floating securities
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Securities bought in a broker's name and resold quickly to attain a profit in a short amount
of time
...
Floor
The area of a stock exchange where active trading occurs
...
Floor broker
Member of an exchange who is an employee of a member firm and executes orders, as agent,
on the floor of the exchange for clients
...
Floor picture
Details of the trading crowd for a stock, such as the major players, their sizes, and the outside
market +/- an eighth
...
A finance company buys the inventory, which is
then held in trust for the user
...
Floor trader
A stock exchange member who generally trades only for his own account or for an account
controlled by him, or who has such a trade made for him
...
"
Flotation (rotation)
The costs associated with creating capital through the issue of new stocks or bonds,
including the compensation earned by the investment banker plus legal, accounting and
printing expenses
...
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In the context of mutual funds, refers to the movement of money into or out of a mutual
funds or between or among various fund sectors
...
Flow-through method
The practice of reporting to shareholders using straight-line depreciation but using accelerated
depreciation for tax purposes and "flowing through" the lower income taxes actually paid to
financial statements prepared for shareholders
...
Fluctuation
A price or interest rate change
...
Flurry
A drastic volume increase in a specific security
...
Investment banks published list of buy and sell
recommendations from its research department; signified by a flashing "F" on Quotron
...
For/At
Used in the context of general equities
...
See: On
...
Implies that the quantity mentioned is not his
total but instead is only approximate, and to open him up more will obligate one to
participate
...
GFEDU
...
Forbes 500
Forbes magazine's list of the largest publicly owned corporations in the United States
according to sales, assets, profits, and market value
...
Forced conversion
Occurs when a convertible security is called in by the issuer, usually when the underlying stock
is selling well above the conversion price
...
Upon conversion into common, the carrying value of
the bonds becomes part of a corporation's equity, thus strengthening the balance sheet and
enhancing future debt capability
...
Foreclosure
Process by which the holder of a mortgage seizes the property of a homeowner who has
not made interest and/or principal payments on time as stipulated in the mortgage contract
...
Foreign base company income
A category of Subpart F income that includes foreign holding company income and foreign
base company sales and service income
...
Foreign bond market
In the domestic bond market Issues floated by foreign companies or government
...
According to the U
...
tax code,
foreign branch income is taxed as it is earned in the foreign country
...
GFEDU
...
See: Alien corporation
...
Foreign Credit Insurance Association (FCIA)
A private consortium of US insurance companies that offers trade credit insurance to US
exporters in conjunction with the US Export-Import Bank
...
Foreign currency
Money of another country from one's own
...
Foreign currency futures contract
Standardized and easily transferable obligation between two parties to exchange
currencies at a specified rate during a specified delivery month; standardized contract on
specified underlying currencies, in multiples of standard amounts
...
Foreign currency option
An option that conveys the right (but not the obligation) to buy or sell a specified amount
of foreign currency at a specified price within a specified time period
...
Foreign direct investment (FDI)
The acquisition abroad of physical assets such as plant and equipment, with operating
control residing in the parent corporation
...
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Foreign exchange
Currency of another country
...
Foreign exchange broker
Intermediaries in the foreign exchange market that do not put their own money at risk
...
Foreign exchange dealer
A firm or individual that buys foreign exchange from one party and then sells it to another
party
...
Foreign exchange market
Largely banks that serve firms and consumers who may wish to buy or sell various
currencies
...
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency at
one or more future dates
...
Foreign investment risk matrix (FIRM)
Graph that displays financial and political risk by intervals on which countries may be
compared according to risk ratings
...
Foreign market
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Part of a nation's internal market, representing the mechanisms for issuing and trading
securities of entities domiciled outside that nation
...
Foreign market beta
A measure of foreign market risk that is derived from the capital asset pricing model
...
Foreign Sales Corporation (FSC)
A special type of corporation created by the Tax Reform Act of 1984 that is designed to
provide a tax incentive for exporting U
...
-produced goods
...
Foreign-targeted issue
Notes sold between October 1984 and February 1986 to foreign institutions, foreign
branches of US institutions, foreign central banks or monetary authorities, and to
international organizations in which the United States held membership
...
Interest was paid annually
...
Received in return for foreign taxes
paid on foreign derived earnings
...
Also refers to persons in the United States to the
extent that they are known by reporting institutions to be acting for foreigners
...
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Forfaiter (Primary)
An individual or financial entity that arranges a forfaiting transaction directly with an
exporter and then holds or sells on the payment obligations of the importer/ guarantor
...
Forfaiting
A form of factoring that involves selling large, medium to long-term receivables to buyers
(forfaiters) who are willing and able to bear the costs and risks of credit and collections
...
Forfeiture
The loss of rights to an asset outlined in a legal contract if a party fails to fulfill obligations
of the contract
...
Form 4
The form required by the SEC for a change in the holdings of an individual owning 10%
or more of the outstanding stock or in the holdings of a company officer
...
It is also the form most often used to
cover resales of restricted securities by selling stockholders
...
Form T
The form required by the NASD to report equity transactions after the market's regular hours
...
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Form 3
A form required by the SEC and the stock exchange from all holders of 10% or more of a
company's stock and all directors and officers, which details securities owned
...
Formula investing
A formula-based investment technique in which investment decisions are made using
predetermined timing or asset allocation models, e
...
, dollar cost averaging
...
48-hour rule
PSA Uniform Practices requirement that all pool information in a to be announced (TBA)
transaction be communicated by the seller to the buyer before 3 p
...
EST on the
business day 48 hours prior to the agreed-upon trade date
...
Forward contract
A contract that specifies the price and quantity of an asset to be delivered on in the
future
...
For example, if you
agreed to sell 100,000 bushels of corn in September in a forward contract, but you only
have 60,000, you need to purchase 40,000 to cover your obligation
...
This guarantees an exchange rate on a given date
...
GFEDU
...
Forward differential
Annualized percentage difference between spot and forward rates
...
Forward exchange
A type of foreign exchange transaction whereby a contract is made to exchange one
currency for another at a fixed date in the future at a specified exchange rate
...
Forward exchange rate
Exchange rate fixed today for exchanging currency at some future date
...
Forward Fed funds
Fed funds traded for future delivery
...
Forward foreign exchange rate
The exchange rate available today to exchange currency at some specified date in the
future
...
Forward interest rate
Interest rate fixed today on a loan to be made at some future date
...
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Forward market
A market in which participants agree to trade some commodity, security, or foreign exchange
at a fixed price for future delivery
...
Forward premium
A currency trades at a forward premium when its forward price is higher than its spot price
...
Forward rate
A projection of future interest rates calculated from either spot rates or the yield curve
...
Forward sale
A method for hedging price risk that involves an agreement between a lender and an
investor to sell particular kinds of loans at a specified price and future time
...
Forwarder
Acts as a travel agent for cargo
...
Some are affiliated with NVOCC services
...
Foul Bill of Lading
A bill of lading that contains a notation indicating damage or shortage
...
401(K)
Under section 401(K) of the Internal Revenue Code, a deferred compensation plan set
up by an employer so that employees can set aside money for retirement on a pre-tax
basis
...
Contributions by both employees and employersn as well as investment
earnings and interest, are not taxed until the employee withdraws the money; if the
employee withdraws the money before retirement age, he or she pays an early
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withdrawal penalty tax
...
Many
employers now offer these deferred compensation plans in lieu of or in addition to
pensions
...
See: Instinet
...
That is, the individual
components are "self-similar
...
While each
branch, and each successive smaller branching is different, they are qualitatively similar
to the structure of the whole tree
...
In Euclidean, or Plane
geometry, objects are solid and continuous
...
As such,
they have integer dimensions
...
Fractal Distribution
A probability density function that is statistically self-similar
...
Fractal Market Hypothesis
The fractal market hypothesis states that (1) a market consists of many investors with
different investment horizons, and (2) the information set that is important to each
investment horizon is different
...
When the market's
investment horizon becomes uniform, the market becomes unstable because everyone
is trading based upon the same information set
...
Fractional Brownian
A biased random walk
...
It is like playing with loaded dice
...
Fractional discretion order
A type of order that gives the broker discretion to alter the price, up or down, within a
specific fractional range in order to guarantee an execution
...
GFEDU
...
See Fractional Brownian
Motion, 1/f Noise, White Noise
...
Franchise agreement
Contract by which a domestic company (franchisor) licenses its trade name and/or
business system and practices for a fee to an independent company (franchisee) in a
foreign market
...
Frankfurt Stock Exchange
The largest of Germany's eight securities exchanges, operated by Deutsche Borse AS
...
Free Alongside Ship (FAS)
An Incoterm (FAS) that means the seller is responsible for the cost of transporting and
delivering goods alongside a vessel in a port in his or her country
...
S
...
FAS should be used only for ocean shipments since risk and responsibility shift
from seller to buyer when the goods are placed within the reach of the ship's tackle
(crane)
...
)
are included in the price
...
Free Carrier (FCA)
An Incoterm meaning that the cost, risk and responsibility shift from the seller to the
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buyer when the goods are turned over to a carrier at a designated place
...
Often defined as earnings before
interest (often obtained from the operating income line on the income statement) less
capital expenditures less the change in working capital
...
For
firm valuation, you want the former; for stock valuation you want the latter
...
This will give you the value of a levered
firm, including the tax benefits of debt financing
...
To value the firm's equity, you can either take the above number and subtract the market
value of all outstanding debt (liabilities) or you can calculate the FCFs to the firm's equity
holders and discount this stream by the firm's levered equity cost of capital
...
e
...
For example, suppose you had to
spend $XX to increase the capacity of your plant
...
Likewise, if you had to increase the level of your
cash balance, inventory or receivables by $XX to accommodate greater sales, then this
too would result in a like reduction in free cash flows in the year the level of working
capital was increased
...
]
Free delivery
Securities industry procedure whereby delivery of securities sold is made to the buying
customer's bank without requiring immediate payment; thus a credit agreement of sorts
...
payment
...
GFEDU
...
Also
known as clean float
...
Free reserves
Excess reserves minus member bank borrowings at the Fed
...
Free-riding
A forbidden practice in which the member of an underwriting syndicate retains a portion of
an initial public offering (IPO) and resells the securities at a higher price determined by the
market at a later time
...
Free right of exchange
An investor's right to transfer securities from one name to another name without paying
charges that accompany a sales transaction
...
Free to trade
Used in the context of general equities
...
Freed up
A term used to indicate that an underwriting syndicate's members are no longer restricted
to the fixed price agreed upon in the agreement among underwriters and are permitted to
trade the security on a free market basis
...
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Freeze out
The action of pressurizing shareholders with relatively minor amounts of stock to sell their
shares after a takeover
...
Freight Forwarder
See: forwarder
...
FREIT
See: Finite-Life Real Estate Investment Trust
Frequency distribution
The organization of data to show how often certain values or ranges of values occur
...
Fresh signal
Piece of information (fundamental or technical) leading one to believe a stock will move in a
certain manner
...
Such costs include time,
effort, money, and associated tax effects of gathering information and making a
transaction
...
The typically
lower rate of return from the fund results from transactions costs
...
Frictions
The "stickiness" involved in making transactions; the total process including time, effort,
money, and tax effects of gathering information and making a transaction such as
buying a stock or borrowing money
...
GFEDU
...
Friendly takeover
Merger when the target firm's management and board of directors is in favor of the takeover
...
Front-end load
The fee applied to an investment at the time of initial purchase, e
...
, on a mutual fund
purchased from a broker or mutual fund company
...
Front office
Refers to revenue generating sales personnel in a brokerage, insurance, or other
financial services operation
...
This
practice is expressly forbidden by the SEC
...
Fry a bigger fish
Used in the context of general equities
...
Full
Handle
...
Full coupon bond
A bond with a coupon equal to the going market rate; the bond is therefore selling at par
...
GFEDU
...
Full
Employment
and
Balance
1978(Humphrey-Hawkins Act)
Growth
Act
of
Federal legislation that, among other things, specifies the primary objectives of U
...
economic policy-maximum employment, stable prices, and moderate long-term interest
rates
...
Full-payout lease
See: Financial lease
Full price
Also called dirty price; the price of a bond including accrued interest
...
Full-service broker
A broker who provides clients an all-inclusive selection of services such as advice on
security selection and financial planning
...
Arrangement in which lessor promises to maintain and insure the
equipment leased
...
Full trading authorization
Indication that a broker with a discretionary account can operate free of all trading
guidelines from the client
...
Fully diluted earnings per shares
Earnings per share expressed as if all outstanding convertible securities and warrants have
been exercised
...
GFEDU
...
Fully invested
Used to describe an investor whose assets are totally committed to investments, typically
stock
...
Related: Modified pass-throughs
...
Said of a stock that has reached a price at which
analysts think the underlying company's fundamental earnings power has been fully
recognized by the market
...
52, an affiliate's functional currency is the currency of the primary
economic environment in which the affiliate generates and expends cash
...
Fund family
Set of funds with different investment objectives offered by one management company
...
Fund of funds
A mutual fund or hedge fund that invests in other funds
...
The fund manager is charged with investing the
money to attain the returns and level of risk of the mutual fund investors
...
Fun money
Money that can be used to invest in risky investments with high potential return
...
GFEDU
...
Research often focuses on earnings, dividend prospects, expectations
for future interest rates, and risk evaluation of the firm
...
In
macroeconomic
analysis,
information
such
as
interest
rates,
GNP,
inflation,
unemployment, and inventories is used to predict the direction of the economy, and
therefore the stock market
...
Fundamental beta
The product of a statistical model to predict the fundamental risk of a security using not
only price data but also other market-related and financial data
...
Fundamental forecasting
Analyzing the future on the basis of fundamental relationships between economic
variables and exchange rates
...
In market analysis,
fundamental information is related to the earnings prospects of the firm only
...
Funded Liability
A source of funds that a firm must take overt action to arrange and that carries an
interest cost
...
Funding
Used to describe the refinancing of a debt prior to its maturity (the same as refunding)
...
See
also: refunding
...
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Funding risk
Related: Interest rate risk
Funds From Operations (FFO)
Used by real estate and other investment trusts to define the cash flow from trust
operations; earnings with depreciation and amortization added back
...
Fungibility
The substitutability of listed options, which is dependent upon their common expiration
dates and strike prices
...
Furthest month
Used in the context of commodities or options trading to refer to the month that is away from
the contract's date of settlement
...
Future
A term used to designate all contracts covering the sale of financial instruments or physical
commodities for future delivery on a commodity exchange
...
Futures
A term used to designate all contracts covering the sale of financial instruments or physical
commodities for future delivery on a commodity exchange
...
The FCM must be licensed by the
CFTC
...
Futures contract
A legally binding agreement to buy or sell a commodity or financial instrument in a
designated future month at a price agreed upon today by the buyer and seller
...
GFEDU
...
A futures contract differs from an option because an option
is the right to buy or sell, while a futures contract is the promise to actually make a
transaction
...
Futures contract multiple
A constant set by an exchange, which when multiplied by the futures price gives the dollar
value of a stock index futures contract
...
Futures option
An option on a futures contract
...
Futures price
The price at which parties to a futures contract agree to transact upon the settlement date
...
Fuzzy Logic
A system which mathematically models complex relationships which are usually handled
in a vague manner by language
...
Fuzzy sets measure the similarity between
an object and a group of objects
...
Fuzzy sets can more closely approximate human reasoning than
traditional "crisp" sets
...
FVO (for valuation only)
See: For your information
G
Fifth letter of a Nasdaq stock symbol specifying that the issue is the first convertible bond
of the company
...
GAAP
See: Generally Accepted Accounting Principles
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GB
The two-character ISO 3166 country code for UNITED KINGDOM
...
GD
The two-character ISO 3166 country code for GRENADA
...
GF
The two-character ISO 3166 country code for FRENCH GUIANA
...
GI
The two-character ISO 3166 country code for GIBRALTAR
...
GNP
See: Gross National Product
GM
The two-character ISO 3166 country code for GAMBIA
...
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GP
The two-character ISO 3166 country code for GUADELOUPE
...
GR
The two-character ISO 3166 country code for GREECE
...
GT
The two-character ISO 3166 country code for GUATEMALA
...
GW
The two-character ISO 3166 country code for GUINEA-BISSAU
...
Gadfly
A nickname for a "professional" securityholder who owns stock in various companies,
attends annual meetings and asks senior management hard and often embarrassing
questions
...
Gain
A profit on a securities transaction recognized by selling a security for more than the security
originally cost
...
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Gamma
The ratio of a change in the option delta to a small change in the price of the asset on which
the option is written
...
The difference in
total funding needed for a proposal and the amount of funding already made available
...
Garage
The floor of the NYSE, which is situated on the north side of the main trading floor
...
Speculators
feel other takeovers are likely in the sector
...
Garman-Kohlhagen option pricing model
A model widely used to price foreign currency options
...
Once the price is low enough, the stop orders become market
orders and are executed, to create snowballing
...
GDP implicit price deflator
An economic technique used to account for inflation by comparing the current-dollar
gross domestic product GDP to constant-dollar GDP as a ratio
...
Gearing
Financial leverage
...
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General Average
Provision in maritime law where all shippers on a given voyage would reimburse the ship
line in the event of vessel sinking or catastrophic damage
...
General Average Contribution
The amount of money paid by each shipper involved in a General Average
...
Governed by Regulation T of the FED
...
General cash offer
A public offering made to investors at large
...
For example,
10-year single A corporates were priced or trading at 130 basis points above Treasuries
last night, or said diffrently, 130 is the generic credit spread for 10-year single A
corporates
...
General lien
An attachment that gives the lender the right to seize the personal property of a borrower
who has not fulfilled the obligations of the loan, but prevents the lender from seizing real
property
...
See: Broker loan rate
...
General obligation bonds
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Municipal securities secured by the issuer's pledge of its full faith, credit, and taxing power
...
General partner
A participant who has unlimited liability for the obligations of a partnership
...
General revenue
The sum of taxes, charges, and miscellaneous income taken in at the state and local
level while neglecting overlapping revenue which may be erroneously counted twice
...
S
...
The income from the trust goes to
the children of person A while they survive
...
Genetic Algorithms
Models that optimize rules by mimicking the Darwinian Law of survival of the fittest
...
The weakest are discarded
...
The offspring can replace the parents, or they will be
discarded if less successful than the parents
...
Mutation and cross-over occur with low probability, as in nature
...
Geometric mean return
Also called the time-weighted rate of return, a measure of the compound rate of growth of the
initial portfolio market value during the evaluation period, assuming that all cash
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distributions are reinvested in the portfolio
...
Gestation repo
A reverse repurchase agreement between mortgage firms and securities dealers
...
Get hit
Go lower in price, when bids in the stock or market are hit, causing those bids to vanish and
be replaced by lower ones
...
Antithesis of on the take
...
Sell interest ("We could get out big size in
Humana
...
Gift splitting
A technique used to avoid a gift tax in which a large sum of money to be given by two
parents to a child is halved and given to the child separately For example, a husband and
wife each donate $10,000 to their child rather than one parent donating $20,000
...
A $10,000 federal gift tax
exemption exists per recipient
...
Gift inter vivos
A piece of property or asset given from one living person to another
...
Blue Chip
...
Blue Chip
...
GFEDU
...
Give up
Used for listed equity securities
...
The broker with
whom broker A completes the transaction (the sell-side broker) is broker C
...
This
is a grey area of the law governing reimbursement of a broker for services (e
...
,
research)
...
Glamor stock
A popular stock characterized by high earnings growth rate and a price that rise is faster
than the market average in a bull market
...
Glass-Steagall Act
1933 legislation prohibiting commercial banks to own, underwrite, or deal in corporate
stock and corporate bonds
...
Global fund
A mutual fund that can invest anywhere in the world, including the U
...
Globalization
Tendency toward a worldwide investment environment, and the integration of national
capital markets
...
B
...
) on which registered holders receive separate principal
and interest payments on each of their certificates, usually directly from the servicer of
the M
...
S
...
GNMA-I mortgage-backed securities are single-issuer pools
...
B
...
) on which registered holders receive an aggregate principal
and interest payment from a central paying agent on all their certificates
...
GFEDU
...
GNMA-II M
...
S
...
Multiple-issuer pools are known as "jumbos
...
Jumbo pool mortgage interest rates
may vary within one percentage point
...
GNMA Midget is a dealer term and is not used by GNMA in the formal description of its
programs
...
Go along
Used for listed equity securities
...
Go around
Describes the N
...
Federal Reserve Bank's trading desk practice of communicating with
primary dealers to establish a market of bids and offers on behalf of the Federal Open Market
Committee
...
Godfather offer
An aggressive takeover technique in that the proposed offer of the acquiring company is
so large that management of the target company cannot refuse, out of fear of lawsuits or
shareholder revolt
...
The fund has high levels of risk
and potential return
...
Sell interest ("we've got 50 IBM to go"
...
(1) Trades ("10 IBM goes on at 115 "); see Print;
(2) indicates a change in the stock's inside market ("Apple goes 3/4 bid")
...
GFEDU
...
Prohibited by the NASD rules of fair practice
...
Going-concern value
The value of a company to another company or individual in terms of an operating
business
...
Going long
The investor's purchase of a security for investment or speculation that the price will rise
resulting in a profit once the security is sold
...
Antithesis of going short
...
Soliciting/advertising over the SS1, NASDSAQ, or
Autex
...
The firm is delisted on stock exchanges and can no longer be purchased in
the open markets
...
See: IPO
...
The
assumption is that the price will fall
...
Antithesis of going long
...
1) Condition of the traders position in the security
and expectations of stock placement with accounts just prior to taking an order to the
exchange floor for execution; 2) On the way in
...
Gold bars
Bars with a minimum content of 99
...
Gold bond
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Bonds issued by gold-mining companies and backed by gold
...
Gold bullion
Investment-grade, pure gold, which may be smelted into gold coins or gold bars
...
Gold coins
Coin minted in gold, such as the American Eagle or the Canadian Maple Leaf
...
It required the U
...
to
peg the dollar to gold and other countries to peg their currencies to the dollar
...
Gold mutual fund
A mutual fund that primarily invests in gold-mining companies' stock
...
It was in effect
from about 1870 to 1914
...
Golden handcuffs
A contract that binds a broker to a brokerage firm by offering the broker commissions and
bonuses, but penalizes the broker if he or she goes to work for another firm
...
Golden hello
A bonus a securities firm pays to attract an employee from a competing firm
...
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Goldilocks economy
A term developed in the mid 1990s to describe the positive performance of the economy
as "not too hot, not too cold; just right
...
Good delivery and settlement procedures
Refers to PSA Uniform Practices such as cutoff times on delivery of securities and
notification, allocation, and proper endorsement
...
Refers to the initial margin account deposit needed
when buying or selling a futures contract; approximately 2%-10% of the contract value
...
Also used to refer to the deposit with a municipal bond issuer by firms competing for the
underwriting business
...
Good-this-Month order (GTM)
An order to buy or sell securities that continues to be a valid order until the end of the
current month
...
Market or limited price order that remains viable for
a stated period of time unless cancelled, executed, or changed, after which such order or the
portion thereof not executed is to be treated as cancelled
...
Brokerages usually set
a limit of 30-60 days, at which the G
...
C
...
(Different from a
day order
...
Government bond
See: Government securities
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Government National Mortgage Association (Ginnie Mae)
A wholly owned U
...
government corporation within the Department of Housing & Urban
Development
...
Government obligations
U
...
government-backed debt instruments, which are considered among the safest
investments possible, including Treasury bonds, bills, and notes, and savings bonds
...
S
...
Government sponsored enterprises
Privately owned, publicly chartered entities, such as the Student Loan Marketing
Association, created by Congress to reduce the cost of capital for certain borrowing sectors
of the economy including farmers, homeowners, and students
...
S
...
Governments are considered among the safest investments available as they are
backed by the U
...
government
...
S
...
Grace period
The time period stipulated in most loan contracts and insurance policies during which a
late payment will not result in default or cancellation
...
Graduated lease
A type of long-term lease whose payments are variable rather than fixed, and depend
upon a benchmark rate, such as changes in the consumer price index
...
A graduated payment loan usually involves negative amortization
...
GFEDU
...
The payments gradually increase over a
predetermined period (usually 3, 5, or 7 years), and then are fixed at a level-pay schedule,
which will be higher than the level-pay amortization of a level-pay mortgage originated at
the same time
...
Graduated security
A security that has moved from listing on an exchange of less prominence to one of more
prominence
...
Investors buy stocks
with undervalued assets speculating that these assets will appreciate to their true value
...
The idea is to
lever a fund's portfolio to exactly match the volatility of the S&P 500
...
Graham-Harvey Measure 2
Performance measure developed by John Graham and Campbell Harvey
...
The difference
between the fund's return and the levered S&P 500 return is the performance measure
...
Such activities may be continued under the "grandfather"
clauses of the Bank Holding Company Act and the International Banking Act
...
Grant
The issuance of an award under a stock plan, such as a stock option or shares of restricted
stock
...
Grantor
A trader in the options market who makes premium income by selling options
...
GFEDU
...
Grantor trust
A mechanism of issuing MBS wherein the mortgages' collateral is deposited with a trustee
under a custodial or trust agreement
...
Gray knight
In a merger or acquisitions, a gray knight is an acquiring company that outbids a white
knight in pursuit of its own best interests, although it is friendlier than a hostile bidder
...
g
...
A stock's presence on this list should never be conveyed
to anyone outside the trading area, much less outside the firm
...
Gray market
Describes the sale of securities that have not officially been issued to firms other than the
underwriting syndicate
...
Great call
Used in the context of general equities
...
Greater fool theory
An investment notion that even when a stock is fully valued by conventional standards,
there is room for upward movement because there are enough buyers to push prices
farther upward purely on speculation or hype
...
Greenshoe option
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Option that allows the underwriter for a new issue to buy and resell additional shares
...
Gross domestic product (GDP)
The market value of goods and services produced over time including the income of
foreign corporations and foreign residents working in the U
...
, but excluding the income
of U
...
residents and corporations overseas
...
See: adjusted gross income
...
Gross income
A person's total income prior to exclusions and deductions
...
Gross lease
A type of property lease in which the lessor (owner of the property being leased) pays
expenses associated with ownership such as damages, taxes, and insurance
...
It is equal to G
...
P
...
Gross parity
Applies mainly to convertible securities and international equities
...
For the price of a convertible, including accrued interest
...
S
...
Gross profit
Sales minus the cost of goods sold
...
GFEDU
...
Gross sales
Total sales calculated by summing all sales at invoice values, neglecting any adjustments
such as customer discounts or returns
...
Gross Weight
The full weight (including goods and packaging) of shipment
...
Group insurance
Insurance coverage for a group, which can usually be obtained at a cheaper rate than
insurance for an individual
...
Group of Five (G-5)
The five leading countries (France, Germany, Japan, the U
...
, and the U
...
) that meet
periodically to achieve some cooperative effort on international economic issues
...
Group of Seven (G-7)
The G-5 countries plus Canada and Italy
...
The ten
are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the
United Kingdom, and the United States
...
Group rotation manager
A top-down manager who deduces the phases of the business cycle and allocates assets
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accordingly
...
Group Universal Life Policy (GULP)
Universal life insurance on a group basis
...
Growing Equity Mortgage (GEM)
Mortgage with a fixed interest rate and payments that increase throughout the term of the
mortgage
...
Growth fund
A mutual fund that invests primarily in stocks with a history of and future potential for
capital gains
...
Growth manager
A money manager who seeks to buy stocks that typically sell at relatively high P/E ratios due
to high earnings growth, with the expectation of continued high or higher earnings growth
...
Growth phase
A phase of development during which a company experiences rapid earnings growth as it
produces new products and expands market share
...
If there is a
negative or zero value for the first or last year, the growth is N
...
(not meaningful)
...
Guarantee
The assumption of responsibility for payment of a debt or performance of some obligation
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if the liable party fails to perform to expectations
...
Guarantee letter
A commercial bank's letter assuring payment of the exercise price of a client's put option
...
Guaranteed insurability
A life and health insurance policy feature that enables the insured to add coverage at
future times and at fixed and agreed-upon rates regardless of health conditions
...
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a single premium, to pay
at a maturity date the principal amount of a predetermined annual crediting (interest) rate
over the life of the investment
...
M
...
s, like PCs, represent undivided interest in
specified conventional whole loans and participations previously purchased by Freddie Mac
...
Guaranteed renewable policy insurance
A type of insurance policy that requires the insurer to renew the policy to an individual
regardless of health changes
...
Guaranteed replacement cost coverage insurance
A policy that covers the full cost of replacing damaged property without any allowances
or deductions, e
...
, depreciation
...
GFEDU
...
Guarantor program
Under the Freddie Mac program, the aggregation by a single issuer (usually an S&L) for the
purpose of forming a qualifying pool to be issued as PCs under the Freddie Mac guarantee
...
The illegal solicitation of buy orders in an
underwriting before completion and finalization of Securities and Exchange Commission
registration
...
H
Fifth letter of a Nasdaq stock symbol specifying that the issue is the second preferred
bond of the company
...
HKD
The ISO 4217 currency code for theHong Kong Dollar
...
HN
The two-character ISO 3166 country code for HONDURAS
...
GFEDU
...
HR
The two-character ISO 3166 country code for CROATIA
...
(The ISO 4217 currency code)
HT
The two-character ISO 3166 country code for HAITI
...
HU
The two-character ISO 3166 country code for HUNGARY
...
Haircut
The margin or difference between the actual market value of a security and the value
assessed by the lending side of a transaction)
...
Half-stock
Stock, common or preferred, with a $50 par value
...
Handle
The whole-dollar price of a bid or offer is referred to as the handle (e
...
, if a security is
quoted at 101
...
11 offered, 101 is the handle)
...
See: Full
...
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Hands-on investor
An investor who has a large stake in a corporation and takes an active role in its
management
...
Hang Seng index
The major index in Hong Kong
...
Hard currency
A freely convertible currency that is not expected to depreciate in value in the foreseeable
future
...
Antithesis of soft dollars
...
The Harmonized Commodity Description and Coding System
Commonly known as Harmonized System
...
Hart-Scott-Rodino Act
Often used in risk arbitrage
...
S
...
The government has thirty days to respond to the filer
...
Author of this glossary
...
Author of research on
international finance, asset allocation, and emerging markets
...
The first and third peaks are shoulders, while the
second peak is the formation's head
...
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Heavy
An equities market now dominated by sellers, or oversupply, resulting in falling prices
...
Hedge
A transaction that reduces the risk of an investment
...
Hedge fund
A fund that may employ a variety of techniques to enhance returns, such as both buying
and shorting stocks according to a valuation model
...
Hedge ratio (delta)
For options, ratio between the change in an option's theoretical value and the change in
price of the underlying stock at a given point in time
...
If a preferred is convertible into 2000 common
shares, a 75% hedge ratio would be short (long) 1500 common for every 1000 preferred
long (short)
...
Hedge wrapper
An options strategy in which an investor with a long position in an underlying stock buys an
out-of-the-money put and sells an out-of-the-money call
...
Hedged portfolio
A portfolio consisting of a long position in the stock and a long position in the put option on the
stock, so as to be riskless and produce a return that equals the risk-free interest rate
...
For example, investor Q has 5000 shares of XYZ
...
Investor Q short-sells 2500 shares after the announcement and the price of the stock has
approached $100
...
Investor Q has sold all shares at $100 even as the price of the stock drops on a post-news
dip
...
GFEDU
...
Hedging
A strategy designed to reduce investment risk using call options, put options, short-selling,
or futures contracts
...
Its purpose is to reduce the volatility of
a portfolio by reducing the risk of loss
...
Held at the opening
Used for listed equity securities
...
Held order
Order that must be executed without hesitation (Hit the bid or take the offer in line) or if the
stock can be bought or sold at that price (held limit order) in sufficient quantity
...
Helsinki Exchanges (HEX)
The Helsinki Exchanges (HEX Ltd
...
and SOM Ltd
...
Hemline theory
A theory that stock prices move in the same direction as the hemlines of women's dresses
...
Herstatt risk
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but
the counterparty financial institution will fail to complete its end of the contract
...
H-H page
Quotron display page that shows new listed inquiries/orders received after the block call
...
GFEDU
...
Hidden load
A sales charge that is not explicitly disclosed or is buried in the fine print of a mutual fund
prospectus or life insurance policy and therefore is not immediately apparent
...
High-coupon bond refunding
Replace a high-coupon bond with a new, lower-coupon bond
...
High current income mutual fund
A mutual fund whose primary goal is to produce a high level of income by making
higher-risk investments in instruments such as junk bonds
...
Generally glamorous in nature due to the capital gains potential associated with
them; also used to describe any high-priced stock
...
High-grade
Credit quality of AAA or AA
...
High price
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits
...
It also offers a
competitive interest rate
...
High-tech stock
Stocks of companies operating in high-technology fields
...
GFEDU
...
Specified
in US tax code
...
High-yield bond
See: Junk bond
Highjacking
Japanese term for a takeover
...
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm
...
Historical cost
Describes the accounting cost carried in the books for a current cost of the item
...
Historical exchange rate
An accounting term that refers to the exchange rate in effect at the time an asset or liability
is acquired
...
Historical volatility
Fluctuations estimated from a historical time series
...
g
...
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Hit the bid
A dealer who agrees to sell at the bid price quoted by another dealer is said to "hit" that
bid
...
Hit the ribbon
Used in the context of general equities
...
Hold
To maintain ownership of a security over a long period of time
...
Holder
The purchaser of an option
...
Also called date of record
...
Holding the market
The illegal practice of maintaining and/or placing a sufficient number of buy orders to
create price support for a security or commodity in an amount to of stabilize a downward
trend
...
Holding-period return
Rate of return on an investment over a given period
...
Home asset bias
The tendency of investors to over invest in their own county's assets
...
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Homemade dividend
Sale of some shares of stock to get cash in an amount similar to that of a cash dividend
...
Thus, if levered firms are priced
too high, rational investors will simply borrow on personal accounts to buy shares in
unlevered firms
...
Homeowner's insurance policy
An insurance policy protecting a homeowner against damage or loss to property
...
Homogeneous
Exhibiting a high degree of homogeneity
...
Hong Kong Futures Exchange (HKFE)
Established in 1976, the Hong Kong Futures Exchange (H
...
F
...
) operates futures and
options markets in index, stock, interest rate, and foreign exchange products
...
Horizon matching strategy
An income immunization strategy that cash-matches over the next few years and
duration-matches the rest
...
Horizontal acquisition
Merger between two companies producing similar goods or services
...
GFEDU
...
It allows assessment of changes in the relative importance of expense
items over time and the behavior of expense items as sales change
...
Horizontal price movement
Stock price movement within a narrow price range over an extended period of time which
creates the appearance of a relatively straight line on a graph of the stock's price
...
Hospital revenue bond
A bond issued to finance construction of a hospital by a municipal or state agency
...
Hostile takeover
A takeover of a company against the wishes of the current management and the board of
directors by an acquiring company or raider
...
Active, usually with positive price implications
...
House
Firms that conduct business as broker-dealers in securities or in the investment banking field
are characterized as houses
...
House Air Waybill (AWB)
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An air waybill issued by an air freight consolidator
...
The client must provide more cash or equity, or the account will be
liquidated
...
House maintenance requirement
The internal rules of a brokerage house that govern the minimum amount of equity that
must be present in a customer's margin account
...
"
House rules
Internal rules of broker-dealer firm that govern the handling of its customers' accounts
...
"How are you making XXX?"
"What is your market in a particular stock?" See: Quotation
...
A classic character
flaw of a trader or investor
...
Human capital
The unique capabilities and expertise of individuals
...
Hung up
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Used to describe the position of an investor whose stocks or bonds have dropped in value
below their original purchase price
...
Hurdle rate
The required return in capital budgeting
...
Hurst Exponent(H)
A measure of the bias in fractional Brownian motion
...
50 for Brownian motion
...
50
0
The inverse of the Hurst exponent is equal to alpha, the
characteristic exponent for Stable Paretian distributions
...
Hybrid
A package of two or more different kinds of risk management instruments that are usually
interactive
...
Hybrid security
A convertible security whose optioned common stock is trading in a middle range, causing the
convertible security to trade with the characteristics of both a fixed income security and
a common stock instrument
...
In securities, refers to the commitment of securities to serve as collateral for margin
loans at the broker-dealer firm
...
Firms may fail to enter markets that appear
attractive, or firms that are once invested in a market may persist in operating at a loss
...
GFEDU
...
I
Fifth letter of a Nasdaq stock symbol specifying that it is the third preferred bond of the
company
...
IDR
The ISO 4217 currency code for the Indonesian Rupiah
...
IEP
The ISO 4217 currency code for the Irish Punt
...
ILS
The ISO 4217 currency code for the Israeli Shekel
...
GFEDU
...
INR
The ISO 4217 currency code for the Indian Rupee
...
IO
See: Interest-only strip
IOC order
See: Immediate or canceled order
IOM
See: Index and Option Market
IPL
See: Investment Product Line
IPO
See: Initial Public Offering
IQ
The two-character ISO 3166 country code for IRAQ
...
IR
The two-character ISO 3166 country code for IRAN, ISLAMIC REPUBLIC OF
...
GFEDU
...
IRR
See: Internal rate of return
IS
The two-character ISO 3166 country code for ICELAND
...
ISMA
See: International Security Market Association
ISO
See: International Organization for Standardization
...
ITL
The ISO 4217 currency code for the Italian Lira
...
I-bonds
Treasury savings bonds with a 30-year maturity indexed to account for inflation
...
Idiosyncratic Risk
Unsystematic risk or risk that is uncorrelated to the overall market risk
...
GFEDU
...
I-I page
In over-the-counter trading, same as H-H page, but exclusively for OTC stocks
...
Illiquid
In the context of finance
...
In the context of investments, describes a lightly traded investment such as a
stock or bond that is not easily converted into cash
...
Too many market orders of one kind-buy or to sell or limit
orders to buy up or sell down, without matching orders of the opposite kind
...
If it occurs before the stock exchange opens, trading in the stock is delayed
...
Immediate
Market or limited price order that is to be executed in whole or in part as soon as such order
is represented in the trading crowd
...
A stop is considered an execution in this context
...
Immediate family
Term used in the NASD rules of fair practice to refer to one's parents, brothers, sisters,
children, relatives supported financially, father-in-law, mother-in-law, sister-in-law, and
brother-in-law
...
Immediate settlement
Delivery and settlement of securities within five business days
...
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Immunization strategy
A bond portfolio strategy whose goal is to eliminate the portfolio's risk, in case of a general
change in the rate of interest, through the use of duration
...
Impaired credit
Result of a borrower's reduced credit rating
...
Implicit Bankruptcy Costs
Opportunity costs incurred prior to the bankruptcy process such as the loss of sales or
financing
...
Implied call
The right of the homeowner to prepay, or call, a mortgage at any time
...
Related: Cheapest to deliver issue
...
Import/export letters of credit
Bank or financial institution issuance's of funds in a certain amount provided to facilitate
international trade
...
There is a Fixed quota, which is a
maximum quantity not to be exceeded, and tariff rate surcharge, which permits
additional quantities but at much higher duty
...
GFEDU
...
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid
...
Imputed value
Refers to the value of an asset, service, or company that is not physically recorded in any
accounts but is implicit in the product, e
...
, the opportunity cost of cash remaining in a
savings account and not invested
...
Priced higher than the bid price but lower than
the offer price
...
In competition
Indication that the customer has revealed trading interest to multiple brokers and that the
trade will take place with the firm having the highest bid or lowest offer
...
In hand
Used in the context of general equities
...
In the hole
Used in the context of general equities
...
Antithesis of premium
...
For example,
rather than go to the marketplace and sell a security for a client to anyone, an attempt is
made to find a buyer to complete the transaction with the firm
...
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In-house processing float
The time it takes the receiver of a check to process a payment and deposit it in a bank
for collection
...
(1) An order or market in a specific security within
the inside market; 2) any announcement (earnings) that adheres closely to Wall Street
analysts' expectations
...
At a price exactly in between the bid and offer
prices
...
For example, if the March COMEX
silver futures contract is trading at $6 an ounce, a March call with a strike price of $5
...
50 an ounce
...
Antithesis of
out-of-the-money
...
Company that has become the target of a takeover, and
whose stock has now become a speculative issue
...
In & out
Refers to over-the-counter trading
...
See: Cross
In-and-out trader
A daytrader, or a speculator who buys and sells the same security on the same day
...
Slang expression meaning market prices are
dropping rapidly
...
Having a sell inquiry in a stock (not a firm
customer sell order), often entailing a capital commitment
...
In-substance defeasance
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Process through which debt is removed from the balance sheet but not canceled
...
Inactive post
Trading post on NYSE floor where inactive, lightly traded stocks are traded in 10-share lots as
opposed to 100-share lots
...
See:: Illiquid
...
Sometimes called performance fee
...
Such an option is free from regular tax at the date of grant and the date of
exercise (when a non-qualified option would become taxable)
...
If the holding periods are not met, there has been a "disqualifying
disposition"
...
Income baskets
Category to which certain income is allocated
...
Specified in U
...
tax code
...
Income bond
A bond whose payment of interest is contingent on sufficient earnings
...
Income dividend
Any payout to mutual fund shareholders resulting from interest, dividends, or other income
...
GFEDU
...
g
...
Income fund
A mutual fund that seeks to provide to liberal current income from investments
...
Income investment company
A management company focused on managing a mutual fund whose primary purpose is
income generation, typically investing in bonds and high dividend yielding stocks
...
g
...
Income property
Real estate purchased for the reasons of income generation
...
Income risk is generally greatest for money market instruments and short-term bonds, and
least for long-term bonds
...
Income stock
Common stock with a high dividend yield and few profitable investment opportunities
...
Incontestability clause
Clause in a life insurance contract preventing the insurer from revoking the policy after it
has been in force for a year or two if the life insurance company discovers any important
facts that the policyholder may have concealed, such as experiencing a stroke
...
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Incoterms
Trade terms used worldwide to specify seller and buyer obligations in shipments against
international sales contracts
...
Since they in themselves
are not law, they must be specified if desired in quotations, sales contracts, purchase
orders and commercial invoices
...
Incremental cost of capital
Average cost applicable to the issue of each additional unit of debt and equity
...
Incremental internal rate of return
Internal rate of return (I
...
R
...
Indemnify
Used in insurance policy agreements as to compensation for damage or loss
...
In the
context of corporate governance, Director Indemnification uses the bylaws and/or
charter to indemnify officers and directors from certain legal expenses and judgements
resulting from lawsuits pertaining to their conduct
...
Specifies legal obligations of bond issuer and rights of bondholders
...
Independent auditor
A certified public accountant operating outside the company who can provide an
accountant's opinion
...
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Independent investments
Investments available to a firm that may be selected individually or in groups because each
investment is different in its nature and purpose
...
Independent variable
Term used in regression analysis to represent the element or condition that is expected to
influence another (so-called dependent) variable
...
Indexes measure the ups and downs of stock, bond, and some commodities markets, in
terms of market prices and weighting of companies the index
...
An example is the simultaneous buying (selling) of stock index futures (i
...
,
S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the
temporarily inflated basis between these two baskets
...
See: Program
trading
...
Mutual fund whose
portfolio matches that of a broad-based index such as the S&P 500 and whose
performance therefore mirrors the market as represented by that index
...
Index method
Technique to calculate rates of return that is based on initial and terminal values
...
Index option
A call or put option based on a stock market index
...
GFEDU
...
Index swap
A swap of a market index for some other asset, such as a stock-for-stock or debt-for-stock
swap
...
Indexed bond
Bond whose payments are linked to an index, e
...
, the consumer price index
...
Indexing
A passive instrument strategy calling for construction of a portfolio of stocks designed to
track the total return performance of an index of stocks
...
Usually represented
by the letter "e" in stock tables
...
To determine the yield,
divide the annual dividend by the price of the stock
...
See: Dividend yield
...
Indication of interest
A dealer's or investor's interest in purchasing (not commitment to buy) securities that are still
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in the underwriting stage and are being registered by the Securities and Exchange Commission
...
Indicator
Used in the context of general equities
...
Indifference curve
The expression in a graph of a utility function, where the horizontal axis measures risk and
the vertical axis measures expected return
...
Indirect Claim
Claim of a financial intermediary; the intermediary relends funds to the deficit unit to
enable it to acquire real assets
...
Indirect diversification benefits
Diversification benefits provided by the multinational corporation that are not available to
investors through their portfolio investment
...
Indirect method
Reporting in the statement of cash flow that adjusts or reconciles net income to cash from
operations
...
Indirect terms
The price of a unit of domestic currency in foreign currency terms
...
Individual Retirement Account (IRA)
A retirement account that may be established by an employed person
...
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Individual Retirement Account (IRA) rollover
A provision of the law governing IRA's that enables a retiree or anyone receiving a
lump-sum payment from a pension, profit-sharing, or salary reduction plan to transfer the
amount into an IRA
...
Inductive reasoning
The attempt to use information about a specific situation to draw a conclusion
...
Used as an economic indicator
...
Industrials
General term used in the financial markets to refer to companies manufacturing,
producing, or distributing goods and services
...
This category is usually
determined by the largest portion of revenue
...
Sometimes called
sector allocation
...
For example, if A has both lower return and higher volatility than B, we say A is
dominated by B
...
Inflation
The rate at which the general level of prices for goods and services is rising
...
GFEDU
...
Inflation-escalator clause
A clause in a contract providing for increases or decreases in inflation depending on
fluctuations in the cost of living, production costs, and so forth
...
Inflation-indexed securities
Securities such as bonds or notes that guarantee a return higher than the rate of inflation if
the security is held to maturity
...
Inflation uncertainty
The fact that future inflation rates are not known
...
Inflexible expenses
Expenses that cannot be adjusted or eliminated such as car payments or rental
payments
...
Information Agent
Agent whose primary task is to disseminate and explain the details of capital transactions
...
Information Coefficient (IC)
The correlation between predicted and actual stock returns, sometimes used to measure
the contribution of a financial analyst
...
0 indicates a perfect linear relationship
between predicted and actual returns, while an IC of 0
...
Information content effect
The rise in the stock price following a dividend signal, or publication of some other related
news
...
Related: Search costs
...
GFEDU
...
Information Ratio
The ratio of annualized expected residual return to residual risk
...
Information services
Organizations that furnish investment and other types of information, such as
information that helps a firm monitor its cash position
...
Information Signaling
Conveying intelligence through a firm's actions
...
Informational efficiency
The degree to which market prices correctly and quickly reflect information and thus the
true value of an underlying asset
...
Infrastructure
A country's fundamental system of transportation, communications, and other aspects
of its physical capabilities
...
Inheritance tax return
Tax form required to determine the amount of state tax due on an inheritance
...
It could refer to a form that is filed with the Securities and
Exchange Commission in advance of a major event, such as a public offering or a share
repurchase
...
Initial margin
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(1) Amount of money deposited by both buyers and sellers of futures contracts to ensure
performance of the terms of the contract; (2) amount of cash or eligible securities required
to be deposited with a broker before engaging in margin transactions
...
The Security Exchange Act of 1934 gives the Board
of Governors of the Federal Reserve the responsibility to set initial margin requirements,
but individual brokerage firms are free to set higher requirements
...
Initial public offering (IPO)
A company's first sale of stock to the public
...
Investors purchasing stock in IPOs generally must be prepared to
accept considerable risks for the possibility of large gains
...
Initial Public Offering Spinning
The practice of an investment bank setting aside portions of a corporation's Initial Public
Offering for senior management of that corporation
...
Inland Bill of Lading
A document used as a receipt from the carrier to shipper that covers the transport of
goods overland
...
Input-output tables
Tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output
...
In-line expression of interest in a particular stock,
usually asking the firm to bid for or offer stock
...
Inside market
Refers to over-the-counter trading
...
GFEDU
...
T
...
Market
...
Insider information
Material information about a company that has not yet been made public
...
Insider trading
Trading by officers, directors, major stockholders, or others who hold private inside
information allowing them to benefit from buying or selling stock
...
Insider
Federal legislation that greatly increased the penalties for trading on material inside
information
...
An insider also is someone who owns more than
10% of the voting shares of a company
...
Also known as bankruptcy risk
...
Inspector(s) of Election
The person(s) appointed by the Corporation to act as a judge on voting matters brought
before a shareholder meeting
...
They also count and record the votes, supervise
and inspect the counting process and attest to the final results
...
Inspector’s or Judge’s Certificate
A form provided by the Corporation, and completed by the Inspectors of Election, attesting
to the final voting results and percentages of a shareholder meeting
...
Installment sale
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The sale of an asset in exchange for a specified series of payments (the installments)
...
"Instinet"
is registered with the SEC As a stock exchange it numbers among its subscribers a large
number of mutual funds and other institutional investors linked to each other by computer
terminals
...
Instinet is largely used by market makers, but,
nonmarket makers and customers have equal access
...
Normally a bank, insurance company, or mutual fund
...
Institutional Brokers' Estimate System (IBES)
Service that assembles analysts' estimates of future earnings for thousands of publicly
traded companies, detailing how many estimates are available for each company and
the high, low, and average estimates for each
...
Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to
individual investors
...
Instrumentality
Notes
issued
by
a
federal
agency
whose
obligations
are
guaranteed
by
the
full-faith-and-credit of the government, even though the agency's responsibilities are
not necessarily those of the US government
...
Insurable interest
An insurance term referring to the relationship between a policy's insured person or
property and the potential beneficiary
...
GFEDU
...
Insurance
Guarding against property loss or damage making payments in the form of premiums to
an insurance company, which pays an agreed-upon sum to the insured in the event of
loss
...
Insurance broker
A broker, independent of any insurance company, who represents the interests of the
buyer in searching for insurance coverage at the lowest cost and providing the highest
benefit to the buyer
...
Insurance dividend
Money paid annually to policyholders participating in cash value life insurance policies
...
Insurance premium
Payments calculated by the insurance company based on risk factors that must be made
by the insured to guarantee protection of property loss under an insurance policy
...
The average outcome for many independent trials of an experiment
will approach the expected value of the experiment
...
Insured
The property or persons covered by an insurance policy
...
GFEDU
...
See: FDIC
...
Insured plans
Defined benefit pension plans that are guaranteed by life insurance products
...
Intangible asset
A legal claim to some future benefit, typically a claim to future cash
...
Integer programming
Variant of linear programming in which the solution values must be integers
...
Intellectual property rights
Patents, copyrights, and proprietary technologies and processes that may be the basis of
a company's competitive advantage
...
Interbank rate
See: LIBOR
Interbank spread
The difference between a bank's offer and bid rates for deposits in the Eurocurrency
market
...
g
...
Intercompany loan
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Loan made by one unit of a corporation to another unit of the same corporation
...
Interdelivery spread
Used in futures or options market to refer the purchase of one month of a contract and
selling another month in the same contract, in the hope that the price difference will
widen or narrow, depending on the investment
...
Interest
The price paid for borrowing money
...
Also, a share or title in property
...
This ratio
measures a firm's ability to pay interest
...
Interest deduction
An interest expense, such as interest on a margin account, that is allowed as a deduction for tax
purposes
...
Interest expense
Interest expense is the money the corporation or individual pays out in interest on loans
...
Interest on interest
Interest earned on reinvestment of each interest payment on money invested
...
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Interest-only loan
A loan in which payment of principal is deferred and interest payments are the only current
obligation
...
Once the principal on the mortgages or bonds has been repaid, interest
payments stop, and the value of the IO falls to zero
...
Interest rate
The monthly effective interest rate
...
5% per month
...
Interest rate cap
An interest rate agreement in which payments are made when the reference rate exceeds the
strike rate
...
Interest rate on debt
The firm's cost of debt capital
...
Related: Interest rate cap
...
The
value of the contract rises and falls inversely to changes in interest rates
...
Interest rate parity line (IRP)
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Diagonal line on a graph that characterizes interest rate parity
...
For example,
a bond's price drops as interest rates rise
...
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
some predetermined dollar principal, which is called the notional principal amount
...
Interest-sensitive insurance policy
A cash value life insurance policy whose insurance dividend rates vary with respect to
inflation, enabling the policyholder to avoid the loss of purchasing power associated with
inflation
...
g
...
Interest subsidy
The value of a firm's deduction of the interest payments on its debt from its earnings
before calculation of its tax bill under current tax law
...
Interim dividend
The declaration and payment of a dividend prior to annual earnings determination
...
Interim rate of return
The rate of return earned between cash flows
...
Interlocking directorate
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Describes cross-memberships of directors on each other's company Board of Directors
...
Intermarket spread swaps
An exchange of one bond for another based on the manager's projection of a realignment
of spreads between sectors of the bond market
...
Intermarket Trading System (ITS)
Electronic communications network linking the trading floors of seven registered
exchanges to permit trading among them in stocks listed on either the NYSE or AMEX and
one or more regional exchanges
...
A floor broker on the exchange can enter
an ITS order to assure excecution of all of an offering or bid, instead of splitting it with
competing brokers
...
Intermediate-term
Typically one-ten years
...
Intermediated market
A financial market in which some financial institution stands between counterparties to
financial transactions
...
Related: Disintermediation
...
GFEDU
...
See: Chaos, Dynamical Systems
...
Internal expansion
Growth of assets resulting from internal financing or internally generated cash flow
...
Internal growth rate
Maximum rate a firm can expand without outside sources of funding
...
Internal market
The mechanisms for issuing and trading securities within a nation, including its domestic
market and foreign market
...
Internal measure
The number of days that a firm can finance operations without additional cash income
...
Discount rate at which net present value (NPV) investment is zero
...
Internal Revenue Code
The various statutes and regulations making up federal tax law
...
Internal Revenue Service Restructuring and Reform Act of 1998
The legislation targeted at IRS reform, particularly related to the time period required for
capital gains and taxpayer protection and rights
...
GFEDU
...
International Asset Pricing Model (IAPM)
The international version of the CAPM assuming that investors in each country share the
same consumption basket and purchasing power parity holds
...
International Banking Facility (IBF)
A branch that an American bank establishes in the United States to do Eurocurrency
business
...
It is a United Nations affiliated institution that
assists in the development of its poorer members by facilitating private investments,
and by making and guaranteeing loans
...
International Chamber of Commerce (ICC)
A business organization with membership from over 80 countries
...
International Depository Receipt (IDR)
A receipt issued by a bank as evidence of ownership of one or more shares of the underlying
stock of a foreign corporation that the bank holds in trust
...
The US version of the
IDR is the American Depository Receipt (ADR)
...
International diversification
The attempt to reduce risk by investing in more than one nation
...
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International Finance Corporation (IFC)
A corporation owned by the World Bank that produces a number of well-known stock
indexes for emerging markets
...
International finance subsidiary
A subsidiary incorporated in the US, usually in Delaware, whose sole purpose once was to
issue debentures overseas and invest the proceeds in foreign operations, with the interest
paid to foreign bondholders not subject to US withholding tax
...
International Fisher effect
States that the interest rate differential between two countries should be an unbiased
predictor of the future change in the spot rate
...
The Fisher equation says the nominal interest rate is the product of one plus the real
interest rate times one plus the expected rate of inflation
...
International market
Related: External market
International market index
An index listed on the American Stock Exchange tracking the performance of 50 American
Depository Receipts traded on the AMEX, NYSE, and NASDAQ
...
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial futures
...
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International mutual fund
A mutual fund that invests strictly in securities markets throughout the world, excluding the
United States
...
International Organization for Standardization
ISO is not an acronym but the name of a standards setting organization chartered by the
United Nations
...
e
...
The ISO 4217 are the
standard three letter currency codes
...
International Petroleum Exchange (IPE)
Energy futures and options exchange based in London
...
Establishes uniform trading procedures in the international
bond markets
...
K
...
International Swap Dealers Association (ISDA)
Formed in 1985 to promote uniform practices in the writing, trading, and settlement of
swaps and other derivatives
...
Interpositioning
The practice of using a second broker in a securities transaction, which is considered illegal
it is if used to generate additional commission
...
Antithesis of a testamentary trust
...
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Intracommodity spread
Used in the context of futures trading to refer to a trader holding, buying, and selling
contracts in the same commodity on the same exchange, but for different months
...
Intraday
Term meaning "within the day," often to refer to the high and the low price of a stock
...
For instance,
the difference in interest rates offered for five-year industrial corporate bonds and five-year
utility corporate bonds
...
Intrinsic value
The value of an option if it were to expire immediately with the underlying stock at its
current price; the amount by which an option is in-the-money
...
For put options it is the difference between the striking price and the stock
price, if that difference is positive, and zero otherwise
...
Intrinsic value of an option
The amount by which an option is in the money
...
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the required rate of
return
...
They can be individually valued by several different means, including cost
or current market value, and collectively by FIFO (First in, first out), LIFO (Last in, first out) or
other techniques
...
For securities firms: Securities bought and held by a broker or dealer for
resale
...
GFEDU
...
See also: Inventory loan
...
The three basic forms are a blanket
inventory lien, a trust receipt, and field warehousing financing
...
Low turnover is an unhealthy sign, indicating excess
stocks and/or poor sales
...
Inverse floating-rate note
A variable-rate security whose coupon rate increases as a benchmark interest rate declines
...
Related: Premium
...
Inverted yield curve
When short-term interest rates are higher than long-term rates
...
Investment
The creation of more money through the use of capital
...
Also called a portfolio manager
...
The measure was enacted to protect the public from fraud or
misrepresentation by investment advisers
...
GFEDU
...
All advisers of an
advisory service must be registered with the Securities and Exchange Commission
...
Investment analysts
Related: Financial analysts
Investment bank
Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to
both individual and institutional clients, and trading for their own accounts
...
Investment certificate
A document that serves as proof that an individual has an investment in a savings and loan
association
...
Investment club
A group of people who combine their money into a larger pool, then invest collectively in
stocks and bonds, making decisions as a group
...
See also: Mutual fund
...
Investment Company Institute (ICI)
A national industry group of investment companies, including mutual funds, founded in
1940
...
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Investment-grade bonds
A bond that is assigned a rating in the top four categories by commercial credit rating
companies
...
Related: High-yield bond
...
Investment income
The revenue from a portfolio of invested assets
...
The letter of intent establishes that the securities are being bought
for a minimum time period and are treated as an investment, not for resale
...
Investment management
The process of managing money
...
Investment manager
The individual who manages a portfolio of investments
...
Investment objective
The financial objective of an investor
...
The investor's objective governs the investment strategy
...
Investment philosophy
The style and general ideology of investment practiced by an investor
...
Investment policy
Statement of objectives and constraints for an individual's or organization's approach
...
Investment Risk
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Uncertainty about the future benefits to be realized from an investment
...
Investments
As a discipline, the study of financial securities, such as stocks and bonds, from the
investor's viewpoint
...
Investment strategy
A strategy, or plan of attack, an investor uses when deciding how to allocate capital among
several options including stocks, bonds, cash equivalents, commodities, and real estate
...
Investment strategy committee
A
committee
within
a
brokerage
firm
that
conducts
research
and
makes
recommendations on the firm's stated investment strategy
...
Investment trust
A closed-end fund regulated by the Investment Company Act of 1940
...
The
market price may exceed the net asset value per share, in which case shares are selling
at a premium
...
Many closed-end funds are of a specialized nature; the portfolio represents a
particular industry or, country
...
Investment value
Applies mainly to dealer securities
...
Bond value
...
Investor
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The owner of a financial asset
...
Investor relations
The process by which the corporation communicates with its investors
...
Related: Buying on margin, initial margin requirement
...
Invoice
Bill written by a seller of goods or services and submitted to a purchaser for payment
...
Invoice date
Usually the date when goods are shipped
...
Invoice price
The price that the buyer of a futures contract must pay the seller when a Treasury bond is
delivered
...
IPO Spinning
See Initial Public Offering Spinning
...
These plans
are subject to frequent changes in law with respect to the deductibility of contributions
...
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Irredeemable bond
A bond lacking a call feature or a right of redemption
...
Irrational call option
The implied call imbedded in a MBS
...
Option exercise like this affects
payments on the MBS
...
Irrevocable letter of credit
Assurance of funds issued by a bank that cannot be canceled or amended without the
beneficiary's approval
...
Issue
A particular financial asset
...
Related: Outstanding shares
...
Issuing bank
Bank that issues a letter of credit
...
Italian Derivatives Market (IDEM)
A derivatives market operated by the Italian Stock Exchange Council
...
See: Italian Stock Exchange
...
Italian Stock Exchange (ISE)
The Milan-based stock exchange, which came into effect after the unification of Italy's ten
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national exchanges in 1991
...
The main indexes
are the MIB and the MIBTEL, based on the prices of all listed shares, and the MIB 30,
based on a sample of the 30 most liquid and highly capitalized shares
...
"It's us,"
Used in the context of general equities
...
"
J
Fifth letter of a Nasdaq stock symbol specifying the issue is the voting stock of the
company
...
JMD
The ISO 4217 currency code for the Jamaican Dollar
...
JOD
The ISO 4217 currency code for the Jordanian Dinar
...
JPY
The ISO 4217 currency code for the Japanese Yen
...
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Jakarta Stock Exchange
Established in 1977, the largest securities exchange in Indonesia
...
Studies have suggested this holds only for small-capitalization stocks
...
Japanese Association of Securities Dealers Automated Quotation System
(Jasdaq)
Japanese equivalent of Nasdaq
...
The alpha of an investment or investment manager
...
Johannesburg Stock Exchange (JSE)
Established in 1886, the Johannesburg Stock Exchange is the only stock exchange in South
Africa
...
Joint account
An agreement between two or more firms to share risk and financing responsibility in
purchasing or underwriting securities, or an account owned jointly by two or more persons at a
bank or brokerage house
...
Joint bond
A bond that is guaranteed by the issuer and a party other than the issuer
...
Joint float
An arrangement by which a group of currencies maintain a fixed relationship relative to
each other, but move jointly relative to another currency in response to supply and
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demand conditions in the exchange market
...
The
company sells stock, and its shareholders are free to sell their stock, but shareholders are liable
for all debts of the company
...
A firm with 20% of the account is responsible for selling
20% of the unsold bonds even if has already sold 25% of the total debt issue, for example
...
Joint tax return
Tax return filed by two people, usually spouses
...
Joint venture
An agreement between two or more firms to undertake the same business strategy and
plan of action
...
The defensive tactics are so extreme that they typically lead to
the destruction of the target corporation
...
Joseph Effect
The tendency for persistent time series (0
...
00), to have trends and cycles
...
Jumbo certificate of deposit
A certificate of deposit in increments of $100,000
...
Or, loans that exceed the statutory size limit eligible for
purchase or securitization by the federal agencies
...
(1) Deal in which no trading house has exclusivity
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(each firm is in direct competition for a piece of business); (2) no preference in picking
a particular side (buy/sell) of a stock as profile, indicated during the block call, indicate that
the sales force could have the stock either way
...
Subordinated debt
...
Junior mortgage
A mortgage that will be satisfied only after more senior mortgages have been satisfied
...
g
...
Junior refunding
Issuing of new securities to refinance government debt that matures in one to five years
...
For example common stock is junior to preferred stock
...
Junk or
high-yield bonds offer investors higher yields than bonds of financially sound companies
...
Jury of executive opinion
A method of forecasting using a composite forecast prepared by a number of individual
experts
...
Finally, the individuals' final opinions are
combined
...
"Not a customer request for information
...
Just title
See: Clear title
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Justified price
The fair market price of an asset
...
KCBT
See: Kansas City Board of Trade
KE
The two-character ISO 3166 country code for KENYA
...
KG
The two-character ISO 3166 country code for KYRGYZSTAN
...
KH
The two-character ISO 3166 country code for CAMBODIA
...
KI
The two-character ISO 3166 country code for KIRIBATI
...
KN
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The two-character ISO 3166 country code for SAINT KITTS AND NEVIS
...
KPW
The ISO 4217 currency code for the North Korean Won
...
KRW
The ISO 4217 currency code for the South Korean Won
...
KWD
The ISO 4217 currency code for the Kuwait Dinar
...
KYD
The ISO 4217 currency code for the Cayman Islands Dollar
...
KZ
The two-character ISO 3166 country code for KAZAKSTAN
...
Kaffirs
South African gold mining shares that trade on the London Stock Exchange
...
Kansas City Board of Trade (KCBT)
The U
...
-based futures and options exchange for no
...
GFEDU
...
Kappa
The ratio of the dollar price change in the price of an option to a 1% change in the
expected volatility
...
Keiretsu
A network of Japanese companies organized around a major bank
...
For example, firm A and B are controled by
firm C
...
As a result, A is
unprofitable and B is very profitable
...
Available to those who are
self-employed
...
Key man (or woman) insurance
A life insurance policy purchased by a company to insure the life of a key executive
...
Keynesian economics
An economic theory of British economist, John Maynard Keynes that active government
intervention is necessary to ensure economic growth and stability
...
"Liquidate a position (sell a long/cover a short)
without regard to price
...
In the context of contracts, refers to secret payments made to insure that the contract
goes to a specific firm
...
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Kiddie tax
Tax owed for the investment income of children if the amount is more than $1,400
...
Kiting
Used in of banking to refer to the practice of depositing and drawing checks at two or
more banks and taking advantage of the time it takes for the second bank to collect
funds from the first bank
...
In the context of securities, refers to the manipulation and inflation of stock prices
...
Know your customer
An ethical foundation of securities brokers that an adviser who recommends the purchase
or sale of any security to a customer, must believe that the recommendation is suitable for
the customer, given the customer's financial situation
...
Korea Stock Exchange
The major securities market of Korea
...
Kuala Lumpur Commodities Exchange (KLCE)
The Malaysian commodity exchange for trading futures in crude palm oil, crude palm
kernel oil, tin, rubber, and cocoa
...
GFEDU
...
Kuala Lumpur Stock Exchange (KLSE)
Established in 1973, the Kuala Lumpur Stock Exchange (KLSE) is the only stock exchange
in Malaysia
...
A fat-tailed distribution has
higher-than-normal chances of a big positive or negative realization
...
Kurtosis is sometimes
referred to as the volatility of volatility
...
KCBT
See: Kansas City Board of Trade
KE
The two-character ISO 3166 country code for KENYA
...
KG
The two-character ISO 3166 country code for KYRGYZSTAN
...
KH
The two-character ISO 3166 country code for CAMBODIA
...
KI
The two-character ISO 3166 country code for KIRIBATI
...
GFEDU
...
KN
The two-character ISO 3166 country code for SAINT KITTS AND NEVIS
...
KPW
The ISO 4217 currency code for the North Korean Won
...
KRW
The ISO 4217 currency code for the South Korean Won
...
KWD
The ISO 4217 currency code for the Kuwait Dinar
...
KYD
The ISO 4217 currency code for the Cayman Islands Dollar
...
KZ
The two-character ISO 3166 country code for KAZAKSTAN
...
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Kaffirs
South African gold mining shares that trade on the London Stock Exchange
...
Kansas City Board of Trade (KCBT)
The U
...
-based futures and options exchange for no
...
Kappa
The ratio of the dollar price change in the price of an option to a 1% change in the
expected volatility
...
Keiretsu
A network of Japanese companies organized around a major bank
...
For example, firm A and B are controled by
firm C
...
As a result, A is
unprofitable and B is very profitable
...
Available to those who are
self-employed
...
Key man (or woman) insurance
A life insurance policy purchased by a company to insure the life of a key executive
...
Keynesian economics
An economic theory of British economist, John Maynard Keynes that active government
intervention is necessary to ensure economic growth and stability
...
"Liquidate a position (sell a long/cover a short)
without regard to price
...
GFEDU
...
In the context of contracts, refers to secret payments made to insure that the contract
goes to a specific firm
...
Kiddie tax
Tax owed for the investment income of children if the amount is more than $1,400
...
Kiting
Used in of banking to refer to the practice of depositing and drawing checks at two or
more banks and taking advantage of the time it takes for the second bank to collect
funds from the first bank
...
In the context of securities, refers to the manipulation and inflation of stock prices
...
Know your customer
An ethical foundation of securities brokers that an adviser who recommends the purchase
or sale of any security to a customer, must believe that the recommendation is suitable for
the customer, given the customer's financial situation
...
Korea Stock Exchange
The major securities market of Korea
...
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Kuala Lumpur Commodities Exchange (KLCE)
The Malaysian commodity exchange for trading futures in crude palm oil, crude palm
kernel oil, tin, rubber, and cocoa
...
Kuala Lumpur Stock Exchange (KLSE)
Established in 1973, the Kuala Lumpur Stock Exchange (KLSE) is the only stock exchange
in Malaysia
...
A fat-tailed distribution has
higher-than-normal chances of a big positive or negative realization
...
Kurtosis is sometimes
referred to as the volatility of volatility
...
LA
The two-character ISO 3166 country code for LAO PEOPLE'S DEMOCRATIC REPUBLIC
...
LB
The two-character ISO 3166 country code for LEBANON
...
LC
The two-character ISO 3166 country code for SAINT LUCIA
...
GFEDU
...
LIBOR
See: London Interbank Offered Rate
LIFFE
See: London International Financial Futures and Options Exchange
LIFO
See: Last in, first out
LK
The two-character ISO 3166 country code for SRI LANKA
...
LOC
See: Letter of credit
LR
The two-character ISO 3166 country code for LIBERIA
...
LS
The two-character ISO 3166 country code for LESOTHO
...
LT
The two-character ISO 3166 country code for LITHUANIA
...
GFEDU
...
LTV
See: Loan-to-value ratio
LU
The two-character ISO 3166 country code for LUXEMBOURG
...
LV
The two-character ISO 3166 country code for LATVIA
...
LY
The two-character ISO 3166 country code for LIBYAN ARAB JAMAHIRIYA
...
LYON
See: Liquid yield option note
Ladder strategy
A bond portfolio construction strategy that invests approximately equal amounts in every
maturity within a given range
...
Laffer curve
A curve conjecturing that economic output will increase if marginal tax rates are cut
...
Lag
Payment of a financial obligation later than is expected or required, as in lead and lag
...
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Lag response of prepayments
A delay of typically about three months between the time the weighted-average coupon of
an MBS pool crosses the threshold for refinancing and observation of an acceleration in
prepayment speed is observed
...
Lagging indicators
Economic indicators that follow rather than precede the country's overall pace of
economic activity
...
Laisse-faire
Doctrine that a government should not interfere with business and economic affairs
...
It is the
partial derivative of the option price with respect to the option volatility
...
Landlord
A property owner who rents property to a tenant
...
Large-cap
A stock with a high level of capitalization, usually at least $5 billion market value
...
See also: Leading indicators and coincident indicators
...
Hence, if prices are generally rising, LIFO will lead to lower accounting profitability
...
GFEDU
...
Last split
After a stock split, the number of shares distributed for each share held and the date of the
distribution
...
Contracts outstanding at the end of the last trading day must be
settled by delivery of underlying physical commodities or financial instruments, or by
agreement for monetary settlement, depending futures contract specifications
...
Late tape
A delay in the display of price changes on the tape of an exchange because of heavy trading
...
Launder
To move illegally acquired cash through financial systems so that it appears to be legally
acquired
...
Law of one price
An economic rule stating that a given security must have the same price no matter how
the security is created
...
If it is unequal, an arbitrage
opportunity would present itself
...
Layup
Used in the context of general equities
...
See: Lead pipe
...
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Lead manager
The commercial or investment bank with the primary responsibility for organizing syndicated
bank credit or bond issued
...
Lead pipe
Used in the context of general equities
...
See: Layup
...
Lead underwriter
The head of a syndicate of financial firms that are sponsoring an initial public offering of
securities or a secondary offering of securities
...
Leader
A stock or group of stocks that is the first to move in a market upsurge or downturn
...
Leading economic indicators
Economic series that tend to rise or fall in advance of the rest of the economy
...
Leading and lagging
Refers to timing of cash flows within a corporation
...
Leakage
Release of information selectively or not before official public announcement
...
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Lease acquisition cost
The legal fees and other expenses incurred when acquiring a lease
...
Leasehold improvement
An improvement made to leased property
...
Lease rate
The payment per period stated in a lease contract
...
Leaves
Used in the context of general equities
...
If the floor broker to buy 20M IBM
at $115, and he then buys 6M at this price, his report would be, "You bought 6M IBM at
$115; leaves 14
...
Also called book cash
...
See: Lifting a leg
...
(1)Have a portion of the offsetting side of a trade
in your pocket (spoken for) so your capital risk in the transaction is reduced
...
) (2) Complete one side of a
two-sided transaction, as in a swap or contingency order
...
This term is not an acronym but is
referred to in capitals
...
GFEDU
...
Legal bankruptcy
A legal proceeding for liquidating or reorganizing a business
...
Legal entity
A person or organization that can legally enter into a contract, and may therefore be sued
for failure to comply with the terms of the contract
...
Legal list
A list of high-quality debt and equity securities chosen by a state agency that are acceptable
holdings for fiduciary institutions
...
Legal opinion
A statement, usually written by a specialized law firm, required for a new municipal bond
issue stating that the issue is legally acceptable
...
Legislative risk
The risk that new or changed legislation will have a large positive or negative effect on
an investment
...
Real interest in trading as compared to a profile
stance
...
Lehman Brothers Adjustable-Rate Mortgage Index
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A benchmark index that includes all agency-guaranteed securities with coupons that
periodically adjust based on a spread over a published index
...
Lehman Brothers California Municipal Bond Index
A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds
issued in California
...
Lehman Brothers Corporate Bond Index
A benchmark index that includes all publicly issued, fixed-rate, nonconvertible,
dollar-denominated, SEC-registered, investment-grade corporate debt
...
Lehman Brothers Government/Corporate Bond Index
A benchmark index made up of the Lehman Brothers® Government and Corporate Bond
indexes, including U
...
government Treasury and agency securities as well as corporate and
Yankee bonds
...
Lehman Brothers Municipal Bond Index
A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds
with long-term maturities (greater than two years) selected from issues larger than $50
million
...
All securities have long-term maturities (greater than two
years) and are selected from issues larger than $50 million
...
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Lemons problem
Named after 2001 Nobel Laureate George Akerlof's 1970 paper "The Market for Lemons"
...
Why does the seller want to get rid of the
car? It might be a lemon
...
Hence, the
buyer will demand a deep discount on the car because of the possibility it is a lemon
...
Lendable funds
The pool of funds available to borrows; typically categorized by currency and maturity
...
Lender of last resort
Traditionally the Federal Reserve Bank in the US, which assists banks that face large
withdrawals of funds and in so doing stabilizes the banking system
...
Lending agreement
A contract regarding funds transferred between a lender and a borrower
...
A fee is unusual since securities are normally lent freely between
brokers
...
Lending securities
Securities borrowed from a broker's inventory, from another customer's margin account, or
from another broker, when a customer is required to deliver on a short sale
...
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Less-developed countries (LDCs)
Also known as emerging markets
...
Less Than Container Load
Shipments of less than container load size (<$50,000)
...
Lessor
An entity that leases an asset to another entity
...
Letter of comment
A communication to the firm from the SEC that suggests changes to its registration
statement
...
Letter of Guarantee
A letter from a bank to a brokerage firm which states that a customer (who has written
a call option) does indeed own the underlying stock and the bank will guarantee delivery
if the call is assigned
...
Not all brokerage firms
accept letters of guarantee
...
Letter of intent
An assurance by a mutual fund shareholder that a certain amount of money will be invested
monthly, in exchange for lower sales charges
...
Letter stock
Privately placed common stock, so-called because the SEC requires a letter from the
purchaser stating that the stock is not intended for resale
...
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Letter of Transmittal
A document used by security holder to accompany certificates surrendered in an
exchange or other corporate action
...
Price measure of an indication
...
Level debt service
A municipal charter provision that debt payments must be relatively equal from year to
year so that required revenue projections are easier
...
See: Front-end loads and back-end loads
...
Different from the typical mortgage for which the principal
payment component of the monthly payment becomes gradually greater while the
monthly interest component shrinks
...
Leverage
The use of debt financing, or property of rising or falling at a proportionally greater
amount than comparable investments
...
Leverage clientele
A group of shareholders who, because of their personal leverage, seek to invest in
corporations that maintain a compatible degree of corporate leverage
...
Value of firm's debt to the total value of the
firm (debt plus stockholder capitalization)
...
GFEDU
...
Leveraged beta
The beta of a leveraged required return; that is, the beta as adjusted for the degree of
leverage in the firm's capital structure
...
Because of the large amount of debt relative to equity in the new
corporation, the bonds are typically rated below investment-grade, properly referred to as
high-yield bonds or junk bonds
...
e
...
Leveraged company
A company that has debt in its capital structure
...
Holders of leveraged equity experience the
benefits and costs of using debt
...
Also, an
investment company that issues both income shares and capital shares
...
The lender has a lien on the assets and a pledge of the lease
payments to secure the borrowing
...
Leveraged recapitalization
Often used in risk arbitrage
...
Popular form of shark repellent See: Stub
...
Leveraged stock
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Stocks financed with credit, such as that purchased on a margin account
...
Liability
A financial obligation, or the cash outlay that must be made at a specific time to satisfy
the contractual terms of such an obligation
...
Liability insurance
Insurance guarding against damage or loss that the policyholder, may cause another
person in the form of bodily injury or property damage
...
License agreement
A contract by which a domestic company (the licensor) allows a foreign company (the
licensee) to market its products in a foreign country in return for royalties, fees, or other
forms of compensation
...
Lien
A security interest in one or more assets that lenders hold in exchange for secured debt
financing
...
Life cycle
The lifetime of a product or business, from its creation to its demise or transformation
...
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Life insurance
An insurance policy that pays a monetary benefit to the insured person's survivors after
death
...
Life insurance policy
The contract that sets out the terms of life insurance coverage
...
When the owner
ceases living in the house, the property is sold, and the loan repaid
...
Lifted
Refers to over-the-counter trading
...
Lifting a leg
Closing out one side of a long-short arbitrage before the other is closed
...
Lima Stock Exchange
Peru's major securities market
...
Limit Cycles
An attractor for non-linear dynamic systems which has periodic cycles or orbits in phase
space
...
See: Attractor, Phase Space
...
GFEDU
...
Limit order
An order to buy a stock at or below a specified price, or to sell a stock at or above a
specified price
...
A conditional
trading order designed to avoid the danger of adverse unexpected price changes
...
These orders are treated
equally with other orders in terms of priority of execution
...
Limit price
See: Maximum price fluctuation
Limit up, limit down
The maximum price change allowed for a commodity futures contract per trading day
...
Limitation on conversion
Applies mainly to convertible securities
...
More frequently,
the right to convert may be terminable prior to a redemption date, preventing the holder
from receiving a final coupon or dividend
...
Limitation on liens
A bond covenant that restricts in some way a firm's ability to grant liens on its assets
...
Limitation on sale-and-leaseback
A bond covenant that restricts in some way a firm's ability to enter into sale-and-leaseback
transactions, financing techniques that could affect creditor thinness
...
GFEDU
...
Limited company
A form of business commonly used in the U
...
comparable to incorporation in the U
...
Limited discretion
Permission by a client that allows a broker to make certain stock and option trades without
first consulting the client about the trade
...
Limited liability
Limitation of loss to what has already been invested
...
Limited partner
A partner who has limited legal liability for the obligations of the partnership
...
Limited payment policy
Life insurance providing full life protection but requiring premiums for only part of the
customer's lifetime
...
The maximum loss in buying a call option, for example, is the
premium paid for the option
...
See: Limit order
...
Limited warranty
A warranty with certain conditions and limitations on the parts covered, type of damage
covered, and/or time period for which the agreement is good
...
GFEDU
...
Linear programming
Technique for finding the maximum value of some equation, subject to stated linear
constraints
...
Linking method
Method for calculating rates of return that multiplies one plus the interim rate of return
...
Lipper Mutual Fund Industry Average
The average level of performance for all mutual funds, as reported by Lipper Analytical
Services
...
Liquid market
A market allowing the buying or selling of large quantities of an asset at any time and at
low transactions costs
...
Liquidating dividend
Payment by a firm to its owners from capital rather than from earnings
...
Assets are sold, proceeds are used to pay
creditors, and any leftovers are distributed to shareholders
...
Related: Buy in, evening up, offset liquidity
...
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Liquidation rights
The rights of a firm's securityholders in the event the firm liquidates
...
Liquidator
Person appointed by an unsecured creditor in the United Kingdom to oversee the sale of an
insolvent firm's assets and the repayment of its debts
...
Also, a market characterized by the ability to buy and sell with relative ease
...
Liquidity diversification
Investing in a variety of maturities to reduce the price risk to which holding long bonds
exposes the investor
...
Liquidity preference hypothesis
The argument that greater liquidity is valuable, all else equal
...
Liquidity premium
Forward rate minus expected future short-term interest rate
...
Liquidity risk
The risk that arises from the difficulty of selling an asset in a timely manner
...
Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward rates will not be a pure
estimate of the market's expectations of future interest rates because they embody a
liquidity premium
...
GFEDU
...
The BVL general index is the exchange's
official index
...
Listed option
An option that has been accepted for trading on an exchange
...
Generally, the advantages of being listed are that
exchanges provide: (1) an orderly marketplace; (2) liquidity; (3) fair price determination;
(4) accurate and continuous reporting on sales and quotations; (5) information on listed
companies; and (6) strict regulation for the protection of securityholders
...
Listed stocks
Stocks that are traded on an exchange
...
See: Listing broker
...
Listing requirements
Requirements, including minimum shares outstanding, market value, and income, that are
laid down by an exchange for any stock to be listed for trading
...
Living trust
A trust that an individual establishes during the individual's lifetime, enabling the person
to control the assets contributed to the trust
...
Living will
A document specifying the kind of medical care a person wants-or does not want-in the
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event of terminal illness or incapacity
...
Load
The sales fee charged to an investor when shares are purchased in a load fund or annuity
...
Load fund
A mutual fund that sells shares with a sales charge-typically 4% to 8% of the net amount
indicated
...
25%
...
Load spread option
A method of allocating the annual sales charge on load funds, often through percentage
deductions from a customer's periodic fixed payments
...
If you borrow $1 million you have taken out a
loan for $1 million
...
Loan commitment
Assurance by a lender to make money available to a borrower on specific terms in return
for a fee
...
In the 1920's and 1930's, it refers to the group of member firms that lend
or borrow securities needed to cover the positions of customers who have sold short securities
...
Loan Preference Principle
The theory that a covered loan is less expensive when its cost is calculated in one currency,
it will also be less expensive in all other currencies
...
GFEDU
...
See: Syndicate
...
Loan-to-value ratio (LTV)
The ratio of money borrowed on a property to the property's fair market value
...
Local
A futures exchange member who trades securities for his or her own account
...
Local expectations theory
A form of the pure expectations theory that suggests that the returns on bonds of different
maturities will be the same over a short-term investment horizon
...
Local taxes are usually
deductible for federal income tax purposes
...
Locational arbitrage
Attempt to exploit discrepancies in exchange rates between banks
...
Make a market both ways (bid and offer) either on
the bid, offering, or an in-between price only
...
Locking on the bid side attracts buyers for similar reasons
...
Lock in
To ensure that an individual transacts all his or her business with a sole broker by
providing superior services, such as accommodating block buy and sell needs or
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preparing excellent research (soft-dollar lock)
...
Lock-out
With PAC bond CMO classes, the period before the PAC sinking fund becomes effective
...
Lock-up CDs
CDs that are issued with the tacit understanding that the buyer will not trade the certificate
...
Lockup option
Often used in risk arbitrage
...
The aim is to discourage a hostile takeover
...
Lockbox
A collection and processing service provided to firms by banks, which collect payments
from a dedicated postal box to which the firm directs its customers to send payment to
...
Locked in
When an investor is unable to take advantage of preferential tax treatment because of
time remaining on a required holding period
...
Locked market
A market is locked if the bid price equals the ask price
...
Highly competitive market environment with inside bid and
offering at the same price
...
Log-linear least-squares method
A statistical technique for fitting a curve to a set of data points
...
Lognormal distribution
Pattern of frequency of occurrence in which the logarithm of the variable follows a normal
distribution
...
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Lombard rate
Applies mainly to international equities
...
London Commodity Exchange (LCE)
Merged with the London International Financial Futures and Options Exchange in 1996
...
Related: LIBOR
...
Many variable interest rates in the US are based on spreads off LIBOR
...
London International Financial Futures and Options Exchange
(LIFFE)
A leading market for trading options and futures on euro money market derivatives
...
London Stock Exchange (LSE)
The U
...
's six regional exchanges joined together in 1973 to form the stock exchange of
Great Britain and Ireland, later named the LSE
...
Long
One who has bought a contract to establish a market position and who has not yet closed
out this position through an offsetting sale; the opposite of short
...
The "long bond" is the 30-year US Treasury bond
...
(2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period
...
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Long hedge
The purchase of a futures contract in anticipation of actual purchases in the cash market
...
Related: hedge, short hedge
Long leg
The part of an option spread in which an agreement to buy the underlying security is made
...
Long position
Owning or holding options (i
...
, the number of contracts bought exceeds the number of
contracts sold)
...
An
owner of 1,000 shares of stock is said to be "Long the stock
...
Long position in an option
Purchase of an options
...
Long straddle
Taking a long position in both a put and a call option
...
Long-term assets
Value of property, equipment, and other capital assets minus the depreciation
...
It is usually established on a "cost" basis,
and thus does not necessarily reflect the market value of the assets
...
Long-term debt
An obligation having a maturity of more than one year from the date it was issued
...
Long-term debt/capitalization
Indicator of financial leverage
...
GFEDU
...
Determined by dividing long-term debt by the sum of long-term debt, preferred
stock and common stockholder's equity
...
Long-term debt ratio
The ratio of long-term debt to total capitalization
...
Long-term financial plan
Financial plan covering two or more years of future operations
...
Long-term gain
A profit on the sale of a capital assets held longer than 12 months, and eligible for
long-term capital gains tax treatment
...
Long-term investor
A person who makes investments for a period of at least five years in order to finance his
or her long-term goals
...
Long-term loss
A loss on the sale of a capital asset held less than 12 months that can be used to offset a
capital gain
...
See: Picture
...
Lookback option
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An option that allows the buyer to choose as the option strike price any price of the
underlying asset that has occurred during the life of the option
...
This option will always be in the money
...
Antithesis of in touch with
...
Loose credit
Policy by the Federal Reserve Board to make loans less expensive and more available by
reducing interest rates through open market operations
...
Loss Carry-Back (Carry-Forward)
A tax provision that allows operating losses to be used as a tax shield to reduce taxable income
in prior and future years
...
Loss-control activities
Actions that an insured person or company takes at the instigation of an insurance
company in order to prevent accidents or losses
...
Loss ratio
The ratio of losses paid or accrued by an insurer to premiums collected over a year
...
Can express a specific
transaction in a stock at a certain time, often implying execution at the same price (e
...
, "I
traded 40m in two lots of 10 and four lots of 5
...
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Low
In the context of general equities, this is a specific minimum limit required by a seller in
execution an order ("I'll sell 50 with an eighth low
...
Antithesis of top
...
Low ball
Slang for making an offer well below the fair value of an asset in hopes that the seller
may be desperate to sell
...
Low grade
A bond with a rating of B or lower
...
5% or less for the purchase of shares
...
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios
of stocks with high price-earnings ratios
...
Lump-sum distribution
A single payment that represents an employee's interest in a qualified retirement plan
...
Lyapunov Exponents
A measure of the dynamics of an attractor
...
A
positive exponent measures sensitive dependence on initial conditions, or how much our
forecasts can diverge based upon different estimates of starting conditions
...
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Strange Attractors are characterized by at least one positive exponent
...
Point Attractors are
characterized by all negative variables
...
M
Fifth letter of a NASDAQ stock symbol specifying that the issue is the company's fourth
class of preferred shares
...
S
...
M2
Measure of the U
...
money stock that consists of M1, certain overnight repurchase
agreements and certain overnight Eurodollars, savings deposits (including money
market deposit accounts), time deposits in amounts of less that $100,000 and balances
in money market mutual funds (other than those restricted to institutional investors)
...
S
...
MA
The two-character ISO 3166 country code for MOROCCO
...
MBO
See: Management buyout
MBSCC
See: Mortgage-Backed Securities Clearing Corporation
MC
The two-character ISO 3166 country code for MONACO
...
GFEDU
...
MDA
See: Multiple discriminant analysis
MDL
The ISO 4217 currency code for the Moldovan Leu
...
MGF
The ISO 4217 currency code for the Madagascar Franc
...
MHS
See: Manufactured housing securities
MK
The two-character ISO 3166 country code for MACEDONIA, THE FORMER YUGOSLAV
REPUBLIC OF
...
ML
The two-character ISO 3166 country code for MALI
...
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MMDA
See: Money market demand account
MMK
The ISO 4217 currency code for the Myanmar (ex-Burma) Kyat
...
MNC
See: Multinational corporation
MNT
The ISO 4217 currency code for the Mongolian Tugrik
...
MOC
See Market on Close
...
MP
The two-character ISO 3166 country code for NORTHERN MARIANA ISLANDS
...
MR
The two-character ISO 3166 country code for MAURITANIA
...
MS
The two-character ISO 3166 country code for MONTSERRAT
...
GFEDU
...
MTL
The ISO 4217 currency code for the Maltese Lira
...
MUR
The ISO 4217 currency code for the Mauritius Rupee
...
MVR
The ISO 4217 currency code for the Maldive Islands Rufiyaa
...
MWK
The ISO 4217 currency code for the Malawian Kwacha
...
MYR
The ISO 4217 currency code for the Malaysian Ringgit
...
MXN
The ISO 4217 currency code for the Mexican Peso
...
MZM
The ISO 4217 currency code for the Mozambique Metical
...
GFEDU
...
Macaulay duration
The weighted-average term to maturity of the cash flows from a bond, where the weights are
the present value of the cash flow divided by the price
...
For example, the manager might believe that the Yen will appreciate relative to the dollar
over the next six months and alter the portfolio to capture this potential profit
opportunity
...
Macroassessment
Overall risk assessment of a country without consideration of an MNC's business
...
Madrid Stock Exchange (Bolsa de Madrid)
The largest of Spain's four stock exchanges
...
Related: Markowitz diversification
...
Mail float
Time period that checks for payment spend in the postal system
...
Maintenance
Appropriate ongoing adjustments to security holder records
...
GFEDU
...
Maintenance fee
A yearly charge to maintain brokerage accounts, such as asset management accounts or
IRAs
...
Maintenance margin requirement
A sum, usually smaller than but part of the original margin, that must be maintained on
deposit at all times
...
Related: Margin, margin call
...
Majority voting
Voting system under which corporate shareholders vote for each director separately
...
Make a market
Dealers are said to make a market when they quote bid and offered prices at which they
stand ready to buy and sell
...
The payment can be
significant and negate the attractiveness of a call
...
Malaysia Commodity Exchange
A subsidiary of the KLSE that trades interest rate futures on the three-month Kuala Lumpur
Interbank offered rate
...
GFEDU
...
Managed account
An investment portfolio one or more clients entrusted to a manager who decides how to
invest it
...
Managed Futures
In the context of hedge funds, a style of management that focuses on short-term trading
in the futures market
...
Management buying
The acquisition of a controlling interest in a promising business by an outside investment
group that retains existing management and places representatives on the board of
directors
...
Management/closely held shares
Percentage of shares held by persons closely related to a company, as defined by the
Securities and Exchange Commission
...
There is overlap as institutions sometimes acquire enough stock to be considered by the
SEC to be closely allied to the company
...
Management fee
An investment advisory fee charged by the financial adviser to a fund typically on the basis
of the fund's average assets, but sometimes determined on a sliding scale that declines as
the dollar amount of the fund increases
...
GFEDU
...
It explains the period's financial results and enables
management to discuss topics that may not be apparent in the financial statements in
the annual report
...
Managerial decisions
Decisions concerning the operation of the firm, such as the choice of firm size, firm
growth rates, and employee compensation
...
Managing underwriter
The leading firm in an underwriting group, which originates the deal and acts as an agent
for the group
...
Mandatory redemption schedule
Schedule according to which bond sinking fund payments must be made
...
Illegal
...
Maple Leaf
A gold, silver, or platinum coin minted in Canada that usually trades at slightly more than
its current bullion value
...
The margin is the
difference between the market value of a stock and the loan a broker makes
...
Margin account (stocks)
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A leverageable account in which stocks can be purchased for a combination of cash and a
loan
...
Margin rules are federally regulated, but margin requirements and interest may
vary among broker/dealers
...
Margin stock
Any stock listed on a national securities exchange, any over-the-counter security
approved by the SEC for trading in the national market system, or appearing on the
Board's list of over-the-counter margin stock and most mutual funds
...
Marginal
Incremental
...
Marginal cost
The increase or decrease in a firm's total cost of production as a result of changing
production by one unit
...
Marginal revenue
The change in total revenue as a result of producing one additional unit of output
...
Marginal utility
The change in total satisfaction as a result of consuming one additional unit of a specific
good or service
...
Maintenance margin
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requirement, security deposit maintenance
...
Margin of profit
Gross profit divided by net sales
...
Margin of safety
With respect to working capital management, the difference between (1) the amount of
long-term financing and (2) the sum of fixed assets and the permanent component of
current assets
...
Margin security
A security that may be bought or sold in a margin account as defined in Regulation T
...
Marital deduction
A tax deduction that allow spouses to transfer unlimited amounts of property to one
another
...
Markdown
The amount subtracted from the selling price of securities when they are sold to a dealer in
the OTC market
...
Marked-to-market
An arrangement whereby the profits or losses on a futures contract are settled each day
...
"The market went down today" means that the value
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of the stock market dropped that day
...
Market-based forecasting
Analyzing future spot rates on the basis of a market-determined exchange rate (such as
the current spot rate or forward rate)
...
Market-book ratio
Market price of a share divided by book value per share
...
Computed as shares times current market
price
...
Market capitalization rate
Expected return on a security
...
Market clearing
Total demand for loans by borrowers equals total supply of loans from lenders
...
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common
stock by purchasing a convertible security and then exercising the conversion option
...
Market correction
A relatively short-term drop in stock market prices, generally viewed as bringing overpriced
stocks back to a level closer to companies' actual values
...
A market cycle is
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complete when the S&P is 15% below the highest point or 15% above the lowest point
(ending a down market)
...
K
...
Market failure
The inability of arm's length markets to deliverer goods or services
...
Market-if-touched (MIT)
A price order, below market if a buy or above market if a sell, that automatically becomes
a market order if the specified price is reached
...
Also called price impact costs
...
A stock market tracks the performance of certain stocks by
weighting them according to their prices and the number of outstanding shares by a
particular formula
...
Market internalization advantages
Conditions that allow a corporation to exploit the failure of an arm's length market to
deliver goods or services efficiently
...
Market letter
A newsletter analyzing the market that is written by an SEC-registered investment adviser
who sells the letter to subscribers
...
Market maker
Used in the context of general equities
...
See:
Agent, dealer, specialist
...
GFEDU
...
Market model
The market model says that the return on a security depends on the return on the market
portfolio and the extent of the security's responsiveness as measured by beta
...
The market model can be
graphed as a line fitted to a plot of asset returns against returns on the market portfolio
...
Market Neutral
In the context of hedge funds, a style of management that has long and short equity
exposure with nearly exposure on average to fluctuations in the market
...
The risk of the longs and the shorts could fluctuate
through time leading to negative returns when the market falls sharply
...
If the floor broker expects a decline in price and
he is holding a "market not held buy order", he (she) may wait to buy, figuring that a
better price will soon be available
...
Market-on-Close (MOC) order
An order to trade stocks, options, or futures as close as possible to the market close
...
Market opening
The start of formal trading on an exchange
...
Order to buy or sell a stated amount of a security
at the most advantageous price obtainable after the order is represented in the trading
crowd
...
See: Limit order
...
See: Percentage order
...
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Market overhang
The theory that, in certain situations, institutions wish to sell their shares but postpone
the sale because large orders under current market conditions would drive down the
share price and that the consequent threat of securities sales will tend to retard the rate
of share price appreciation
...
Market penetration/share
Used in the context of general equities
...
Market Performance Committee (MPC)
A group of NYSE market oversight specialists who monitor specialists' efficiency in
maintaining fair prices and orderly markets
...
Market research
A technical analysis of factors such as volume, price trends, and market breadth that are used
to predict price movement
...
Marketplace price efficiency is sometimes estimated as the difficulty faced by active
management of earning a greater return than passive management would, after
adjusting for the risk associated with a strategy and the transactions costs associated with
implementing a strategy
...
Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk
...
Market prices
The amount of money that a willing buyer pays to acquire something from a willing seller,
when a buyer and seller are independent and when such an exchange is motivated by
only commercial consideration
...
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Market risk
Risk that cannot be diversified away
...
The schedule begins at the risk-free interest rate and rises as risk increases
...
Market segmentation theory
A biased expectations theory that asserts that the shape of the yield curve is determined
by the supply of and demand for securities within each maturity sector
...
Market sweep
A second offering following a tender offer, allowing institutional investors to obtain a
controlling interest at a price higher than the original offer
...
Market timing
Asset allocation in which investment in the equity market is increased if one forecasts that
the equity market will outperform T-bills and is decreased when the market is anticipated
to underperform
...
Market tone
The general state of well-being of a securities market, based mostly on trading activity
...
(2)
What investors believe a firm is worth; calculated by multiplying the number of shares
outstanding by the current market price of a firm's shares
...
GFEDU
...
Market value-weighted index
An index of a group of securities computed by calculating a weighted average of the returns
on each security in the index, where the weights are proportional to outstanding market
value
...
Marketable securities
Securities that are easily convertible to cash because there is high demand allowing them
to be sold quickly
...
Marketed claims
Claims that can be bought and sold in financial markets, such as those of stockholders and
bondholders
...
Also refers
to the practice of reporting the value of assets on a market rather than book value basis
...
Markowitz, Harry
Nobel laureate in economics
...
Markowitz diversification
A strategy that seeks to combine in a portfolio assets with returns that are less than
perfectly positively correlated, in an effort to lower portfolio risk (variance) without
sacrificing return
...
Markowitz efficient frontier
The graphical depiction of the Markowitz efficient set of portfolios representing the boundary
of the set of feasible portfolios that have the maximum return for a given level of risk
...
Any below the frontier are dominated
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by Markowitz efficient portfolios
...
Markovian Dependence
The condition where observations in a time series are dependent on previous
observations in the near term
...
Markowitz efficient set of portfolios
The collection of all efficient portfolios, which can be graphed as the Markowitz efficient
frontier
...
Mark-to-market
Adjustment of the book value or collateral value of a security to reflect current market value
...
Married put
A put option bought at the same time as its underlying securities in order to hedge the price
paid for the securities
...
This
is a limited risk strategy during the life of the puts because the stock can be sold at the
strike price of the puts
...
Master Air Waybill (MAB)
A document issued by the originating airline when and if a shipment involves more than
one air carrier
...
GFEDU
...
Master pension plan
See: Prototype plan
Matador market
The foreign market in Spain
...
Match-fund
A bank is said to match-fund a loan or other asset when it does so by buying (taking) a
deposit of the same maturity
...
Matched book
A bank runs a matched book when the of maturities of its assets and liabilities is distribution
equal
...
Matched orders
Used for listed equity securities
...
Matched Sale Purchase Transactions
Transaction in which the Federal Reserve sells a government security to a dealer or a
foregin central bank and agrees to buy back the security to a dealer or a foreign central
bank and agrees to buy back the security on a specified date (usually within seven days)
at eh same price (the reverse of a repurchase agreement)
...
Matched sale transaction
Applies mainly to convertible securities
...
The agreement requires the dealer to sell the securities back by a specified date, which
ranges from 1 to 15 days
...
These transactions, also called reverse repurchase agreements, decrease the
money supply for temporary periods by reducing dealers' bank balances and thus excess
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reserves
...
Material Adverse Change or Effect
Many mergers and acquisitions contracts include a material adverse change clause that
allows a company to renegotiate or walk away from a deal if the other company or its
subsidiaries announces a significant event that may negatively affect its stock price or
operations
...
Materiality
The importance of an event or information in influencing a company's stock price
...
Materials requirement planning
Computer-based systems that plan backward from the production schedule to make
purchases in order to manage inventory levels
...
Mathematical programming models include linear
programming, quadratic programming, and dynamic programming
...
Matrix trading
Swapping bonds in order to take advantage of temporary differences in the yield spread
between bonds with different ratings or different classes
...
Mature economy
The economy of a nation with a stable population and slowing economic growth
...
Includes all Series A-D, F, G, 1, J, and K bonds
...
Series HH bonds (issued since
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January 1980) mature after 20 years
...
In an interest rate swap,
the date that the swap stops accruing interest
...
Date that the bond finishes and is paid off
...
Maturity factoring
An arrangement that provides collection and insurance of accounts receivable
...
Related: Three-phase DDM
...
Maturity value
Related: Par value
Maximum capital gains mutual fund
A mutual fund whose objective is to produce capital gains by investing in small or risky
rapid-growth companies
...
Maximum price fluctuation
The greatest amount by which the contract price can change, up or down, during one
trading session, as fixed by exchange rules in the contract specification
...
Maximum return criterion (MRC)
Standard that one choose the asset with the highest return
...
May expand
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Used in the context of general equities
...
See: "more behind it
...
The depository was initially operated by
MBSCC and is now a separately incorporated, participant-owned, limited-purpose trust
company organized under the State of New York Banking Law
...
Meals and entertainment expense
A tax deduction allowed for meals and entertainment expenses incurred in the course of
business
...
Arithmetic average of a sample
...
Mean return
See: Expected return
Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes
...
The choice of
the higher expected return portfolio for a given level of variance or the lower variance
portfolio for a given expected return
...
Measurement Noise
See: Observational Noise
...
GFEDU
...
The Medallion programs ensure that the
individual signing the certificate or stock,power is in fact the registered owner as it
appears on the stock certificate or stock power
...
S
...
Such
institutions include banks, savings and loans, credit unions and U
...
brokerages
...
Half the stocks in the portfolio will have higher
market capitalizations; half will have lower
...
Medium-Term Guarantee Program
Ex-Im Bank effort encouraging commercial lenders to finance the sale of U
...
capital
equipment and services to approved foreign buyers
...
Medium-term note
A corporate debt instrument that is continuously offered to investors over a period of time
by an agent of the issuer
...
, up to 30 years
...
Meff Renta Variable
Stock index and equity derivatives market in Spain trading futures and options on the Iberian
Exchange (IBEX)-35 index and on individual stocks
...
Member firm
Used for listed equity securities
...
Membership or a seat on the exchange
A limited number of exchange positions that enable the holder to trade for the holder's own
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accounts and charge clients for the execution of trades for their accounts
...
Member short sale ratio
The total shares sold short by NYSE members divided by total short sales, which is used to
analyze market expectations and bullish or bearish trends
...
Hierarchy of choices concerning price and
volume of bids or offers proposed to a customer (e
...
Menu of offerings to a customer
buyer - a) 10m @ 24 1/4; b) 25m @ 24 1/2; or c) 50m @ 24 3/4)
...
Mercantile agency
An organization that supplies credit ratings and reports on firms that are prospective
customers
...
Merchandise
All movable goods such as cars, textiles, appliances, etc
...
o
...
' means free on
board
...
Merchant bank
A British term for a bank that specializes not in lending out its own funds, but in
providing various financial services such as accepting bills arising out of trade,
underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange,
portfolio management, etc
...
Merger
(1) Acquisition in which all assets and liabilities are absorbed by the buyer
...
The firm's activity in this respect is
sometimes called M&A (Merger and Acquisition)
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Merger Arbitrage
In the context of hedge funds, a style of management that involves the simultaneous
purchase of stock in a company being acquired and the sale of stock in its acquirer
...
Mexican Stock Exchange
The only stock exchange in Mexico
...
Mezzanine bracket
The members of an underwriting group with involvement large enough to be in the second
participation tier from the top
...
Mezzanine financing
The next stage of financing that follows venture capital financing
...
Microassessment
The risk assessment of a country as related to an MNC's type of business
...
Mid cap
A stock with a capitalization usually between $1 billion and $5 billion
...
This
SPDR also trades on the AMEX, under the symbol MDY
...
GFEDU
...
Midget
A 15 year GNMA bond; similar to a Dwarf
...
Milan Stock Exchange
The largest regional stock exchange in Italy, facilitating more than 90% of the country's
trading volume
...
Miller, Merton
Nobel Laureate and coauthor of the famous Miller-Modigliani theorems
...
Mimic
An imitation that sends a false signal
...
Minimum maintenance
The lowest required equity level that must be held with a broker in a margin account
...
Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract
...
Minimum purchases
For mutual funds, the amount required to open a new account (Minimum Initial Purchase)
or to deposit into an existing account (Minimum Additional Purchase)
...
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Minimum-variance portfolio
The portfolio of risky assets with lowest variance
...
Minus
The symbol (-) that precedes the change figure in a stock table to indicate a closing sale
lower than that of the previous day
...
Misery index
An index that sums the unemployment and inflation rates, used as a political rating or
measure of consumer confidence
...
g
...
Miss the price/market
Used for listed equity securities
...
Mixed account
A brokerage account holding both long and short positioned securities
...
Group of stocks which consists of some which are
up, down, and neutral
...
Mob spread
The yield spread between a tax-free municipal bond and a Treasury bond with the same
maturity
...
GFEDU
...
Modeling
The process of creating a depiction of reality, such as a graph, picture, or mathematical
representation
...
Modified Accelerated Cost Recovery System (MACRS)
A 1986 act that set out rules for the depreciation of qualifying assets, allowing for greater
acceleration over longer periods of time
...
Modified duration is
inversely related to the approximate percentage change in price for a given change in
yield
...
Related: fully modified
pass-throughs
Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot change the total
value of its outstanding securities by changing its capital structure proportions
...
Modigliani and Miller Proposition II
A proposition by Modigliani and Miller which states that the cost of equity is a linear
function of the firm's debt/equity-ratio
...
A trader that
follows a movement strategy will purchase stocks that have recently risen in price
...
M-1, M-2 and M-3
See: money supply
...
GFEDU
...
Monetarist
An economist who believes that changes in the money supply are the most important
determinants of economic activity and economic cycles
...
Monetary Control Act of 1980 (MAC)
Act which requires that all banks and all institutions that accept deposits from the public
make periodic reports to the Federal Reserve System
...
Monetary gold
Gold held by governmental authorities as a financial asset
...
Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the
money supply or interest rates
...
g
...
g
...
Monetize the debt
Financing the national debt by printing new money, which causes inflation due to a larger
money supply
...
Money base
Composed of currency and coins outside the banking system plus liabilities to the deposit
money banks
...
GFEDU
...
Money management
Related: Investment management
...
Money market
Money markets are for borrowing and lending money for three years or less
...
S
...
Money market demand account (M
...
D
...
)
An account that pays interest based on short-term interest rates
...
The net asset value per share is
maintained at $1
...
Such funds are not federally insured, although the portfolio may
consist of guaranteed securities and/or the fund may have private insurance protection
...
Money market instruments
See: Cash investments
Money market notes
Publicly traded issues that may be collateralized by mortgages and Mortgage Backed Securities
(MBSs)
...
Money market yield
A bond quotation convention based on a 360-day year and semiannual coupons
...
Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and the
firm contributes at the same or a different rate
...
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Money order
A financial instrument backed by a deposit at a certain firm such as a bank that can be
easily converted into cash
...
Money supply
M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits
...
M3: M-2 plus large time deposits and term repos
...
Monitor
To seek information about an agent's behavior; a device that provides such information
...
Monopsony
The existence of only one buyer in a market, forcing sellers to accept a lower price than
the socially optimal price
...
Method for calculating the probability distribution of possible outcomes
...
The subsidiary relends the money
to the parent
...
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Montreal Exchange/Bourse de Montreal
The oldest stock exchange in Canada trading stocks, bonds, futures, and options
...
Moody's investment grade
A rating of one through four assigned by Moody's Investment Service to municipal short-term
bonds
...
Moral hazard
The risk that the existence of a contract will change the behavior of one or both parties to
the contract, e
...
an insured firm will take fewer fire precautions
...
"More behind it"
Used in the context of general equities
...
Often, the buyer or seller does not disclose the full
size of his buy or sell interest as not to affect the market adversely
...
More flexible exchange rate system
The International Monetary Fund's name for an exchange rate system in which rates float
freely
...
Morgan Stanley Capital International Emerging Markets Global
Index
A market capitalization-weighted benchmark index made up of equities from 29
developing countries
...
GFEDU
...
France, Germany, and the United Kingdom represent about two-thirds of the
index
...
Japan represents about three-fourths of the index
...
Morgan Stanley REIT Index
A capitalization-weighted benchmark index of the most actively traded real estate investment
trusts (REITs), designed to measure real estate equity performance
...
Mortality tables
Tables of probability that individuals of various ages will die within one year
...
Mortgage-Backed
"Founded" in 1979, MBSCC is the sole provider of automated post-trade comparison,
netting, risk management and pool notification services to the mortgage-backed
securities market
...
MBSCC provides its specialized
services to major market participants active in various Government National Mortgage
Association (GNMA), Fannie Mae(FNMA) and Federal Home Loan Mortgage Corporation
(FHLMC) MBS programs
...
Mortgage banker
A company or individual that originates mortgage loans and sells them to investors, while
taking care of borrowers' loan payments, records, taxes, and insurance
...
GFEDU
...
See:
Collateral trust bonds
Mortgage broker
A company or individual that places mortgage loans with lenders, but does not originate
or service loans like a mortgage banker
...
Two factors are
employed: one that reflects the impact of changes in prepayment speed or price
...
Mortgage interest deduction
A federal tax deduction for interest paid on a mortgage used to acquire, construct, or improve
a residence
...
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage holders form a
collection (pool) of mortgages and sells shares or participation certificates in the pool
...
This is the predominant type of MBS
traded in the secondary market
...
Mortgage-pipeline risk
The risk associated with taking applications from prospective mortgage borrowers who
may opt to decline to accept a quoted mortgage rate within a certain grace period
...
Mortgager
The borrower of a loan secured by property
...
GFEDU
...
Mortgage REIT
An REIT that invests in loans secured by real estate which derive income from mortgage
interest and fees
...
Moscow Interbank Currency Exchange (MICEX)
Established in 1992, the most liquid and best organized financial exchange in Russia
...
Most distant futures contract
When several futures contracts are considered, the contract settling last
...
Moving average
Used in charts and technical analysis, the average of security or commodity prices constructed
in a period as short as a few days or as long as several years and showing trends for the
latest interval
...
MTN
Medium term notes issued by corporations, much like shorter-term commercial paper
...
Multibuyer policy
Ex-Im Bank program that provides credit risk insurance on export sales to many different
buyers
...
GFEDU
...
Multicurrency loans
Gives the borrower the possibility of drawing a loan in different currencies
...
Related: arbitrage pricing theory
Multifamily loans
Loans usually represented by conventional mortgages on multi-family rental apartments
...
Multilateral netting system
Elimination of offsetting cash flows between a parent and several subsidiaries
...
Multinational netting
Elimination of offsetting cash flows within a multinational corporation's books
...
Multi-option financing facility
A syndicated confirmed credit line with attached options
...
Multiple Arbitrage
In the context of hedge funds, a style of management where by the fund employs more
than one arbitrage strategy
...
Common strategies include merger arbitrage, convertible arbitrage, fixed income arbitrage,
long/short equities pairs trading, and volatility arbitrage
...
GFEDU
...
Multiple-discriminant
Statistical technique for distinguishing between two groups on the basis of their
observed characteristics
...
Multiple listing
An agreement used by a broker who is a member of a multiple-listing organization,
providing the exclusive right to sell with an additional authority and obligation on the part
of the listing broker to distribute the listing to the other brokers
...
Multiple rates of return
More than one rate of return from the same project that make the net present value of the
project equal to zero
...
For each sign change in the cash
flows, there is a different rate of return
...
Multiples
Another name for price/earnings ratios
...
The deposit multiplier which shows the effects of a change in bank deposits
on the total amount of outstanding credit and the money supply
...
Municipal bond
State or local governments offer muni bonds or municipals, as they are called, to pay for
special projects such as highways or sewers
...
GFEDU
...
Municipal bond insurance
An insurance policy which guarantees payment on municipal bonds in the event of default
...
The interest obtained from these bonds is passed through to shareholders
and is generally free of federal (and sometimes state and local) income taxes
...
Municipal Investment Trust (MIT)
A unit investment trust that buys municipal bonds and usually holds them until maturity,
passing the bond income on to shareholders, usually tax-free
...
Municipal revenue bond
A bond issued to finance a public project that is funded by the revenues of the project
...
Mutual association
A savings and loan association organized as a cooperative, with members purchasing shares,
voting on association affairs, and receiving income in the form of dividends
...
Mutual exclusion doctrine
The doctrine that ruled that municipal bond interest is federal tax-free
...
Mutual fund
Mutual funds are pools of money that are managed by an investment company
...
GFEDU
...
Some
funds, for example, seek to generate income on a regular basis
...
Still others seek to invest in companies that are growing at a rapid
pace
...
Many funds these days are no load and impose no sales charge
...
Related:
open-end fund, closed-end fund
...
Mutual fund custodian
A commercial bank or trust company that holds securities owned by a mutual fund and
sometimes acts as transfer agent for the mutual fund
...
Mutual fund theorem
A result associated with the CAPM, asserting that investors will choose to invest their
entire risky portfolio in a market-index or mutual fund
...
Mutual offset
A system, such as the arrangement between the Chicago Mercantile Exchange (CME) and
Singapore International Monetary Exchange (SIMEX), which allows trading positions established
on one exchange to be offset or transferred on another exchange
...
NA
The two-character ISO 3166 country code for NAMIBIA
...
NASD
See: National Association of Securities Dealers
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Nasdaq
See: National Association of Securities Dealers Automatic Quotation System
NAV
See: Net asset value
NC
The two-character ISO 3166 country code for NEW CALEDONIA
...
NF
The two-character ISO 3166 country code for NORFOLK ISLAND
...
NGN
The ISO 4217 currency code for the Nigerian Naira
...
NIF
See: Note issuance facility
NIO
The ISO 4217 currency code for the Nicaraguan Cordoba Oro
...
NLG
The ISO 4217 currency code for the Dutch Guilder
...
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NOK
The ISO 4217 currency code for the Norwegian Krone
...
NPR
The ISO 4217 currency code for the Nepalese Rupee
...
NPV
See: Net present value
NR
The two-character ISO 3166 country code for NAURU
...
NU
The two-character ISO 3166 country code for NIUE0
...
In contrast,
mathematical programming can be used to select the best possible investment weights
...
NZ
The two-character ISO 3166 country code for NEW ZEALAND
...
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Nagoya Stock Exchange
Established after World War II, one of the three major securities markets in Japan
...
By
themselves, these positions are called naked strategies because they do not involve an
offsetting or risk-reducing position in another option or the underlying security
...
Antithesis of covered option
...
Holder is naked because holder may
have agreed to sell something not owned
...
Named perils insurance
An insurance policy that names specific risks covered by the policy
...
Narrow-Based
Generally referring to an index, it indicates that the index is composed of only a few
stocks, generally in a specific industry group
...
Narrow market
An inactive market, which displays large fluctuations in prices due to a low volume of
trading
...
Nasdaq small-capitalization companies
A group of 2000 companies with relatively small capitalization, which are listed separately
and have at least two market makers
...
The Nasdaq stock market
comprises two separate markets, namely the Nasdaq National Market, which trades large,
active securities and the Nasdaq Smallcap Market that trades emerging growth companies
...
GFEDU
...
National Association of Securities Dealers (NASD)
Nonprofit organization formed under the joint sponsorship of the investment bankers'
conference and the SEC to comply with the Maloney Act, which provides for the
regulation of the OTC market
...
About 4000 common
stock issues are included in the Nasdaq system
...
S
...
National Credit Union Administration
Federal agency that oversees and insures the federal credit union system, and is funded
by its members
...
National Foundation for Consumer Credit
A nonprofit organization that seeks to help consumers who have taken on too much debt
by helping them work out payment plans and supplying credit counseling
...
National market
Related: Internal market
National Market Advisory Board
Group that advises the SEC on establishing a national exchange market system, which is
a highly automated, continuous national exchange, but that preserves the regional
exchanges
...
System of trading OTC stocks under the sponsorship
of the NASD
...
More
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comprehensive information is available for NMS stocks than for non-NMS stocks traded
OTC (high, low, and last-sale prices, cumulative volume figures, and bid and ask
quotations throughout the day)
...
National Quotation Bureau
A service that publishes bid and offer quotes from market makers in OTC transactions
...
National Stock Exchange (NSE)
Second-largest stock exchange based in India
...
Nationalization
A government takeover of a private company
...
Customer buyer or seller, versus a principal or
profile interest
...
Natural logarithm
Logarithm to the base e (approximately 2
...
Near money
Assets that are easily convertible into cash, such as money market accounts and bank
deposits
...
Related:
Deferred futures
...
The next (or the "next out") futures contract is the one
that settles just after the nearby futures contract
...
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Nearest month
The expiration date of an option or future that is closest to the present
...
A stock must trade up/down at least one tick (1/8) in
order to comply with regulations governing short sales/corporate repurchases
...
The unpaid interest is added to the outstanding
principal, to be repaid later
...
Negative carry
Related: Net financing cost
Negative cash flow
Occurs when spending in a business is greater than earnings
...
For example, a
fixed-rate mortgage may lose value as rates go down because of prepayments
...
Negative duration
Occurs when the price of an MBS moves in the same direction as interest rates
...
After filing a tax
return, such persons would receive a subsidy to bring them up above the poverty level
...
Negative working capital
Occurs when current liabilities exceed current assets, which can lead to bankruptcy
...
GFEDU
...
Neglected firm effect
The tendency of firms that are neglected by security analysts to outperform firms that are
the subject of considerable attention
...
See also: Negotiable instrument
...
Negotiable certificates of deposit
Large-denomination bank certificates of deposit that can be traded
...
Negotiable order of withdrawal (NOW)
Demand deposits that pay interest
...
Withdrawals from NOW
accounts may be offered by commerical banks, mutual savings banks, and savings and
loan associations and may be owned only by individuals and certain nonprofit
organizations and govermental units
...
Negotiated commission
An unfixed broker's commission that is determined through negotiation, depending on the
specifics of the trades performed
...
e
...
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Negotiated offering
An offering of securities for which the terms, including underwriters' compensation, have
been negotiated between the issuer and the underwriters
...
Negotiated underwriting
A securities offering process in which the purchase price paid to the issuer and the public
offering price are determined by negotiation rather than through competitive bidding
...
Net
The gain or loss on a security sale as measured by the selling price of a security less the
adjusted cost of acquisition
...
Net advantage to leasing
The net present value of entering into a lease financing arrangement rather than borrowing
the necessary funds and buying the asset
...
Net advantage of refunding
The net present value of the savings from a refunding
...
Net asset value (NAV)
The value of a fund's investments
...
For a
closed-end fund, the market price may vary significantly from the net asset value
...
GFEDU
...
Net benefit to leverage factor
A linear approximation of a number, that enables one to operationalize the total impact
of leverage on firm value in the capital market imperfections view of capital structure
...
Net capital requirement
SEC requirement that member firms and nonmember securities broker-dealers maintain a
maximum ratio of indebtedness to liquid capital of 15 to 1
...
Net change
This is the difference between a day's last trade and the previous day's last trade
...
Net current assets
The difference between current assets and current liabilities, also known as working capital
...
Net exposed assets
Exposed assets less exposed liabilities
...
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
the purchase of an asset and the asset's cash yield
...
Net float
Sum of disbursement float and collection float
...
GFEDU
...
Net income per share of common stock
See: Earnings per share
Net interest cost (NIC)
The total amount of interest that will be paid on a debt obligation by a corporate or
municipal bond issuer
...
Net investment income per share
Income received by an investment company from dividends and interest on investments less
administrative expenses, divided by the number of outstanding shares
...
Net monetary assets
See: Monetary assets less monetary liabilities
...
Net operating loss carryforwards
Application of losses to offset earnings in future years
...
Net operating margin
The ratio of net operating income to net sales
...
Convertibles: Price of a convertible security including accrued interest
...
S
...
Net period
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The period of time between the end of the discount period and the date payment is due
...
For example,
if 100 options where purchased for $1 each and the option is currently trading for $9, the
value of the net position is $900 - $100 = $800
...
Net proceeds
Amount received from the sale of an asset after deducting all transaction costs
...
Net present value of growth opportunities
A model valuing a firm in which net present value of new investment opportunities is
explicitly examined
...
Net profit margin
Net income divided by sales; the amount of each sales dollar left over after all expenses
have been paid
...
Net realized capital gains per share
Capital gains realized by an investment company minus any capital losses divided by the total
number of the company's outstanding shares
...
Net sales transaction
Refers to over-the-counter trading
...
e
...
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Net salvage value
The after-tax net cash flow for terminating the project
...
Net transaction
A securities transaction in which no commissions or extra fees are paid, such as in an initial
public offering
...
Net Weight
The weight of goods being shipped that does not include the weight of wrapping material,
container, or other packaging
...
Often simply referred to as working capital
...
Net yield
The rate of return on a security minus purchase costs, commissions, or markups
...
Netting out
To get or bring in as a net; to clear as profit
...
Neutral option strategies are
generally designed to perform best if there is little or no net change in the price of the
underlying stock or index
...
Neutral hedge
Hedge that is expected to yield a dollar-neutral result of the combined position, regardless
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of price change in any part of the hedge securities
...
The higher the convertible premium, the lower a
ratio must be to be neutral
...
Neural Nets
Models which mimic the massive parallel processing that occurs in the brain
...
Neutral stock
A stock with a beta of 1
...
New account report
A broker's document including information about a new client
...
New European Exchange (NEWEX)
A trading market for Central and East Eurpoean securities established by the Deutsche
Börse (German Stock Market) and the Wiener Börse (Austrian Stock Market) in 2000
...
New issue
Securities that are publicly offered for the first time, whether in an IPO or as an additional
issue of stocks or bonds by a company that is already public
...
This is not a separate
market but refers to a niche of the overall market
...
New money
In a Treasury auction, the amount by which the par value of the securities offered exceeds
that of those maturing
...
New York Futures Exchange (NYFE)
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A wholly owned subsidiary of the NYSE that trades futures and futures options on the NYSE
composite index
...
New York Stock Exchange (NYSE)
Also known as the Big Board or the Exchange
...
It is based on the close of the market on December 31, 1965,
at a level of 50
...
Print changes in the index are converted to dollars and cents so as to provide a
meaningful measure of changes in the average price of listed stocks
...
New Zealand Stock Exchange
Automated, screen-based national trading system based in Wellington
...
A news story concerning the stock being considered
has recently been posted on one of the news services, such as the Dow Jones News
Service or Reuters
...
Next day settlement
Transaction in which the contract is settled the day after the trade is executed
...
Next futures contract
The contract settling immediately after the nearby futures contract
...
NICs
Newly Industrialized Countries, which are countries with high-growth industrial
economies, such as Hong Kong and Malaysia
...
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Nikkei stock average
Applies mainly to international equities
...
Japanese equivalent of
the US Dow
...
19c3 stock
A stock listed on a national securities exchange after April 26, 1979, that is exempt from
the Securities and Exchange Commission rule that prohibits exchange members from
participating in off-board trading
...
No Adjournment
Within the text on the proxy, card are the words: "Shares will be voted at this annual
meeting or at any adjournment thereof
...
"No Autex"
Used in the context of general equities
...
" Inquirers do not want exposure of an inquiry to affect
the price at which they hope to ultimately transact the trade, hence disturbing the
customer's picture
...
Not much, if any, stock is being bid for or offered at the
present time by customers or the specialist
...
No-load fund
A mutual fund that does not impose a sales commission
...
No-load mutual fund
An open-end investment company whose shares are sold without a sales charge
...
A true no-load fund has
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neither a sales charge nor a distribution fee
...
NM
Abbreviation for "not meaningful"
...
50
The normal distribution assumes continuous changes in a
system
...
Mandelbrot coined the term "Noah effect" after
the biblical story of the deluge
...
NOB spread
Notes over bonds spread
...
No Substitution
Within the text on a proxy card are the words: "The shareholder appoints certain people
(collectively, the proxy committee) with full power of substitution to vote the shares
...
Noise
Price and volume fluctuations that can confuse interpretation of market direction
...
Stock market activity caused by program trades, dividend
rolls, and other phenomena not reflective of general sentiment
...
Noisy Chaos
A chaotic dynamical system with either observational or system noise added
...
No-par-value stock
A stock with no par value given in the charter or stock certificate
...
The use of nominee names makes the processing of security transfers easier
...
GFEDU
...
Differences in compounding cause the nominal rate to differ from the
effective interest rate
...
Nominal annual rate
An effective rate per period multiplied by the number of periods in a year
...
Nominal cash flow
A cash flow expressed in nominal terms if the actual dollars to be received or paid out are
given
...
Nominal exchange rate
The actual foreign exchange quotation in contrast to the real exchange rate, which has been
adjusted for changes in purchasing power
...
Nominal income
Income that has not been adjusted for inflation and decreasing purchasing power
...
Nominal price
Price quotations on futures for a period in which no actual trading took place
...
Bid and offer prices given by a market maker for the
purpose of valuation, not as an invitation to trade; must be specifically identified as such
by prefixing the quotes FYI (for your information) or FVO (for valuation only)
...
See
also: Coupon rate
...
GFEDU
...
Nonaccredited investor
Wealthy, sophisticated investors who do not meet SEC net worth requirements
...
Noncallable
A preferred stock or bond that cannot be redeemed whenever desired by the issuer
...
Nonclearing member
An exchange member firm that is not able to clear transactions, and must pay another
member firm to carry out its clearing operations
...
Noncompetitive bid
In a Treasury auction, bidding for a specific amount of securities at the price, whatever it
may turn out to be, equal to the average price of the accepted competitive bids
...
Noncompetitive tenders are always accepted in full
...
Noncumulative
Applies mainly to convertible securities
...
Omitted dividends are, as a rule, gone forever
...
Related: Cumulative preferred stock
...
GFEDU
...
Noncurrent liability
A liability due in one year
...
Therefore, the broker cannot vote on behalf of the
beneficial owner, it can only vote after specific instructions have been received from the
beneficial owner
...
Nondeductible contribution
A contribution to either a traditional IRA or Roth IRA
...
Nondeliverable Forward Contracts (NDF)
Agreement regarding a position in a specified currency, a specified exchange rate, and a
specified future settlement date, that does not result in delivery of currencies
...
Nondiversifiability of human capital
The difficulty of hedging one's human capital (the unique capabilities and expertise of
individuals) and employment effort
...
Non-Equity Option
An option whose underlying entity is not common stock; typically refers to options on
physical commodities and index options
...
Nonfinancial services
Such things as freight, insurance, passenger services, and travel
...
GFEDU
...
Related: Insured plans
...
See: Zero-coupon bond
...
Nonintermediated debt market
A financial market in which borrowers (government and large corporations) appeal directly
to savers for debt capital through the securities markets without using a financial institution as
intermediary>
...
Nonmember bank
Depository institution that is not a member of the Federal Reserve System
...
Nonmember firm
Used for listed equity securities
...
Such firms execute trades either through member firms, or on regional
exchanges where they are members, or in the third market
...
Nonparallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same number of basis points
for every maturity
...
Nonparticipating life insurance policy
Life insurance policy whose policyholders do not receive dividends, because they are not
participants in the interest, dividends, and capital gains earned by the insurer on premiums
paid
...
Nonproductive loan
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A loan that increases spending power, but is used in business that does not directly
increase the economy's output, such as a leveraged buyout loan
...
See: Insider trading
...
Nonqualified plan
A retirement plan that does not meet the IRS requirements for favorable tax treatment
...
Contributions are made
with after-tax dollars, but earnings can accumulate tax-deferred until withdrawal
...
Nonrated
A bond that has not been rated by a large rating agency, usually because the issue is too
small
...
Nonrecourse loan
A loan taken by limited partners used to finance their portion of the partnership, which
is secured by their ownership in the venture
...
Nonredeemable
Not permitted, under the terms of an indenture, to be redeemed
...
Nonreproducible assets
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A tangible asset with unique physical properties, like a parcel of land, a mine, or a work of
art
...
Nonsystematic risk
Nonmarket or firm-specific risk factors that can be eliminated by diversification
...
Systematic risk refers to risk factors common to the entire
economy
...
Non Vessel Operating Common Carriers (NVOCC)
An ocean carrier that does not own or operate their own vessels
...
They issue their own bills of lading
which are backed up by actual on board ocean bills of lading issued to them by the other
carrier
...
No Protest
Instructions given to a collecting bank not to protest a specific item in the event of non
payment or non acceptance
...
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected spot price
...
According to the Central Limit Theorem, the probability
density function of a large number of independent, identically distributed random
numbers will approach the normal distribution
...
50
...
GFEDU
...
See: Alpha, Central Limit Theorem, Fractal Distribution
...
Normal investment practice
The investment history of a customer, which is used as a benchmark to test the bona fide
public offerings requirement of the allocation of a hot issue
...
Normal portfolio
A customized benchmark that includes all the securities from which a manager normally
chooses, weighted as the manager would weight them in a portfolio
...
This distribution has no skewness or excess kurtosis
...
Normal retirement
The age or number of working years after which a pension plan beneficiary can retire and
receive unreduced benefits immediately
...
Normalized earnings
Earnings that have been adjusted in order to take into account the effect of cycles in the
economy
...
North American Free Trade Agreement (NAFTA)
A regional trade pact among the United States, Canada, and Mexico
...
GFEDU
...
Not a registered market maker in the security,
especially in OTC and convertibles, or having nothing real to do
...
Not rated
A rating service indicator, neither positive nor negative, showing that a security or
company has not been rated
...
Not held order (NH order)
Applies mainly to international equities
...
This will not hold the broker responsible for missing the price within
the limits (limit not held) or obtaining a worse price (market not held)
...
" See: Held order
...
Note agreement
A contract for privately placed debt
...
Notes to the financial statements
A detailed set of notes immediately following the financial statements in an annual report
that explain and expand on the information in the financial statements
...
Related: Delivery notice
...
GFEDU
...
This page is normally attached to the front of the proxy statement
...
Typically, the 3 to 6 weeks preceding the expiration of the contract
...
Notifying Bank
See: Advising Bank
Notional principal amount
In an interest rate swap, the predetermined dollar principal on which the exchanged interest
payments are based
...
Novation
Defeasance whereby the firm's debt is cancelled
...
NRA (Non-Resident Alien) Tax
The tax which must be withheld by the corporation or its disbursing agent (usually 15%
or 30%, depending on the holder's citizenship)
...
Numismatist
Collector of historical coins and currencies
...
OAS
See: Option adjusted spread
OCC
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See: Options Clearing Corporation
OECD
See: Orgainization for Economic Cooperation and Development
OID
See: Original issue discount debt
OM
The two-character ISO 3166 country code for OMAN
...
OTC
See: Over-the-counter
...
OPEC
See: Organization of Petroleum Exporting Countries
Oath of Inspectors
A sworn statement signed by the Inspectors of Election, usually notarized, wherein they
swear they will impartially and faithfully execute their duties as Inspectors of Election at
the annual or special meeting of shareholders
...
There are more than
20 standardized categories
...
g
...
Objective probability
The true unobservable underlying odds that something is so
...
Obligation bond
A municipal bond with a face value greater than the value of the underlying property
...
Obligor
A person who has an obligation to pay off a debt
...
GFEDU
...
Also called Measurement Noise
...
Ocean bill of lading
Receipt for a shipment by boat, that includes freight charges and title to the
merchandise
...
Compare round lot
...
Odd-lot dealer
A broker who combines odd lots of securities from multiple buy or sell orders into round lots and
executes transactions in those round lots
...
Odd-lot short-sale ratio
The percentage of total odd-lot sales that is composed of short sales
...
This theory is no longer popular
...
Quotron symbol for the S&P 100 index option
...
Off-board
Used for listed equity securities
...
After 9:30
a
...
, if the stock has not opened due to the exchange's discretion, trading can occur
elsewhere, but the trader must assume the role of a quasi-specialist in the process
...
GFEDU
...
Their receipts, outlays, and surplus or deficit are not
included in budget receipts, outlays or deficits
...
Off-floor order
Used for listed equity securities
...
Exchange rules require that an
off-floor order be executed before orders initiated on the floor
...
Antithesis of
on-floor order; (2) order not handled on the floor but instead upstairs
...
Related: Bid
...
Offer wanted
Used in the context of general equities
...
Antithesis of bid wanted
...
Offering memorandum
A document that outlines the terms of securities to be offered in a private placement
...
Offering statement
A shortened registration statement required by the Securities and Exchange Commission on debt issues
with less than a nine-month maturity
...
When a firm goes public and makes an offering of stock
to the market
...
S
...
GFEDU
...
Official reserves
Holdings of gold and foreign currencies by official monetary institutions
...
Official settlements balance (overall balance)
An overall measurement of a country's private financial and economic transactions with the
rest of the world
...
Offset
Elimination of a long or short position by making an opposite transaction
...
Offshore finance subsidiary
A wholly owned affiliate incorporated overseas, usually in a tax haven country, whose
function is to issue securities abroad for use in either the parent's domestic or foreign
business
...
"O
...
to cross"
Used for listed equity securities
...
"
Old-line
Factoring arrangement that provides collection, insurance, and finance for accounts receivable
...
Oligopsony
A Market characterized by a small number of large buyers who control all purchases and
therefore the market price of a good or service
...
GFEDU
...
The
exchange trades futures and options on the OMX equity index
...
Omnibus account
An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in
the name of the originating broker, rather than designated separately
...
Omnibus Proxy
A list issued by depositories detailing their participants, and their holdings, and
authorizing the participants to vote their proxies directly
...
and by certain bank custodians
...
Conjunction that denotes trade execution /indication,
usually during a pre-opening look
...
" See: for/at
...
Left over after pairing off other market buy and sell orders,
usually before the opening of a stock or market but at times at the close (especially during index
expirations)
...
On board
Used in the context of general equities
...
On Board Ocean Bill of Lading
An ocean bill of lading bearing an on board notation, or words indicating that the
merchandise is located aboard the vessel for transportation
...
On Carriage
Freight costs arising after the cost of principal international freight costs
...
On a clean up
Used in the context of general equities
...
"
On the close order
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A market order that is to be executed as close as possible to the closing price of the day
...
Security order originating with a member on the floor of an
exchange when dealing with his or her own account, versus an upstairs order
...
On the money
Used in the context of general equities
...
On the opening order
A market order that is to be executed at the price of the first trade of the day
...
To participate in a block trade that has already
transpired, as if that customer had been part of the trade originally; often used by a new
party looking to participate in a trade that has just happened
...
On the run
The most recently issued (and typically the most liquid) government bond in a particular maturity
range
...
On the take
Used in the context of general equities
...
Antithesis of
come in, get hit
...
(1) Trade printed on the ticker tape; (2) news
displayed on Reuters or the Dow Jones News Service
...
One-factor APT
A special case of the arbitrage pricing theory that is derived from the one-factor model by using
diversification and arbitrage
...
144 stock
Used in the context of general equities
...
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One-man picture
When both bid and the offered prices of a broker come from the same source
...
In phase space we plot the value of
a variable against possible values of the other variables at the same time
...
One-share-one-vote rule
The principle that all shareholders should have equal voting rights in public companies and
each shareholder should have one vote
...
(2) A market that is
moving strongly in one direction
...
Open
Used in the context of general equities
...
"Open on the buy/sell side" means looking for
buyers/sellers (for someone who is a seller/buyer)
...
Open account
Arrangement whereby sales are made with no formal debt contract
...
Open book
See: Unmatched book
Open contracts
Contracts that have been bought or sold without completion of the transaction by
subsequent sale or purchase, or by making or taking actual delivery of the financial
instrument or physical commodity
...
GFEDU
...
Having room for a customer buyer or seller contingent
on the results of a trade being executed on the floor (i
...
, satisfying the specialist book and the
orders the trader opened up)
...
Open-end credit
Revolving line of credit that is extended with every purchase or cash advance
...
Mutual fund that continually creates new shares on
demand
...
Antithesis of closed-end fund
...
Open-end mortgage
Mortgage against which additional debts may be issued
...
Open interest
The total number of derivatives contracts traded that have not yet been liquidated either
by an offsetting derivative transaction or by delivery
...
Open-market operation
Purchase or sale of government securities by the monetary authorities to increase or decrease
the domestic money supply
...
Open-market rates
Interest rates that are determined in the open market by supply and demand, as opposed to
being set by the Federal Reserve Board
...
Open-outcry
The method of trading used at futures exchanges, typically involving calling out the specific
details of a buy or sell order, so that the information is available to all traders
...
GFEDU
...
Open position
A net long or short position whose value will change with a change in prices
...
Block trader's term for a block trade that has been
completed with an institutional client and printed on the consolidated tape, but leaves the
block trader with stock available (because the trader has taken a long or short position to
complete the trade) for new customers who are on the opposite side of the market to the
initiating customer
...
The agreement is made on a day-to-day basis,
and either the borrower or the lender may choose to terminate
...
Open up
Used in the context of general equities
...
g
...
See: Put pants on it
...
" Related: Close
...
Opening price
The range of prices at which the first bids and offers are made or the first transactions are
completed on an exchange
...
Opening sale
Creation of or increase in a short position in a given series of options
...
(1)Buy or sell transaction that creates a position out of a flat
one (writing an option short or buying an option long)
...
(2) First
transaction of the day in a stock
...
GFEDU
...
Operating cash flow
Earnings before depreciation minus taxes
...
Operating cycle
The average time between the acquisition of materials or services and the final cash
realization from that acquisition
...
Earnings are distributed
after operating expenses are deducted
...
Operating lease
Short-term, cancelable lease
...
Operating leverage
Fixed operating costs, which are characterized as leverage because they accentuate
variations in profits
...
Operating profit margin
The ratio of operating profit to net sales
...
Operating ratio
A ratio that measures a firm's operating efficiency
...
Operating risk
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The inherent or fundamental risk of a firm, without regard to financial risk
...
Also called business risk
...
Also called an internally efficient market
...
Opinion shopping
Attempts by a corporation to attain reporting objectives by following questionable
accounting principles, with the help of an auditor willing to sanction the practices
...
OPM
Stands for "other people's money," which refers to borrowed funds used to increase the
return on invested capital
...
Opportunity cost of capital
Expected return that is forgone by investing in a project rather than in comparable financial
securities
...
It often refers to the most
valuable alternative that is given up
...
Sometimes called investment opportunity set
...
Optimal contract
The contract that balances the three types of agency costs (contracting, monitoring, and
misbehavior) against one another to minimize the total cost
...
GFEDU
...
A portfolio that maximizes an investor's
preferences with respect to return and risk
...
Optimization approach to indexing
An approach to indexing that seeks to optimize some objective, such as to maximize the
portfolio yield, to maximize convexity, or to maximize expected total returns
...
Optimum Leverage Ratio
The borrowing level that maximizes the value of the firm
...
Option
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or
before a given date
...
Buyers of call options bet that a
stock will be worth more than the price set by the option (the strike price), plus the price they
pay for the option itself
...
An option is part of a class of securities called derivatives, which
means these securities derive their value from the worth of an underlying investment
...
Option-adjusted spread (OAS)
(1) The spread over an issuer's spot rate curve, developed as a measure of the yield spread that
can be used to convert dollar differences between theoretical value and market prices
...
When added to the base yield spread of an MBS without an operative call produces the
option-adjusted spread
...
Option cycle
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The cycle of option expiration months
...
Option elasticity
The percentage increase in an option's value, given a 1 percentage point change in the
value of the underlying security
...
Option margin
The margin requirement for options described in Regulation T and in brokers' individual policies
...
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or substitute
sale
...
Option price
Also called the option premium; the price the buyer of the options contract pays for the right to
buy or sell a security at a specified price in the future
...
It
reflects the amount of time value premium in the option for various stock prices, as well
...
The delta (or hedge ratio) is the
slope of a tangent line to the curve at a fixed stock price
...
Option series
A group of options on the same underlying security with the same exercise price and maturity
month
...
GFEDU
...
Option writer
See: Option seller
Optional dividend
A dividends that the shareholder can elect to receive either in cash or in stock
...
Options Clearing Corporation (OCC)
Applies to derivative products
...
Options contract
A contract that, in exchange for the option price, gives the option buyer the right, but not the
obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller
within a specified time period, or on a specified date (expiration date)
...
That is the dollar value of the underlying stock
index = Cash index value x $100 (the options contract multiple)
...
Or better
Used in the context of general equities
...
Does not imply a not-held order, but rather puts more emphasis on executing at the limit if
available
...
Order
Instruction to a broker/dealer to buy, sell, deliver, or receive securities or commodities that
commits the issuer of the "order" to the terms specified
...
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Order Book Official
The exchange employee in charge of keeping a book of public limit orders on exchanges
utilizing the "marker-maker" system, as opposed to the "specialist system", of executing
orders
...
Order imbalance
Orders of one kind for a stock not offset by the opposite orders, which causes a wide spread
between bid and offer prices
...
In a
controlled experiment, involving thermal convection, for example, temperature can be a
control parameter; in a large complex system, temperature can be an order parameter,
because it summarizes the effect of the sun, air pressure, and other atmospheric
variables
...
Order room
The brokerage firm department receives and processes all orders to buy and sell securities
...
Prohibited by NASD
...
Ordering Costs
Costs that occur when an order is placed regardless of the size of the order
...
Ordinary interest
Interest based on a 360-day year instead of a 365-day year, resulting in what can be a
significant difference
...
Shares of non-U
...
companies traded in their
individual home markets
...
Organization chart
A chart showing the hierarchical interrelationships of positions within an organization
...
GFEDU
...
Organized exchange
A securities marketplace where purchasers and sellers regularly gather to trade securities
according to the formal rules adopted by the exchange
...
Original issue discount debt (OID debt)
Debt that is initially offered at a price below par
...
Original margin
The margin needed to cover a specific new position
...
Original maturity
Maturity at issue
...
Origination
The making of mortgage loans
...
Originator
A bank, savings and loan, or mortgage banker that initially made a mortgage loan that is part
of a pool
...
Orphan stock
A stock that is ignored by research analysts and as a result may be trading at low price
earnings ratios
...
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Oslo Stock Exchange
An exchange founded in 1819 and trading stocks, bonds, and stock options that is considered the
options market of Norway
...
OTC margin stock
Shares traded over-the-counter that can be used as margin securities under Regulation T
...
It is divided into long-term capital and short-term capital and,
because of its residual status, can differ from country to country
...
Other short-term capital includes financial assets that can be
liquidated in less than a year such as currency, deposits, and bills
...
Other income
Income from activities that are not undertaken in the ordinary course of a firm's
business
...
Other sources
Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes
...
Out
Used in the context of general equities
...
Out-of-favor industry or stock
An unpopular industry or stock that usually has a low price-earnings ratio
...
GFEDU
...
Out-of-the-money option
A call option is out of the money if the strike price is greater than the market price of the
underlying security
...
A put option is out of the money if the strike price is
lower than the market price of the underlying security
...
To no longer have an active trading profile/ position
in the stock
...
See: Clean
...
Indication gained from their trading and inquiry
activity that buyers and/or (more often) sellers are in the market and should be found to
get their order
...
"
Out with
Used in the context of general equities
...
Outlays
Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the
maturing of interest coupons
...
See: Points quote
...
Outside director
A director of a company who is not an employee of that company and brings in outside
experience to help make board decisions
...
Outside the inside market (above the lowest offering
and below the highest bid)
...
GFEDU
...
Another order bidding for or offering stock at the same price
that the trader has put on the floor himself, represented by another broker in the trading
crowd
...
See: Matching orders
...
Outstanding
Used in the context of general equities
...
Outstanding Dividends
Dividend checks which have been mailed to shareholders of record but not yet cashed
...
Outstanding share capital
Issued share capital less the par value of shares that are held as the company's treasury stock
...
A decentralized market (as opposed to an exchange market) where geographically dispersed
dealers are linked by telephones and computer screens
...
The NASDAQ market is an OTC market for US stocks
...
Over-the-Counter Option
An option traded off-exchange, as opposed to a listed stock option
...
See also Secondary Market
...
Difference between how much common stock one
party must sell and the other wishes to buy for the same amount of convertible in a swap
...
Overall market price coverage
Total assets less intangibles divided by the total of the market value of the security issue and the
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book value of liabilities and issues having a prior claim
...
Overbought
Used in the context of general equities
...
See: Heavy
...
Overbought-oversold
An indicator that attempts to define when prices have moved too far and too fast in either
direction and thus are vulnerable to reaction
...
Overdraft
Provision of instant credit by a lending institution
...
Overfunded pension plan
A pension plan that has a positive surplus (i
...
, assets exceed liabilities)
...
Sizable block of securities or commodities contracts that,
if released on the market, would put downward pressure on prices; prohibits buying activity
that would otherwise translate into upward price movement
...
Overhanging Bond
A convertible bond issue that investors do not convert into common stock because the stock
has not appreciated in value
...
Overheating
An economy that is growing very quickly, with the risk of high inflation
...
GFEDU
...
Overissue
An excess of issued shares over authorized shares
...
Create a crossed market by expressing a willingness
to sell on the bid side of the market and buy on the offer side
...
Overlay strategy
A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the
activities of money managers
...
Particularly apparent when delivery takes place in Europe for payment in dollars in New
York
...
Overnight repo
A repurchase agreement with a term of one day
...
Overreaching
Used in the context of general equities
...
Overreaction hypothesis
The supposition that investors overreact to unanticipated news, resulting in exaggerated
movements in stock prices followed by corrections
...
GFEDU
...
Oversold
Used in the context of general equities
...
Antithesis of overbought
...
This occurs when a new issue is underpriced or in great
demand because of growth prospects
...
Overtrading
Excessive broker trading in a discretionary account
...
This premium is offset by the underwriting spread
...
Overwithholding
Deducting and paying too much tax that may be refunded to the taxpayer or applied
against the next period's obligation
...
Own foreign offices
US reporting institutions' parent organizations, branches, and/or majority owned
subsidiaries located outside the United States
...
Ownership-specific advantages
Property rights or intangible assets, including patents, trademarks, organizational and
marketing
expertise,
production
technology,
and
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organizational abilities, that form the basis for a company's advantage over other firms
...
OAS
See: Option adjusted spread
OCC
See: Options Clearing Corporation
OECD
See: Orgainization for Economic Cooperation and Development
OID
See: Original issue discount debt
OM
The two-character ISO 3166 country code for OMAN
...
OTC
See: Over-the-counter
...
OPEC
See: Organization of Petroleum Exporting Countries
Oath of Inspectors
A sworn statement signed by the Inspectors of Election, usually notarized, wherein they
swear they will impartially and faithfully execute their duties as Inspectors of Election at
the annual or special meeting of shareholders
...
There are more than
20 standardized categories
...
g
...
Objective probability
The true unobservable underlying odds that something is so
...
GFEDU
...
Obligation bond
A municipal bond with a face value greater than the value of the underlying property
...
Obligor
A person who has an obligation to pay off a debt
...
Also called Measurement Noise
...
Ocean bill of lading
Receipt for a shipment by boat, that includes freight charges and title to the
merchandise
...
Compare round lot
...
Odd-lot dealer
A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots
...
Odd-lot short-sale ratio
The percentage of total odd-lot sales that is composed of short sales
...
This theory is no longer popular
...
Quotron symbol for the S&P 100 index option
...
GFEDU
...
Off-board
Used for listed equity securities
...
After 9:30 a
...
, if the stock has not opened due to the exchange's discretion,
trading can occur elsewhere, but the trader must assume the role of a quasi-specialist in
the process
...
Their receipts, outlays, and surplus or deficit are not
included in budget receipts, outlays or deficits
...
Off-floor order
Used for listed equity securities
...
Exchange rules require
that an off-floor order be executed before orders initiated on the floor
...
Antithesis of on-floor order; (2) order not handled on the floor but instead upstairs
...
Related: Bid
...
Offer wanted
Used in the context of general equities
...
Antithesis of bid wanted
...
Offering memorandum
A document that outlines the terms of securities to be offered in a private placement
...
GFEDU
...
Offering statement
A shortened registration statement required by the Securities and Exchange Commission on debt
issues with less than a nine-month maturity
...
When a firm goes public and makes an offering of
stock to the market
...
S
...
Official reserves
Holdings of gold and foreign currencies by official monetary institutions
...
Official settlements balance (overall balance)
An overall measurement of a country's private financial and economic transactions with
the rest of the world
...
Offset
Elimination of a long or short position by making an opposite transaction
...
Offshore finance subsidiary
A wholly owned affiliate incorporated overseas, usually in a tax haven country, whose
function is to issue securities abroad for use in either the parent's domestic or foreign
business
...
"O
...
to cross"
Used for listed equity securities
...
GFEDU
...
"
Old-line
Factoring arrangement that provides collection, insurance, and finance for accounts
receivable
...
Oligopsony
A Market characterized by a small number of large buyers who control all purchases and
therefore the market price of a good or service
...
The exchange trades futures and options on the OMX equity index
...
Omnibus account
An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in
the name of the originating broker, rather than designated separately
...
Omnibus Proxy
A list issued by depositories detailing their participants, and their holdings, and
authorizing the participants to vote their proxies directly
...
and by certain bank custodians
...
Conjunction that denotes trade execution
/indication, usually during a pre-opening look
...
" See:
for/at
...
Left over after pairing off other market buy and sell orders,
usually before the opening of a stock or market but at times at the close (especially during
index expirations)
...
On board
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Used in the context of general equities
...
On Board Ocean Bill of Lading
An ocean bill of lading bearing an on board notation, or words indicating that the
merchandise is located aboard the vessel for transportation
...
On Carriage
Freight costs arising after the cost of principal international freight costs
...
On a clean up
Used in the context of general equities
...
"
On the close order
A market order that is to be executed as close as possible to the closing price of the day
...
Security order originating with a member on the floor of an
exchange when dealing with his or her own account, versus an upstairs order
...
On the money
Used in the context of general equities
...
On the opening order
A market order that is to be executed at the price of the first trade of the day
...
To participate in a block trade that has already
transpired, as if that customer had been part of the trade originally; often used by a new
party looking to participate in a trade that has just happened
...
On the run
The most recently issued (and typically the most liquid) government bond in a particular
maturity range
...
On the take
Used in the context of general equities
...
Antithesis of
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come in, get hit
...
(1) Trade printed on the ticker tape; (2) news
displayed on Reuters or the Dow Jones News Service
...
One-factor APT
A special case of the arbitrage pricing theory that is derived from the one-factor model by
using diversification and arbitrage
...
144 stock
Used in the context of general equities
...
One-man picture
When both bid and the offered prices of a broker come from the same source
...
In phase space we plot the value of
a variable against possible values of the other variables at the same time
...
One-share-one-vote rule
The principle that all shareholders should have equal voting rights in public companies and
each shareholder should have one vote
...
(2) A market that
is moving strongly in one direction
...
Open
Used in the context of general equities
...
GFEDU
...
"Open on the buy/sell side" means looking for
buyers/sellers (for someone who is a seller/buyer)
...
Open account
Arrangement whereby sales are made with no formal debt contract
...
Open book
See: Unmatched book
Open contracts
Contracts that have been bought or sold without completion of the transaction by
subsequent sale or purchase, or by making or taking actual delivery of the financial
instrument or physical commodity
...
Having room for a customer buyer or seller contingent
on the results of a trade being executed on the floor (i
...
, satisfying the specialist book and
the orders the trader opened up)
...
Open-end credit
Revolving line of credit that is extended with every purchase or cash advance
...
Mutual fund that continually creates new shares on
demand
...
Antithesis of closed-end fund
...
Open-end mortgage
Mortgage against which additional debts may be issued
...
Open interest
The total number of derivatives contracts traded that have not yet been liquidated either
by an offsetting derivative transaction or by delivery
...
Open-market operation
Purchase or sale of government securities by the monetary authorities to increase or
decrease the domestic money supply
...
GFEDU
...
Open-market rates
Interest rates that are determined in the open market by supply and demand, as opposed
to being set by the Federal Reserve Board
...
Open-outcry
The method of trading used at futures exchanges, typically involving calling out the specific
details of a buy or sell order, so that the information is available to all traders
...
Open position
A net long or short position whose value will change with a change in prices
...
Block trader's term for a block trade that has been
completed with an institutional client and printed on the consolidated tape, but leaves the
block trader with stock available (because the trader has taken a long or short position to
complete the trade) for new customers who are on the opposite side of the market to the
initiating customer
...
The agreement is made on a day-to-day
basis, and either the borrower or the lender may choose to terminate
...
Open up
Used in the context of general equities
...
g
...
See: Put pants on it
...
" Related: Close
...
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Opening price
The range of prices at which the first bids and offers are made or the first transactions are
completed on an exchange
...
Opening sale
Creation of or increase in a short position in a given series of options
...
(1)Buy or sell transaction that creates a position out of a
flat one (writing an option short or buying an option long)
...
(2)
First transaction of the day in a stock
...
Operating cash flow
Earnings before depreciation minus taxes
...
Operating cycle
The average time between the acquisition of materials or services and the final cash
realization from that acquisition
...
Earnings are
distributed after operating expenses are deducted
...
Operating lease
Short-term, cancelable lease
...
Operating leverage
Fixed operating costs, which are characterized as leverage because they accentuate
variations in profits
...
GFEDU
...
Operating profit margin
The ratio of operating profit to net sales
...
Operating ratio
A ratio that measures a firm's operating efficiency
...
Operating risk
The inherent or fundamental risk of a firm, without regard to financial risk
...
Also called business risk
...
Also called an internally efficient market
...
Opinion shopping
Attempts by a corporation to attain reporting objectives by following questionable
accounting principles, with the help of an auditor willing to sanction the practices
...
OPM
Stands for "other people's money," which refers to borrowed funds used to increase the
return on invested capital
...
Opportunity cost of capital
Expected return that is forgone by investing in a project rather than in comparable
financial securities
...
GFEDU
...
It often refers to the
most valuable alternative that is given up
...
Sometimes called investment
opportunity set
...
Optimal contract
The contract that balances the three types of agency costs (contracting, monitoring, and
misbehavior) against one another to minimize the total cost
...
A portfolio that maximizes an investor's
preferences with respect to return and risk
...
Optimization approach to indexing
An approach to indexing that seeks to optimize some objective, such as to maximize the
portfolio yield, to maximize convexity, or to maximize expected total returns
...
Optimum Leverage Ratio
The borrowing level that maximizes the value of the firm
...
Option
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or
before a given date
...
Buyers of call options bet that
a stock will be worth more than the price set by the option (the strike price), plus the price
they pay for the option itself
...
GFEDU
...
An option is part of a class of securities called derivatives,
which means these securities derive their value from the worth of an underlying
investment
...
Option-adjusted spread (OAS)
(1) The spread over an issuer's spot rate curve, developed as a measure of the yield spread
that can be used to convert dollar differences between theoretical value and market prices
...
When added to the base yield spread of an MBS without an operative call
produces the option-adjusted spread
...
Option cycle
The cycle of option expiration months
...
Option elasticity
The percentage increase in an option's value, given a 1 percentage point change in the
value of the underlying security
...
Option margin
The margin requirement for options described in Regulation T and in brokers' individual
policies
...
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or
substitute sale
...
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Option price
Also called the option premium; the price the buyer of the options contract pays for the right
to buy or sell a security at a specified price in the future
...
It
reflects the amount of time value premium in the option for various stock prices, as well
...
The delta (or hedge ratio) is the
slope of a tangent line to the curve at a fixed stock price
...
Option series
A group of options on the same underlying security with the same exercise price and maturity
month
...
Option writer
See: Option seller
Optional dividend
A dividends that the shareholder can elect to receive either in cash or in stock
...
Options Clearing Corporation (OCC)
Applies to derivative products
...
Options contract
A contract that, in exchange for the option price, gives the option buyer the right, but not
the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option
seller within a specified time period, or on a specified date (expiration date)
...
That is the dollar value of the underlying stock
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index = Cash index value x $100 (the options contract multiple)
...
Or better
Used in the context of general equities
...
Does not imply a not-held order, but rather puts more emphasis on executing at
the limit if available
...
Order
Instruction to a broker/dealer to buy, sell, deliver, or receive securities or commodities that
commits the issuer of the "order" to the terms specified
...
Order Book Official
The exchange employee in charge of keeping a book of public limit orders on exchanges
utilizing the "marker-maker" system, as opposed to the "specialist system", of executing
orders
...
Order imbalance
Orders of one kind for a stock not offset by the opposite orders, which causes a wide spread
between bid and offer prices
...
In a
controlled experiment, involving thermal convection, for example, temperature can be a
control parameter; in a large complex system, temperature can be an order parameter,
because it summarizes the effect of the sun, air pressure, and other atmospheric
variables
...
Order room
The brokerage firm department receives and processes all orders to buy and sell securities
...
Prohibited by NASD
...
GFEDU
...
Ordering Costs
Costs that occur when an order is placed regardless of the size of the order
...
Ordinary interest
Interest based on a 360-day year instead of a 365-day year, resulting in what can be a
significant difference
...
Shares of non-U
...
companies traded in their
individual home markets
...
Organization chart
A chart showing the hierarchical interrelationships of positions within an organization
...
Organized exchange
A securities marketplace where purchasers and sellers regularly gather to trade securities
according to the formal rules adopted by the exchange
...
Original issue discount debt (OID debt)
Debt that is initially offered at a price below par
...
Original margin
The margin needed to cover a specific new position
...
Original maturity
Maturity at issue
...
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Origination
The making of mortgage loans
...
Originator
A bank, savings and loan, or mortgage banker that initially made a mortgage loan that is
part of a pool
...
Orphan stock
A stock that is ignored by research analysts and as a result may be trading at low price
earnings ratios
...
Oslo Stock Exchange
An exchange founded in 1819 and trading stocks, bonds, and stock options that is considered
the options market of Norway
...
OTC margin stock
Shares traded over-the-counter that can be used as margin securities under Regulation T
...
It is divided into long-term capital and short-term capital and,
because of its residual status, can differ from country to country
...
Other short-term capital includes financial assets that can be
liquidated in less than a year such as currency, deposits, and bills
...
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Other income
Income from activities that are not undertaken in the ordinary course of a firm's
business
...
Other sources
Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes
...
Out
Used in the context of general equities
...
Out-of-favor industry or stock
An unpopular industry or stock that usually has a low price-earnings ratio
...
Out-of-the-money option
A call option is out of the money if the strike price is greater than the market price of the
underlying security
...
A put option is out of the money if the strike price
is lower than the market price of the underlying security
...
To no longer have an active trading profile/ position
in the stock
...
See: Clean
...
Indication gained from their trading and inquiry
activity that buyers and/or (more often) sellers are in the market and should be found to
get their order
...
"
Out with
Used in the context of general equities
...
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Outlays
Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the
maturing of interest coupons
...
See: Points quote
...
Outside director
A director of a company who is not an employee of that company and brings in outside
experience to help make board decisions
...
Outside the inside market (above the lowest
offering and below the highest bid)
...
Another order bidding for or offering stock at the same
price that the trader has put on the floor himself, represented by another broker in the
trading crowd
...
See: Matching orders
...
Outstanding
Used in the context of general equities
...
Outstanding Dividends
Dividend checks which have been mailed to shareholders of record but not yet cashed
...
Outstanding share capital
Issued share capital less the par value of shares that are held as the company's treasury
stock
...
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A decentralized market (as opposed to an exchange market) where geographically
dispersed dealers are linked by telephones and computer screens
...
The NASDAQ market is an OTC market for
US stocks
...
Over-the-Counter Option
An option traded off-exchange, as opposed to a listed stock option
...
See also Secondary Market
...
Difference between how much common stock one
party must sell and the other wishes to buy for the same amount of convertible in a swap
...
Overall market price coverage
Total assets less intangibles divided by the total of the market value of the security issue and
the book value of liabilities and issues having a prior claim
...
Overbought
Used in the context of general equities
...
See: Heavy
...
Overbought-oversold
An indicator that attempts to define when prices have moved too far and too fast in either
direction and thus are vulnerable to reaction
...
Overdraft
Provision of instant credit by a lending institution
...
Overfunded pension plan
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A pension plan that has a positive surplus (i
...
, assets exceed liabilities)
...
Sizable block of securities or commodities contracts
that, if released on the market, would put downward pressure on prices; prohibits buying
activity that would otherwise translate into upward price movement
...
Overhanging Bond
A convertible bond issue that investors do not convert into common stock because the
stock has not appreciated in value
...
Overheating
An economy that is growing very quickly, with the risk of high inflation
...
Overissue
An excess of issued shares over authorized shares
...
Create a crossed market by expressing a
willingness to sell on the bid side of the market and buy on the offer side
...
Overlay strategy
A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the
activities of money managers
...
Particularly apparent when delivery takes place in Europe for payment in dollars in New
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York
...
Overnight repo
A repurchase agreement with a term of one day
...
Overreaching
Used in the context of general equities
...
Overreaction hypothesis
The supposition that investors overreact to unanticipated news, resulting in exaggerated
movements in stock prices followed by corrections
...
Oversold
Used in the context of general equities
...
Antithesis of overbought
...
This occurs when a new issue is underpriced or in
great demand because of growth prospects
...
Overtrading
Excessive broker trading in a discretionary account
...
This premium is offset by the underwriting
spread
...
GFEDU
...
Overwithholding
Deducting and paying too much tax that may be refunded to the taxpayer or applied
against the next period's obligation
...
Own foreign offices
US reporting institutions' parent organizations, branches, and/or majority owned
subsidiaries located outside the United States
...
Ownership-specific advantages
Property rights or intangible assets, including patents, trademarks, organizational and
marketing
expertise,
production
technology,
and
management
and
general
organizational abilities, that form the basis for a company's advantage over other firms
...
P2P
Business slang, usually used in reference to startups or internet startup,refers to "path
to profitability
...
PAB
The ISO 4217 currency code for the Panama Balboa
...
GFEDU
...
PEFCO
See: Private Export Funding Corporation
PEG Ratio
See: Prospective earnings growth ratio
PEN
The ISO 4217 currency code for the Peruvian Nuevo Sol
...
PF
The two-character ISO 3166 country code for FRENCH POLYNESIA
...
PGK
The ISO 4217 currency code for the Papua New Guinea Kina
...
PHP
The ISO 4217 currency code for the Philippines Peso
...
GFEDU
...
PKR
The ISO 4217 currency code for the Pakistani Rupee
...
PLC
See: Project loan certificate
PLN
The ISO 4217 currency code for the Polish Zloty
...
PN
The two-character ISO 3166 country code for PITCAIRN
...
PS
The two-character ISO 3166 country code for PALESTINIAN TERRITORY, OCCUPIED
...
PTE
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The ISO 4217 currency code for the Portugese Escudo
...
PY
The two-character ISO 3166 country code for PARAGUAY
...
PAC Bond
Stands for Planned Amortization Class bond
...
Pacific
Used for listed equity securities
...
S
...
Pac-Man strategy
Takeover defense strategy in which the prospective acquiree retaliates against the
acquirer's tender offer by launching its own tender offer for the other firm
...
Paid-in capital
Capital received from investors in exchange for stock, but not stock from capital
generated from earnings or donated
...
It would also
include surplus resulting from recapitalization
...
Paid-up policy
A life insurance policy in which all premiums that are due have been paid
...
GFEDU
...
Paired off
Used for listed equity securities
...
Paired shares
Stock of two companies under the same management that are sold as one unit with one
certificate
...
Panic
Rapid trading of stocks or bonds in high volume in anticipation of sharply rising or falling
prices, usually after unexpected news is released
...
Paper dealer
A brokerage firm that buys and sells commercial paper to make a profit
...
Par
Equal to the nominal or face value of a security
...
See: Discount, premium
...
Par value
Also called the maturity value or face value; the amount that an issuer agrees to pay at the
maturity date
...
GFEDU
...
Parallel bonds
Fixed income instruments denominated in the respective currencies of the countries
where they are placed
...
Also referred to as back-to-back loans
...
In other words, if the three month T-bill increases 100
basis points (one %), then the 6-month, 1-year, 5-year, 10-year, 20-year, and 30-year
rates all increase by 100 basis points as well
...
Parameter
A model is a combination of variables, such as GDP growth, and coefficients which
multiply these variables
...
The
coefficients are called parameters
...
Paris Bourse
National stock market of France
...
Parity
For convertibles, level at which a convertible security's market price equals the aggregate
value of the underlying common stock; value/worth of the convertible bond considered only as
an equity instrument (Conversion ratio times common price)
...
For
international parity, US$ price of a foreign stock's last sale in an overseas market (Local
currency stock price times forex rate times ADR ratio)
...
For options parity, dollar amount by
which an option is in the money
...
Parity value
Related: Conversion value
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Parking
Putting money into safe investments such as money market investments while deciding
where to invest the money
...
Illegal holding of stock by a third party, or the financing of
such a stock, in which the third party's sole reason for holding the stock is to conceal
ownership or control of a raider, thus sidestepping the Williams Act requirements of 5%
holding limits
...
Part B prospectus
See: Statement of Additional Information
Partial
Used in the context of general equities
...
Partial compensation
Incomplete payment for the delivery of goods to one party by buying back a certain
amount of product from the same party
...
For example, a broker has
1,000 shares and sends out a card to each of four shareholder clients
...
If the fourth card arrives later, an additional
vote can be counted
...
"Participate in the side of the market indicated by the
order, but do not initiate the interest that causes the trade to take place
...
See: Market order go along, percentage order
...
(1) Customer willing to buy/sell in line with market
...
Participating convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder
...
That is, one gets conversion plus the value of the stock
...
GFEDU
...
Participating fees
The portion of total fees in a syndicated credit that go to the participating banks
...
Participating
Life insurance that pays dividends to policyholders depending on the company's success as
provided by few claims and profitable underwritings and investments
...
Participation certificates (PC)
Used in the context of general equities
...
Participation loan
A large loan made by a group of lenders, that enables a borrower to obtain financing
above the legal lending limit of an individual lender
...
Partnership
Shared ownership among two or more individuals, some of whom may, but do not
necessarily, have limited liability with respect to obligations of the group
...
Partnership agreement
A written agreement among partners detailing the terms and conditions of participation
in a business ownership arrangement
...
GFEDU
...
A trustee, for example, would be prohibited from using an IRA as
collateral for a loan
...
Pass-through coupon rate
The interest rate paid on a securitized pool of assets, which is less than the rate paid on the
underlying loans by an amount equal to the servicing and guaranteeing fees
...
Pass-through securities
A pool of fixed income securities backed by a package of assets (i
...
, mortgages) where the
holder receives the principal and interest payments
...
Passive Activity Loss (PAL)
A loss incurred in participating in passive investing
...
Passive income
Income (such as investment income) that does not come from active participation in a
business
...
S
...
Passive Income Generator (PIG)
An investment that favors passive income, such as an income-oriented real estate limited
partnership
...
Passive investment management
Buying a well diversified portfolio to represent a broad-based market index without
attempting to search out mispriced securities
...
GFEDU
...
Passive management
See: Indexing
Passive portfolio
A market index portfolio
...
A passive strategy assumes that the
marketplace will reflect all available information in the price paid for securities, and
therefore, does not attempt to find mispriced securities
...
Patent
The exclusive right to use documented intellectual property in producing or selling a
particular product or using a process for a designated period of time
...
Pattern
A technical chart formation used to make market predictions by following the price
movements of securities
...
Pay-to-play
Attempts by municipal bond underwriting businesses to gain influence with political officials
who decide which underwriters are awarded the municipality's business
...
Used in the context
of general equities
...
(2) Buy shares in a high-quality company at
what is felt to be a high, but supportable, price due to its quality
...
GFEDU
...
The payer's bank delivers the
payable through draft to the payer, which must approve it and return it to the bank before
payment can be received
...
Payables
Related: Accounts payable
Payback
The length of time it takes to recover the initial cost of a project, without regard to the
time value of money
...
In the context of general equities, paying a lower price in an
accumulation of stock
...
Payee
A person receiving payment through any form of money transfer method
...
Paying agent
An agent who makes principal and interest payments to bondholders on behalf of the issuer
...
Payment float
Company-written checks that have not yet cleared
...
Payments netting
Reducing fund transfers between affiliates to only a netted amount
...
GFEDU
...
Payments pattern
Describes the collection pattern of receivables
...
Payments System
Collective term for mechanisms (both paper-backed and electronic) for moving funds,
payments and money among financial institutions throughout the nation
...
Payoff diagram
In option pricing, a graph of the value of the option position at expiration as a function of the
underlying asset price
...
Also used with
changes in value
...
Payout period
The time period during which withdrawals from a retirement account or annuity are paid
...
Morespecifically, the firm's cash dividend divided by the firm's earnings in the same
reporting period
...
See: Pacific Stock Exchange
...
Related: Value manager
...
Assume XYZ Co
...
50 per share and has earned $2
...
GFEDU
...
50 = 10 times $2
...
XYZ stock sells for ten times earnings
...
Pecking-order view (of capital structure)
The argument that external financing transactions costs, especially those associated with
the problem of adverse selection, create a dynamic environment in which firms have a
preference, or pecking-order of preferred sources of financing, when all else is equal
...
Finally, new equity is at the least preferred source
...
Pegging
Making transactions in a security, currency, or commodity in order to stabilize or target its
value through market intervention
...
Penalty tax
A federal tax that can be applied if a plan holder does not meet certain requirements
when making withdrawals from a tax-advantaged retirement plan (for instance, if the
plan holder has not reached age 59-1/2)
...
Pennant
A chart pattern resembling a pointed flag, with the point facing to the right, which shows
a diminishing variance of price
...
Stock that typically sells for less than $1 a share,
although it may rise to as much as $10/share after the initial public offering, usually
because of heavy promotion
...
Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of pension plan participants (established
in 1974 by the ERISA legislation)
...
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Pension liabilities
Future liabilities resulting from pension commitments made by a corporation
...
Pension parachute
A form of poison pill providing that in the event of a hostile takeover attempt, any excess
pension plan assets can be used to benefit pension plan participants
...
In the context of
corporate governance, these provisions prevent an acquirer from using surplus cash in
the pension fund of the target in order to finance an acquisition
...
Pension plan
A fund that is established for the payment of retirement benefits
...
Pension sponsors
Organizations that have established a pension plan
...
People pill
A form of poison pill providing that the entire management threatens to resign in the
event of a takeover
...
Per stirpes
A method for distributing the assets of an individual who dies without a valid will
...
Percent to double
Percentage that the stock price has to rise (fall) to double the price of the call (put)
...
GFEDU
...
Percentage order
Used for listed equity securities
...
See: participating buyer/seller, "Participate but do not
initiate
...
Premium over parity of a convertible bond divided
by parity
...
Perfect competition
An idealized market environment in which every market participant is too small to affect
the market price by acting on its own
...
Perfect hedge
A situation in which the profit and loss from the underlying asset and the hedge position are
equal
...
The assumptions include frictionless
markets, rational investors, and equal access to market prices and information
...
Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital market environment, that
shows the irrelevance of dividend policy
...
Perfectly competitive financial markets
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Markets in which no trader has the power to change the price of goods or services
...
Performance
Also known as performance-accelerated restricted stock ("PARS") and time-accelerated
restricted stock award plans ("TARSAPs")
...
Otherwise, a time-vesting schedule would remain in effect
...
This analysis seeks to answer questions such as: (1) What
were the major sources of added value? (2) Was short-term factor timing statistically
significant? (3) Was market timing statistically significant? and (4), was security selection
statistically significant?
Performance bond
A surety bond between two parties, insuring one party against loss if the terms of a
contract are not fulfilled
...
Performance fund
A growth-oriented mutual fund investing in growth stock and performance stock with low
dividends and high risk
...
Performance measurement
Calculation of the return a money manager realizes over some time interval
...
A control device shareholders sometimes use to tie management
to the self-interest of shareholders
...
GFEDU
...
Period-certain annuity
An annuity that provides guaranteed payments to an annuitant for a specified period of
time
...
Periodic call auction
Selling stocks by bid at intervals throughout the day
...
Periodic payments
A series of payments from an annuity, qualified retirement plan, or 403(b)(7) account
made over a certain term of years
...
Periodic purchase deferred contract
A fixed or variable annuity contract for which fixed-amount premiums are paid either
monthly or quarterly, and that does not begin paying out until a time elected by the
annuitant
...
For example, the periodic rate on a credit card with an
18% annual percentage rate is 1
...
Permanent Assets
Fixed assets (plant and equipment) and permanent current assets
...
Because
some level is always maintained, they are called permanent current assets
...
Permanent spontaneous current Liabilities
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The minimum level of spontaneous liabilities that is always maintained by a firm
...
For example, a BHC
might own finance companies or engage in mortgage banking
...
Before making such
activities permissible, the Board must determine that performance of the activities by
bank holding companies is in the public interest
...
Perpetual bond
Nonredeemable bond with no maturity date that pays regular interest rates indefinitely
...
Perpetual warrants
Warrants that have no expiration date
...
Perquisites
Personal benefits, including direct benefits, such as the use of a firm car or expense
account for personal business, and indirect benefits, such as up-to-date office
decoration
...
Personal exemption
Amount of money a taxpayer can exclude from personal income for each member of the
household in calculation of a tax obligation
...
Personal inflation rate
The inflation rate as it affects a specific individual
...
GFEDU
...
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between income from debt and
income from equity eliminates the disadvantage of the double taxation (corporate and
personal) of income from equity
...
Petrodollars
Deposits by countries that receive dollar revenues from the sale of petroleum to other
countries; the term commonly refers to OPEC deposits of dollars in the Eurocurrency
market
...
Phantom Stock Award
A type of incentive grant in which the recipient is not issued actual shares of stock on the
grant date but receives an account credited with a certain number of hypothetical shares
...
Payout may be settled in cash or stock
...
Phase space
A graph which shows all possible states of a system
...
If a system
had three descriptive variables, we plot the phase space in three dimensions, with each
variable taking one dimension
...
Philadelphia Stock Exchange (PHLX)
A securities exchange trading American and European foreign currency options on spot exchange
rates
...
GFEDU
...
Phillips Curve
A graph that supposedly shows the relationship between inflation and unemployment
...
Named
after A
...
Phillips
...
For a modern
treatment, see work of Robert Lucas
...
There may be a charge associated with these transfers
...
Physical asset
Actual property such as precious metals or real estate
...
Physical commodity
See: Commodity
Physical option
An option whose underlying security is a physical commodity that is not stock or futures
...
See also index option
...
P&I
Stands for principal and interest on bonds or mortgage-backed securities
...
Pickup bond
A bond with a relatively high coupon that is close to the date at which it is callable, meaning
that a fall in interest rates will most likely cause early redemption of the bond at a premium
...
Used for listed equity
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securities
...
e
...
Piece
Apply mainly to convertible securities
...
Not all bonds can be traded in "pieces," and the increments can vary
...
Pier
A man made structure extending from the shore against which vessels may lie to load or
unload cargo
...
Piggybacking
A broker who trading stocks, bonds or commodities in a personal account following a trade
just made for a customer
...
PIK (Payment-in-kind) securities
Highly speculative bonds or preferred stock that pay interest or dividends through additional
bonds or preferred stock
...
Daily publication of the national quotation bureau that
reports the bid and ask prices of thousands of OTC stocks, as well as the market makers who
trade each stock
...
Smallest unit of a currency (i
...
, cents for US dollars)
...
Pit
A specific area of the trading floor that is designed for the trading of commodities,
individual futures, or option contracts
...
GFEDU
...
PITI
Stands for principal, interest, taxes, and insurance, the four main parts of monthly
mortgage obligations
...
P&L
Profit and loss statement for a trader
...
See: Float
...
Placement ratio
The percentages of last week's new municipal bond offerings that have been bought from
the underwriters, according to the Bond Buyer newspaper
...
Plain vanilla swap
See: Fixed for floating swap
Plan agreement
A document detailing the terms and conditions of a retirement plan such as an IRA
...
Plan for reorganization
A plan for reorganizing a firm during the Chapter 11 bankruptcy process
...
GFEDU
...
Planned amortization class (PAC)
(1) The class of CMO that has the most stable cash flows and the lowest prepayment risk of
any class of CMO Because of a stable cash flow, it is considered the least risky CMO (2) A
CMO bond class that stipulates cash flow contributions to a sinking fund
...
Similarly, cash flows received by the trust in excess of the sinking fund requirement
are also allocated to other bond classes
...
Planned capital expenditure program
Budgeted or projected outlays for major expenditures on permanent or fixed assets as
outlined in the corporate financial plan
...
Planning horizon
The length of time a model or investor or plan projects into the future
...
Player
Used in the context of general equities
...
Playing the
Trading in high, uncalculated risk usually refers to actions of amateur investors
...
Pledging
See: Hypothecation
Plow back
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To reinvest earnings in a business rather than pay out them out as dividends
...
Plowback rate
Related: Retention rate
Plug
A variable that handles financial slack in the financial plan
...
Dealers in government bonds normally give price quotes in
32nds
...
Plus a match
Used for listed equity securities
...
Outside
...
Compare to ahead
...
Trade occurring at a price higher than the
previous sale
...
Antithesis of minus tick
...
Plus tick seller
Used for listed equity securities
...
Point
The smallest unit of price change quoted, or one one-hundredth of a percent
...
Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i
...
, a
2-point change
...
Point Attractor
In non-linear dynamics, an attractor where all orbits in phase space are drawn to one point,
or value
...
A pendulum which is damped by friction will always stop, so its
phase space will always be drawn to the point where velocity and position are equal to zero
...
Points quote
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An abbreviated form of the outright quote used by traders in the interbank market
...
Named after the cyanide pill that secret government agents are said to be
instructed to swallow if capture is imminent
...
Policy
Way in which an investor seeks to assess an appropriate long-term "normal" mix of assets
that represents an ideal blend of controlled risk and enhanced return
...
Policy loan
A loan often made at a below-market interest rate from an insurance company to a
policyholder that is secured by the cash surrender value of a life insurance policy
...
Policyholder loan bonds
Packaged loans acquired by policyholders that are secured by the cash surrender value of
the policies, and are offered by a broker/dealer as bonds
...
Pool
In capital budgeting, the concept that investment projects are financed out of a pool of
bonds, preferred stock, and common stock, and a weighted-average cost of capital must be
used to calculate investment returns
...
In investments, the combination of funds for
the benefit of a common project, or a group of investors who use their combined influence
to manipulate prices
...
GFEDU
...
Pool factors are published monthly by the Bond Buyer
newspaper for Ginnie Mae, Fannie Mae, and Freddie Mac (Federal Home Loan Mortgage
Corporation) MBSs
...
The combined assets of the merged entity are consolidated using book value, as opposed to
the purchase method, which uses market value
...
Porcupine
Often used in risk arbitrage
...
Portability
The character of benefits that may be carried from a previous job to the next
...
Portfolio allocation by region
The distribution, by geographic region, of a portfolio's holdings
...
Portfolio beta
Used in the context of general equities
...
E
...
, if 50% of the money is in stock A with a beta of 2
...
00,the portfolio beta is 1
...
Portfolio beta describes relative
volatilityof an individual securities portfolio, taken as a whole, as measured by the individual
stock betas of the securities making it up
...
05 relative to the S&P 500 implies
that if the S&P's excess return increases by 10% the portfolio is expected to increase by
10
...
Portfolio diversification
Investing in different asset classes and in securities of many issuers in an attempt to reduce
overall investment risk and to avoid damaging a portfolio's performance by the poor
performance of a single security, industry, (or country)
...
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Portfolio
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put option
...
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the bonds in the
portfolio and then finding the interest rate that will make the present value of the cash
flows equal to the market value of the portfolio
...
Professional responsible for the securities portfolio
of an individual or institutional investor, such as a mutual fund, pension fund, profit-sharing
plan, bank trust department, or insurance company
...
Related: Investment manager
...
Portfolio R
Used in the context of general equities
...
Indeed,
the R2 is the square of the correlation
...
Portfolio restructuring
Applies to derivative products
...
Often a firm is asked to bid on an old
portfolio and give an offering of the desired portfolio
...
Portfolio separation theorem
Theory that an investor's choice of a risky investment portfolio is separate from his attitude
towards risk
...
Portfolio theory
See: Modern portfolio theory
...
GFEDU
...
In a mutual
fund prospectus, these expenses are listed separately from the fund's expense ratio
...
Portfolio variance
Weighted sum of the covariance and variances of the assets in a portfolio
...
The buyer of a commodity is said to have a long position,
and the seller of a commodity is said to have a short position
...
Position building
Buying shares to build up a long position or selling shares to create a short position in a
particular security or group of securities
...
Position limits
Applies to derivative products
...
For "bona fide" futures hedgers, there are no position limits
...
Going long or short in anticipation of a stock's
movement
...
List of long and short positions for an individual
trader or desk, at times accompanied by the trades from the previous trading session that
brought these closing positions
...
Positive carry
Related: Net financing cost
Positive convexity
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A property of option-free bonds that the price appreciation for a large downward change
in interest rates will be greater (in absolute terms) than the price depreciation for the same
downward change in interest rates
...
Also called an affirmative
covenant
...
Possessions corporation
A type of corporation permitted under the US tax code whose branch operation in a US
possession can obtain tax benefits as though it were operating as a foreign subsidiary
...
Post-audit
A set of procedures for evaluating a capital budgeting decision after the fact
...
Postponement
The option of deferring a project without eliminating the possibility of undertaking it
...
Post-trade benchmarks
Prices after the decision to trade
...
Pot is clean
Phrase used when managing underwriter has sold the entire pot
...
GFEDU
...
Prearranged trading
Possibly fraudulent practice whereby commodities dealers carry out risk-free trades at
predetermined prices to acquire tax advantages
...
Preauthorized electronic debits (PAD)
Debits to a bank account in advance by the payer
...
Preauthorized payment
Accelerating cash inflows by directly charging a customer's bank account with permission
...
Precautionary demand (for money)
The need to meet unexpected or extraordinary contingencies with a buffer stock of cash
...
Precedence
The established system of priorities of trades in an exchange
...
Precious metals
Gold, silver, platinum, and palladium, which are used for their intrinsic value or for their
value in production
...
Precompute
Method of charging interest in which the annual interest is either deducted from the face
amount of the loan when the funds are distributed or is added to the total amount and
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divided into the regular payments
...
Preference
Refers to over-the-counter trading
...
Often the "preferenced dealer" will then
move his market in line
...
Preference stock
A security that ranks junior to preferred stock but senior to common stock in the right to
receive payments from the firm; essentially junior preferred stock
...
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a stated date
...
Preferred habitat theory
A biased expectations theory that believes the term structure reflects the expectation of the
future path of interest rates as well as risk premium
...
Preferred shares
Preferred shares give investors a fixed dividend from the company's earnings and entitle
them to be paid before common shareholders
...
Preferred stock
A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of
liquidation
...
This stock does not
usually carry voting rights
...
GFEDU
...
Preferred stock agreement
A contract for preferred stock
...
PREG
Financial ratio defined as stock price divided by sales over earnings growth
...
Related: PSSG
...
Preliminary prospectus
An initial or tentative version of a prospectus
...
Generally, a 10%
penalty tax is owed on such a distribution
...
Premium
(1) A bond sold above its par value
...
(3)
For convertibles, amount by which the price of a convertible exceeds parity, and is usually
expressed as a percentage
...
A similar bond without the
conversion
feature
trades
at
$90
...
66%=(105-90)/90
...
See: Gross parity, net parity
...
(5) For options,
price of an option in the open market (sometimes refers to the portion of the price that
exceeds parity)
...
Related: Inverted market premium payback period
...
Premium bond
A bond that is selling for more than its par value
...
GFEDU
...
Premium raid
An attempt to acquire a large portion of a company's stock to gain control by offering
stockholders a premium over the market value for their shares
...
Prepaid interest
An asset account showing interest that has been paid in advance, which is expensed and
charged to the borrower's P & L statement
...
Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
schedule, critical in assessing the value of mortgage pass-through securities
...
Prerefunded bond
Refunded bond
...
Presale order
An order to purchase part of a new municipal bond issue that is accepted by an underwriting
syndicate before an official public offering
...
To determine the present value, each future cash
flow is multiplied by a present value factor
...
10)] =
$91
...
GFEDU
...
Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in a
future period
...
10)]
...
Present Value Index (PVI)
The ratio of the NPV of a project to the initial outlay required for it
...
President
Highest-ranking officer in a corporation after the chief executive officer
...
Presidential election cycle theory
A theory that stock market trends can be predicted and explained by the four-year
presidential election cycle
...
Pre-tax contribution
Payment to an account made with funds from a worker's paycheck before federal income
taxes are deducted
...
Pretax rate of return
Gain on a security before taxes
...
Previous balance method
Method of calculating finance charges based on the account balance at the end of the
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previous month
...
Cost to become a player in a stock in an
inordinately aggressive market (i
...
,locking on one side, size or price concessions); trader
becomes aggressive in order to break the domination of customer activity by another
dealer
...
Determined by dividing current stock price by common stockholder equity per share (book
value), adjusted for stock splits
...
Price change
Increase or decrease in the closing price of a security compared to the previous day's
closing price
...
Price continuity
Minimal price changes due to transactions
...
Price-earnings ratio
Shows the multiple of earnings at which a stock sells
...
Earnings per share for the
P/E ratio are determined by dividing earnings for past 12 months by the number of
common shares outstanding
...
Price effect
Impact of a change in interest rates on bond prices
...
Answers
the question: How much will the demand for my product decrease if I raise prices by
10%?
Price gap
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A term used when the price of a stock rockets or dives in a direction away from its last
price range, such as a stock with a trading range of $10-$12 that closes at $12 and climbs
to $14 the next day
...
Willingness of a buyer or seller to negotiate on
price, within reason, from the price at the last sale or the indicated level
...
Price immunization
Portfolio protection strategy that focuses on the current market value of assets and liabilities
...
Price momentum
Related: Relative strength
Price persistence
Related: Relative strength
Price range
The interval between the high and low prices over which a stock has traded over a
particular period of time
...
Or, a type of
mortgage pipeline risk created in the production segment when loan terms are set for the
borrower in advance of setting terms for secondary market sale
...
Price-sales ratio
Determined by dividing current stock price by revenue per share (adjusted for stock splits)
...
Price-specie flow mechanism
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Adjustment mechanism under the classic gold standard allowing disturbances in the
price level in one country to be wholly or partly offset by a countervailing flow of specie
(gold coins) that would act to equalize prices across countries and automatically bring
international payments into balance
...
Price support
Government intervention to set an artificially high price through the use of a price floor
designed to aid producers
...
Price uncertainty
Chance that the future price of an asset will change
...
Price-volume relationship
A relationship espoused by some technical analysts that signals continuing rises or falls in
security prices that are related to changes in volume traded
...
Prices (of equity)
Price of a share of common stock on the date shown
...
Priced out
The market has already incorporated information, such as a low dividend, into the price of
a stock
...
Pricing efficiency
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Also called external efficiency; a market characteristic that prices at all times fully reflect
all available information that is relevant to the valuation of securities
...
Primary distribution
Sale of a new issue of stock or bonds, as distinguished from a secondary distribution
...
Primary market
Where a newly issued security is first offered
...
Primary offering
Direct/Sale of a firm's newly issued shares by the firm to investors
...
PRIME
Stands for prescribed right to income and maximum equity, a certificate that entitles the
owner to the dividend/income from an underlying security, but not to the capital appreciation
of that security
...
Prime rate
The interest rate at which banks lend to their best (prime) customers
...
Prime rate fund
A mutual fund that buys portions of corporate loans from banks and pays the interest to
shareholders
...
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Principal
(1) The total amount of money being borrowed or lent
...
Principal-agent relationship
Occurs when one person, an agent, acts on the behalf of another person, the principal
...
Often called principal
...
S
...
S
...
Principal-only (PO)
A mortgage-backed security (MBS) whose holder receives only principal cash flows on the
underlying mortgage pool
...
Principal stockholder
A stockholder who owns 10% or more of the voting stock of a company
...
Principle of diversification
That portfolios of different sorts of assets differently correlated with one another will
have negligible unsystematic risk
...
Used in the context of general equities
...
As a noun, a trade
...
Prior-preferred stock
Preferred stock that has a higher claim on all dividends and assets in liquidation than claims of
other preferred stock
...
GFEDU
...
System used in an auction market, in which the first bid
or offer price is executed before other bid and offer prices, even if subsequent orders are
larger
...
" The bid not
executed is then turned to the broker, who informs the customer that the trade was not
completed because there was stock ahead
...
Private Export Funding Corporation (PEFCO)
Company that mobilizes private capital for financing the export of big-ticket items by US
firms by purchasing at fixed interest rates the medium- to long-term debt obligations of
importers of US products
...
Private letter ruling
A ruling by the IRS in response to a request for interpretation of a tax law
...
Private market value (PMV)
The break-up market value of all divisions of a company if divisions were each independent
and established their own market stock prices
...
Private placement
The sale of a bond or other security directly to a limited number of investors
...
Antithesis of public offering
...
Private unrequited transfers
Resident immigrant workers' remittances to their country of origin as well as, e
...
, gifts,
dowries, inheritances, prizes, charitable contributions
...
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Pro forma capital structure analysis
A method of analyzing the impact of alternative possible capital structure choices on a
firm's credit statistics and reported financial results, especially to determine whether the
firm will be able to use projected tax shield benefits fully
...
"What-if" analysis
...
Probability
The relative likelihood of a particular outcome among all possible outcomes
...
Probability distribution
A function that describes all the values a random variable can take and the probability
associated with each
...
Probability function
A measure that assigns a likelihood of occurrence to each and every possible outcome
...
Proceeds sale
OTC securities sale whose revenue is used to buy another security
...
Producer Price Index (PPI)
Index measuring changes in wholesale prices, published by the US Bureau of Labor
Statistics every month
...
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Product cycle theory
Theory suggesting that a firm initially establish itself locally and expand into foreign
markets in response to foreign demand for its product; over time, the MNC will grow in
foreign markets; after some point, its foreign business may decline unless it can
differentiate its product from competitors
...
Product risk
A type of mortgage pipeline risk that occurs when a lender has an unusual loan in production
or inventory but does not have a sale commitment at a prearranged price
...
Production-flow commitment
An agreement by the loan purchaser to allow a monthly loan quota to be delivered in
batches
...
Production possibilities schedule
The maximum amount of goods (i
...
, food and clothing) that a country is able to produce
given its labor supply
...
Productivity
The amount of output per unit of input, such as the quantity of a product produced per
hour of capital employed
...
That is the trader has nothing real, or natural
...
The amount one makes on a transaction
...
GFEDU
...
Profit forecast
A prediction of future profits of a company, which may affect investment decisions
...
Dollars of profit or
loss are graphed on the vertical axis, and various stock prices are graphed on the
horizontal axis
...
Profit margin
Indicator of profitability
...
Determined by dividing net income by revenue for the same 12-month period
...
Also known as net profit margin
...
Generally used in refernce to
strategies that have two break-even points - an upside break-even and a downside
break-even
...
Profit-sharing plan
An incentive system providing that employees share in company profits through a cash
fund or a deferred plan used to buy stock or bonds
...
This is usually a tabular
compilation of the data drawn on a profit graph
...
Profit taking
Action by short-term securities traders to cash in on gains created by a sharp market rise,
which pushes prices down temporarily but implies an upward market trend
...
Profitability index
The present value of the future cash flows divided by the initial investment
...
Profitability ratios
Ratios that focus on how well a firm is performing
...
Rate of return ratios measure performance relative to some
measure of size of the investment
...
GFEDU
...
Program trades
Orders requiring the execution of trades in a large number of different stocks at as near the
same time as possible
...
Related: Block trade
Program trading
Trades based on signals from computer programs, usually entered directly from the
trader's computer in to the market's computer system and executed automatically
...
A process of electronic execution of trading of a basket of stocks
simultaneously, for index arbitrage, portfolio restructuring, or outright buy/sell interests
...
Progress payments
Periodic payments to a supplier, contractor, or subcontractor for work as it is completed
as desired, in order to reduce working capital requirements
...
Progressive tax system
A tax system that taxes the wealthy at a higher percentage rate than the less wealthy
...
Increases for some increases in income, but never decreases with an
increase in income
...
Project financing
A form of asset-based financing in which a firm finances a discrete set of assets on a
stand-alone basis
...
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Project loan certificate (PLC)
A primary program of Ginnie Mae for securitizing FHA-insured and coinsured multifamily,
hospital, and nursing home loans
...
Project loan securities
Securities backed by a variety of FHA-insured loans-primarily multifamily apartment
buildings, hospitals, and nursing homes
...
S
...
Projected benefit obligation (PBO)
A measure of a pension plan's liability at the calculation date assuming that the plan is
ongoing and will not terminate in the foreseeable future
...
Projected maturity date
With CMOs, the date at the end of the estimated cash flow window where final payment
is made
...
Promissory note
Written pledge to pay
...
Property rights
Rights of individuals and companies to own and use property as they see fit and to
receive the stream of income that their property generates
...
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Proportional representation
A method of stockholder voting that allows minority shareholders and groups of small
shareholders to have a better chance of getting representation on a board of directors than
under statutory voting
...
Proprietorship
An unincorporated business that is owned and operated by only one person who has
complete liability for all assets, and complete rights to all profits
...
Growth is forecast of earnings minus current earnings
divided by current earnings
...
Prospectus
Formal written document to sell securities that describes the plan for a proposed
business enterprise, or the facts concerning an existing one, that an investor needs to
make an informed decision
...
Protect
Assure the salesperson or trader that interest, buy or sell, will be attended to, given any
change in the trading circumstances, as follows:
At a price: If the stock trades at a certain price or price range, the trader will show this
market to the salesperson and thus allow participation under these favorable
circumstances
...
Volume (OTC): If a certain amount of volume trades (that parallels the protectee's
interest), trader assures salesperson of reasonable participation in the trading activity
...
Protected Strategy
A position that has limited risk
...
See also Combination and Straddle
...
GFEDU
...
Protective covenant
A part of an indenture or loan agreement that limits certain actions a company may take
during the term of the loan to protect the lender's interests
...
Related: Hedge option strategies
...
Prototype plan
A qualified retirement plan sponsored by a financial institution
...
A prototype is generally more flexible than the IRS Form
5305 or 5305-A and may have additional special features
...
Provision for income taxes
An amount on the P & I statement that estimates a company's total income tax liability for
the year
...
In the case of convertible securities,
right of an issuer to accelerate the first redemption date if the underlying common should
trade at or above a certain level for a sustained period
...
Note that under these circumstances the security
has appreciated, at a minimum, 50% since being issued
...
Shareholders can and often do give management their proxies, delegating the
right and responsibility to vote their shares as specified
...
Proxy Committee Ballot
The ballot signed and submitted at the meeting by the Proxy Committee
...
GFEDU
...
Proxy contest
A battle for the control of a firm in which a dissident group seeks, from the firm's other
shareholders, the right to vote those shareholders' shares in favor of the dissident group's
slate of directors
...
Proxy fight
Often used in risk arbitrage
...
The acquirer tries to persuade the shareholders of the target
company that the present management of the firm should be ousted n favor of a slate of
directors favorable to the acquirer, thus enabling the acquiring company to gain control
of the company without paying a premium price
...
Proxy Solicitor
A specialist (firm) hired to gather proxy votes
...
Includes
information on closely held shares
...
Proxy vote
Vote cast by one person or entity on behalf of another
...
P&S
Purchase and sale statement
...
PSA Prepayment Rate
The Bond Market Trade Association's Mortgaged Asset-Backed Securities Division's
prepayment model based on an assumed rate of prepayment each month of the then
unpaid principal balance of a pool of mortgages
...
00% PSA assumes a prepayment rate of 2%
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per month in the first month following the date of issue, increasing at 2% percentage
points per month thereafter until the 30th month
...
PSSG
Financial ratio defined as stock price divided by sales over sales growth
...
Related: PREG
...
The order book official or specialist keeps the public book
...
The specialist's book is closed
(only he knows at what price and in what quantity the nearest public orders are)
...
Public Company
A company that has held an initial public offering and whose shares are traded on a stock
exchange or in the over-the-counter market
...
Public debt
Issues of debt by governments to compensate for a lack of tax revenues
...
Public limited partnership
A limited partnership with an unlimited number of partners that is registered with the SEC
and is available for public trading by broker/dealers
...
Offering to the investment public, after
compliance with registration requirements of the SEC, usually by an investment banker or a
syndicate made up of several investment bankers, at a price agreed upon between the
issuer and the investment bankers
...
See: Primary distribution
and secondary distribution
...
Public ownership
The portion of a company's stock that is held by the public
...
GFEDU
...
Interest on municipal bonds is federal income tax-free
...
Public securities offering
A securities issue placed with the public through an investment or commercial bank
...
Public Utility Holding Company Act of 1935
Legislation intended to eliminate many holding company abuses by reorganizing the
financial structures of holding companies in the gas and electric utility industries and
regulating their debt and dividend policies
...
Publicly held
Describes a company whose stock is held by the public, whether individuals or business
entities
...
Puke
Slang for a trader selling aposition, usually a losing position, as in, "When in doubt, puke
it out
...
See: Cancel
...
Pulling
Investors selling off positions after a stock or bond market has increased sharply or setting
up hedging positions to guard against a negative turn of the market
...
GFEDU
...
Purchase
Method of accounting for a merger that treats the acquirer as having purchased the assets
and assumed the liabilities of the acquiree, which are then written up or down to their
respective fair market values
...
Purchase
Used in connection with project financing; an agreement to purchase a specific amount
of project output per period
...
Purchase fund
Resembles a sinking fund, except that money is used to purchase bonds only if they are
selling below their par value
...
Purchase method
Accounting for an acquisition using market value for the consolidation of the two entities'
net assets on the balance sheet
...
Purchase-money mortgage
A mortgage given by a buyer in lieu of cash when the buyer is unable to borrow
commercially for the purchase of property
...
Purchase and
A method of securities distribution in which a firm purchases securities from the issuer for
its own account at a stated price and then resells them, as contrasted with a best-efforts
sale
...
GFEDU
...
Purchasing power of the dollar
The amount of goods and services that can be exchanged for a dollar as compared with
amount of a previous time period
...
Purchasing
Related: Inflation risk
Pure discount
A bond that will make only one payment of principal and interest
...
Pure
A theory that asserts that forward rates exclusively represent the expected future rates
...
For example, an increasing slope to the term structure implies increasing
short-term interest rates
...
Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market
portfolio
...
Pure play
A company involved in only one line of business
...
Purpose credit
Credit used for the purpose of buying, carrying or trading in securities
...
GFEDU
...
Purpose statement
A form filed by a borrower that describes the use of a loan backed by securities, and
guarantees that the funds lent will not be used illegally to buy securities against Federal
Reserve regulations
...
Opposite of a call
...
If the price is above par, the put is a "premium put
...
Option pricing principle that says, given a stock's price, a
put and call of the same class must have a static price relationship because arbitrage
opportunities or activities will always reestablish such a relationship
...
Holding the
underlying stock and buying a put will deliver the exact payoff as buying one call and
investing the present value (PV) of the exercise price
...
Put-call ratio
The ratio of the volume of put options traded to the volume of call options traded, which is used
as an indicator of investor sentiment (bullish or bearish)
...
Put on
Used for listed equity securities
...
See: Print
...
"Go to the floor to transact
...
Put option
This security gives investors the right to sell (or put) a fixed number of shares at a fixed price
within a given period
...
GFEDU
...
Put an option
To exercise a put option
...
"Elaborate on your intentions or your inquiry,"
especially with respect to size, side, and price
...
Put price
The price at which an asset will be sold if a put option is exercised
...
Put provision
Gives the holder of a floating-rate bond the right to redeem the note at par on the coupon
payment date
...
Put to seller
Exercise a put option; require that the option writer to purchase the stock at the strike price
...
The writer of the swaption therefore becomes the floating-rate
receiver/fixed-rate payer
...
Pyramiding
A type of stock swap option exercise in which a small number of previously-owned shares
is surrendered to the company to pay a portion of the exercise price, for which a slightly
larger number of option shares may be purchased, which are then immediately
surrendered back to the company to pay additional amounts of the exercise price, and so
on until the full option price has been paid and the optionee is left with just the number of
shares equal to the option spread
...
GFEDU
...
Q
Fifth letter of a Nasdaq stock symbol specifying that it is in bankruptcy proceedings
...
QAR
The ISO 4217 currency code for the Qatar Rial
...
Named after
James Tobin of Yale University
...
In portfolio selection, we often minimize the variance of the portfolio (which is a
quadratic function) subject to constraints on the mean return of the portfolio
...
Qualified Domestic Relations Order (QDRO)
A judgment, decree, or order that gives a pension plan participant access to retirement
assets that must be used to pay an ex-spouse or dependent children
...
Qualified opinion
An auditor's opinion expressing certain limitations of an audit
...
Tax is paid only when
amounts are drawn from the trust
...
GFEDU
...
The plan may provide for employer contributions, as in a
pension or profit-sharing plan, as well as employee contributions
...
Plan earnings are not taxed to the employee until withdrawn
...
Qualified total distribution
A payment representing an employee's interest in a qualified retirement plan
...
Payment can be in installments as long as the
complete distribution is made within a single tax year
...
Qualifying share
Shares of common stock that a person must hold in order to qualify as a director of the
issuing corporation
...
Qualitative analysis
An analysis of the qualities of a company that cannot be measured concretely, such as
management quality or employee morale
...
It may be based on
data collected by the analysts, there is no formal quantitative framework used to generate
projections
...
Quality option
Gives the seller choice of deliverables in Treasury bond and Treasury note futures contracts
...
Related: Cheapest to deliver issue
...
GFEDU
...
Combined with
more subjective or qualitative considerations (such as management effectiveness),
quantitative analysis can enhance investment decisions and portfolios
...
Quality spread
Difference between Treasury securities and non-Treasury securities that are identical in all
respects except for quality rating
...
Also called credit spread
...
Quantize
To convert an asset or liability into a currency other than the regular trading currency
...
Quantitative research
Use of advanced econometric and mathematical valuation models to identify the firms
with the best possible prospectives
...
Quanto swap
See: Differential swap
Quantos
Currency options with a guaranteed exchange rate that enable buyers who like an asset,
German bonds for example, but not the asset's pricing currency, to arrange payment in a
different currency for a fee
...
Quarterly
Occurring every three months
...
GFEDU
...
Quarterly issues currently consist of a 3-year note, a
10-year note, and a 30-year bond
...
See:
Reopening
...
Quay
A landing place or pier, usually of solid construction, where vessels berth to load or
unload cargo
...
Quick ratio
Indicator of a company's financial strength (or weakness)
...
This ratio provides information regarding
the firm's liquidity and ability to meet its obligations
...
Quid pro quo
An arrangement allowing a firm to use research from another firm at no cost in exchange
for executing all of its trades with the firm that provides the research
...
Quorum
The minimum number of people who must be present or must provide a proxy to vote at
a meeting in order to make a valid decision
...
Quotation board
The electronic board at a brokerage firm displaying prices other financial data
...
GFEDU
...
Quoted price
The price at which the last trade of a particular security or commodity took place
...
RAM
See: Reverse-annuity mortgage
RAP
See: Regulatory accounting procedures
RE
The two-character ISO 3166 country code for REUNION
...
ROA
See: Return on assets
ROCE
See: Return on capital employed
ROE
See: Return on equity
ROI
See: Return on investment
ROL
The ISO 4217 currency code for the Romanian Leu
...
GFEDU
...
RUB
The ISO 4217 currency code for the Russian Rouble
...
RWF
The ISO 4217 currency code for the Rwanda Franc
...
See: Shark watcher
...
Raiders who accumulate 5% or more of the outstanding shares in the target
company must report their purchases to the SEC, the exchange of listing, and the target
itself
...
Rainmaker
A valuable employee, manager or subcontracted person who brings new business to a
company
...
Opposite of reaction
...
The
loan is then paid to the homeowner in the form of an annuity
...
Random walk
Theory that stock price changes from day to day are accidental or haphazard; changes
are independent of each other and have the same probability distribution
...
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Randomized strategy
A strategy of introducing into the decision-making process a chance element that is
designed to confound the information content of the decision-maker's observed choices
...
Range forward
A forward exchange rate contract that places upper and lower bounds on the future cost of
foreign exchange
...
Rate base
The value of a regulated public utility and its operations as defined by its regulators and
on which the company is allowed to earn a particular rate of return
...
Rate of exchange
See: Exchange Rate
Rate lock
An agreement between the mortgage banker and the loan applicant guaranteeing a
specified interest rate for a designated period, usually 60 days
...
Rate of return
Calculated as the (value now minus value at time of purchase) divided by value at time
of purchase
...
See also: Return,
annual rate of return
...
Rate risk
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In banking, the risk that profits may drop or losses occur because a rise in interest rates
forces up the cost of funding fixed-rate loans or other fixed-rate assets
...
Investors and analysts use ratings to assess the
riskness of an investment
...
Ratio Calendar Combination
A strategy consisting of a simultaneous position of a ratio calendar spread using "calls"
and a similar position using puts, where the striking price of the "calls" is greater that the
striking price of the "puts"
...
Ratio Spread
Constructed with either puts or calls, the strategy consists of buying a certain amount of
options and then selling a larger quantity of more out-of-the-money options
...
Normally, it implies a preponderance of short options over either long options or long
stock
...
Rational expectations
The idea that people rationally anticipate the future and respond today to what they see
ahead
...
Lucas, Jr
...
Raw material supply agreement
As used in connection with project financing, an agreement to furnish a specified amount
per period of a specified raw material
...
GFEDU
...
Reaction
A decline in prices following an advance
...
Reading the tape
Judging the performance of stocks by monitoring changes in price as they are displayed
on the ticker tape
...
(1) natural, (2) not dividend roll-or program
trading-related; (3) not tax-related
...
Real assets
Identifiable assets, such as land and buildings, equipment, patents, and trademarks, as
distinguished from a financial investment
...
Real body
On a candlestick line, it is the broad part consisting of the difference between opening
and closing prices
...
Real cash flow
Income expressed in current purchasing power terms
...
Real estate
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A piece of land and whatever physical property is on it
...
Real estate broker
An intermediary who receives a commission for arranging and facilitating the sale of a
property for a buyer or a seller
...
A REIT is similar to a closed-end mutual fund
...
A financing vehicle created under
the Tax Reform Act of 1986
...
Real gain or loss
A gain or loss adjusted for increasing prices by an inflation index such as the CPI
...
Real income
The income of an individual, group, or country adjusted for inflation
...
Interest rate expressed in terms
of real goods, i
...
nominal interest rate adjusted for expected inflation
...
Quotes in the brokers market
...
Real property
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Land plus all other property that is in some way attached to the land
...
Real return
The actual payback on an investment after removing the effect of inflation
...
Different from a delayed quote, which shows the same bid and ask prices 15
minutes and sometimes 20 minutes after a trade takes place
...
See: Takes price
...
Realized profit (or loss)
A capital gain or loss on securities held in a portfolio that has become actual by the sale or
other type of surrender of one or many securities
...
Realized yield
The holding-period return actually generated from an investment in a bond
...
Rebalancing
Realigning the proportions of assets in a portfolio as needed
...
When a stock is sold short, the seller borrows stock from an owner or custodian and
delivers it to the buyer
...
The borrower, who is
short, often wants a rebate of the interest earned on the proceeds under the lender's
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control, especially when the stock can be borrowed from many sources
...
Recalculation method
A method of calculating required minimum distributions from a retirement plan using life
expectancy tables
...
Recapitalization proposal
Often used in risk arbitrage
...
Recapture
A provision in a contract that allows one party to recover (recapture) some degree of
possession of an asset, such as a share of the profits derived from some property
...
Receive fixed counterparty
The transactor in an interest rate swap who receives payments based on the fixed rate and
makes payments based on the floating rate
...
Receive versus payment
An instruction that only cash will be accepted in exchange for delivery of securities
...
Receivables turnover ratio
Total operating revenues divided by average receivables
...
Received for Shipment Bill of Lading
A document issued by a carrier that looks like a bill of lading as evidence of receipt of
goods for shipment
...
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Receiver
A bankruptcy practitioner appointed by secured creditors to oversee the repayment of
debts
...
Recession
A temporary downturn in economic activity, usually indicated by two consecutive
quarters of a falling GDP
...
Reciprocal marketing agreement
A strategic alliance in which two companies agree to comarket each other's products
...
Reclamation
A claim for the right to return or the right to demand the return of a security that has been
previously accepted as a result of bad delivery or other irregularities in the delivery and
settlement process
...
For example, a firm might declare a dividend on Nov
...
1 to
holders of record Nov
...
Once a trade is executed, an investor becomes the "owner of
record" on settlement, which currently takes five business days for securities and one
business day for mutual funds
...
(2) The date that determines who is entitled to payment of principal and interest due to be
paid on a security
...
The record dates for CMOs and asset-backed securities vary with each issue
...
Record Owner
The stockholder of record as distinguished from the beneficial owner
...
GFEDU
...
If a loan is with recourse, the lender has a general claim
against the parent company if the collateral is insufficient to repay the debt
...
Redemption date
The date on which a bond matures or is redeemed
...
Redemption price
See: Call price
Red herring
A preliminary prospectus providing information required by the SEC
...
Redeemable
Eligible for redemption under the terms of an indenture
...
Redemption charge
The commission a mutual fund charges an investor who is redeeming shares
...
This charge may
decline or be eliminated as shares are held for longer time periods
...
Redemption or call
Right of the issuer to force holders on a certain date to redeem their convertibles for cash
...
Typically, an issue is not called away unless the conversion price is 15%-25% below
the current level of the common
...
GFEDU
...
Rediscount
To discount short-term negotiable debt instruments for a second time, after they have
been discounted with a bank
...
Reduction-Option Loan (ROL)
A hybrid of a fixed-rate and adjustable-rate mortgage
...
This reduction is
usually allowed if rates drop more than 2% in a year
...
Refinancing
An extension and/or increase in amount of existing debt
...
Refund
To retire existing bond issues through the sale of a new bond issue, usually to reduce the
interest rate being paid
...
Refunded bond
Also called a prerefunded bond, a bond that originally may have been issued as a general
obligation or revenue bond but that is now secured by an escrow fund consisting entirely
of direct U
...
government obligations that are sufficient for paying the bondholders
...
Refunding Escrow Deposits (REDs)
A financial instrument involving a forward purchase contract that obligates investors to buy
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bonds at a certain rate when issued
...
In the interim, investors' money is invested in secondary
market Treasury bonds
...
Regional bank
A bank operating in a specific region of the country, taking deposits and offering loans
...
RCPCs expedite collection and settlement of
checks within the area on an overnight basis
...
Regional stock exchanges
Organized national securities exchanges located outside of New York City and registered
with the SEC They include: the Boston, Cincinnati, Intermountain (Salt Lake
City-dormant, owned by COMEX), Midwest (Chicago), Pacific (Los Angeles and San
Francisco), Philadelphia (Philadelphia and Miami), and Spokane (local mining and
Canadian issues, non-reporting trades) Stock Exchanges
...
Differs from a bearer bond,
which is traded without record of ownership and whose possession is the only evidence
of ownership
...
Registered company
A company that is listed with the SEC after submission of a required statement and
compliance with disclosure requirements
...
Registered equity market maker
Member firm of the American Stock Exchange registered as a trader to make stabilizing
trades for its own account in particular securities
...
GFEDU
...
Registered investment company
An investment firm which is registered with the SEC and complies with certain stated legal
requirements
...
Registered Owner
An individual or organization to whom certificates are directly issued and who, as a result,
is recorded on the Corporation's securityholder records (as maintained by the transfer
agent)
...
Registered representative
A person registered with the CFTC who is employed by and solicits business for a
commission house or futures commission merchant
...
Registered security
Used in the context of general equities
...
Registered Shares
Shares that are issued in a shareholder's name as the holder of record
...
Registrar
Financial institution appointed to record issue and ownership of company securities
...
GFEDU
...
Registration statement
A legal document filed with the SEC to register securities for public offering that details the
purpose of the proposed public offering
...
See: Registration
...
The general form is Y = a + bX
+ u, where Y is the variable that we are trying to predict; X is the variable that we are
using to predict Y, a is the intercept; b is the slope, and u is the regression residual
...
The ability to
fit or explain is measured by the R-square
...
Regression coefficient
Term yielded by regression analysis that indicates the sensitivity of the dependent variable
to a particular independent variable
...
Regression equation
An equation that describes the average relationship between a dependent variable and a
set of explanatory variables
...
Regressive tax
A tax system that provides that average tax rates decrease with increases in individuals'
income brackets
...
In Japan, regular settlement occurs
three business days following the trade date; in London, two weeks following the trade
date (at times, three weeks); in France, once per month
...
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Regulated commodities
The group of registered commodity futures and options contracts traded on organized U
...
futures exchanges
...
Regulation A
A Federal Reserve Board regulation that exempts small public offerings, valued at less
than $1
...
Regulation D
Federal Reserve Board regulation that currently requires member banks to hold reserves
against their net borrowings from foreign offices of other banks over a 28-day averaging
period
...
Regulation FD (fair disclosure)
U
...
SEC regulation whose purpose is to ensure that select groups of investors are not
privy to firm-specific information before other investors
...
If information is inadvertently released, they must take steps to broaden
the dissemination of the information within 24 hours of discovering the disclosure
...
This regulation was
discontinued by a 1998 amendment
...
Reg M has also required member banks to hold reserves against Eurodollars lent by their
foreign branches to domestic corporations for domestic purposes
...
Currently time deposits with a denomination of $100,000 or more are
exempt from Reg Q
...
GFEDU
...
Regulation T Calls
Federal Reserve Board Regulation T margin calls are issued when a customer makes a
transaction in a margin account and does not meet the minimum initial requirement of
50% cash or loan available
...
The customer
must increase the equity in the account by depositing additional funds and/or
marginable securities
...
Regulation U
Federal Reserve Board limit on how much credit a bank can allow a customer for the
purchase and carrying of margin securities
...
Regulatory accounting procedures (RAP)
Accounting principles required by the FHLB that allow S&Ls to elect annually to defer
gains and losses on the sale of assets and amortize these deferrals over the average life of
the asset sold
...
Regulatory surplus
The surplus as measured using regulatory accounting principles (RAP), which may allow the
nonmarket valuation of assets or liabilities and which may be materially different from
economic surplus
...
Reimbursement
Payment made to someone for out-of-pocket expenses has incurred
...
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Reinsurance
The spreading of risk and division of client premiums among insurance companies
allowing the sharing of the burden of a large risk
...
Many mutual fund companies and
investment services offer the automatic reinvestment of dividends and capital gains
distributions as an option investors
...
Also known as the ex-dividend
date
...
Reinvestment privilege
A shareholder's right to reinvest dividends and buy more shares in the corporation or mutual
fund
...
Reinvestment risk
The risk that proceeds received in the future may have to be reinvested at a lower
potential interest rate
...
It can also be used as a netting center
...
Relative form of purchasing power parity
Theory that the rate of change in the prices of products should be somewhat similar, but
not absolutely the same when measured in a common currency, as long as
transportation costs and trade barriers are unchanged
...
GFEDU
...
Relative strength
Movement of a stock price over the past year as compared to a market index (like the S&P
500)
...
0 means the stock shows relative weakness in price movement
(underperformed the market); a value above 1
...
Equation for Relative Strength: [current stock price/year-ago
stock price] divided by [current S&P 500/year-ago S&P 500]
...
Relative value
The attractiveness measured in terms of risk, liquidity, and return of one instrument
relative to another, or, for a given instrument, of one maturity relative to another
...
Used for bonds
...
Release clause
A mortgage provision that releases a pledged asset after a certain portion of the total
payments has been made
...
The number of reload shares granted is equal to the number of shares delivered to
exercise the option plus, in some cases, any shares withheld for tax withholding
obligations
...
The option
generally expires on the same date that the original option would have
...
Remaining maturity
The length of time remaining until a bond comes due
Remaining principal balance
The amount of principal dollars remaining to be paid under a mortgage as of a given time
...
GFEDU
...
Rembrandt market
The foreign market in the Netherlands
...
Remote disbursement
Technique that involves writing checks drawn on banks in remote locations so as to
maximize disbursement float
...
The interest rate
on the loan is generally fixed during the term of the note, but when the balloon comes
due, the lender may refinance it at a higher rate
...
Renewal
Placement of a day order identical to one not completed on the previous day
...
Rent
Regular payments to an owner for the use of some leased property
...
Reoffering yield
In a purchase and sale, the yield to maturity at which an underwriter offers to sell bonds to
investors
...
Reopening
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Treasury offerings of additional amounts of outstanding issues, rather than an entirely new
issue
...
Reorg (or Corporate Action or Reorganization)
Any transaction involving the issuance of stock or cash, or the cancellation of stock tendered
by a shareholder, such as in the case of a merger, acquisition or tender offer
...
Reorganization bond
A bond issued by a company undergoing a reorganization process
...
Replacement Chain
A concept that views a capital investment as an indefinite commitment to a specific type of
technology
...
Replacement cost
Cost to replace a firm's assets
...
Replacement cost insurance
Insurance that pays out the full amount required to replace damaged property with new
property, without taking into account the depreciated value of the property
...
Replacement value
Current cost of replacing the firm's assets
...
Replicating portfolio
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A portfolio constructed to match an index or benchmark
...
See: Repurchase agreement
...
Report of Condition and Income
Financial report that all banks, bank holding companies, savings, and loan associations,
Edge Act and agreement corporations, and certain other types of organizations must file
with a federal regulatory agency
...
Reported factor
The pool factor as reported by the bond buyer for a given amortization period
...
Repricing
To change the price of an asset
...
Reproducible assets
A tangible asset with physical properties that can be matched or duplicated, such as a
building or machinery
...
Also called a repo,
it represents a collateralized short-term loan for which, where the collateral may be a
Treasury security, money market instrument, federal agency security, or mortgage-backed
security
...
Repurchase of stock
Technique to pay cash to firm's shareholders that provides more preferential tax treatment
for shareholders than dividends
...
A repurchase is achieved through either a Dutch
auction, open market, purchase, or tender offer
...
GFEDU
...
Roth IRAs are exempt from this rule
...
Required reserves
The dollar amounts, based on reserve ratios, that banks are required to keep on deposit at
a Federal Reserve Bank
...
Required yield
Generally referring to bonds; the yield required by the marketplace to match available
expected returns for financial instruments with comparable risk
...
E
...
Rescaled range analysis measures how the distance covered by a
particle increases as we look at longer and longer time scales
...
A series which increases at a
different rate is not random
...
Rescheduled loans
Bank loans that are usually altered to have longer maturities in order to assist the borrower
in making the necessary repayments
...
Research and development (R"D)
Development of new products and services by a company in order to obtain a
competitive advantage
...
Research department
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The office in an institutional investing organizations that analyzes markets and securities
...
Reserve
An accounting entry that properly reflects contingent liabilities
...
Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks
must keep in a noninterest-bearing account at one of the twelve Federal Reserve Banks
...
Reservation price
The price below or above which a seller or purchaser is unwilling to go
...
Reset frequency
The frequency with which the floating rate changes
...
Residential property
Property that consists of homes, apartments, townhouses, and condominiums
...
Residual claim
Related: Equity claim
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Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment
opportunities for those funds are currently unavailable
...
Residual Return
Return independent of the benchmark
...
To be exact, an asset's residual return equals its excess return
minus beta times the benchmark excess return
...
Residuals measure the impact of firm-specific events during a particular period
...
Residual value
Usually refers to the value of a lessor's property at the time the lease expires
...
Resistance
An effective upper bound on prices achieved because of many willing sellers at that price
level
...
Price
ceiling at which technical analysts note persistent selling of a commodity or security
...
Resolution
A document that records a decision or action by a board of directors, or a bond resolution
by a government entity authorizing a bond issue
...
GFEDU
...
Resolution Trust Corporation (RTC)
A government agency established in 1989 and disbanded in 1996 that administered
federal savings and loan institutions that were insolvent between 1989 and August 1992 by
either bailing them out or merging them
...
Traders are so restricted due to investment bank involvement with the company
on nonpublic activity (i
...
, mergers and acquisitions defense), affiliate ownership, or
underwriting activities; signified on the Quotron by a flashing "R
...
See: Grey list
...
Restricted Securities
The term used under Rule 144 for securities issued privately by the company, without the
benefit of a registration statement
...
Restricted surplus
A portion of retained earnings not allowed by law to be used for the payment of dividends
...
These restrictions generally result from affiliate ownership, M&A
activity, and underwriting activity
...
Restricted stock typically vests in increments over a period of
several years
...
Restrictive covenants
Provisions that place constraints on the operations of borrowers, such as restrictions on
working capital, fixed assets, future borrowing, and payment of dividends
...
GFEDU
...
Restructuring
The reorganization of a company in order to attain greater efficiency and to adapt to new
markets
...
Resyndication limited partnership
The sale of existing properties to new limited partners, so that they can receive the tax
advantages that are no longer available to the old partners
...
Retail credit
Credit granted by a firm to consumers for the purchase of goods or services
...
Retail house
A brokerage firm that caters to individual customers rather than large institutions
...
Retail price
The total price charged for a product sold to a customer, which includes the
manufacturer's cost plus a retail markup
...
Retained earnings statement
A statement of all transactions affecting the balance of a company's retained earnings
account
...
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Retention rate
The percentage of present earnings held back or retained by a corporation, or one minus
the dividend payout rate
...
Retire
To extinguish a security, as in paying off a debt
...
Retirement Protection Act of 1994
Legislation designed to protect the pension benefits of workers and retirees by
increasing required support of pension plans by employers
...
Return
The change in the value of a portfolio over an evaluation period, including any distributions
made from the portfolio during that period
...
Return of capital
A cash distribution resulting from the sale of a capital asset, or securities, or tax breaks
from depreciation
...
Determined by dividing net income for the past 12 months by total
average assets
...
ROA can be decomposed into return on
sales (net income/sales) multiplied by asset utilization (sales/assets)
...
Determined by dividing Earnings
Before Interest and Taxes by (capital employed plus short-term loans minus intangible
assets)
...
Return on equity (ROE)
Indicator of profitability
...
Result is shown as a percentage
...
ROE may be
decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total
equity)
...
GFEDU
...
Return on sales
A measurement of operational efficiency equaling net pre-tax profits divided by net sales
expressed as a percentage
...
Return-to-maturity expectations
A variant of pure expectations theory that suggests that the return an investor will realize by
rolling over short-term bonds to some investment horizon will be the same as holding a
zero-coupon bond with a maturity that is the same as that investment horizon
...
Revaluation
An increase in the foreign exchange value of a currency that is pegged to other currencies
or gold
...
The options have the same terms
...
Revenue bond
A bond issued by a municipality to finance either a project or an enterprise in which the
issuer pledges to the bondholders the revenues generated by the operation of the projects
financed
...
Revenue fund
A fund accounting for all revenues from an enterprise financed by a municipal revenue bond
...
Revenue sharing
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The percentage split between the general partner and limited partners of profits and losses
resulting from the operation of the involved business
...
For convertible reversal, selling a convertible and buying the underlying
common, usually effected by an arbitrageur
...
For
options reversal, closing the positions of each aspect of an options spread or combination
strategy
...
Reverse conversion
A technique in which brokerage firms earn interest on the stocks they hold for their
customers by selling the short and investing the proceeds in money market accounts
...
Reverse leverage
Occurs when the interest on borrowings exceeds the return on investment of the funds that
were borrowed
...
Reverse mortgage
A mortgage agreement allowing a homeowner to borrow against home equity and receive
tax-free payments until the total principal and interest reach the credit limit of equity, and
the lender is either repaid in full or takes the house
...
The lender is thus exposed to the risk of falling rates
...
From the customer's perspective, the
customer provides a collateralized loan to the seller
...
Shareholders maintain the same percentage of equity as before the
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split
...
After the reverse split, the firm's stock price is, in
this example, three times the pre-reverse split price
...
Some think this supposedly attracts
investors
...
Revised estimate
The third estimate of GDP released about three months after the measurement period
...
Revocable letter of credit
Assurance of funds issued by a bank that can be canceled at any time without prior
notification to the beneficiary
...
Since the
arrangement can be altered at any time, the assets are considered part of the grantor's
estate and they are taxed as such
...
Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take and repay
funds at will
...
Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation
...
RICO
Stands for Racketeer Influenced and Corrupt Organization Act
...
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Rider
A form accompanying an insurance policy that alters the policy's terms or coverage
...
Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994
Law permitting interstate banking in the US
Rigged market
Manipulation of prices in a market to attract buyers and sellers
...
Such a right, which normally has a life of two
to four weeks, is freely transferable and entitles the holder to buy the new common stock
below the public offering price
...
Right here
Used in the context of general equities
...
See: Tight
...
Holdings of shareholders who do not exercise rights are usually
diluted by the offering
...
Rights offerings are
particularly common to closed-end funds, which cannot otherwise issue additional common
stock
...
Right of redemption
The right to recover property that has been attached by paying off the debt
...
Rights Agreement (aka "Poison Pill")
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An anti-takeover arrangement often established by a company in anticipation of a hostile
takeover attempt
...
The shareholder may then
exercise these rights to receive additional shares of stock and/or debentures, making the
target company more expensive to acquire as a result of the additional shares outstanding,
or the additional debt
...
Rights-on
Shares trading with rights attached to them
...
A
setoff is common in parallel loan arrangements
...
Sometimes called a pit
...
"Take a profit
...
Rio de Janeiro Stock Exchange (Bolsa do Rio)
Brazil's major securities market
...
Risk
Often defined as the standard deviation of the return on total investment
...
In context of asset pricing theory
...
Risk-adjusted discount rate
The rate established by adding a expected risk premium to the risk-free rate in order to
determine the present value of a risky investment
...
Risk-adjusted return
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Often we subtract from the rate of return on an asset a rate of return from another asset
that has similar risk
...
We can also use the beta
against the benchmark to calculate an alpha, which is also risk-adjusted performance
...
Modern risk arbitrage focuses on capturing the spreads
between the market value of an announced takeover target and the eventual price at which
the acquirer will buy the target's shares
...
Risk-based capital ratio
Bank requirement that there be a minimum ratio of estimated total capital to estimated
risk-weighted asset
...
Risk controlled arbitrage
A self-funding, self-hedged series of transactions that generally use mortgage securities
(MBS) as the primary assets
...
g
...
Risk-Free Interest Rate
Describes return available to an investor in a security somehow guaranteed to produce that
return
...
Risk indexes
Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth
orientation, and (6) financial risk
...
Also used with
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changes in value
...
Risk-return trade-off
The tendency for potential risk to vary directly with potential return, so that the more risk
involved, the greater the potential return, and vice versa
...
Riskless arbitrage
The simultaneous purchase and sale of the same asset to yield a profit
...
The risk-free asset is commonly
defined as short-term obligations of the US government
...
Riskless rate of return
The rate earned on a riskless asset
...
The evaluation of whether dealer
markups and markdowns in OTC transactions are reasonable
...
Risk lover
A person willing to accept lower expected returns on prospects with higher amounts of risk
...
Risk-neutral
Insensitive to risk
...
Risk premium
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The reward for holding the risky equity market portfolio rather than the risk-free asset
...
Risk premium approach
A common approach for tactical asset allocation to determine the relative valuation of
asset classes based on expected returns
...
Risk-return
The basic concept that higher expected returns accompany greater risk, and vice versa
...
Risk seeker
Investor who likes to take risk and is even willing to pay for it
...
Risk transfer
The shifting of risk through insurance or securitization of debt because of risk aversion
...
Risk-adjusted return
Return earned on an asset normalized for the amount of risk associated with that asset
...
Risk-free rate
The rate earned on a riskless asset
...
Rotation
An active asset management strategy that tactically overweighted and underweighted
certain sectors, depending on expected performance
...
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Rocket scientist
An employee of an investment firm (often having a Ph
...
in physics or mathematics) that
works on highly mathmatic models of derivative pricing
...
Roll forward
To move to an option position with a later expiration date
...
Finance
professor at UCLA
...
Roll over
To reinvest funds received from a maturing security in a new issue of the same or a similar
security
...
In venture capital, refers to the
venture capitalist forcing small firms to merge operations in order to reduce costs
Rolling of Futures
As financial futures have short-term maturities, often 3-9 months, before or at maturity, the
future must be sold and a new future (for the same asset but with a new maturity) must be
repurchased
...
Most term loans in the Euromarket are made on a rollover basis
as to current LIBOR rate
...
These assets, as long as they are not mixed with other contributions, can later be
rolled over to another qualified plan or 403(b) plan
...
Roll's Critique
That the CAPM holds by construction when performance is measured against a mean-variance
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efficient index; otherwise, it holds not at all
...
Ross, Stephen
Developer of the Arbitrage Pricing Theory
...
Roth IRA
Individual Retirement Account that allows contributors to invest up to $2,000 per year, and
to withdraw the principal and earnings totally tax-free under certain conditions
...
Related: odd lot
...
Round-trip transactions costs
Costs of completing a transaction, including commissions, market impact costs, and taxes
...
Royalty
Payment for the right to use intellectual property or natural resources
...
R square (R
Square of the correlation coefficient
...
A
measure of the quality of fit
...
Rule lOb-5
An SEC rule that prohibits trading by insiders on material nonpublic information
...
Rule 13-d
Often used in risk arbitrage
...
The purchaser of such stock must also file a 13-d with the stock exchange on
which the shares are listed (if any) and the company itself
...
GFEDU
...
The law is designed to protect against insidious takeover
attempts and to keep the investing public aware of information that could affect the price
of their stock
...
Rule 14-d
Often used in risk arbitrage
...
Rule 144
Restricts solicitation of buyers to complete the sell order of an insider (unless the firm is
already a buyer); signified by a flashing "E" on Quotron
...
Rule 405
NYSE codification of "know your customer" rules, which require that a customer's
situation is suitable for any investment being made
...
See: Shelf registration
...
Rule of 72
A formula used to determine the amount of time it will take for invested money to double
at a given compound interest rate, which is 72 divided by the interest rate
...
Rumortrage
A term combining the words "rumor" and arbitrage, used to describe trading that occurs
on the basis of rumors of a takeover
...
A group of shareholders who
refuse to tender their shares for a merger or acquisition
...
GFEDU
...
Run
A run consists of a series of bid and offer quotes for different securities or maturities
...
Rundown
A summary of the amount and prices of a serial bond issue that is still available for
purchase
...
Runoff
Used for listed equity securities
...
m
...
Russell Indexes
US equity index widely used by pension and mutual fund investors that are weighted by
market capitalization and published by the Frank Russell Company of Tacoma, Washington
...
Russell 1000
A market capitalization-weighted benchmark index made up of the 1000 highest-ranking US
stocks in the Russell 3000
...
Russell 3000
A market capitalization-weighted benchmark index made up of the 3000 largest US stocks,
which represent about 98% of the US equity market
...
Russian Trading System (RTS)
An electronic system in Russia, like the Nasdaq system on which the majority of Russian
equities trading is conducted
...
GFEDU
...
RAM
See: Reverse-annuity mortgage
RAP
See: Regulatory accounting procedures
RE
The two-character ISO 3166 country code for REUNION
...
ROA
See: Return on assets
ROCE
See: Return on capital employed
ROE
See: Return on equity
ROI
See: Return on investment
ROL
The ISO 4217 currency code for the Romanian Leu
...
RUB
The ISO 4217 currency code for the Russian Rouble
...
GFEDU
...
RWF
The ISO 4217 currency code for the Rwanda Franc
...
See: Shark watcher
...
Raiders who accumulate 5% or more of the outstanding shares in the target
company must report their purchases to the SEC, the exchange of listing, and the target
itself
...
Rainmaker
A valuable employee, manager or subcontracted person who brings new business to a
company
...
Opposite of reaction
...
The
loan is then paid to the homeowner in the form of an annuity
...
Random walk
Theory that stock price changes from day to day are accidental or haphazard; changes
are independent of each other and have the same probability distribution
...
Randomized strategy
A strategy of introducing into the decision-making process a chance element that is
designed to confound the information content of the decision-maker's observed choices
...
GFEDU
...
Range forward
A forward exchange rate contract that places upper and lower bounds on the future cost of
foreign exchange
...
Rate base
The value of a regulated public utility and its operations as defined by its regulators and
on which the company is allowed to earn a particular rate of return
...
Rate of exchange
See: Exchange Rate
Rate lock
An agreement between the mortgage banker and the loan applicant guaranteeing a
specified interest rate for a designated period, usually 60 days
...
Rate of return
Calculated as the (value now minus value at time of purchase) divided by value at time
of purchase
...
See also: Return,
annual rate of return
...
Rate risk
In banking, the risk that profits may drop or losses occur because a rise in interest rates
forces up the cost of funding fixed-rate loans or other fixed-rate assets
...
Investors and analysts use ratings to assess the
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riskness of an investment
...
Ratio Calendar Combination
A strategy consisting of a simultaneous position of a ratio calendar spread using "calls"
and a similar position using puts, where the striking price of the "calls" is greater that the
striking price of the "puts"
...
Ratio Spread
Constructed with either puts or calls, the strategy consists of buying a certain amount of
options and then selling a larger quantity of more out-of-the-money options
...
Normally, it implies a preponderance of short options over either long options or long
stock
...
Rational expectations
The idea that people rationally anticipate the future and respond today to what they see
ahead
...
Lucas, Jr
...
Raw material supply agreement
As used in connection with project financing, an agreement to furnish a specified amount
per period of a specified raw material
...
Reaction
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A decline in prices following an advance
...
Reading the tape
Judging the performance of stocks by monitoring changes in price as they are displayed
on the ticker tape
...
(1) natural, (2) not dividend roll-or program
trading-related; (3) not tax-related
...
Real assets
Identifiable assets, such as land and buildings, equipment, patents, and trademarks, as
distinguished from a financial investment
...
Real body
On a candlestick line, it is the broad part consisting of the difference between opening
and closing prices
...
Real cash flow
Income expressed in current purchasing power terms
...
Real estate
A piece of land and whatever physical property is on it
...
Real estate broker
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An intermediary who receives a commission for arranging and facilitating the sale of a
property for a buyer or a seller
...
A REIT is similar to a closed-end mutual fund
...
A financing vehicle created under
the Tax Reform Act of 1986
...
Real gain or loss
A gain or loss adjusted for increasing prices by an inflation index such as the CPI
...
Real income
The income of an individual, group, or country adjusted for inflation
...
Interest rate expressed in terms
of real goods, i
...
nominal interest rate adjusted for expected inflation
...
Quotes in the brokers market
...
Real property
Land plus all other property that is in some way attached to the land
...
Real return
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The actual payback on an investment after removing the effect of inflation
...
Different from a delayed quote, which shows the same bid and ask prices 15
minutes and sometimes 20 minutes after a trade takes place
...
See: Takes price
...
Realized profit (or loss)
A capital gain or loss on securities held in a portfolio that has become actual by the sale or
other type of surrender of one or many securities
...
Realized yield
The holding-period return actually generated from an investment in a bond
...
Rebalancing
Realigning the proportions of assets in a portfolio as needed
...
When a stock is sold short, the seller borrows stock from an owner or custodian and
delivers it to the buyer
...
The borrower, who is
short, often wants a rebate of the interest earned on the proceeds under the lender's
control, especially when the stock can be borrowed from many sources
...
Recalculation method
A method of calculating required minimum distributions from a retirement plan using life
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expectancy tables
...
Recapitalization proposal
Often used in risk arbitrage
...
Recapture
A provision in a contract that allows one party to recover (recapture) some degree of
possession of an asset, such as a share of the profits derived from some property
...
Receive fixed counterparty
The transactor in an interest rate swap who receives payments based on the fixed rate and
makes payments based on the floating rate
...
Receive versus payment
An instruction that only cash will be accepted in exchange for delivery of securities
...
Receivables turnover ratio
Total operating revenues divided by average receivables
...
Received for Shipment Bill of Lading
A document issued by a carrier that looks like a bill of lading as evidence of receipt of
goods for shipment
...
Receiver
A bankruptcy practitioner appointed by secured creditors to oversee the repayment of
debts
...
GFEDU
...
Recession
A temporary downturn in economic activity, usually indicated by two consecutive
quarters of a falling GDP
...
Reciprocal marketing agreement
A strategic alliance in which two companies agree to comarket each other's products
...
Reclamation
A claim for the right to return or the right to demand the return of a security that has been
previously accepted as a result of bad delivery or other irregularities in the delivery and
settlement process
...
For example, a firm might declare a dividend on Nov
...
1 to
holders of record Nov
...
Once a trade is executed, an investor becomes the "owner of
record" on settlement, which currently takes five business days for securities and one
business day for mutual funds
...
(2) The date that determines who is entitled to payment of principal and interest due to be
paid on a security
...
The record dates for CMOs and asset-backed securities vary with each issue
...
Record Owner
The stockholder of record as distinguished from the beneficial owner
...
If a loan is with recourse, the lender has a general claim
against the parent company if the collateral is insufficient to repay the debt
...
GFEDU
...
Redemption date
The date on which a bond matures or is redeemed
...
Redemption price
See: Call price
Red herring
A preliminary prospectus providing information required by the SEC
...
Redeemable
Eligible for redemption under the terms of an indenture
...
Redemption charge
The commission a mutual fund charges an investor who is redeeming shares
...
This charge may
decline or be eliminated as shares are held for longer time periods
...
Redemption or call
Right of the issuer to force holders on a certain date to redeem their convertibles for cash
...
Typically, an issue is not called away unless the conversion price is 15%-25% below
the current level of the common
...
Rediscount
To discount short-term negotiable debt instruments for a second time, after they have
been discounted with a bank
...
GFEDU
...
Reduction-Option Loan (ROL)
A hybrid of a fixed-rate and adjustable-rate mortgage
...
This reduction is
usually allowed if rates drop more than 2% in a year
...
Refinancing
An extension and/or increase in amount of existing debt
...
Refund
To retire existing bond issues through the sale of a new bond issue, usually to reduce the
interest rate being paid
...
Refunded bond
Also called a prerefunded bond, a bond that originally may have been issued as a general
obligation or revenue bond but that is now secured by an escrow fund consisting entirely
of direct U
...
government obligations that are sufficient for paying the bondholders
...
Refunding Escrow Deposits (REDs)
A financial instrument involving a forward purchase contract that obligates investors to buy
bonds at a certain rate when issued
...
In the interim, investors' money is invested in secondary
market Treasury bonds
...
Regional bank
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A bank operating in a specific region of the country, taking deposits and offering loans
...
RCPCs expedite collection and settlement of
checks within the area on an overnight basis
...
Regional stock exchanges
Organized national securities exchanges located outside of New York City and registered
with the SEC They include: the Boston, Cincinnati, Intermountain (Salt Lake
City-dormant, owned by COMEX), Midwest (Chicago), Pacific (Los Angeles and San
Francisco), Philadelphia (Philadelphia and Miami), and Spokane (local mining and
Canadian issues, non-reporting trades) Stock Exchanges
...
Differs from a bearer bond,
which is traded without record of ownership and whose possession is the only evidence
of ownership
...
Registered company
A company that is listed with the SEC after submission of a required statement and
compliance with disclosure requirements
...
Registered equity market maker
Member firm of the American Stock Exchange registered as a trader to make stabilizing
trades for its own account in particular securities
...
Registered investment company
An investment firm which is registered with the SEC and complies with certain stated legal
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requirements
...
Registered Owner
An individual or organization to whom certificates are directly issued and who, as a result,
is recorded on the Corporation's securityholder records (as maintained by the transfer
agent)
...
Registered representative
A person registered with the CFTC who is employed by and solicits business for a
commission house or futures commission merchant
...
Registered security
Used in the context of general equities
...
Registered Shares
Shares that are issued in a shareholder's name as the holder of record
...
Registrar
Financial institution appointed to record issue and ownership of company securities
...
Registration statement
A legal document filed with the SEC to register securities for public offering that details the
purpose of the proposed public offering
...
GFEDU
...
See: Registration
...
The general form is Y = a + bX
+ u, where Y is the variable that we are trying to predict; X is the variable that we are
using to predict Y, a is the intercept; b is the slope, and u is the regression residual
...
The ability to
fit or explain is measured by the R-square
...
Regression coefficient
Term yielded by regression analysis that indicates the sensitivity of the dependent variable
to a particular independent variable
...
Regression equation
An equation that describes the average relationship between a dependent variable and a
set of explanatory variables
...
Regressive tax
A tax system that provides that average tax rates decrease with increases in individuals'
income brackets
...
In Japan, regular settlement occurs
three business days following the trade date; in London, two weeks following the trade
date (at times, three weeks); in France, once per month
...
Regulated commodities
The group of registered commodity futures and options contracts traded on organized U
...
futures exchanges
...
GFEDU
...
Regulation A
A Federal Reserve Board regulation that exempts small public offerings, valued at less
than $1
...
Regulation D
Federal Reserve Board regulation that currently requires member banks to hold reserves
against their net borrowings from foreign offices of other banks over a 28-day averaging
period
...
Regulation FD (fair disclosure)
U
...
SEC regulation whose purpose is to ensure that select groups of investors are not
privy to firm-specific information before other investors
...
If information is inadvertently released, they must take steps to broaden
the dissemination of the information within 24 hours of discovering the disclosure
...
This regulation was
discontinued by a 1998 amendment
...
Reg M has also required member banks to hold reserves against Eurodollars lent by their
foreign branches to domestic corporations for domestic purposes
...
Currently time deposits with a denomination of $100,000 or more are
exempt from Reg Q
...
Regulation T Calls
Federal Reserve Board Regulation T margin calls are issued when a customer makes a
transaction in a margin account and does not meet the minimum initial requirement of
50% cash or loan available
...
The customer
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must increase the equity in the account by depositing additional funds and/or
marginable securities
...
Regulation U
Federal Reserve Board limit on how much credit a bank can allow a customer for the
purchase and carrying of margin securities
...
Regulatory accounting procedures (RAP)
Accounting principles required by the FHLB that allow S&Ls to elect annually to defer
gains and losses on the sale of assets and amortize these deferrals over the average life of
the asset sold
...
Regulatory surplus
The surplus as measured using regulatory accounting principles (RAP), which may allow the
nonmarket valuation of assets or liabilities and which may be materially different from
economic surplus
...
Reimbursement
Payment made to someone for out-of-pocket expenses has incurred
...
Reinsurance
The spreading of risk and division of client premiums among insurance companies
allowing the sharing of the burden of a large risk
...
Many mutual fund companies and
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investment services offer the automatic reinvestment of dividends and capital gains
distributions as an option investors
...
Also known as the ex-dividend
date
...
Reinvestment privilege
A shareholder's right to reinvest dividends and buy more shares in the corporation or mutual
fund
...
Reinvestment risk
The risk that proceeds received in the future may have to be reinvested at a lower
potential interest rate
...
It can also be used as a netting center
...
Relative form of purchasing power parity
Theory that the rate of change in the prices of products should be somewhat similar, but
not absolutely the same when measured in a common currency, as long as
transportation costs and trade barriers are unchanged
...
Relative strength
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Movement of a stock price over the past year as compared to a market index (like the S&P
500)
...
0 means the stock shows relative weakness in price movement
(underperformed the market); a value above 1
...
Equation for Relative Strength: [current stock price/year-ago
stock price] divided by [current S&P 500/year-ago S&P 500]
...
Relative value
The attractiveness measured in terms of risk, liquidity, and return of one instrument
relative to another, or, for a given instrument, of one maturity relative to another
...
Used for bonds
...
Release clause
A mortgage provision that releases a pledged asset after a certain portion of the total
payments has been made
...
The number of reload shares granted is equal to the number of shares delivered to
exercise the option plus, in some cases, any shares withheld for tax withholding
obligations
...
The option
generally expires on the same date that the original option would have
...
Remaining maturity
The length of time remaining until a bond comes due
Remaining principal balance
The amount of principal dollars remaining to be paid under a mortgage as of a given time
...
Rembrandt market
The foreign market in the Netherlands
...
GFEDU
...
Remote disbursement
Technique that involves writing checks drawn on banks in remote locations so as to
maximize disbursement float
...
The interest rate
on the loan is generally fixed during the term of the note, but when the balloon comes
due, the lender may refinance it at a higher rate
...
Renewal
Placement of a day order identical to one not completed on the previous day
...
Rent
Regular payments to an owner for the use of some leased property
...
Reoffering yield
In a purchase and sale, the yield to maturity at which an underwriter offers to sell bonds to
investors
...
Reopening
Treasury offerings of additional amounts of outstanding issues, rather than an entirely new
issue
...
Reorg (or Corporate Action or Reorganization)
Any transaction involving the issuance of stock or cash, or the cancellation of stock tendered
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by a shareholder, such as in the case of a merger, acquisition or tender offer
...
Reorganization bond
A bond issued by a company undergoing a reorganization process
...
Replacement Chain
A concept that views a capital investment as an indefinite commitment to a specific type of
technology
...
Replacement cost
Cost to replace a firm's assets
...
Replacement cost insurance
Insurance that pays out the full amount required to replace damaged property with new
property, without taking into account the depreciated value of the property
...
Replacement value
Current cost of replacing the firm's assets
...
Replicating portfolio
A portfolio constructed to match an index or benchmark
...
See: Repurchase agreement
...
GFEDU
...
Report of Condition and Income
Financial report that all banks, bank holding companies, savings, and loan associations,
Edge Act and agreement corporations, and certain other types of organizations must file
with a federal regulatory agency
...
Reported factor
The pool factor as reported by the bond buyer for a given amortization period
...
Repricing
To change the price of an asset
...
Reproducible assets
A tangible asset with physical properties that can be matched or duplicated, such as a
building or machinery
...
Also called a repo,
it represents a collateralized short-term loan for which, where the collateral may be a
Treasury security, money market instrument, federal agency security, or mortgage-backed
security
...
Repurchase of stock
Technique to pay cash to firm's shareholders that provides more preferential tax treatment
for shareholders than dividends
...
A repurchase is achieved through either a Dutch
auction, open market, purchase, or tender offer
...
Roth IRAs are exempt from this rule
...
GFEDU
...
Required reserves
The dollar amounts, based on reserve ratios, that banks are required to keep on deposit at
a Federal Reserve Bank
...
Required yield
Generally referring to bonds; the yield required by the marketplace to match available
expected returns for financial instruments with comparable risk
...
E
...
Rescaled range analysis measures how the distance covered by a
particle increases as we look at longer and longer time scales
...
A series which increases at a
different rate is not random
...
Rescheduled loans
Bank loans that are usually altered to have longer maturities in order to assist the borrower
in making the necessary repayments
...
Research and development (R"D)
Development of new products and services by a company in order to obtain a
competitive advantage
...
Research department
The office in an institutional investing organizations that analyzes markets and securities
...
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Reserve
An accounting entry that properly reflects contingent liabilities
...
Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks
must keep in a noninterest-bearing account at one of the twelve Federal Reserve Banks
...
Reservation price
The price below or above which a seller or purchaser is unwilling to go
...
Reset frequency
The frequency with which the floating rate changes
...
Residential property
Property that consists of homes, apartments, townhouses, and condominiums
...
Residual claim
Related: Equity claim
Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment
opportunities for those funds are currently unavailable
...
GFEDU
...
Residual Return
Return independent of the benchmark
...
To be exact, an asset's residual return equals its excess return
minus beta times the benchmark excess return
...
Residuals measure the impact of firm-specific events during a particular period
...
Residual value
Usually refers to the value of a lessor's property at the time the lease expires
...
Resistance
An effective upper bound on prices achieved because of many willing sellers at that price
level
...
Price
ceiling at which technical analysts note persistent selling of a commodity or security
...
Resolution
A document that records a decision or action by a board of directors, or a bond resolution
by a government entity authorizing a bond issue
...
Resolution Trust Corporation (RTC)
A government agency established in 1989 and disbanded in 1996 that administered
federal savings and loan institutions that were insolvent between 1989 and August 1992 by
either bailing them out or merging them
...
GFEDU
...
Traders are so restricted due to investment bank involvement with the company
on nonpublic activity (i
...
, mergers and acquisitions defense), affiliate ownership, or
underwriting activities; signified on the Quotron by a flashing "R
...
See: Grey list
...
Restricted Securities
The term used under Rule 144 for securities issued privately by the company, without the
benefit of a registration statement
...
Restricted surplus
A portion of retained earnings not allowed by law to be used for the payment of dividends
...
These restrictions generally result from affiliate ownership, M&A
activity, and underwriting activity
...
Restricted stock typically vests in increments over a period of
several years
...
Restrictive covenants
Provisions that place constraints on the operations of borrowers, such as restrictions on
working capital, fixed assets, future borrowing, and payment of dividends
...
Restructuring
The reorganization of a company in order to attain greater efficiency and to adapt to new
markets
...
GFEDU
...
Resyndication limited partnership
The sale of existing properties to new limited partners, so that they can receive the tax
advantages that are no longer available to the old partners
...
Retail credit
Credit granted by a firm to consumers for the purchase of goods or services
...
Retail house
A brokerage firm that caters to individual customers rather than large institutions
...
Retail price
The total price charged for a product sold to a customer, which includes the
manufacturer's cost plus a retail markup
...
Retained earnings statement
A statement of all transactions affecting the balance of a company's retained earnings
account
...
Retention rate
The percentage of present earnings held back or retained by a corporation, or one minus
the dividend payout rate
...
Retire
To extinguish a security, as in paying off a debt
...
GFEDU
...
Retirement Protection Act of 1994
Legislation designed to protect the pension benefits of workers and retirees by
increasing required support of pension plans by employers
...
Return
The change in the value of a portfolio over an evaluation period, including any distributions
made from the portfolio during that period
...
Return of capital
A cash distribution resulting from the sale of a capital asset, or securities, or tax breaks
from depreciation
...
Determined by dividing net income for the past 12 months by total
average assets
...
ROA can be decomposed into return on
sales (net income/sales) multiplied by asset utilization (sales/assets)
...
Determined by dividing Earnings
Before Interest and Taxes by (capital employed plus short-term loans minus intangible
assets)
...
Return on equity (ROE)
Indicator of profitability
...
Result is shown as a percentage
...
ROE may be
decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total
equity)
...
Return on sales
A measurement of operational efficiency equaling net pre-tax profits divided by net sales
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expressed as a percentage
...
Return-to-maturity expectations
A variant of pure expectations theory that suggests that the return an investor will realize by
rolling over short-term bonds to some investment horizon will be the same as holding a
zero-coupon bond with a maturity that is the same as that investment horizon
...
Revaluation
An increase in the foreign exchange value of a currency that is pegged to other currencies
or gold
...
The options have the same terms
...
Revenue bond
A bond issued by a municipality to finance either a project or an enterprise in which the
issuer pledges to the bondholders the revenues generated by the operation of the projects
financed
...
Revenue fund
A fund accounting for all revenues from an enterprise financed by a municipal revenue bond
...
Revenue sharing
The percentage split between the general partner and limited partners of profits and losses
resulting from the operation of the involved business
...
For convertible reversal, selling a convertible and buying the underlying
common, usually effected by an arbitrageur
...
GFEDU
...
For
options reversal, closing the positions of each aspect of an options spread or combination
strategy
...
Reverse conversion
A technique in which brokerage firms earn interest on the stocks they hold for their
customers by selling the short and investing the proceeds in money market accounts
...
Reverse leverage
Occurs when the interest on borrowings exceeds the return on investment of the funds that
were borrowed
...
Reverse mortgage
A mortgage agreement allowing a homeowner to borrow against home equity and receive
tax-free payments until the total principal and interest reach the credit limit of equity, and
the lender is either repaid in full or takes the house
...
The lender is thus exposed to the risk of falling rates
...
From the customer's perspective, the
customer provides a collateralized loan to the seller
...
Shareholders maintain the same percentage of equity as before the
split
...
After the reverse split, the firm's stock price is, in
this example, three times the pre-reverse split price
...
Some think this supposedly attracts
investors
...
GFEDU
...
Revised estimate
The third estimate of GDP released about three months after the measurement period
...
Revocable letter of credit
Assurance of funds issued by a bank that can be canceled at any time without prior
notification to the beneficiary
...
Since the
arrangement can be altered at any time, the assets are considered part of the grantor's
estate and they are taxed as such
...
Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take and repay
funds at will
...
Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation
...
RICO
Stands for Racketeer Influenced and Corrupt Organization Act
...
Rider
A form accompanying an insurance policy that alters the policy's terms or coverage
...
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Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994
Law permitting interstate banking in the US
Rigged market
Manipulation of prices in a market to attract buyers and sellers
...
Such a right, which normally has a life of two
to four weeks, is freely transferable and entitles the holder to buy the new common stock
below the public offering price
...
Right here
Used in the context of general equities
...
See: Tight
...
Holdings of shareholders who do not exercise rights are usually
diluted by the offering
...
Rights offerings are
particularly common to closed-end funds, which cannot otherwise issue additional common
stock
...
Right of redemption
The right to recover property that has been attached by paying off the debt
...
Rights Agreement (aka "Poison Pill")
An anti-takeover arrangement often established by a company in anticipation of a hostile
takeover attempt
...
The shareholder may then
exercise these rights to receive additional shares of stock and/or debentures, making the
target company more expensive to acquire as a result of the additional shares outstanding,
or the additional debt
...
GFEDU
...
Rights-on
Shares trading with rights attached to them
...
A
setoff is common in parallel loan arrangements
...
Sometimes called a pit
...
"Take a profit
...
Rio de Janeiro Stock Exchange (Bolsa do Rio)
Brazil's major securities market
...
Risk
Often defined as the standard deviation of the return on total investment
...
In context of asset pricing theory
...
Risk-adjusted discount rate
The rate established by adding a expected risk premium to the risk-free rate in order to
determine the present value of a risky investment
...
Risk-adjusted return
Often we subtract from the rate of return on an asset a rate of return from another asset
that has similar risk
...
We can also use the beta
against the benchmark to calculate an alpha, which is also risk-adjusted performance
...
GFEDU
...
Modern risk arbitrage focuses on capturing the spreads
between the market value of an announced takeover target and the eventual price at which
the acquirer will buy the target's shares
...
Risk-based capital ratio
Bank requirement that there be a minimum ratio of estimated total capital to estimated
risk-weighted asset
...
Risk controlled arbitrage
A self-funding, self-hedged series of transactions that generally use mortgage securities
(MBS) as the primary assets
...
g
...
Risk-Free Interest Rate
Describes return available to an investor in a security somehow guaranteed to produce that
return
...
Risk indexes
Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth
orientation, and (6) financial risk
...
Also used with
changes in value
...
Risk-return trade-off
The tendency for potential risk to vary directly with potential return, so that the more risk
involved, the greater the potential return, and vice versa
...
GFEDU
...
Riskless arbitrage
The simultaneous purchase and sale of the same asset to yield a profit
...
The risk-free asset is commonly
defined as short-term obligations of the US government
...
Riskless rate of return
The rate earned on a riskless asset
...
The evaluation of whether dealer
markups and markdowns in OTC transactions are reasonable
...
Risk lover
A person willing to accept lower expected returns on prospects with higher amounts of risk
...
Risk-neutral
Insensitive to risk
...
Risk premium
The reward for holding the risky equity market portfolio rather than the risk-free asset
...
Risk premium approach
A common approach for tactical asset allocation to determine the relative valuation of
asset classes based on expected returns
...
GFEDU
...
Risk-return
The basic concept that higher expected returns accompany greater risk, and vice versa
...
Risk seeker
Investor who likes to take risk and is even willing to pay for it
...
Risk transfer
The shifting of risk through insurance or securitization of debt because of risk aversion
...
Risk-adjusted return
Return earned on an asset normalized for the amount of risk associated with that asset
...
Risk-free rate
The rate earned on a riskless asset
...
Rotation
An active asset management strategy that tactically overweighted and underweighted
certain sectors, depending on expected performance
...
Rocket scientist
An employee of an investment firm (often having a Ph
...
in physics or mathematics) that
works on highly mathmatic models of derivative pricing
...
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Roll forward
To move to an option position with a later expiration date
...
Finance
professor at UCLA
...
Roll over
To reinvest funds received from a maturing security in a new issue of the same or a similar
security
...
In venture capital, refers to the
venture capitalist forcing small firms to merge operations in order to reduce costs
Rolling of Futures
As financial futures have short-term maturities, often 3-9 months, before or at maturity, the
future must be sold and a new future (for the same asset but with a new maturity) must be
repurchased
...
Most term loans in the Euromarket are made on a rollover basis
as to current LIBOR rate
...
These assets, as long as they are not mixed with other contributions, can later be
rolled over to another qualified plan or 403(b) plan
...
Roll's Critique
That the CAPM holds by construction when performance is measured against a mean-variance
efficient index; otherwise, it holds not at all
...
Ross, Stephen
Developer of the Arbitrage Pricing Theory
...
Roth IRA
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Individual Retirement Account that allows contributors to invest up to $2,000 per year, and
to withdraw the principal and earnings totally tax-free under certain conditions
...
Related: odd lot
...
Round-trip transactions costs
Costs of completing a transaction, including commissions, market impact costs, and taxes
...
Royalty
Payment for the right to use intellectual property or natural resources
...
R square (R
Square of the correlation coefficient
...
A
measure of the quality of fit
...
Rule lOb-5
An SEC rule that prohibits trading by insiders on material nonpublic information
...
Rule 13-d
Often used in risk arbitrage
...
The purchaser of such stock must also file a 13-d with the stock exchange on
which the shares are listed (if any) and the company itself
...
The law is designed to protect against insidious takeover
attempts and to keep the investing public aware of information that could affect the price
of their stock
...
Rule 14-d
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Often used in risk arbitrage
...
Rule 144
Restricts solicitation of buyers to complete the sell order of an insider (unless the firm is
already a buyer); signified by a flashing "E" on Quotron
...
Rule 405
NYSE codification of "know your customer" rules, which require that a customer's
situation is suitable for any investment being made
...
See: Shelf registration
...
Rule of 72
A formula used to determine the amount of time it will take for invested money to double
at a given compound interest rate, which is 72 divided by the interest rate
...
Rumortrage
A term combining the words "rumor" and arbitrage, used to describe trading that occurs
on the basis of rumors of a takeover
...
A group of shareholders who
refuse to tender their shares for a merger or acquisition
...
Run
A run consists of a series of bid and offer quotes for different securities or maturities
...
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Rundown
A summary of the amount and prices of a serial bond issue that is still available for
purchase
...
Runoff
Used for listed equity securities
...
m
...
Russell Indexes
US equity index widely used by pension and mutual fund investors that are weighted by
market capitalization and published by the Frank Russell Company of Tacoma, Washington
...
Russell 1000
A market capitalization-weighted benchmark index made up of the 1000 highest-ranking US
stocks in the Russell 3000
...
Russell 3000
A market capitalization-weighted benchmark index made up of the 3000 largest US stocks,
which represent about 98% of the US equity market
...
Russian Trading System (RTS)
An electronic system in Russia, like the Nasdaq system on which the majority of Russian
equities trading is conducted
...
SA
The two-character ISO 3166 country code for SAUDI ARABIA
...
GFEDU
...
SB
The two-character ISO 3166 country code for SOLOMON ISLANDS
...
SC
The two-character ISO 3166 country code for SEYCHELLES
...
SD
The two-character ISO 3166 country code for SUDAN
...
SDR
See: Special drawing rights
SE
The two-character ISO 3166 country code for SWEDEN
...
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SHP
The ISO 4217 currency code for the Saint Helena Pound
...
SGD
The ISO 4217 currency code for the Singapore Dollar
...
SI
The two-character ISO 3166 country code for SLOVENIA
...
SJ
The two-character ISO 3166 country code for SVALBARD AND JAN MAYEN
...
SKK
The ISO 4217 currency code for the Slovak Republic Koruna
...
SLL
The ISO 4217 currency code for the Sierra Leone Leone
...
GFEDU
...
SMBS
See: Stripped mortgage backed securities
SN
The two-character ISO 3166 country code for SENEGAL
...
SOES
See: Small Order Execution System
SOS
The ISO 4217 currency code for the Somalian Shilling
...
SRG
The ISO 4217 currency code for the Surinam Guilder
...
STD
The ISO 4217 currency code for the Sao Tome & Principe Dobra
...
SVC
The ISO 4217 currency code for the El Salvador Colon
...
SYP
The ISO 4217 currency code for the Syrian Pound
...
GFEDU
...
SZL
The ISO 4217 currency code for the Swaziland Lilangeni
...
A target company acquires a
business so onerously regulated that it makes the target less attractive, giving it, in
effect, a safe harbor
...
Safekeep
Holding by a bank of bonds and money market instruments
...
Safety cushion
In a contingent immunization strategy, the difference between the initially available
immunization level and the safety-net return
...
Salary
Regular wages and benefits an employee receives from an employer
...
Salary reduction plan
A plan allowing employees to contribute pre-tax income to a tax-deferred retirement plan
...
It allows employees to make pretax contributions to their
IRAs through salary reduction each year
...
Existing SARSEPs were allowed to add new participants, but new plans could not be
formed after December 31, 1996
...
GFEDU
...
Sale and lease-back
Sale of an existing asset to a financial institution that then leases it back to the user
...
Sales charge
The fee charged by a mutual fund at purchase of shares, usually payable as a commission to
a marketing agent, such as a financial adviser, who is thus compensated for assistance
to a purchaser
...
Sales Contract
Contract between a seller and buyer for the sale of goods, services, or both
...
External sales forecasts are based on
historical experience, statistical analysis, and consideration of various macroeconomic
factors
...
Sales load
See: Sales charge
Sales tax
A percentage tax on the selling price of goods and services
...
Sallie Mae
See: Student Loan Marketing Association
Salomon Brothers World Equity Index (SBWEI)
A top-down, float capitalization-weighted index used to measure the performance of
fixed-income and equity markets
...
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Salomon
A benchmark index that includes institutionally traded bonds other than U
...
issues that
have a fixed rate and a remaining maturity of one year or longer
...
Same-Day Funds Settlement (SDFS)
A
method
of
settlement
used
in
trading
between
well-collateralized
parties
in
good-the-same-day federal funds used by the Depository Trust Company for transactions in
US government securities, short-term municipal notes, medium-term commercial paper
notes, CMOs, and other instruments
...
Samurai bond
A yen-denominated bond issued in Tokyo by a non-Japanese borrower
...
Samurai market
The foreign market in Japan
...
Sao Paulo Stock Exchange
See: Bolsa de Valores de Sao Paulo
S&P
Standard & Poor's Corporation
...
S&P phenomenon
Tendency of stocks newly added to the S&P composite index to rise in price due to a large
number of buy orders as S&P-related index funds add the stock to their portfolios
...
GFEDU
...
Saturday night special
Often used in risk arbitrage
...
Saucer
Technical chart pattern depicting a security whose price has reached bottom and is moving
up
...
Savings bank
An institution that primarily accepts consumer savings deposits and to make home
mortgage loans
...
Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a
specific maturity, and that usually can be withdrawn upon demand
...
This excess is invested by the
insurance company, and the returns are tax-deferred inside the policy
...
The Small Business Job
Protection Act of 1996 created these plans for companies with fewer than 100
employees
...
Savings and loan association
National- or state-chartered institution that accepts savings deposits and invests the
bulk of the funds thus received in mortgages
...
GFEDU
...
Scale
Payment of different rates of interest on CDs of varying maturities
...
" Commercial paper dealers also post scales
...
That is, the project
allows the firm to grow larger in the context of their current business rather than
diversify into new businesses
...
Scale order
Order to buy (sell) a security that specifies the total amount to be bought (sold) and the
amount to be bought (sold) at successively decreasing (increasing) price intervals; often
placed in order to average the price
...
For a three dimensional object, it could be the volume of an object covered as
you increase the radius of a covering sphere
...
Scalp
To trade for small gains
...
Scalping
Buying up the good IPOs
...
Unconcentrated buy or sell interest
...
Schedule C
Describes membership requirements and procedures of NASD, in its bylaws
...
GFEDU
...
Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the
mortgage, not including possible prepayments
...
Any technique a company that has become the target of a
takeover attempt uses to make itself unattractive to the acquirer
...
SCORE
Stands for Special Claim on Residual Equity, a certificate that entitles the owner to the
capital appreciation of an underlying security, but not to the dividend income from the security
...
That is, the corporation does
not directly pay federal income tax on its earnings
...
Screen stocks
To analyze various stocks in search of stocks that meet predetermined criteria
...
Scrip
A temporary document that represents a portion of a share of stock, often issued after a
stock split or spin-off
...
Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as
advertising) and implicit costs (such as the value of time)
...
Seasonally adjusted
Mathematically
adjusted
by
moderating
a
macroeconomic
indicator
(e
...
,
oil
prices/imports) so that relative comparisons can be drawn from month to month all year
...
GFEDU
...
S
...
Seasoned datings
Extended credit for customers who order goods in periods other than peak seasons
...
Related: Unseasoned issue
...
A
seasoned new issue of common stock can be made using a cash offer or a rights offer
...
SEC fee
Small fee the SEC charges to sellers of equity securities on an exchange
...
Second pass regression
A cross-sectional regression of portfolio returns on betas
...
Second-preferred stock
Preferred stock issue that has less priority in claiming dividends and assets in liquidation than
another issue of preferred stock
...
Second-to-die insurance
Insurance policy that, on the death of the spouse dying last, pays a death benefit to the
heirs that is designed to cover estate taxes
...
The sale is handled off the NYSE, by a securities firm or a group of firms,
and the shares are usually offered at a fixed price related to the current market price of the
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stock
...
(2) More generally, sale of
already issued stock
...
Secondary market
The market in which securities are traded after they are initially offered in the primary market
...
The New York Stock Exchange, as well as all
other stock exchanges and the bond markets, are secondary markets
...
Secondary mortgage market
Buying and selling existing mortgage loans, which are often pooled and traded as
mortgage-backed securities
...
Second mortgage lending
Loans secured by real estate previously pledged in a first mortgage
...
An
independent third party or employees sworn to secrecy are used to count proxy votes,
and the management usually agrees not to look at individual proxy cards
...
Section 16(a)
Provision of the Securities Exchange Act of 1934 that requires company insiders to file
periodic reports disclosing their holdings and changes in beneficial ownership of the
company's equity securities
...
It is also known as the "short-swing profit" rule
...
GFEDU
...
If an employee files the election,
taxes are based on the fair market value on the grant date, with any future appreciation
taxed as a capital gain
...
Section 423
The government agency responsible for the supervision and regulation of the securities
industry and markets, as well as public securities offerings and the ongoing disclosure
obligations of public companies
...
Sector
Used to characterize a group of securities that are similar with respect to maturity, type,
rating, industry, and/or coupon
...
See: Industry allocation
...
Sector fund
A mutual fund that concentrates on a relatively narrow market sector
...
Sector rotation
An active asset management strategy certain sectors, that tactically overweights and
underweights depending on expected performance
...
Secular
Long-term time frame (10-50 years or more)
...
Secured debt
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Debt that has first claim on specified assets in the event of default
...
Securities Act of 1933
First law designed to regulate securities markets, requiring registration of securities and
disclosure
...
Securities analysts
Related: Financial analysts
Securities and commodities exchanges
Exchanges on which securities, options, and futures contracts are traded by members for their
own accounts and for the accounts of customers
...
The SEC also oversees the
securities industry and promotes full disclosure in order to protect the investing public
against malpractice in the securities markets
...
Securities Exchange Act of 1934
Legislation that created the SEC, outlawing dishonest practices in the trading of securities
...
Securities Industry Association (SIA)
An association of broker-dealers who sell taxable securities, which lobbies the government,
records industry trends, and keeps records of broker profits
...
Securities Investor Protection Corporation (SIPC)
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A nonprofit corporation that insures customers' securities and cash held by member
brokerage firms against the failure of those firms
...
Securities markets
Organized exchanges plus over-the-counter markets in which securities are traded
...
Also refers to the replacement of
nonmarketable loans and/or cash flows provided by financial intermediaries with
negotiable securities issued in the public capital markets
...
Security characteristic line
A plot on a graph of the excess return on a security over the risk-free rate as a function of the
excess return on the market
...
Security deposit (initial)
Synonymous with the term margin
...
It is not considered as
part payment or purchase
...
Security deposit (maintenance)
Related: Maintenance margin
Security Industry Automated Corporation (SIAC)
Entity that executes automated DOT orders
...
Security market line
Line representing the relationship between expected return and market risk or beta
...
Security Market Line
The linear relationship between expected asset returns and betas posited by the Capital Asset
Pricing Model
...
GFEDU
...
Security ratings
Commercial rating agencies' assessment of the credit and investment risk of securities
...
Seed money
The first contribution by a venture capitalist toward the financing of a new business, often
using a loan or purchase of convertible bonds or preferred stock
...
Seek a market
Search for a securities buyer or seller
...
Segregation of securities
SEC rules to dictate how customers' securities may be used by broker-dealers in broker loans
...
Select ten portfolio
A unit investment trust that buys and holds for one year the ten stocks in the Dow Jones
Industrial Average with the highest dividend yields
...
Selected dealer agreement
The set of rules governing the selling group in an underwriting
...
GFEDU
...
Self-directed IRA
An IRA that the account holder can after appointing a custodian manager to carry out
investment instructions
...
Self-employment tax
A tax self-employed people must pay to qualify them to receive Social Security benefits
at retirement
...
The sale of the current assets provides the cash to repay the
loan
...
Self-selection
Consequence of a contract that induces only one group to participate
...
In certain deterministic fractals, like the Sierpinski Triangle, small pieces look the same as
the entire object
...
See: Fractal
...
See: revenue bond
...
Self-tender offer
A company that tenders for its own shares
...
GFEDU
...
Order to a broker by the holder of a large quantity of
shares of a security to sell all that can be absorbed at the current bid price
...
In this scenario, the buyers potentially include those in
the specialist's book, the specialist for its own account, and broker-dealers
...
Sell limit order
Conditional trading order that indicates that a security may be sold at the designated price
or higher
...
Sell off
Sale of securities under pressure
...
Sell order
An order that may take many different forms by an investor to a broker to sell a particular
stock, bond, option, future, mutual fund, or other holding
...
The selling of securities by a broker when a customer fails to pay for them
...
Sell plus order
Market or limit order to sell a stated amount of stock provided that the price to be obtained
is not lower than the last sale if the last sale was a plus, or zero plus tick, and is not lower
than the last sale plus the minimum fractional change in the stock if the last sale was a
minimum or zero minimum tick
...
)
Sell price
See: Redemption price
Sell-side analyst
A financial analyst who works for a brokerage firm and whose recommendations are
passed on to the brokerage firm's customers
...
Seller financing
Funding a purchase by a seller's loan to the buyer, the buyer takes full title to the
property when the loan is fully repaid
...
GFEDU
...
As a result, the seller can dictate the price and
the terms of sale
...
Seller's points
In reference to a loan, seller's points consist of a lump sum paid by the seller to the
buyer's creditor to reduce the cost of the loan to the buyer
...
Generally, one point equals one percent of the loan amount
...
Selling concession
The discount underwriters offer the selling group on securities in a new issue
...
Selling, general, and administrative (SG&A) expenses
Expenses such as salespersons' salaries and commissions, advertising and promotion,
travel and entertainment, office payroll and expenses, and executives' salaries
...
Investors believe that the price is as high as it can go and is on the brink of
going down
...
Selling short
Selling a stock not actually owned
...
Eventually, the investor must
buy the stock back on the open market
...
Then, on Aug
...
You've made $1000 (less commissions and other fees) by selling short
...
GFEDU
...
The seller borrows securities needed to cover as the stock in the box may be
inaccessible, or the seller may not wish to disclose ownership
...
Selling Syndicate
A group of underwriters that issues a firm's securities by buying them from the issuing firm
and reselling them to a group of smaller brokerage firms for eventual sale to individual
investors
...
Compare weak-form efficiency and strong-form efficiency
...
"
Senior debt
Debt whose terms in the event of bankruptcy, require it to be repaid before subordinated
debt receives any payment
...
Senior refunding
Replacement by the issuer of securities with 5-to 12-year maturities with securities of 15-year
or longer maturities, in order to delay, reduce, or consolidate payment
...
Seniority
The order of repayment
...
Sensitive market
A market that reacts to a great extent to good or bad news
...
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Sentiment indicators
The general feeling of investors about the state of the market, such as whether they are
bullish or bearish
...
Each
account that is under the name of a different person or group of people is entitled to
maximum protection
...
Separate Trading of Registered Interest and Principal Securities
(STRIPS)
Long-term notes and bonds divided into principal and interest-paying components, which
may be transferred and sold in amounts as small as $1000
...
The amount is an arithmetic function
of the issue's interest rate
...
Separation theorem
Theory that the value of an investment to an individual is not dependent on consumption
preferences
...
Serial bonds
Corporate bonds arranged so that specified principal amounts become due on specified
dates
...
Serial covariance
The covariance between a variable and the lagged value of the variable; the same as
autocorrelation
...
Serial redemption
The redemption of a serial bond
...
GFEDU
...
Stocks: shares that have common characteristics, such as
rights to ownership and voting, dividends, or par value
...
Series bond
Bond that may be issued in several series under the same indenture document
...
S
...
Series EE bond
See: Savings bond
Series HH bond
See: Savings bond
Service charge
A component of some finance charges, such as the fee for triggering an overdraft
checking account into use
...
Set of contracts perspective
View of corporation as a set of contracting relationships among individuals who have
conflicting objectives, such as shareholders or managers
...
Set up
Applies mainly to convertible securities
...
Antithesis of Chinese hedge
...
Settlement
When payment is made for a trade
...
GFEDU
...
For stocks traded on US exchanges,
settlement is currently three business days after the trade
...
In some regional markets, foreign
shares may require months to settle
...
Settlement price
A figure determined by the closing range that is used to calculate gains and losses in futures
market accounts
...
Related: Closing range
...
The rate at which the pension benefits could be effectively
settled if the company sponsoring the pension plan wishes to terminate its pension
obligation
...
Severally but not jointly
An agreement between members of an underwriting group buy a new issue (severally), but
not to assume joint liability for shares left unsold by other members
...
In the context of
corporate governance, an agreement that assures high-level executives of their postions
or some compensation and are not contingent upon a change in control
...
Shadow calendar
A backlog of securities issues registered with the SEC, awaiting the determination of an offer
date
...
GFEDU
...
That is, the management might have done a
great job - but the traded stock plummets because the market as a whole plummets
...
e
...
Shadows
The thin lines above and below the real body on a candlestick line
...
Sham
A business transaction, such as a limited partnership, that is entered into for the sake of
avoiding tax
...
Share broker
A discount broker who charges per share traded, and reduces the per unit charge as the
number of shares traded increases, as opposed to a dealer who charges a percentage of the
dollar amount of the trade
...
It is usually
done when shares are undervalued
...
Shared Appreciation Mortgage (SAM)
A mortgage with a low rate of interest, offset by giving the lender some portion of the
appreciation in the value of the underlying property
...
Shareholders' equity
This is a company's total assets minus total liabilities
...
Shareholders' letter
A section of an annual report where one can find general overall discussion by
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management of successful and failed strategies
...
Shares
Certificates or book entries representing ownership in a corporation or similar entity
...
See: Issued and
outstanding
...
Examples are golden parachutes, poison pills, safe harbor, and
scorched-earth policy
...
Amendment to company charter intended to
protect it against takeover
...
Firm specializing in the early detection of takeover activity
...
Sharpe benchmark
A statistically created benchmark that adjusts for a manager's index-like tendencies
...
Sharpe ratio
A measure of a portfolio's excess return relative to the total variability of the portfolio
...
Named after William Sharpe, Nobel Laureate, and developer of the capital
asset pricing model
...
The shares may be sold in one block or in small
amounts from time to time in agency or principal transactions
...
Shelf registration
A procedure that allows firms to file one registration statement covering several issues of the
same security
...
With the
registration "on the shelf," the corporation, by simply updating regularly filed annual,
quarterly, and related reports to the SEC, can go to the market as conditions become
favorable with a minimum of administrative preparation and expense
...
GFEDU
...
Shenzhen Stock Exchange
One of two major securities markets in China
...
S
...
This document is used to monitor shipments of
controlled goods
...
Shirking
The tendency to do less work when the return is smaller
...
Thus,
shirking is considered an agency cost of equity
...
Shootout
Venture capital jargon
...
Shop
Wall Street slang for a firm
...
Shopping
Seeking to obtain the best bid or offer available by calling a number of dealers and/or
brokers
...
GFEDU
...
Related: Long
...
Short Bias
In the context of hedge funds, a style of management where part or all of the fund
consists of short sales
...
Short book
See: Unmatched book
...
A bond with a short time
to maturity, usually two years or less
...
Actual purchase of securities by a short seller to
replace those borrowed at the time of a short sale
...
A special trading situation where a short sale is allowed
on a minustick
...
Short hedge
The sale of futures contracts to eliminate or lessen the possible decline in value of an
approximately equal amount of the actual financial instrument or physical commodity
...
Short interest
Total number of shares of a security that investors have sold short and that have not been
repurchased to close out the short position
...
As a result, the short interest is often an indicator of the amount of pessimism
in the market about a particular security, although there are other reasons to short that
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are not related to pessimism
...
Short interest theory
The theory that a large interest in short positions in stocks will precede a rise in the market
prices, because the short positions must eventually be covered by purchases of the stock
...
Short position
Occurs when a person sells stocks he or she does not yet own
...
Eventually, the shares must be
bought back to close out the transaction
...
Short ratio
Number of shares of a security that investors have sold short divided by average daily volume
of the security (measured over 30 days or 90 days)
...
When people short, it is usually (but not always) because they are pessimistic
about the security's future performance
...
Hence, some would interpret a high short ratio as an indicator that there will be
some buying pressure on the security that would increase its price
...
Short sale
Selling a security that the seller does not own but is committed to repurchasing eventually
...
Short-sale rule
An SEC rule requiring that short sales be made only in a market that is moving upward; this
means either on an uptick from the last sale, or showing no downward movement
...
Short settlement
Trade settlement made prior to the standard five-day period due to customer request
...
GFEDU
...
The penalty for exceeding this limit would be the loss
of certain tax-free benefits
...
In particular, when prices of a stock or
commodity futures contracts start to move up sharply and many traders with short positions
are forced to buy stocks or commodities in order to cover their positions and prevent (limit)
losses
...
Short straddle
A straddle involves both purchase and sale
...
Short-term capital gain
A profit on the sale of a security or mutual fund share that has been held for one year or less
...
Short-term interest rates
Interest rates on loan contracts-or debt instruments such as Treasury bills, bank
certificates of deposit or commerical paper-having maturities of less than one year
...
Short-term reserves
Investments in interest-bearing bank deposits, money market instruments, U
...
Treasury bills,
and short-term bonds
...
Short-term
Any investments with a maturity of one year or less
...
Short-term debt
Debt obligations, recorded as current liabilities, requiring payment within the year
...
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Short-term gain (or loss)
A profit or loss realized from the sale of securities held for less than a year that is taxed at
normal income tax rates if the net total is positive
...
Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as
they come due, including (1) the current ratio, (2) the acid test ratio, (3) the inventory
turnover ratio, and (4) the accounts receivable turnover ratio
...
Short-term trend
Erratic price movements that last less than three weeks
...
Shortfall risk
The risk of falling short of any investment target
...
Customer who has not placed a firm order to buy
stock but has requested that the salesperson propose available stock for sale or purchase,
along with the asking/bid price
...
Show stopper
A legal barrier, such as a scorched-earth policy or shark repellant system, that firms use to
prevent a takeover
...
Block list which is full of real customer indications
(rather than profile)
...
Shut out the book
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Used for listed equity securities
...
Side effects
Effects of a proposed project on other parts of the firm
...
Sidelines
Hypothetical position referring to noninvolvement in a stock; merely watching
...
Sight Letter of Credit
A letter of credit made payable to a beneficiary upon presentation to the opener of
conforming documents
...
The more costly it is to provide a signal,
the more credibility it has
...
Signaling approach
Notion that insiders in a firm have information that the market does not have, and that the
choice of capital structure by insiders can signal information to outsiders and change the
value of the firm
...
Signaling approach (on dividend policy)
The argument that dividend changes are important signals to investors about changes in
management's expectation about future earnings
...
A notary
public cannot provide a signature guarantee
...
Signature loan
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A good faith loan that is unsecured and requires only the borrower's signature on the loan
application
...
If an individual signs on behalf of another individual and states a legal
representation, it is acceptable
...
On corporate registrations, a manual signature in the
name of the Corporation is acceptable
...
With joint tenancy, one signature is sufficient, as in the case of one trustee signing for
two or more
...
This degree of
holding must be recorded in a firm's financial statements
...
Institutional investors usually spread out such an order over a few days or
weeks to avoid adverse pressures on the buy or sell price
...
Silent partner
A partner in a business who has no role in management but shares in the liability, tax
responsibility, and cash flow
...
Single-buyer policy
Ex-Im Bank practice allows the exporter to insure certain transactions selectively
...
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Simple compound growth method
Calculating a growth rate by relating terminal value to initial value and assuming a constant
percentage annual rate of growth between the two values
...
Compare to
compound interest
...
Simple linear regression
A regression analysis between only two variables, one dependent and the other explanatory
...
Simple moving average
The mean, calculated at any time over a past period of fixed length
...
Simple rate of return
The return from investments figured by dividing income plus capital gains by the amount of
capital invested
...
Simplified Employee Pension (SEP) plan
A pension plan in which both the employee and the employer contribute to an individual
retirement account
...
Simulation
The use of a mathematical model to imitate a situation many times in order to estimate
the likelihood of various possible outcomes
...
Singapore International Monetary Exchange (SIMEX)
A leading futures and options exchange in Singapore
...
Single-factor model
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A model of security returns that acknowledges only one common factor
...
See: Factor model
...
Related: Market
Model
Single life annuity
An annuity covering one person
...
Single option
A single put option or call option, as opposed to a spread or straddle, which involves
multiple puts and calls
...
Single-Premium Deferred Annuity (SPDA)
An IRA-like annuity into which an investor makes a lump-sum payment that is invested in
either a fixed-return instrument or a variable-return portfolio, which is taxed only when
distributions are taken
...
Single-state municipal bond fund
A mutual fund investing only in government obligations within a single state, with state
tax-free dividends, but taxed capital gains
...
Sinking fund
A fund to which money is added on a regular basis that is used to ensure investor
confidence that promised payments will be made and that is used to redeem debt
securities or preferred stock issues
...
Any principal due at maturity is called the balloon
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maturity
...
Size
Refers to the magnitude of an offering, an order, or a trade
...
Size is relative from market to market
and security to security
...
Small is <10,000 shares
...
Good is 50,000 shares
...
Good six-figure size is 200,000-300,000
shares
...
Size of the market is actual number
of shares represented in one's market, or bid and offering; unless specified, assumed to
be at least 500 to 1000 shares, depending on the stock
...
Can never size out a market order
...
Skewed distribution
Probability distribution in which an unequal number of observations lie below (negative
skew) or above (positive skew) the mean
...
Positive skewness means that there is a greater-than-normal probability of a big positive
return
...
We measure skill using the information coefficient
...
Skip-payment privilege
A mortgage contract clause giving borrowers the right to skip payments if they are ahead of
schedule
...
SLD last sale
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Shortened version of "sold last sale," which shows up on the consolidated tape when a
large change (one point for lower priced securities and two points for higher-priced
securities) occurs between transactions
...
Antithesis of high flyer
...
Potential takeover target that has not yet been approached by
an acquirer
...
Slippage
The difference between estimated transactions costs and actual transactions costs
...
Slump
A temporary fall in performance, often describing consistently falling security prices for
several weeks or months
...
Small-cap
A stock with a small capitalization, meaning a total equity value of less than $500 million
...
Small-cap stocks historically have been more volatile than large-cap stocks,
and often perform differently from the overall market
...
Small-cap companies
tend to grow faster than large-cap companies and typically use any profits for expansion
rather to pay dividends
...
Small-firm effect
The tendency of small firms (in terms of total market capitalization) to outperform the stock
market (consisting of both large and small firms)
...
This group of investors
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makes up a minimal fraction of total stock ownership
...
5 million are not required to file a registration
statement with the SEC
...
Small Order Execution System (SOES)
Three-tiered system of automatic execution of an order at the best price
...
Smart money
Investors who make consistent profits in the market, regardless of the investing
environment, by making wise, educated moves
...
Smithsonian Agreement
A revision to the Bretton Woods international monetary system that was signed at the
Smithsonian Institution in Washington, D
...
, in December 1971
...
25% of par, and an increase in the official value
of gold to US$38
...
Snake
Arrangement established in 1972, that ties European currencies to each other within
specified limits
...
Process by which the exercise of stop orders in a
declining or advancing market causes further downward or upward pressure on prices,
thus triggering more stop orders and more price pressure, and so on
...
Social Security Disability Income Insurance
Program financed by the Social Security tax to provide assistance to disabled individuals
with disabilities expected to last at least one year, to compensate for lost income
...
GFEDU
...
Society for Worldwide Interbank Financial Telecommunications
(SWIFT)
A dedicated computer network to support funds transfer messages internationally
between over 900 member banks world-wide
...
Soft currency
A money of a country that is expected to drop in value relative to other currencies
...
Soft landing
A term describing a growth rate high enough to keep the economy out of recession, but
also slow enough to prevent high inflation and interest rates
...
Soft spot
Stocks or groups of stocks that remain weak in a strong market
...
Sold away
Refers to over-the-counter trading
...
Sold-out market
Unavailability of a futures contract in a particular commodity or maturity date because of
contract executions and limited offerings
...
A sole proprietor pays no corporate income tax
but has unlimited liability for business debts and obligations
...
GFEDU
...
Sour bond
A bond issue that has defaulted on interest or principal payments, and will thus trade at a large
discount and a poor credit rating
...
Such a seller
will sell only at advantageous prices, and not aggressively
...
Sovereign risk
The risk that a central bank will impose foreign exchange regulations that will reduce or
negate the value of FX contracts
...
Span
To cover all contingencies within a specified range
...
Stands for Standard & Poor's Depositary Receipt
...
SPDRs are similar to closed-end funds but are
formally known as, a unit investment trust
...
Dividends are disbursed quarterly, and are
based on the accumulated stock dividends held in trust, less any expenses of the trust
...
Special arbitrage account
A margin account with lower cash requirements, reserved for transactions that are hedged by
an offsetting position in futures or options
...
Special bid
A method of purchasing a large block of stock on the NYSE by advertising a client's large
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buy order, and matching it up with a number of other traders' smaller sell orders
...
Special dividend
Also referred to as an extra dividend
...
Special Drawing Rights (SDR)
A form of international reserve assets, created by the IMF in 1967, whose value is based on
a portfolio of widely used currencies
...
In the
context of corporate governance, some limitations either increase the level of
shareholder support required to call a special meeting beyond that specified by state law
or eliminate the ability to call one entirely
...
Special-Purpose Entity
A financing technique in which a company decreases its risk by creating separate
partnerships, rather than subsidiaries, for certain holdings and solicits outside investors
to take on the risk
...
Compare to subsidary
...
Member of a stock exchange who maintains a "fair and orderly
market" in one or more securities
...
In contrast, there can be multiple
market makers in the OTC market
...
Specialist block purchase and sale
Purchase of a large number of securities by a specialist for himself or to pass on to another
floor trader or block buyer
...
GFEDU
...
Specialist unit
A specialist who maintains a stable market by acting as a principal and agent for other brokers
in one or many stocks
...
Specialist's short-sale ratio
The percentage of the total short sales of stock sold short by specialists
...
Specific Return
The part of the excess return not explained by common factors
...
It is also called the idiosyncratic return
...
Speculation
Purchasing risky investments that present the possibility of large profits, but also pose a
higher-than-average possibility of loss
...
Speculative
Securities that involve a high level of risk
...
Speculative-grade bond
Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond
...
GFEDU
...
Speculative stock
Very risky stock
...
A speculator does not use the market in connection with the
production, processing, marketing, or handling of a product
...
Speed
Related: Prepayment speed
Spider
See: SPDRs
Spike
Order ticket that shows the stock, price, number of shares, type, and account of the order
...
) Spike
is also a sudden, drastic increase in a company's share price
...
Spinning
In investment banking, the practice of an investment bank setting aside portions of a
corporation's Initial Public Offering for senior management of that corporation
...
SPINs
Stands for Standard & Poor's 500 Index Subordinated Notes
...
If a company with
1 million shares executes a two-for-one split, the company would have 2 million shares
...
The
investor's percentage of equity in the company remains the same, and the share price of
the stock owned is one-half the price of the stock on the day prior to the split
...
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Split-coupon bond
A bond that begins as a zero-coupon bond paying no interest and converts to an interest
paying bond on a future date
...
The buyer generally executes the split fee with first an initial fee,
with a window period at the end of which (upon payment of a second fee) the original
terms of the option may be extended to a later predetermined final notification date
...
Split order
A large securities transaction that is divided into smaller orders that are spread out over
some period of time to avoid large fluctuations in the market price
...
Often used in dividend rolls to get an average
price equal to the dividend
...
Split rating
Two different ratings given to the same security by two important rating agencies
...
(2) Division of the outstanding shares of a
corporation into a large number of shares
...
Spoken for
Amount of opposite demand (placement) or supply (availability) the trader has in efforts
to cross the stock
...
Sponsor
An underwriting investment company that offers shares in its mutual funds, or an influential
institution that highly values a particular security and thus creates additional demand for
the security
...
GFEDU
...
Spontaneous Liabilities
Obligations that arise automatically in the course of operating a business when a firm
buys goods and services on credit
...
Spot exchange rates
Exchange rate on currency for immediate delivery
...
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices
...
Spot interest rate
Interest rate fixed today on a loan that is made today
...
Spot lending
Originating mortgages by processing applications taken directly from prospective
borrowers
...
Spot price
The current market price of the actual physical commodity
...
Current
delivery price of a commodity traded in the spot market, in which goods are sold for cash
and delivered immediately
...
Spot rate
The theoretical yield on a zero-coupon Treasury security
...
Spot secondary
Secondary distribution that may not require an SEC registration statement and may be
attempted without delay
...
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Spot trade
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery
...
Spousal IRA
An individual retirement account in the name of an unemployed spouse
...
Spread
(1) The gap between bid and ask prices of a stock or other security
...
Also known as a straddle
...
(4) The price an issuer pays above a benchmark fixed-income yield to borrow
money
...
For a depository
institution, the difference between the assets it invests in (loans and securities) and the cost
of its funds (deposits and other sources)
...
Spread order
An order listing the series of options that the customer wants to buy and sell and the
desired spread between the premiums paid and received for the options
...
Spread strategy
A strategy that involves a position in one or more options so that the cost of buying an
option is funded entirely or in part by selling another option in the same underlying
...
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Spreadsheet
A computer program that organizes numerical data into rows and columns in order to
calculate and make adjustments based on new data
...
SPX
Applies to derivative products
...
Squeeze
Period when stocks or commodities futures increase in price and investors who have sold short
must cover their short positions to prevent loss of large amounts of money
...
Stabilization
The action undertakes a country when it buys and sells its own currency to protect its
exchange value
...
Actions a managing underwriter undertake so that the market price does not fall below the
public offering price during the offering period
...
See: Alpha, Fractal Distributions, Gaussian
...
For example, money market funds and other short-term investments offer more stability
than funds that invest in growth stocks
...
Stagflation
A period of slow economic growth and high unemployment with rising prices (inflation)
...
GFEDU
...
Board
terms are often staggered in order to thwart unfriendly takeover attempts, since potential
acquirers would have to wait longer before they could take control of a company's board
through the normal voting procedure
...
Stagnation
A period of slow economic growth, or, in securities trading, a period of inactive trading
...
Stalking horse
In bankruptcy proceedings, this refers to the company that first bids for the companies
assets
...
This is the
bid to beat
...
Stamp duty
Applies mainly to international equities
...
Stamp tax
Tax on a financial transaction
...
Standby Letter of Credit
Documents evidencing failure of the bank's customer (the applicant) to pay an obligation
when due
...
Hence, "standing up"
to the bid signifies the trader's willingness to buy size (i
...
, 50m) volume at the
advertised bid, even if the customer buyer/seller falls down
...
GFEDU
...
Standard deviation
The square root of the variance
...
Standard error
In statistics, a measure of the possible error in an estimate
...
Standard Industrial Classification (SIC)
A code system that designates a unique business activity classified by industry
...
Standard & Poor's
A small-capitalization benchmark index made up of 600 domestic stocks chosen for market
size, liquidity, and industry group representation
...
Standardized value
Also called the normal deviate, the distance of one data point from the mean, divided by the
standard deviation of the distribution
...
Standby commitment
An agreement between a corporation and investment firm that the firm will purchase
whatever part of a stock issue that is offered in a rights offering that is not subscribed to in
the two- to four- week standby period
...
Standby letter of credit
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Agreement to guarantee invoice payments to a supplier; a standby LOC promises to pay
the seller if the buyer fails to pay
...
Standstill agreement
Contract by which the bidding firm in a takeover attempt agrees to limit its holdings of
another firm
...
State bank
A bank authorized in a specific state by a state-based charter, with generally the same
functions as a national bank
...
Interest rates and
maturities comply with IRS arbitrage provisions
...
Time deposit certificates have maturities of up to one year
...
Demand deposit
securities are one-day certificates rolled over with a rate adjustment daily
...
Stated annual interest rate
The interest rate expressed as a per year percentage, by which interest payments are
determined
...
Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the
securityholder to purchase the common stock, equal to the par value of the convertible security
divided by the conversion ratio
...
Stated value
A monetary worth figure that bears no relation to market value that is assigned, for
accounting purposes, to stock for use instead of par value
...
GFEDU
...
It provides more
detailed information about fund policies, operations, and risks
...
Statement billing
Billing method in which the sales for a period such as a month (for which a customer also
receives invoices) are collected into a single statement, and the customer must pay all the
invoices represented on the statement
...
Statement-of-Cash-Flows
A method of cash budgeting that is organized along the lines of the statement of cash flows
...
Statement of Financial Accounting Standards No
...
S
...
See: Statement
of Accounting Standards No
...
Statement of Financial Accounting Standards No
...
It mandates the use of the
current rate method
...
8
...
Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the value of tax
shields against the costs of bankruptcy
...
Statistical Arbitrage
In the context of hedge funds, a style of management that employs complex statistical
models that try to capture small abnormalities in a security's intraday return
...
GFEDU
...
Standard deviation of the difference between the
portfolio return and the desired investment benchmark return
...
When this limit is reached, the Treasury may not sell
new debt issues until Congress raises the limit
...
See: Debt outstanding subject to
limitation
...
Statutory merger
A merger in which one corporation remains as a legal entity, instead of a new legal entity
being formed
...
Statutory voting
The standard rule in most corporations that there is one vote per share in elections of the
board of directors
...
Steady state
As an MBS pool ages, or four to six months after component mortgages have passed at
least once the threshold for refinancing, the prepayment speed tends to stabilize within a
fairly steady range
...
0625) of one full point in price
...
Steepening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and
short-term Treasury has increased
...
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Step aside
Allow a block to trade at a price at which you do not care to participate in the trade
...
Step up
To increase, as in step up the tax basis of an asset
...
Related: Deferred-interest bond, payment-in-kind bond
...
Sterilized intervention
Foreign exchange market activity by which monetary authorities insulate their domestic
money supplies from the foreign exchange transactions with offsetting sales or purchases
of domestic assets
...
Stochastic models
Liability-matching models that assume that the liability payments and the asset cash flows
are uncertain
...
Stochastics index
A computerized tool measuring overbought and oversold conditions in a stock over a
certain period
...
Stock ahead
When two or more orders for a stock at a certain price arrive about the same time, and the
exchange's priority rules take effect
...
The bid that is not executed is then turned to the broker, who informs the
customer that the trade was not completed because there was "stock ahead
...
GFEDU
...
Stockbroker
See: Registered representative
Stock Appreciation Right (SAR)
A contractual right, often granted in tandem with an option that allows an individual to
receive cash or stock of a value equal to the appreciation of the stock from the grant date
to the date the SAR is exercised
...
Stock certificate
A document representing the number of shares of a corporation owned by a shareholder
...
The stock dividend
may be additional shares in the company, or it may be shares in a subsidiary being spun off
to shareholders
...
Unlike a cash dividend, stock dividends are not taxed until sold
...
Stock Exchange of Hong Kong (SEHK)
Only stock exchange located in Hong Kong
...
Stock Exchange of Singapore (SES)
The only stock exchange in Singapore
...
Stock exchanges
Formal organizations, approved and regulated by the Securities and Exchange Commission
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(SEC), that are made up of members who use the facilities to exchange certain common
stocks
...
Five regional stock exchanges include the
Midwest, Pacific, Philadelphia, Boston, and Cincinnati
...
Stock index
Index like the Dow Jones Industrial Average that tracks a portfolio of stocks
...
The
settlement of the contracts is in cash
...
Stock index swap
A swap involving a stock index
...
Stock insurance company
An insurance company owned by a group of stockholders, who are not necessarily
policyholders
...
Stock list
The department within a stock exchange that oversees compliance with listing requirements
and exchange regulations
...
Stock option
An option whose underlying asset is the common stock of a corporation
...
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Stock purchase plan
A plan allowing employees of a company to purchase shares of the company, often at a
discount or with matching employer funds
...
Stock record
The accounting a brokerage firm keeps of all securities held in inventory
...
The strategy involves a swap between the futures and a
Treasury bill and stock portfolio
...
Stock right
Another terminology for a stock option
...
Stock split
Occurs when a firm issues new shares of stock and in turn lowers the current market price of
its stock to a level that is proportionate to pre-split prices
...
See: Split
...
StockWatch
A stock surveillance program offered by proxy solicitation firms, and selected transfer
agents, to track and monitor sales and purchases of a corporation's shares and provide
valuable information at the beneficial owner level
...
GFEDU
...
Stockholder
See: Shareholder
...
The tax books follow IRS tax rules
...
It includes
capital stock, paid-in surplus, and retained earnings
...
Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by subtracting
all current liabilities and debt liabilities from total assets
...
Stockholm Stock Market (Stockholm Borsen)
The major securities market of Sweden
...
Stop basis
Refers to over-the-counter trading
...
Stop-limit order
A stop order that designates a price limit
...
Stop-loss order
An order to unwind a position when the price moves against you
...
GFEDU
...
If you were short the asset, the stop-loss would trigger a purchase
...
Stop-out price
The lowest auction price at which Treasury bills are sold
...
Stop Transfer
A block placed against a security reported lost or stolen (an adverse claim), so it cannot
be transferred
...
Stopped against one's self involves a customer order and a firm's own
account, not two customers
...
Stopped out
A purchase or sale that is executed under a stop order at the stop price specified by the
customer
...
Stopping curve refunding rate
A refunding rate that falls on the stopping curve
...
Straddle
Purchase or sale of an equal number of puts and calls with the same terms at the same time
...
Straight
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Direct telephone line, compared to an outside line that requires a telephone number to
be dialed
...
Straight Discount
The rate applied to the face value of the promissory note to calculate present value without
compounding
...
Straight-line depreciation
Amortizing or apportioning an equal dollar amount of depreciation in each accounting
period
...
Straight value
Also called investment value, the value of a convertible security without the conversion option
...
Strange Attractor
An attractor in phase space, where the points never repeat themselves, and orbits never
intersect, but they stay within the same region of phase space
...
They are a picture of a non-linear, chaotic system
...
Strangle
Buying or selling an out-of-the-money put option and call option on the same underlying
instrument, with the same expiration
...
Strategic alliance
Collaboration between two or more companies designed to achieve some corporate
objective
...
Strategic buyout
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Acquisition of another firm in order to realize some operational benefits which will result
in increased earnings
...
Stratified equity indexing
A method of constructing a replicating portfolio that classifies the stocks in the index into
strata, and represents each stratum in the portfolio
...
Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell representing a
different characteristic, and that buys bonds to match those characteristics
...
Street
Means Wall Street financial community; brokers, dealers, underwriters, and other
knowledgeable participants
...
Strike index
For a stock index option, the index value at which the buyer of the option can buy or sell the
underlying stock index
...
Related: Strike price
...
Striking price
The price at which an option can be exercised
...
Striking Price Intercal
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The distance between striking prices on a particular underlying security
...
There are,
however, exceptions to this general guideline
...
A strip is two puts and one call on a stock
...
The puts and calls have the same strike price and expiration date
...
Strip mortgage participation certificate (strip PC)
Ownership interests in specified mortgages purchased by Freddie Mac from a single seller in
exchange for separate instruments representing interests in the same mortgages
...
Stripped mortgage-backed securities (SMBS)
Securities that redistribute the cash flows from the underlying generic MBS collateral into
the principal and interest components of the MBS to enhance their attractiveness to
different groups of investors
...
Return on the debt portion of a bond/warrant unit
after subtracting the value of the issued warrant segment
...
Strong dollar
When the dollar can be exchanged for a large amount of foreign currency, benefiting
travelers but hurting exporters
...
Related: Weak-form efficiency, semi-strong form
efficiency
...
Defined by Eugene F
...
Structural Adjustment Loan Facility (SAL)
World Bank program established in 1980 to enhance a country's long-term economic
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growth through financing projects
...
Structured debt
Debt that has been customized for the buyer, often by incorporating unusual options
...
Structured portfolio strategy
Designing a portfolio to achieve a level of performance that matches some predetermined
liabilities that must be paid out in the future
...
Property and casualty insurance companies often buy life insurance products to
pay the costs of such settlements
...
Piece of equity security left over from a major cash or security
distribution from a recapitalization
...
Also
known as Sallie Mae
...
Subchapter S
IRS regulation that gives a corporation with 35 or fewer shareholders the option of being
taxed as a partnership to escape corporate income taxes
...
In
other words, not firm, but a bid/offer that needs additional information/confirmation
before becoming firm and is therefore still negotiable
...
GFEDU
...
See: Fast market
...
Subject to opinion
An auditor's opinion reflecting acceptance of a company's financial statements subject to
pervasive uncertainty that cannot be adequately measured, such as information relating
to the value of inventories, reserves for losses, or other matters open to judgment
...
Subjective probabilities
Probabilities that are determined subjectively (for example, on the basis of judgment
rather than statistical sampling)
...
Common stock claims are always
subordinated to debt
...
Subordinated debenture bond
An unsecured bond that ranks after secured debt, after debenture bonds, and often after
some general creditors in its claim on assets and earnings
...
Subordinated debt
Debt over which senior debt takes priority
...
Subordination clause
A provision in a bond indenture that restricts the issuer's future borrowing by subordinating
future lenders' claims on the firm to those of the existing bondholders
...
GFEDU
...
Subrogation
An insurance process whereby a company that has paid out to a policyholder for a loss
incurred recovers the amount of the loss from the party that is legally liable
...
Subscription agreement
An application reviewed by the general partner to join a limited partnership
...
Subscription privilege
The right of current shareholders of a corporation to buy newly issued shares before they
are available to the public
...
Type of security, usually issued with another security, such
as a bond or stock, that entitles the holder to buy a proportionate amount of common stock
at a specified price, usually higher than the market price at the time of issuance
...
Subsidiary
A wholly or partially owned company that is part of a large corporation
...
A
subsidiary's financial results are carried on the parent company's books
...
Substitute sale
A method for hedging price risk that uses debt market instruments, such as interest rate
futures, or that involves selling borrowed securities as the primary assets
...
GFEDU
...
Substantially equal
A method of distribution from IRA account assets that under certain conditions is not
subject to the IRS's 10% premature withdrawal penalty for those under age 59-1/2
...
In essence, the tax had penalized
"successful" investors who accumulated large retirement accounts and took distributions
that exceeded an annual limit deemed excessive by the tax code
...
Taking on a large
amount of debt to prevent the takeover might cause bankruptcy, for example
...
Suitability rules
Policies and guidelines that brokers must use to ensure that investors have the financial
means to assume risks that they wish to undertake
...
Suitable
Describing a strategy or trading philosophy in which the investor is operating in
accordance with his(her) financial means and investment objectives
...
ERISA requires that the
SPD be easy to understand and that each participant receive a copy within 90 days of
joining the plan
...
Sunk costs
Costs that have been incurred and cannot be reversed
...
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Super Bowl indicator
A theory that if a team from the old American Football League pre-1970 wins the Super
Bowl, the stock market will decline during the coming year
...
Super DOT
Super DOT provides faster execution than regular DOT and focuses on large-size trades
and baskets
...
Super Majority
A proposal requiring more than a simple majority of the votes eligible to be cast at an
annual or special meeting
...
66%) vote, but it can be
as high as 3/4 (75%) or 4/5 (80%)
...
Supermajority
Provision in a company's charter requiring a majority of, say, 80% of shareholders to
approve certain changes, such as a merger
...
Corporate amendment requiring that a substantial majority
(usually 67% to 90%) of stockholders approve important transactions, such as mergers
...
Supervisory board
The board of directors that represents stakeholders in the governance of the corporation
...
Supplier credit
Self-financing of a supplier's operations
...
GFEDU
...
Supply-side economics
A theory of economics that reductions in tax rates will stimulate investment and in turn will
benefit the entire society
...
Support level
A price level below which it is supposedly difficult for a security or market to fall
...
Surcharge
An additional levy added to some charge
...
Surplus funds
Cash flow available after payment of taxes in a project
...
Surveillance department of exchanges
A department that monitors trading activity on an exchange in order to identify any
unusual activity that may indicate illegal practices
...
Suspended trading
Temporary halt in trading in a particular security, in advance of a major news
announcement or to correct an imbalance of orders to buy and sell
...
GFEDU
...
Sustainable growth rate
Maximum rate of growth a firm can sustain without increasing financial leverage
...
g
...
Swap arrangements
Short-term reciprocal lines of credit between the Federal Reserve and 14 foreign centeral
banks as well as the Bank for International Settlements
...
In doing so, the demand for dollars and the dollar's foreign
exchange value are increased
...
Swap assignment
Related: Swap sale
Swap book
A swap bank's portfolio of swaps, usually arranged by currency and maturity
...
Swap fund
See: Exchange fund
Swap option
See: Swaption
...
Swap rate
The difference between spot and forward rates expressed in points, e
...
, $0
...
Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap,
accomplished by counterbalancing the original swap in maturity, reference rate, and
notional amount
...
GFEDU
...
Swaption
Options on interest rate swaps
...
The swaption agreement will
specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer
...
Sweat equity
An increase in equity created by the labor of the owner
...
Sweetener
A feature of a security that makes it more attractive to potential purchasers
...
Swiss Electronic Bourse (EBS)
Computer linking system between the former stock exchange trading floors in Zurich,
Geneva, and Basel, Switzerland so that trades can be carried out among traders on all
three of the trading floors
...
Swiss Exchange
The major securities market of Switzerland
...
Switch order
Order for the purchase (sale) of one stock and the sale (purchase) of another stock at a
stipulated price difference
...
Switching
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Liquidating a position and simultaneously reinstating a position in another futures contract of
the same type
...
Investment-disinvestment,
entry-exit,
expansion-contraction,
and
suspension-reactivation decisions are switching options
...
Symbol
Letters used to identify companies on the consolidated tape and other locations
...
Synchronous data
Information available at the same time
...
Syndicate
A group of banks that acts jointly, on a temporary basis, to loan money in a bank credit
(syndicated credit) or to underwrite a new issue of bonds
...
Syndicated Loan
A large Eurocurrency loan from a group of international banks
...
Synergy
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Describes a combination whose value is greater than the sum of the separate individual
parts
...
Synthetic forward position
A forward position constructed through borrowing in one currency, lending in another
currency, and offsetting these transactions in the spot exchange market
...
The synthetic lease therefore
keeps the loan off the company's balance sheet, while the company provides enough
income to the special-purpose entity to cover the interest rate on the loan
...
Synthetic stock
An option strategy that is equivalent to the underlying stock
...
A long put and a short call is sythetic short stock
...
It is a combination of security holdings
that mimics the price movement of another single security (i
...
, synthetic call: long
position in a stock combined with a put on that position; a protected long sale; synthetic
put: short position in a stock combined with a call on that position; a protected short sale)
...
Systematic investment plan
An approach involving regular investments in order to take advantage of dollar-cost
averaging
...
We can break excess returns into
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two components: systematic and residual
...
Systematic risk
Also called undiversifiable risk or market risk
...
Thus,
expected returns must be related only to systematic risks
...
Systemic Risk
Risk common to a particular sector or country
...
T
Fifth letter of a Nasdaq stock symbol indicating that the stock has warrants or rights
...
TD
The two-character ISO 3166 country code for CHAD
...
See: W-9
...
GFEDU
...
TG
The two-character ISO 3166 country code for TOGO
...
THB
The ISO 4217 currency code for the Thai Baht
...
TJR
The ISO 4217 currency code for the Tajikistan Rouble
...
TM
The two-character ISO 3166 country code for TURKMENISTAN
...
TN
The two-character ISO 3166 country code for TUNISIA
...
TO
The two-character ISO 3166 country code for TONGA
...
TP
The two-character ISO 3166 country code for EAST TIMOR
...
GFEDU
...
TRL
The ISO 4217 currency code for the Turkish Lira
...
TTD
The ISO 4217 currency code for the Trinidad and Tobago Dollar
...
Often used with Earnings Per Share
...
TW
The two-character ISO 3166 country code for TAIWAN, PROVINCE OF CHINA
...
TZ
The two-character ISO 3166 country code for TANZANIA, UNITED REPUBLIC OF
...
T-period
The percentage return over the T-year period an investment is held
...
It refers to the obligation
in the brokerage business to settle securities trades by the third day following the trade
date
...
Tabulation Report
A proxy tally report detailing the current quorum and vote figures on each proposal
...
GFEDU
...
Tactical Asset
Portfolio strategy that allows active departures from the normal asset mix according to
specified objective measures of value
...
It involves
forecasting asset returns, volatilities, and correlations
...
Tail
(1) The difference between the average price in Treasury auctions and the stopout price
...
(3) The
extreme ends under a probability curve
...
Tailgating
Purchase of a security by a broker after the broker places an order for the same security
for a customer
...
This is an unethical practice
...
Take
(1) To agree to buy
...
(2) Euro bankers speak of taking deposits rather than
buying money
...
"Take it down"
Reduce the offering price or hit others' bids to such an extent as to lower the inside market
...
"Take me along"
"Allow me to participate in the side of a particular trade
...
Take the offer
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Buy stock by accepting a floor broker's (listed) or dealer's (OTC) offer at an agreed-upon
volume
...
Take-out
A cash surplus generated by the sale of one block of securities and the purchase of another,
e
...
, selling a block of bonds at 99 and buying another block at 95
...
Take-or-pay contract
An agreement that obligates the purchaser to take any product that is offered (and pay
the cash purchase price) or pay a specified amount if the product is not taken
...
Take a powder
Temporarily cancel an order or indication in a stock, while unrepresented interest still exists
...
Take a swing
Execute a trade at a price that the trader feels is higher or more risky than would normally
be acceptable, in order to gain market share in the institutional arena
...
Takeover
General term referring to transfer of control of a firm from one group of shareholders to
another group of shareholders
...
A hostile takeover (with the aim
of replacing current existing management) is usually attempted through a public tender
offer
...
Take-up fee
A fee paid to an underwriter in connection with an underwritten rights offering or an
underwritten forced conversion
...
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Takes a call
Requires a phone call to an account in order for a trade to be completed
...
Takes price
Requiring some price movement or concession on behalf of the initiating party before a
trade can be consummated
...
Taking delivery
When the buyer actually assumes possession from a seller of assets agreed upon in a
forward contract or a futures contract
...
Tandem programs
Ginnie Mae mortgage funds provided at below-market rates to residential MBS buyers
with FHA Section 203 and 235 loans and to developers of multifamily projects with
Section 236 loans initially and later with Section 221(d)(4) loans
...
These include reproducible
assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a
work of art
...
Converse of: Intangible asset
Tangible net worth
Total assets minus intangible assets, which include patents and copyrights, and total liabilities
...
Tape
(1) Service that reports prices and sizes of transactions on major exchanges-ticker tape
...
See: Consolidated tape
...
Tare Weight
The weight of an empty container and any packaging materials used in the container
...
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Target cash balance
Optimal amount of cash for a firm to hold, considering the trade-off between the
opportunity costs of holding too much cash and the trading costs of holding too little cash
...
Firm chosen as an attractive takeover candidate by a
potential acquirer
...
See: Raider
...
Target investment mix
The percentage mix of stocks, bonds, and short-term reserves that an investor considers
appropriate based on his/her personal objectives, time horizon, risk tolerance, and
financial resources
...
Target payout ratio
A firm's long-run dividend-to-earnings ratio
...
Target price
In the context of takeovers, the price at which an acquirer aims to buy a target firm
...
In the context of stocks, the price that an investor hopes a stock will reach in a certain time
period
...
Target zones
Implicit boundaries on exchange rates established by central banks
...
GFEDU
...
S
...
These foreign institutions then maintain a secondary
market in the foreign market
...
Related: Greenmail
...
They
differ from PAC bonds whose amortization is guaranteed as long as prepayments on the
underlying mortgages do not exceed certain limits
...
Tax anticipation
Special bills that the Treasury occasionally issues that mature on corporate quarterly
income tax dates and can be used at face value by corporations to pay their tax liabilities
...
Tax arbitrage
Trading that takes advantage of a difference in tax rates or tax systems as the basis for
profit
...
Tax avoidance
Minimizing tax burden through legal means such as tax-free municipal bonds, tax shelters,
IRA accounts, and trusts
...
Tax base
The assessed value of the taxable property, assets, and income within a specific
geographic area
...
In the context of investments, the price of a stock or bond plus the broker's commission
...
GFEDU
...
The books follow Financial
Accounting Standards Board rules
...
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously realized
project-related tax benefits not already clawed back
...
Tax clientele
Categories of investors who have specific preferences for debt or equity because of
differences in their personal tax rates
...
Compare tax deduction
...
Tax deduction
An expense that a taxpayer is allowed to deduct from taxable income
...
Tax deferral option
Allowing the capital gains tax on an asset to be payable only when the gain is realized by
selling the asset
...
Tax differential view (of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios,
because capital gains are effectively taxed at lower rates than dividends
...
GFEDU
...
Tax-equivalent yield
The pre-tax yield required from a taxable bond in order to equal the tax-free yield of a
municipal bond
...
Tax-exempt bond
A bond usually issued by municipal, county, or state governments whose interest
payments are not subject to federal and, in some cases, state and local income tax
...
Tax-exempt income fund
A mutual fund that seeks income that is exempt from federal and, in some cases, state
and local income taxes
...
Tax-exempt sector
The municipal bond market where state and local governments raise funds
...
Tax-exempt security
An obligation whose interest is tax-exempt, often called a municipal bond, offered by a
country, state, town, or any political district
...
Tax haven
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking
specific activities such as exporting or investing
...
GFEDU
...
The tax benefits of tax haven affiliates were largely
removed in the US by the Tax Reform Act of 1986
...
Tax liability
The amount in taxes a taxpayer to the government
...
Tax and loan account
An account at a private bank, held in the name of the district Federal Reserve Bank,
which holds operating cash for the business of the US Treasury
...
Tax-neutrality
Characteristic that taxes do not interfere with the natural flow of capital toward its most
productive use
...
Tax preference item
Items that must be included when calculating the alternative minimum tax
...
Tax rate
The percentage of tax paid for different levels of income
...
GFEDU
...
Tax Reform Act of 1976
Legislation aimed at tightening provisions relating to taxation, including changes in the
capital gains tax laws
...
Among its provisions are a decrease in the minimum holding period for
assets to qualify for long-term capital gains treatment from one year to six months
...
Tax Reform Act of 1993
See: Revenue Reconciliation Act of 1993
Tax refund
Money back from the government when too much tax has been paid or withheld from a
salary
...
Tax selling
Selling of securities to realize losses that will offset capital gains and reduce tax liability
...
Tax shelter
Legal methods taxpayers can use to reduce tax liabilities
...
Tax-sheltered annuity
A type of retirement plan under Section 403(b) of the Internal Revenue Code that
permits employees of public educational organizations or tax-exempt organizations to
make before-tax contributions via a salary reduction agreement to a tax-sheltered
retirement plan
...
Tax shield
The reduction in income taxes that results from taking an allowable deduction from
taxable income
...
GFEDU
...
Tax status election
The decision of the status under which to file a tax return
...
Tax straddle
Technique used in futures and options trading to create tax benefits
...
Tax swap
Swapping two similar bonds to receive a tax benefit
...
Tax umbrella
Tax loss carryforwards from previous business losses that form a tax shelter for profits
earned in current and future years
...
Some of
the legislation's provisions included tax credits for taxpayers supporting children, an
increase in the amount that could be excluded from estate taxes, and a lower capital gains
tax rate
...
The selling shareholders are treated
as having sold their shares
...
This depends on the investor's tax bracket
...
Taxable event
An event or transaction that has a tax consequence, such as the sale of stock holding that
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is subject to capital gains taxes
...
Taxable municipal bond
Taxed private-purpose bonds issued by the state or local government to finance
prohibited projects such as sports stadiums
...
Taxable year
The 12-month period an individual uses to report income for income tax purposes
...
Tear sheet
A page from an S&P stock that provides information on thousands of stocks, often sent to
prospective purchasers
...
Technical analysis
Security analysis that seeks to detect and interpret patterns in past security prices
...
Technical condition
Demand and supply factors affecting price, in particular, the net position, either long or
short, of the dealer community
...
Technical forecasting
A forecasting method that uses historical prices and trends
...
In market analysis, technical
information is information related to market dynamics and crowd behavior only
...
GFEDU
...
Technical insolvency occurs when a firm doesn't
pay a bill on time
...
Such a rally may result because investors are bargain hunting or because analysts have
noticed a particular support level at which securities usually bounce up
...
Technical sign
A short-term trend in the price movement of a security that analysts recognize as
significant
...
Teeny
1/16 or 0
...
Steenth
...
Telephone switching
Moving one's assets from one mutual fund or variable annuity to another by telephone
...
Assets and liabilities valued at historical cost (market cost) are
translated at the historical (current market) rate
...
Temporary Financing
The sum of negotiated current liabilities and temporary spontaneous current liabilities
...
GFEDU
...
Ten largest holdings
The percentage of a portfolio's total net assets or equity holdings in its ten largest securities
positions
...
10% guideline
The standard analysts' principle that funded debt over 10% of the assessed valuation of
taxable property for a municipality is excessive
...
Provides a comprehensive overview of a
company's state of business
...
A 10-Q
report is filed quarterly
...
Provides a comprehensive overview of
a company's state of business
...
1099
A statement sent to the IRS and taxpayers by the payers of dividends and interest and by
issuers of taxable original issue discount securities
...
1099 DIV
The tax statement used for reporting dividends paid to registered shareholders
...
The
rule allows many shares to be voted, which would otherwise not be, to reach a quorum,
approve the choice of directors and auditors and handle other routine matters
...
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Tenant
A partial owner of a security, or the holder of some property
...
Tenants by Entireties (TEN ENT)
Joint ownership of property or securities by a husband and wife where, upon the death of
one, the property goes to the survivor
...
Each tenant's proportion is distributable as part of the owners estate, so that if
one of the account holders dies, that owner's heirs are entitled to that proportional share
of the account
...
Tender
To offer for delivery against futures
...
Tender offer premium
The premium offered above the current market price in a tender offer
...
Term
The period of time during which a contract is in force
...
Often referred to as bullet-maturity bonds or
simply bullet bonds
...
Term certificate
A certificate of deposit with a longer time to maturity
...
Term insurance
Provides a death benefit only, no build up of cash value
...
GFEDU
...
The premium remains constant only for a specified term of years, and the policy is usually
renewable at the end of each term
...
Term to maturity
The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed
...
Term premiums
Excess of the yields to maturity on long-term bonds over those of short-term bonds
...
Term structure
Relationship between interest rates on bonds of different maturities, usually depicted in the
form of a graph often called a yield curve
...
Term trust
A closed-end fund that has a fixed termination or maturity date
...
Usually, a perpetuity formula is used
...
We make an assumption that
year 11 and beyond will be no growth (except for inflation)
...
Hence, the value is 100/(0
...
02)
that is 1,000
...
12)10, which is 321
...
Note the importance of the inflation assumption
...
See: Incoterms
...
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Terms of trade
The weighted average of a nation's export prices relative to its import prices
...
Territorial tax regimes
are found in Hong Kong, France, Belgium, and the Netherlands
...
A test is passed if prices do not go below the support or
resistance level, and the test is failed if prices go on to new lows or highs
...
The Desk
The trading desk at the Federal REserve Bank of New York through which open market
purchases and sales of government and federal agancy securities are made
...
A
"foreign desk" at the Federal Reserve Bank of New York conducts transactions in the
foregin exchange market
...
Also called the fair price
...
Like the yield curve, this is a graphic depiction of the term
structure of interest rates
...
Mathematically determined value of a derivative instrument
as dictated by a pricing model such as the Black-Scholes model
...
Also called
time decay
...
Very little stock to buy or sell
...
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Thinly traded
Infrequently traded
...
Thirty-day visible supply
The total volume in dollars of municipal bonds with maturities of 13 months or more that
should reach the market within 30 days
...
Three-phase DDM
A version of the dividend discount model that applies a different expected dividend rate
depending on a company's life-cycle phase: growth phase, transition phase, or maturity phase
...
This is a result of increased costs of borrowing for companies
and the increased attractiveness of money market funds and CDs over stocks and bonds as a
result of the higher interest rates
...
Thrift institution
An organization formed as a depository for primarily consumer savings
...
Thrift Institution Advisory Council (TIAC)
A council, established following the passage of the Monetary Control Act of 1980, whose
purpose is to provide information and views on the special needs and problems of thrifts
...
Thrift plan
A defined contribution plan in which an employee contributes, usually on a before-tax
basis, toward the ultimate benefits that will be provided
...
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Throughput agreement
An agreement to put a specified amount of product per period through a particular
facility
...
Tick
Refers to the minimum change in price a security can have, either up or down
...
Tick indicator
A market indicator based on the number of stocks whose last trade was an uptick or a
downtick
...
Tick-test rules
SEC-imposed restrictions on when a short sale may be executed, intended to prevent
investors from destabilizing the price of a stock when the market price is falling
...
Ticker symbol
An abbreviation assigned to a security for trading purposes
...
Ticket
An abbreviation of order ticket
...
Tier 1 refers to core capital while Tier 2
refers to items such as undisclosed resources
...
US government-backed bonds without
coupons, meaning that the bondholders do not receive the periodic interest payments
...
Tight
In line with or extremely close to the inside market or last sale in a stock (+/- 1/8)
...
GFEDU
...
Tight market
A market in which volume is high, trading is active and highly competitive, and
consequently spreads between bid and ask prices are narrow
...
The antithesis of tight
money is easy money
...
Tilted portfolio
An indexing strategy that is linked to active management through the emphasis of a
particular industry sector, selected performance factors such as earnings momentum,
dividend yield, price-earnings ratio, or selected economic factors such as interest rates and
inflation
...
Related:
Certificate of deposit
...
Time horizon
The period, usually expressed in years, for which an investor expects to hold an
investment
...
Time to maturity
The time remaining until a financial contract expires
...
Time order
Order that becomes a market or limited price order or is canceled at a specific time
...
The
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value of an option beyond its current exercise value representing the optionholder's control
until expiration, the risk of the underlying asset, and the riskless return
...
Time series models
Systems that examine series of historical data; sometimes used as a means of technical
forecasting, by examining moving averages
...
Time until expiration
The time remaining until a financial contract expires
...
Time value
Applies to derivative products
...
Time
value is positively related to the length of time remaining until expiration
...
Time value of an option
The portion of an option's premium that is based on the amount of time remaining until
the expiration date of the option contract, and the idea that the underlying components that
determine the value of the option may change during that time
...
Related: In the money
...
Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments
...
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Timing
See: Market timing
Timing option
The seller's choice of when in the delivery month to deliver
...
Tip
Information given by one trader to another, which is used in making buy or sell decisions
but is not available to the general public
...
g
...
Heavy
...
To be announced (TBA)
A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future
date but does not include a specified pool number and number of pools or precise
amount to be delivered
...
A Tobin's Q ratio greater than
1 indicates the firm has done well with its investment decisions
...
Toehold purchase
Often used in risk arbitrage
...
Once 5% is acquired, the acquirer must file with the SEC and other
agencies to explain its intentions and notify the acquiree
...
Tokyo Commodity Exchange (TOCOM)
Tokyo exchange for trading futures on gold, silver, platinum, palladium, rubber, cotton
yarn, and woolen yarn
...
Tokyo Stock Exchange (TSE)
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The largest stock exchange in Japan with the some of the most active trading in the world
...
Tolling agreement
An agreement to put a specified amount of raw material per period through a particular
processing facility
...
Tom next
Means to "tomorrow next
...
Tombstone
Advertisement listing the underwriters of a security issue
...
too-big-too-fail
Government practices that protect large banking organizations from the normal
discipline of the marketplace because of concerns that such institutions are so important
to markets and their positions so intertwined with those of other banks that their failure
would be unaccrptably disruptive, financially and economically
...
Top-down approach
A method of security selection that starts with asset allocation and works systematically
through sector and industry allocation to individual security selection
...
The bottom-up manager, in contrast, selects specific
securities within the particular sectors
...
See: Resistance level
...
GFEDU
...
Toronto Stock Exchange (TSE)
Canada's largest stock exchange, trading approximately 1,200 company stocks and 33
options
...
See: Partial
...
Total capitalization
The total long-term debt and all types of equity of a company that constitutes its capital
structure
...
Total debt-to-equity
A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity
...
See also:
Total return
...
Total return
In performance measurement, the actual rate of return realized over some evaluation
period
...
Total return for calendar year
The profit or loss realized by an investment at the end of a specified calendar year, stated
as the percentage gained or lost per dollar invested on January 1
...
GFEDU
...
Known as "turnover" in the U
...
Total risk
The sum of systematic and unsystematic risk
...
Touch, the
Mainly applies to international equities
...
Tough on price
Firm price mentality at which one wishes to transact stock, often at a discount/premium
that is not available at the time
...
Tracking error
In an indexing strategy, the standard deviation of the difference between the
performance of the benchmark and the replicating portfolio
...
Suppose Company A purchases a business from Company
B and pays B with 1 million shares of A's stock
...
B is worried that the market may fall in
the next 60 days
...
However, it is possible that A's business is much more cyclical than the S&P
500
...
This is a stock that has high
correlation with A
...
The solution is to sell short or buy protective put
options on this tracking stock C
...
Because the degree of the protection is related to the correlation
of A and C's stock, it is extremely unlikely that the protection is perfect
...
A firm with four divisions, for example, might set up
four tracking stocks
...
This is a way to reward managers for good divisional
performance with an equity that is tied to their division-rather than potentially
penalizing them compensation for bad performance in a division they have no control
over
...
GFEDU
...
Once a trade is consummated, it is considered "done" or final
...
Trade acceptance
Written demand that has been accepted by an industrial company to pay a given sum at
a future date
...
Trade away
Trade execution by another broker/dealer
...
Trade credit
Credit one firm grants to another firm for the purchase of goods or services
...
Also, the day
on which a security or a commodity future trade actually takes place
...
With stocks, settlement is generally 3
business days after the trade
...
Trade debt
Accounts payable
...
Trade draft
A draft addressed to a commercial enterprise
...
Trade flat
For convertibles, trade without accrued interest
...
In general, trade in and out of a position
at the same price, neither making a profit nor taking a loss
...
Trade Lanes
The direction of trade, e
...
US to Europe
...
GFEDU
...
Antithesis of "buy them back
...
An aggressive trading posture
...
Trade reporting
Dealer: In a trade between two registered Market Participants (MP), only the sell side
reports the trade
...
Dealer: In a trade between a registered MP and a non-registered MP
(Market Maker not registered in a particular stock, an ECN, etc
...
Auction: Trading can occur ONLY between two member
firms
...
)
Trade Surplus
A nation's excess of exports over imports during a given time frame
...
The
Federal Reserve calculates a trade-weighted value of the dollar based on the
weighted-average exchange value of the dollar against the currencies of 10 industrial
countries
...
Trademarks may be registered with the US Patent and Trademark Office
...
Traders can make markets by trading the flow
...
Traders can also take proprietary positions in which
they seek to profit from the directional movement of prices or spread positions
...
Trading
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Buying and selling securities
...
Trading costs
Costs of buying and selling marketable securities and borrowing
...
See: Transactions costs
...
Trading dividends
Maximizing a firm's revenues by purchasing stock in other firms in order to collect the
maximum amount of dividends of which 70% is tax-free
...
See: Suspended trading
...
Trading paper
CDs purchased by accounts that are likely to resell them
...
Trading pattern
Long-range direction of a security or commodity futures price, charted by drawing one line
connecting the highest prices the security has reached and another line connecting the
lowest prices at which the security has traded over the same period
...
Trading posts
The positions on the floor of a stock exchange where the specialists stand and securities are
traded
...
Trading profit
The profit earned on short-term trades of securities held for less than one year, subject to
tax at normal income tax rates
...
GFEDU
...
Trading symbol
See: Ticker symbol
Trading unit
The number of shares of a particular security that is used as the acceptable quantity for
trading on the exchanges
...
Trading volume
The number of shares transacted every day
...
That is, if A sells
100 shares to B, the volume is 100 shares
...
Contributions are fully deductible for all individuals who
are not active participants in employer-sponsored plans or for plan participants within
certain income ranges
...
Trailing earnings
Past earnings
...
This ratio is usually
distinguished as price to trailing earnings (today's price divided by the most recent 12
months of earnings) versus price to prospective earnings (today's price divided by
consensus forecast earnings for the next 12 months)
...
Often used in the valuation of companies that have negative cash flows or
earnings
...
Tranche
One of several related securities offered at the same time
...
GFEDU
...
Transaction
The delivery of a security by a seller and its acceptance by the buyer
...
Demand-deposit accounts, negotiable order of withdrawal NOW accounts, automatic
transfer service (ATS) accounts, and credit union share draft accounts are examples of
transaction accounts at banks and other depository institutions
...
Transactions costs should also
include the bid/ask spread as well as price impact costs (for example a large sell order could
lower the price)
...
Transaction
The money needed to accommodate a firm's expected cash transactions
...
Related: Translation exposure
...
Transaction Insured Trade Acceptance Locator (TITAL)
A trade acceptance through an insurance entity (rather than a bank) which is conditional
upon exporter performance
...
Lines of credit and revolving credit
agreements involve by contrast loans that can be used for various purposes
...
Levies on a deal that foreign governments
sometimes charge
...
Transactions motive
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A desire to hold cash in order to conduct cash-based transactions
...
Transfer
A change of ownership from one person or party to another
...
Transfer On Death (TOD)
The process of changing title of a security from one name to another upon the death of
one of the titleholders
...
Transfer price
The price at which one unit of a firm sells goods or services to another unit of the same
firm
...
Transferable letter of credit
Document that allows the first beneficiary on a standby bank assurance of funds to
transfer all or part of the original letter of credit to a third party
...
Transferable put right
An option issued by a firm to its shareholders to sell the firm one share of its common stock at
a fixed price (the strike price) within a stated period (the time to maturity)
...
Transferee
The party who has received the benefits of a letter of credit by action of a transfer
...
GFEDU
...
Transshipment
The passing goods from one ocean vessel to another
...
Related: Three-phase DDM
...
Related: Transaction exposure
...
Transmittal letter
A letter describing the contents and purpose of a transaction delivered with a security that
is changing ownership
...
Treasurer
The corporate officer responsible for designing and implementing a firm's financing and
investing activities
...
Treasurer's checks outstanding are
counted as part of a bank's reservable deposits and as part of the money supply
...
Also, the department within a corporation that oversees its
financial operations including the issuance of new shares
...
GFEDU
...
Maturities for
T-bills are usually 91 days, 182 days, or 52 weeks
...
Treasury direct
A system allowing an individual investor to make a noncompetitive bid on US Treasury
securities and thus avoid broker-dealer fees
...
Treasury securities
Securities issued by the US Department of the Treasury
...
The shares are considered issued, but not
outstanding
...
Treasury stock not considered when calculating
dividends or earnings per share
...
" Treat me subject "
In the equities market, a conditional bid or offer
...
"
Trend
The general direction of the market
...
Trendline
A technical chart line that depicts the past movement of a security and that is used in an
attempt to help predict future price movements
...
GFEDU
...
Named after Jack Treynor
...
Such funds are known for
imposing strong discipline on the firms they fund
...
Trickle down
An economic theory that the support of businesses that allows them to flourish will
eventually benefit middle- and lower-income people, in the form of increased economic
activity and reduced unemployment
...
Also known as an ARMS index
...
This, in turn, is divided by the advancing volume divided by the declining volume
...
e
...
Hence, a value less than 1
...
0 indicate bearish demand
...
Triple net lease
A lease providing that the tenant pay for all maintenance expenses, plus utilities, taxes,
and insurance
...
Triple tax-exempt
Municipal bonds featuring federal, state, and local tax-free interest payments
...
It is the last trading hour on
the third Friday of March, June, September, and December, when stock options, futures on
stock indexes, and options on these futures expire concurrently
...
Trough
The transition point between economic recession and recovery
...
GFEDU
...
True lease
A contract that qualifies as a valid lease agreement under the Internal Revenue Code
...
The person creating the trust, who may or may not also be the beneficiary, is
called the grantor
...
Trust deed
Agreement between trustee and borrower setting out terms of a bond
...
Trust Indenture Act of 1939
A law that requires all corporate bonds and other debt securities to be issued subject to
indenture agreements and comply with certain indenture provisions approved by the SEC
...
Trustee
Agent of a bond issuer who handles the administrative aspects of a loan and ensures that
the borrower complies with the terms of the bond indenture
...
TSE 300 (Toronto Stock Exchange 100 index)
Canadian form of a S&P 500
...
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TT&L account
Treasury tax and loan account at a bank
...
Turn
In the equities market, a reversal; unwind
...
Also describes a firm that has
been performing poorly, but changes its financial course and improves its performance
...
Turnkey construction
A type of construction contract under which the construction firm is obligated to complete
a project according to prespecified criteria for a price that is fixed at the time the contract
is signed
...
A turnover rate of 25% means that the
value of trades represented one-fourth of the assets of the fund
...
For corporate finance, the ratio of annual sales to net worth, representing
the extent to which a company can grow without outside capital
...
For Great Britain, total revenue
...
Turnover rate
Measures trading activity during a particular period
...
12B-1 fees
The percent of a mutual fund's assets used to defray marketing and distribution
expenses
...
The SEC has recently
proposed that 12B-1 fees in excess of 0
...
A true no load fund
has neither a sales charge nor a 12b-1 fee
...
GFEDU
...
25% of average daily fund assets each year to cover the costs of selling and
marketing shares, an arrangement allowed by the SEC's Rule 12B-1 (passed in 1980)
...
It consists of the yields on 20
general obligation municipal bonds with 20-year maturities with an average rating
equivalent to a1l
...
20% cushion rule
Guideline that revenues from facilities financed by municipal bonds should exceed the
operating budget plus maintenance costs and debt service by at least 20% to allow for
unforeseen expenses
...
Twisting
Convincing a customer that trades are necessary in order to generate a commission
...
Two dollar broker
Floor broker of the NYSE, who executes orders for other brokers having more business at that
time than they can handle with their own private floor brokers or who do not have their
exchange member on the floor
...
It may also
refer to another type of model whereby expected returns are generated by any two
factors
...
Two-sided market
A market in which both bid and asked prices, good for the standard unit of trading, are
quoted
...
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Two-state
A pricing equation allowing an underlying asset to assume only two possible (discrete)
values in the next time period for each value it can take on in the preceding time period
...
Two-tier bid
Takeover bid in which the acquirer offers to pay more for the shares needed to gain control
than for the remaining shares, or to pay the same price but at different times in the
merger period; contrasts with any-or-all bid
...
Type
The classification of an option contract as either a put or a call
...
UAH
The ISO 4217 currency code for the Ukraine Hryvnia
...
UGX
The ISO 4217 currency code for the Uganda Shilling
...
US
The two-character ISO 3166 country code for UNITED STATES
...
UY
The two-character ISO 3166 country code for URUGUAY
...
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UZ
The two-character ISO 3166 country code for UZBEKISTAN
...
Ultra vires activities
Corporate actions and operations that are not sanctioned by corporate charter,
sometimes leading to shareholder lawsuits
...
Firm proprietary software that stores, and sends baskets
of stock through SEAQ to either the NYSE or the curb for program trading
...
Umbrella personal liability policy
A liability insurance policy that provides protection against damages not covered by
standard liability policies, such as large jury awards in lawsuits
...
Unamortized bond discount
Par value of a bond less the proceeds received from the sale of the bond, less whatever
portion has been amortized
...
Unbiased expectations hypothesis
Theory that forward exchange rates are unbiased predictors of future spot rates
...
Unbiased predictor
A theory that spot prices at some future date will be equal to today's forward rates
...
See: Bundling
...
GFEDU
...
Uncollectible account
An account which cannot be collected by a company because the customer is not able to
pay or is unwilling to pay
...
The advising bank merely informs the beneficiary of the letter of
credit terms and conditions
...
Uncovered calls are much riskier for the writer than
a covered call, where the writer of the uncovered call owns the underlying stock
...
Also called a "naked" asset
...
Uncovered options
See: Naked options
Uncovered put
A short put option position in which the writer does not have a corresponding short stock
position or has not deposited, in a cash account, cash or cash equivalents equal to the
exercise value of the put
...
Uncovered put options limit the writer's risk to
the value of the stock (adjusted for premium received
...
Uncovered Put writing
A short put option position in which the writer does not have a corresponding short
position in the underlying security or has not deposited, in a cash account,
Under the belt
Long position in a stock
...
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Underbooked
Describes limited interest by prospective buyers in a new issue of a security during the
preoffering registration period
...
Underfunded pension plan
A pension plan that has a negative surplus (i
...
, liabilities exceed assets)
...
Underlying
What supports the security or instrument that parties agree to exchange in a derivative
contract
...
Underlying debt
Municipal bonds issued by government entities but under the control of larger government
entities and for which the larger entity shares the credit responsibility
...
Underlying security
For options, the security that is subject to purchase or sold upon exercise of an option
contract
...
For Depository
receipts, the class, series, and number of the foreign shares represented by the depository
receipt
...
Underperform
When a security is expected to, or does, appreciate at a slower rate than the overall market
rate of performance
...
GFEDU
...
Undervalued
A stock price perceived to be too low or cheap, as indicated by a particular valuation
model
...
To refer to
undervaluation or overvaluation implicitly assumes some model of valuation
...
Undervalued security
A security selling below its market value or liquidation value
...
Underwrite
To guarantee, as to guarantee the issuer of securities a specified price by entering into a
purchase and sale agreement
...
Underwriter
A firm, usually an investment bank, that buys an issue of securities from a company and
resells it to investors
...
Underwriter's discount
See: Gross spread
Underwriting
Acting as the underwriter in the issue of new securities for a firm
...
Compare to agreement among
underwriters
...
Underwriting fee
The portion of the gross underwriting spread that compensates the securities firms that
underwrite a public offering for their services
...
GFEDU
...
Underwriting spread
The income that is generated by the underwriting syndicate and the selling group, which is
essentially the difference between the amount paid to the issuer of securities in a primary
distribution and the public offering price
...
The underwriting syndicate is led by the lead underwriter
...
Underwritten offering
A purchase and sale
...
Undiversifiable risk
Related: Systematic risk
Unearned income (revenue)
Income received in advance of the time at which it is earned, such as prepaid rent
...
Unemployment rate
The percentage of the people classified as unemployed as compared to the total labor
force
...
For example, securities bought with
cash instead of on margin and homes with mortgages paid off
...
Under time-phased voting, shareholders who have held the stock for a given period of
time are given more votes per share than recent purchases
...
GFEDU
...
Unfavorable Balance of Trade
The value of a nation's imports in excess of the value of its exports
...
See: Funded debt
...
There is no money put aside on a regular basis
...
Unified tax credit
A federal tax credit that reduces tax liability, dollar for dollar, on lifetime gifts and asset
transfers at death
...
Uniform Customs and Practices (Brochure 500)
International Chamber of Commerce rules (commonly referred to as UCP 500 or ICC
500), that are used for Letters of credit
...
Uniform Gifts to Minors Act (UGMA)
Legislation that provides a tax-effective manner of transferring property to minors
without the complications of trusts or guardianship restrictions
...
Uniform Rules for Collections
International Chamber of Commerce rules on the handling of documentary and clean
collections
...
Uniform Transfers to Minors Act (UTMA)
A law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include
real estate, paintings, royalties, and patents
...
GFEDU
...
Uninsured motorist insurance
Insurance that covers the policyholder and family if they are injured by a hit-and-run or
uninsured motorist, assuming the other driver is at fault
...
Unique risk
Also called unsystematic risk or idiosyncratic risk
...
See: Diversifiable risk and unsystematic risk
...
Unit
More than one class of securities traded together (e
...
, one common share and three
subscription warrants)
...
Involves
multiplying years of service by the percentage of salary
...
Shares in
a unit trust are called redeemable trust certificates, and they are sold at a premium to net
asset value
...
Unit of trading
See: Trading unit
...
United States Customs Service
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An agency of the Treasury Department charged with enforcing laws relative to imports
...
S
...
Universal life
A whole life insurance product whose investment component pays a competitive interest
rate rather than the below-market crediting rate
...
Unleveraged beta
The beta of an unleveraged required return (i
...
, no debt) on an investment when the
investment is financed entirely by equity
...
In a leveraged
program borrowed funds are used to finance more than 50%
...
e
...
Unlevered cost of equity
The discount rate appropriate for an investment that it is financed with 100% equity
...
The general partners of a
partnership have unlimited liability
...
Unlimited tax bond
A municipal bond secured by the pledge to levy taxes until full repayment at an unlimited
rate
...
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Unlisted trading
Trading in unlisted securities that occurs on an organized exchange to accommodate members
...
Unloading
Selling securities or commodities whose prices are dropping to minimize loss
...
Unmatched book
If the average maturity of a bank's liabilities is shorter than that of its assets, it is said to be
running an unmatched book
...
Also
refers to entering into OTC derivatives contracts and not hedging by making trades in the
opposite direction to another financial intermediary
...
Related
expressions: Open book and short book
...
Unqualified opinion
An independent auditor's opinion that a company's financial statements comply with
accepted accounting procedures
...
Unrealized capital gain/loss
An increase/decrease in the value of a security that is not "real" because the security has
not been sold
...
Usance
The time allowed for settlement of a draft
...
Unseasoned issue
Issue of a security for which there is no existing market
...
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Unsecured debt
Debt that does not identify specific assets that the debtholder is entitled to in case of default
...
Unsystematic risk
Also called the diversifiable risk or residual risk
...
Related: Systematic risk
...
Up
Market indication; willingness to go both ways (buy or sell) at the mentioned volume and
market
...
Up tick
Plus tick
...
This can increase investor confidence and push
up the price of the security
...
Upside potential
The amount by which analysts or investors expect the price of a security may increase
...
Upstairs order
Used for listed equity securities
...
Upswing
An upward turn in a security's price after a period of falling prices
...
GFEDU
...
Uptick trade
A transaction that takes place at a higher price than the preceding transaction involving
the same security
...
Useful life
The expected period of time during which a depreciating asset will be productive
...
US Treasury bond
US government debt with a maturity of more than 10 years
...
U
...
Treasury securities
Interest-bearing obligations if the U
...
government issued by the U
...
Department of
the Treasury as a means of borrowing money to meet government expenditures not
covered by tax revenues
...
Usury laws
Laws limiting the amount of interest that can be charged on loans
...
Utility function
A mathematical expression that assigns a value to all possible choices
...
Utility revenue bond
A municipal bond issued to finance the construction of public utility services
...
Utility value
The welfare a given investor assigns to an investment with a particular expected return and
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risk
...
VA
The two-character ISO 3166 country code for HOLY SEE (VATICAN CITY STATE)
...
VE
The two-character ISO 3166 country code for VENEZUELA
...
VG
The two-character ISO 3166 country code for VIRGIN ISLANDS, BRITISH
...
S
...
VND
The ISO 4217 currency code for the Vietnamese Dong
...
VUV
The ISO 4217 currency code for the Vanuatu Vatu
...
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Validated Export License
Document issued by the U
...
government (BXA), authorizing the export of specific
commoditites to a specified foreign country within a specified time period
...
Valuation Clause
Stipulates a fixed sum for insured property in the event of loss when included in a marine
cargo insurance policy
...
Valuation reserve
An allowance to provide for changes in the value of a company's assets, such as
depreciation
...
Value-added tax
Method of indirect taxation that levies a tax is at each stage of production on the value
added at that specific stage
...
Or, the principle that the net present
value of a set of independent projects is just the sum of the net present values of the
individual projects
...
Value date
In the market for Eurodollar deposits and foreign exchange, the delivery date of funds traded
...
In the case of a forward foreign exchange trade, it is the future date
...
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Value investing
In the context of asset management, mutual funds, and hedge funds, the a style of
investment that focuses on securities with low price to earnings ratios or low price to
book ratios
...
Value Line investment survey
A proprietary service that ranks stocks for timeliness and safety
...
Often a value stock is one with a low price-to-book value
ratio
...
Value Maximization
Increases in owners' wealth achieved by maximizing of the value of a firm's common stock
...
Value stocks
Stocks with low price/book ratios or price/earnings ratios
...
Value stock fund
A mutual fund that emphasizes stocks of companies whose growth opportunities are
generally regarded as subpar by the market
...
Vancouver Stock Exchange (VSE)
A securities and options exchange in Vancouver, British Columbia, (Canada), specializing in
venture capital companies
...
Variable
An element in a model
...
GFEDU
...
e
...
Variable annuities
Investment contracts whose issuer pays a periodic amount linked to the investment
performance of an underlying portfolio
...
When production is
zero, the variable cost is equal to zero
...
Typically the company invests premiums in
common stocks, so variable life policies are referred to as equity-linked policies
...
Variable-price security
A security that sells at a fluctuating market-determined price stocks and bonds are example
...
The rate is often tied to an index
that reflects changes in market rates of interest
...
Limits are often placed on the
degree to which the interest rate or the payments can vary
...
On each roll date,
the coupon on the CD is adjusted to reflect current market rates
...
Variable-rate loan
Loan made at an interest rate that fluctuates depending on a base interest rate, such as
the prime rate or LIBOR
...
GFEDU
...
Variable Ratio Write
An option strategy in which the investor owns 100 shares of the underlying security and
writes two call options against it, each option having a different striking price
...
The
mathematical expectation of the average squared deviations from the mean
...
Variance-minimization approach to tracking
An approach to bond indexing that uses historical data to estimate the variance of the
tracking error
...
For Ginnie Mae, Fannie Mae, and Freddie Mac pass-through securities,
the accepted variance is plus or minus 2
...
Variation margin
An additional required deposit to bring an investor's equity account up to the initial margin
level when the balance falls below the maintenance margin requirement
...
Velda Sue
Stands for Venture Enhancement and Loan Development Administration for Smaller
Undercapitalized Enterprises
...
Velocity
The number of times a dollar is spent, or turns over, in a specific period of time
...
Vendor
Seller or supplier
...
GFEDU
...
Type of financing sought by early-stage
companies seeking to grow rapidly
...
Vertical acquisition
Buying or taking over a firm in the same industry in which the acquired firm and the
acquiring firm represent different steps in the production process
...
Vertical line charting
A form of technical charting that shows the high, low, and closing prices of a stock or a
market on each day on one vertical line with the closing price indicated by a short
horizontal mark
...
For example, the firm being acquired serves as a supplier to the firm
doing the acquiring
...
See:
Horizontal spread
...
Vest
Become applicable or exercisable
...
Employees might be given equity in a firm but they must
stay with the firm for a number of years before they are entitled to the full equity
...
It provides incentive for the employee to perform
...
The
Tax Reform Act of 1986 established minimum vesting rights for employees based on
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their years of service—full vesting in five years or 20% vesting per year starting by the
end of the third year
...
Veterans Administration (VA) mortgage
A home mortgage loan granted by a lending institution to U
...
veterans and guaranteed
by the Veterans Administration
...
Vienna Convention
Common name for the United Nations Convention on Contracts for the International Sale
of Goods
...
Vienna Stock Exchange (VSX)
One of the world's oldest exchanges, which accounts for approximately 50% of Austrian
stock transactions; the balance are traded OTC
...
Usually a
complicated and artistic design, it is meant to make the counterfeiting of stock
certificates as difficult as possible
...
These options are also called 3-Ds (dollar-denominated
delivery)
...
VIX
The implied volatility on the S&P 100 (OEX) option
...
It is calculated from both calls and puts that are near the
money
...
Volatility
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A measure of risk based on the standard deviation of the asset return
...
There are volatility indexes
...
Volume counting
The SEC dictates how volume is counted
...
Any time money changes hands
(or any time capital is risked), it must be counted as a trade
...
In either case, it is counted as
100 shares
...
The Specialist matches the order between the two firms and it is counted
as 100 shares
...
It is counted as 100 shares
...
It does not have 100 shares in its inventory
...
It then sells these 100 shares to the client
...
Volume deleted
A note appearing on the consolidated tape when the tape is running behind under heavy
trading, meaning that only the stock symbol and price will be shown for trades under 5000
shares
...
Voluntary accumulation plan
Arrangement allowing shareholders of a mutual fund to purchase shares over a period of time
on a regular basis, and in so doing take advantage of dollar cost averaging
...
Voluntary liquidation
Liquidation proceedings that are supported by a company's shareholders
...
Volatility risk
The risk in the value of options portfolios due to the unpredictable changes in the volatility
of the underlying asset
...
GFEDU
...
Volume
This is the daily number of shares of a security that change hands between a buyer and a
seller
...
Voting rights
The right to vote on matters that are put to a vote of security holders
...
Voting stock
The shares in a corporation that entitle the shareholder to vote
...
VXN
The implied volatility on the Nasdaq 100 (NPX) option
...
It is calculated from both calls and puts that are near the
money
...
WACC
See: Weighted average cost of capital
WEBS
See: World Equity Benchmark Series
WF
The two-character ISO 3166 country code for WALLIS AND FUTUNA
...
GFEDU
...
WST
Western Samoa Tala currency
W-8
Certificate of Foreign Status form required by the IRS to tell the payer, transfer agent,
broker or other middleman that an employee is a nonresident alien or foreign entity that
is not subject to U
...
tax reporting or backup withholding rules
...
W-9
A form used to certify a shareholder's social security or tax identification number as true
and correct, in order to avoid federal tax withholding
...
Wage-push inflation
Inflation caused by skyrocketing wages
...
During this time the firm may distribute a preliminary prospectus
...
Walk away
To take and maintain a position in a stock after going to the floor to consummate a trade
...
Wall Street
Generic term for the securities industry firms that buy, sell, and underwrite securities
...
GFEDU
...
Wallpaper
A security with no monetary value
...
War babies
Slang term for the stocks and bonds of corporations in the defense industry
...
War Risk Insurance
Separate insurance coverage against loss or damage due to acts of war (including
objects left over from previous wars)
...
Warehousing
The interim holding period from the time of the closing of a loan to its subsequent
marketing to capital market investors
...
Warrants
are traded as securities whose price reflects the value of the underlying stock
...
Warrants are like call options, but with much longer time spans-sometimes
years
...
Warranty
A guarantee by a seller to a buyer that if a product requires repair or remedy of a
problem within a certain period after its purchase, the seller will repair the problem at no
cost to the buyer
...
GFEDU
...
Wash
Gains equal losses
...
See: Tax selling
...
Also
applies to consumed assets, such as oil or gas, and termed "depletion
...
Watered stock
A stock representing ownership in a corporation that is worth less than the actual
invested capital, resulting in problems of low liquidity, inadequate return on investment,
and low market value
...
Waybills are issued by both air
carriers (air waybills) and ship lines (sea waybills)
...
Weak dollar
A depreciated dollar with respect to other currencies, meaning that more dollars are
needed to buy a unit of foreign currency
...
Weak-form efficiency
A pricing theory that the price of a security reflects the past price and trading history of
the security
...
Related:
Semistrong-form efficiency, strong-form efficiency
...
Wedge
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A chart pattern composed of two converging lines connecting peaks and troughs
...
In the case of rising wedges, indicates interruptions of a falling price trend
...
Weight
Either Gross Weight, Net Weight, or Tare Weight
...
Used as a hurdle rate for capital
investment
...
Weighted average Coupon
The weighted average of the gross interest rates of mortgages underlying a pool as of the pool
issue date; the balance of each mortgage is used as the weighting factor
...
Weighted average
The weighted average of the yield of all the bonds in a portfolio
...
Well-diversified portfolio
A portfolio that includes a variety of securities so that the weight of any security is small
...
When distributed
When issued
...
GFEDU
...
I
...
Treasury securities, new issues of stocks and bonds, stocks that have
split, and in-merger situations after the time the proxy has become effective but before
completion are all traded on a when-issued basis
...
Whipsawed
Buying stocks just before prices fall and selling stocks just before prices rise in a volatile
market, often as the result of misleading signals
...
These
are often found on the Internet
...
Whistle blower
A person who has knowledge of fraudulent activities inside a firm or government agency,
who is protected from the employer's retribution by federal law
...
White Noise
The audio equivalent of Brownian motion
...
The video equivalent of white noise is "snow" in television reception
...
White-shoe firm
Broker-dealer firms that disdain practices such as hostile takeovers
...
White's rating
A rating of municipal securities, that uses market factors rather than credit considerations to
find appropriate yields
...
GFEDU
...
Whole life insurance
A contract with both insurance and investment components: (1) It pays off a stated
amount upon the death of the insured, and (2) it accumulates a cash value that the
policyholder can redeem or borrow against
...
Wholesale mortgage banking
The purchasing of loans originated by others, for the acquisition of the servicing rights
...
Wholly owned subsidiary
A subsidiary whose parent company owns virtually 100% of its common stock
...
WPPSS defaulted on the payments to bondholders
...
Treasury bills trade on a WI basis between the day they are
auctioned and the day settlement is made
...
Widow-and-orphan stock
A stock paying high dividends with a low beta and noncyclical business, that is an extremely
safe investment
...
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Wild card option
The right of the seller of a Treasury bond futures contract to give notice of intent to deliver
at or before 8:00 p
...
Chicago time after the closing of the exchange (3:15 p
...
Chicago
time) when the futures settlement price has been fixed
...
Williams Act
Federal legislation enacted in 1968 (and now constituting Rules 13d and 14d of the
Security Exchange Act of 1934) that imposes requirements with respect to public tender
offers
...
S
...
Windfall profit
A sudden unexpected profit uncontrolled by the profiting party
...
Window contract
A guaranteed investment contract purchased with deposits over some future designated
time period (the "window"), usually between 3 and 12 months
...
Related: Bullet contract
...
For example, a portfolio
manager may sell losing positions so as to display only positions that have gained in value
...
Winner's curse
Problem faced by uninformed bidders
...
Wire house
A firm operating a private wire to its own branch offices or to other firms, commission
houses, or brokerage houses
...
GFEDU
...
Wire transfer
Electronic transfer of funds; usually involves large dollar payments
...
A
...
Also called With particular average
...
Related: Ex-dividend
...
With rights
Shares sold accompanied by entitlement the buyer to buy additional shares in the
company's rights issue
...
Withholding
Used in the context of securities, the illegal practice of a public offering participant keeping
some shares in a private account or with a family member, employee, or dealer to profit
from the higher market price of a hot issue
...
Also used to refer to the
withholding by corporations and financial institutions of a flat 10% of interest and dividend
payments due to security holders
...
Without
Indicates a one-way market if 70 were bid in the market and there was no offer, the quote
would be "70 bid without
...
GFEDU
...
Without Recourse Financing
Financing in which the right of recourse to the party receiving funds is forfeited to the
party advancing funds
...
Woody
Slang to describe a market moving strongly upward, as in, "This market has a woody
...
Working away
Transacting with another broker/dealer
...
Current assets may or may not include cash and cash equivalents,
depending on the company
...
Working capital ratio
Working capital expressed as a percentage of sales
...
Working order
Standing order in the marketplace, through which a broker bids or offers to fill the order in
a series of lots at opportune times in hopes of obtaining the best price
...
GFEDU
...
Workout market
Market indicating prices at which it is believed a security can be bought or sold within a
reasonable length of time
...
World Bank
A multilateral development finance agency created by the 1944 Bretton Woods, (New
Hampshire) negotiations
...
See: International Bank for
Reconstruction and Development
...
WEBS trade on the AMEX, and
track the Morgan Stanley Capital International (MSCI) country indexes
...
World investible wealth
The part of world wealth that is traded and is therefore accessible to investors
...
Wrap account
An investment consulting relationship for management of a client's funds by one or more
money managers, that bills all fees and commissions in one comprehensive fee charged
quarterly
...
The creditor combines or "wraps" the remainder of the old loan
with the new loan at the intermediate rate
...
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Wraparound mortgage
A second mortgage that leaves the original mortgage in force
...
The borrower
makes payments on both loans to the wraparound lender, which in turn makes payments
on the original senior mortgage
...
Write
Sell an option
...
Write-down
Reducing the book value of an asset if its is overstated compared to current market values
...
Write out
The procedure used when a specialist makes a trade involving his own inventory, on one
hand, and a floor broker's order, on the other
...
Writer
The seller of an option, usually an individual, bank, or company that issues the option and
consequently has the obligation to sell the asset (if a call) or to buy the asset (if a put) on
which the option is written if the option buyer exercises the option
...
Instead of depositing margin with a
broker, a put writer can deposit a cash balance equal to the option exercise price, and can
avoid additional margin calls
...
If the stock price
unexpectedly goes up, the option will not be exercised and the writer is at least ahead the
amount of the premium received
...
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Written-down value
The book value of an asset after allowing for depreciation and amortization
...
See: Technical
analysis
...
XAF
The ISO 4217 currency code for the CFA Franc
...
XBB
The ISO 4217 currency code for the European Monetary Unit (EMU)
...
XDR
The ISO 4217 currency code for the Special Drawing Rights (SDR)
...
XMI
Applies to derivative products
...
XOF
The ISO 4217 currency code for the CFA Franc
...
X or XD
Symbol that indicating that stock is trading ex-dividend, with no dividend
...
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XW
Symbol indicating that a stock is trading ex-warrants, with no warrants attached
...
YER
The ISO 4217 currency code for the Yemen Rial
...
YU
The two-character ISO 3166 country code for YUGOSLAVIA
...
Yankee bonds
Foreign bonds denominated in U
...
dollars and issued in the United States by foreign
banks and corporations
...
Such as, bonds
issued by originators with roots in Japan are called Samurai bonds
...
Yankee market
The foreign market in the United States
...
Used particularly in currency trading, e
...
, for
Japanese yen since one billion yen equals approximately US$10 million
...
"
Year-end dividend
A special dividend declared at the end of a fiscal year that usually represents distribution
of higher-than-expected company profits
...
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Yellow sheets
Sheets published by the National Quotation Bureau that detail bid and ask prices, plus
those firms that are making a market in over-the-counter corporate bonds
...
Yield
The percentage rate of return paid on a stock in the form of dividends, or the effective rate
of interest paid on a bond or note
...
Yield burning
A municipal bond financing method
...
Since bond prices and yields
move in opposite directions, when the bonds are marked up, they "burn down" the yield,
which may violate federal tax rules and diminishes tax revenues
...
Difference in current yield between the
convertible and the underlying common
...
Related: Term structure of interest rates
...
The yield curve can accurately forecast the
turning points of the business cycle
...
Also called arbitrage-free option-pricing models
...
Yield differential/pickup
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Mainly applies to convertible securities
...
Yield equivalence
The interest rate at which a tax-exempt bond and a taxable security of similar quality give
the investor the same rate of return
...
Yield spread
The difference in yield between different security issues usually securities of different credit
quality
...
Yield to average life
A yield calculation in which bonds are retired routinely during the life of the issue
...
Yield to call
The percentage rate of a bond or note if the investor buys and holds the security until the call
date
...
Generally bonds are
callable over several years and normally are called at a slight premium
...
Yield to maturity
The percentage rate of return paid on a bond, note, or other fixed income security if the
investor buys and holds it to its maturity date
...
It assumes that coupon interest
paid over the life of the bond will be reinvested at the same rate
...
Effective yield of usable or synthetic convertible
bonds determined against the first date at which the warrants can be called
...
Effective yield of usable convertible bonds
determined by the expiration date of the applicable warrants
...
GFEDU
...
Yo-yo stock
A highly volatile stock that moves up and down like a yo-yo
...
ZA
The two-character ISO 3166 country code for SOUTH AFRICA
...
ZBA
See: Zero balance account
ZM
The two-character ISO 3166 country code for ZAMBIA
...
ZRN
The ISO 4217 currency code for the Zaire New Zaire
...
ZWD
The ISO 4217 currency code for the Zimbabwe Dollar
...
Japanese securities transactions conducted on
the principal of auction, i
...
, (1) price priority in which the selling (buying) order with the
lowest (highest) price takes precedence over other orders, and (2) time priority in that
an earlier order takes precedence over other orders at the same price
...
GFEDU
...
Z bond
A bond on which interest accrues but is not currently paid to the investor but rather is added
to the principal balance of the Z bond and becoming payable upon satisfaction of all prior
bond classes
...
Zero-base budgeting (ZBB)
Budgeting method that disregards the previous year's budget in setting a new budget,
since circumstances may have changed
...
Zero-beta portfolio
A portfolio constructed to have zero systematic risk, similar to the risk-free asset, that is,
having a beta of zero
...
Zero-coupon bond
A bond in which no periodic coupon is paid over the life of the contract
...
Zero-coupon convertible security
A zero-coupon bond convertible into the common stock of the issuing company after the stock
reaches a certain price, using a put option inherent in the security
...
Zero-investment portfolio
A portfolio of zero net value established by buying and shorting component securities,
usually in the context of an arbitrage strategy
...
Antithesis of zero-plus tick
...
GFEDU
...
Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments
...
Transaction at the same price as the preceding trade, but
higher than the preceding trade at a different price
...
See:
Short sale
...
Zero uptick
Related: Tick-test rules
Zombies
Companies that continue operation while they await merger or closure, even though they
are insolvent and bankrupt
...
Separately, Z score is the output from a
credit-strength test that gauges the likelihood of bankruptcy