Accounting & Investement Dictionary
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An alphabetical listing of General terms and items. |
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See: Par value
A debt security issued by face amount. The holder makes payments periodicaly to the issues, and the issuer promies to pay the purchaser the face value at maturity or the surrended value if the security is presented by the maturity specified in the certificate.
To sell accounts receivable at a discount before they are due.
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.
A way of decomposing the forces that influence a security's rate of return into common and firm-specific influences.
A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of zero on any other factors.
An investment prospect that has a zero risk premium.
Amount at which an asset would change hands between two parties, that both have knowledge of the relevant facts. Also referred to as market price.
The current value of an asset, e.g., the amount at which an asset could be sold or purchased in an arm's-length transaction.
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval.
See:Appraisal rights
The rate of return that state governments allow a public utility to earn on its investments and expenditures. Utilities then use these profits to pay investors and provide service upgrades to their customers.
In the context of futures, the equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval. More generally, fair value for any asset simply refers to the perception that it is neither underpriced (too cheap) nor overpriced (too expensive).
A set of requirements for a plan of reorganization to be approved by the bankruptcy court.
An investment banker's professional opinion as to the price an acquiring firm is offering in a takeover or merger.
In the context of general equities, may not be able to produce as indicated in one's advertised market, due to less help (than anticipated) from other parties or due to changing market conditions.
A sudden drop in a stock's price resulting from failed or poor business deals gone bad or falling through.
Bonds that at the time of issue were considered investment grade but that have dropped below that rating over time.
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. The risk is that either of the two parties, borrower or investor, fails to close and the loan "falls out" of the pipeline.
Finance professor at the University of Chicago. Developer of the Efficient Markets Hypothesis.
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Used in the context of option or futures to refer to the trading month of the contract that is farthest away. Antithesis of nearest month.
Used in the context of options to refer to the relative length of option contract maturities.
(Financial Accounting Standards Board): The private organization responsible for establishing the standards for financial accounting and reporting in the United States.
Financial Accounting Standards Board (FASB): The private organization responsible for establishing the standards for financial accounting and reporting in the United States.
The U.S. accounting standard that replaced FASB No. 8. U.S. 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.
U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by the temporal method; that is reporting gains and losses from currency fluctuations in current income. It was in effect between 1975 and 1981 and became the most controversial accounting standard in the U.S. It was replaced by FASB No. 52 in 1981.
Excessively rapid trading in a specific security that causes a delay in the electronic updating of its last sale and market conditions, particularly in options.
Condition that total exports of a nation exceed total imports, creating a net export.
See: Foreign Credit Insurance Association
See: Futures commission merchant
(Foreign Corrupt Practices Act): Legislation requiring any company that has publicly-traded stock to maintain records that accurately and fairly represent the company's transactions; additionally, requires any publicly-traded company to have an adequate system of internal accounting controls.
Foreign Corrupt Practices Act (FCPA): Legislation requiring any company that has publicly-traded stock to maintain records that accurately and fairly represent the company's transactions; additionally, requires any publicly-traded company to have an adequate system of internal accounting controls.
See: Foreign direct investment
A portfolio that an investor can construct, given the assets available.
The collection of all feasible portfolios.
Payout ratios that are consistent with the level of excess funds available to make cash dividend payments.
A Federal Reserve action adding more reserves to the banking system, increasing the money available for lending, and making credit easier to attain.
Securities issued by corporations and agencies created by the U.S. government, such as the Federal Home Loan Bank Board and Ginnie Mae.
A federal agency chartered in 1988 to provide a secondary market for farm mortgage loans.
Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g., S&Ls, small business firms, students, farmers, and exporters.
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When federal government expenditures are exceeded by federal government revenue.
A federal institution that insures bank deposits.
An institution created by the government with the purpose of uniting the financing activities of the federal land banks, the federal intermediate credit banks, and the banks for cooperatives. See: Federal Farm Credit System.
A system chartered in 1971 through the farm credit act providing farmers with credit services through a federal land bank, a federal intermediate credit bank, and a bank for cooperatives. See: Federal Farm Credit Bank.
A federal institution that lends to a wide array of federal credit agencies funds it obtains by borrowing from the U.S. Treasury.
Noninterest-bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other.
The market in which banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow reserves from banks that have excess reserves.
The interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed funds rate, as it is called, often points to the direction of U.S. interest rates. 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.
A federal tax imposed on assets conveyed as gifts to individuals.
The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis member commercial banks.
See: Freddie Mac
Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures the lenders against loss.
U.S. government agency chartered in 1989 to assume the responsibilities formerly held by the Federal Home Loan Bank system.
A bank sponsored by the federal government to provide funds to institutions making loans to farmers.
A bank administered under the U.S. Farm Credit Administration that provides long-term mortgage credit to farmers for agriculture-related expenditures.
A publicly owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some nongovernment-backed mortgages.
The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System.
One of the 12 member banks constituting the Federal Reserve System that is responsible for overseeing the commercial and savings banks of its region to ensure their compliance with regulation.
The seven-member governing body of the Federal Reserve System, which is responsible for setting reserve requirements, and the discount rate, and making other key economic decisions.
The monetary authority of the U.S., established in 1913, and governed by the Federal Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding companies, international operations of U.S. banks, and U.S. operations of foreign banks.
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An institution chartered by the federal government whose primary function is to collect savings deposits and to provide mortgage loans.
Arms of the federal government exempt from SEC registration whose securities are backed by the full faith and credit of the U.S. government (with the exception of the Tennessee Valley Authority).
A wire transfer system for high-value payments operated by the Federal Reserve System.
See: Funds from operations
The percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.
Nonconvertible paper money.
Federal Insurance Contributions Act taxes imposed on employee and employer; used mainly to provide retirement benefits.
See: Financing corporation
A margin account's credit balance. Fictitious credit exists after the proceeds from a short sale are accounted for with respect to the margin requirement. The proceeds from the short sale are reflected as a credit, but must stay in the account to serve as security for the loan of securities made in a short sale, and are therefore inaccessible to the client for withdrawal.
See: Blanket fidelity bond
Warehouse rented by a company on another firm's premises.
(first-in, first-out): An inventory cost flow whereby the first goods purchased are assumed to be the first goods sold so that the ending inventory consists of the most recently purchased goods.
Calculating the yield at which a future money market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo.
A trading order that is cancelled unless executed within a designated time period. 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 cancelled. For purposes of this definition, a stop is considered an execution. Equivalent to AON and IOC simultaneously.
The total cost of credit a customer must pay on a consumer loan, including interest.
A company whose business and primary function is to make loans to individuals, while not receiving deposits like a bank.
The area of accounting concerned with reporting financial information to interested external parties.
(FASB): The private organization responsible for establishing the standards for financial accounting and reporting in the United States.
A professional offering financial advice to clients for a fee and/or commission.
Analysis of a company's financial statement, often by financial analysts.
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Also called securities analysts and investment analysts,. Pofessionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks.
Claims on real assets.
The management of a firm's costs and expenses in relation to budgeted amounts.
Events preceding and including bankruptcy, such as violation of loan contracts.
Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs).
Combining or carving up existing instruments to create new financial products.
A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.
Insurance created to cover losses from specified financial transactions.
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.
Legislation that established the Office of Thrift Supervision, which was created in the wake of the savings and loan crisis of the late 1980s.
Institutions that provide the market function of matching borrowers and lenders or traders.
Long-term, noncancellable rental agreement.
Use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.
A group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy.
Common ratios are debt divided by equity a debt divided by the sum of debt plus equity. Related: capitalization ratios.
An organized institutional structure or mechanism for creating and exchanging financial assets.
A method of establishing the amount of life insurance required by an individual by estimating the financial needs of dependents in the event of the individual's death.
Goals related to returns that a firm will strive to accomplish during the period covered by its financial plan.
A blueprint relating to the financial future of a firm.
Evaluating the investing and financing options available to a firm. 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.
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The account status of a firm's or individual's assets, liabilities, and equity positions as reflected on its financial statement.
Media devoted to reporting financial news.
Public relations division of a company charged with cultivating positive investor relations and proper disclosure information.
A risk structure that spreads investor's risks across low-, medium-, and high-risk vehicles. The bulk of the assets are in safe, low-risk investments that provide a predictable return (base of the pyramid). At the top of the pyramid are a few high-risk ventures that have a modest chance of success.
The result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focusing on specific relationships.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm uses debt and equity.
Reports such as the balance sheet, income statement, and statement of cash flows, which summarize the financial status and results of operations of a business entity.
The way in which a company's assets are financed, such as short-term borrowings, long-term debt, and ownership equity. Financial structure differs from capital structure in that capital structure accounts for long-term debt and equity only.
A company offering a wide variety of financial services such as a combination of banking services, stock, and insurance brokerage.
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.
Share price indexes for U.K. companies The denominator in the index formula is the market capitalization at the base date, adjusted for all capital changes affecting the particular index since the base date. See: Footsie (FTSE) (procounced footsie).
Transactions and events whereby resources are obtained from, or repaid to, owners (equity financing) and creditors (debt financing).
A government agency chartered in 1987 to bail out the Federal Savings and Loan Insurance Corporation (FSLIC) by issuing bonds.
Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as a decision to issue bonds.
A fee a person or company charges for service as an intermediary in a transaction.
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.
A Real Estate Investment Trust whose priority is to sell its holdings within a specified period to realize capital gains.
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.
In the context of general equities, prices at which a security can actually be bought or sold in decent sizes, as compared to an inside market with very little depth. See: Actual market.
In the context of general equities, (1) order to buy or sell for the proprietary account of the broker-dealer firm; (2) buy or sell order not conditional upon the customer's confirmation.
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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).
Total firm value minus total firm debt.
See: Diversifiable risk or unsystematic risk
See: Financial Institutions Reform, Recovery and Enforcement Act of 1989
The Chicago Board of Trade's established dates for delivery on futures contracts.
With collateralized mortgage obligation (C.M.O.s), the start of the cash flow cycle for the cash flow window.
A date stated in an indenture, that is the first date on which the issuer may redeem a bond either partially or completely.
An accounting method for valuing the cost of goods sold that uses the cost of the oldest item in inventory first.
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.
The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized.
A type of preferred stock that has priority over other preferred issues and common stock when claiming dividends and assets.
A time series regression to estimate the betas of securities portfolios.
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as a representative of the borrower.
Government spending and taxing for the specific purpose of stabilizing the economy.
An entity's reporting year, covering a 12 month accounting period.
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.
Thte notion that a firm's choice of investments is separate from its owner's attitudes toward investments. Also referred to as portfolio separation theorem.
Used in the context of general equities. Chronological listing of trades in a security showing the price, size, exchange, and time (to the second) of the trades; obtained by hitting "#M" on Quotron.
Five characteristics that are used to form a judgment about a customer's creditworthiness: character, capacity, capital, collateral, and conditions.
A rule of the Federal Reserve that excludes deficiencies of $500 or less in margin requirements as a necessary reason for the firm to liquidate the client's account to cover a margin call.
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A rule of the National Association of Securities Dealers providing ethical guidelines for spreads created by market makers and commissions charged by brokers.
Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period.
Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition.
The ratio of sales to fixed assets.
Payments to a beneficiary that are paid in fixed preset amounts and are not variable.
A cost that is fixed in total for a given period of time and for given production levels.
In the Euromarket, the standard periods for which Euros are traded (one month out to a year out) are referred to as the fixed dates.
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.
Also called a busted convertible. Convertible security that is trading like a straight security because the optioned common stock is trading well below the conversion price.
Assets that pay a fixed dollar amount, such as bonds and preferred stock.
The market for trading bonds and preferred stock.
Payments of a fixed, equal amounts paid to an insurance company for insurance or an annuity.
An offering of securities at a fixed price.
A unit investment trust consisting of securities that were agreed upon at the time of investment and do not change.
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments).
Conventional bonds for which the coupon rate is set at a fixed percentage of the par value.
A nonnegotiable debt security that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds.
A one-time offer to purchase a stated number of shares at a stated fixed price, usually at a premium over the current market price.
A loan whose rate is fixed for the life of the loan.
In an interest rate swap, the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.
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A mortgage in which the lending institution provides payments to a homeowner for a fixed number of years.
Method used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit.
The quoted newspaper price of a bond that does not include accrued interest. The price paid by the purchaser is the full price.
Taking a position either long or short that does not involve spreading.
The pattern for new issues where shorter- and longer-term yields display very little difference over the bond's maturity range.
A tax which is levied at the same rate on all levels of income. Antithesis of progressive tax.
A bond in default trades flat; that is, the price quoted covers both principal and unpaid accrued interest. Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat.
A change in the yield curve when the spread between the yield on long-term and short-term Treasuries has decreased. Compare steepening of the yield curve and butterfly shift.
A budget that shows how costs vary with different rates of output or at different levels of sales volume and projects revenue based on these different output levels.
Expenses for an individual or corporation that can be adjusted or completely dispessed with, e.g., luxury goods.
Fund that invests in a variety of securities in varying proportions in order to maximize shareholder returns while maintaining a low level of risk.
The tendency of investors to move toward safer investments (often government bonds) during periods of high economic uncertainty.
In the context of general equities, opposite side to a proposition or position (buy, if sell is the proposition and vice versa).
Note that allows investors to switch between two different types of debt.
Buying shares in an initial public offering (IPO), and then selling the shares immediately after the start of public trading to turn an immediate profit.
Short-term debt that is renewed and refinanced contantly to fund capital needs of a firm or institution.
A country's decision to allow its currency value to change freely. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market.
General attachment against a company's assets or against a particular class of assets.
Securities bought in a broker's name and resold quickly to attain a profit in a short amount of time.
The aggregate of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell.
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An guaranteed investment instrument whose interest payment is tied to some variable (floating) interest rate benchmark, such as a specific-maturity Treasury yield.
Note whose interest payment varies with short-term interest rates.
In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment.
Preferred stock paying dividends that vary with short-term interest rates.
The minimum market amount at which inventory can be carried on the books; equal to net realizable value minus a normal profit.
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.
An employee of a stock exchange who settles disputes related to the auction process on the floor of the stock exchange.
Details of the trading crowd for a stock, such as the major players, their sizes, and the outside market +/- an eighth.
Arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust for the user.
Summary of a stock or commodities exchange order ticket by the registered representative on receipt of a buy or sell order from a client; gives the floor broker the information needed to execute a securities transaction.
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. Also referred to as a "local."
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.
In the context of municipal bonds, refers to the statement displaying the priorities by which municipal revenue will be applied to the debt.In the context of mutual funds, refers to the movement of money into or out of a mutual funds or between or amoung various fund sectors.
An account for an investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset.
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.
Government bonds that when owned at the time of death are acceptable at par in payment of federal estate taxes.
The limit created by the commodity exchange that halts trading on a future if the price of the future changes, in either direction, more than a previously set amount.
(free-on-board) : A business term meaning that the seller of merchandise bears the shipping costs and maintains ownership until the merchandise is delivered to the buyer.
A business term meaning that the buyer of merchandise bears the shipping costs and acquires ownership at the point of shipment.
Used in the context of general equities. Investment banks published list of buy and sell recommendations from its research department; signified by a flashing "F" on Quotron.
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See: Fill or kill order
Financial Times (F-T)-Actuaries 100 index: "Dow average" of London.
Used in the context of general equities. 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.
A prefix to a security price indicating that the quote is for information purposes only, and not an offer to trade.
Used in the context of general equities. Conjunctions used in an order, market summary, or trade recap that signify a bid or an offer, respectively. See: On.
Forbes magazine's list of the largest publicly owned corporations in the United States according to sales, assets, profits, and market value.
The risk that there will be prolonged interruption of operations for a project finance enterprise due to fire, flood, storm, or some other factor beyond the control of the project's sponsors.
Occurs when a convertible security is called in by the issuer, usually when the underlying stock is selling well above the conversion price. The issuer thus assures the bonds will be retired without requiring any cash payment. 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.
That portion of domestic bank loans supplied to foreigners for use abroad.
A bond issued on the domestic capital market of another company.
In the domestic bond market Issues floated by foreign companies or government.
A corporation conducting business in another country from the one it is chartered in and that abides by the laws of another country. See: Alien corporation.
(FCPA) : Legislation requiring any company that has publicly-traded stock to maintain records that accurately and fairly represent the company's transactions; additionally, requires any publicly-traded company to have an adequate system of internal accounting controls.
A private consortium of U.S. insurance companies that offers trade credit insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank.
NYSE members who trade in foreign bonds on the floor.
Money of another country from one's own.
Agreement that obligates its parties to exchange given quantities of currencies at a prespecified exchange rate on a certain future date.
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. Purchased and traded on a regulated exchange on which margins are posted.
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.
The process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements.
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The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation.
Issues floated by foreign companies in the domestic equity market.
Currency of another country. Abbreviated Forex.
Foreign exchange: The exchange of one currency for another, or the conversion of one currency into another currency. It also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."
Various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.
A firm or individual that buys foreign exchange from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or the spread.
The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in exchange rates.
An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates.
Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. Compare external market and domestic market.
A measure of foreign market risk that is derived from the capital asset pricing model.
A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods.
Home country credit against domestic income tax. Received in return for foreign taxes paid on foreign derived earnings.
See: Foreign exchange
Purchaser of promises to pay issued by importers.
A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.
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.
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.
The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock.
The form required by the NASD to report equity transactions after the market's regular hours.
A method of selling a new issue of common stock in which the S.E.C. declares the registration statement effective on the basis of a price formula rather than on a specific range.
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A formula-based investment technique in which investment decisions are made using predetermined timing or asset allocation models, e.g., dollar cost averaging.
Fortune magazine's listing of the top 500 U.S. corporations determined by an index of 12 variables.
A contract that specifies the price and quantity of an asset to be delivered on in the future. Forward contracts are not standardized and are not traded on organized exchanges
The purchase in the cash market of the difference between what you are obligated to deliver in a forward contract and the amount of the asset you own. 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.
A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date.
Annualized percentage difference between spot and forward rates.
A currency trades at a forward discount when its forward price is lower than its spot price.
Exchange rate fixed today for exchanging currency at some future date.
Foreign currency purchase or sale at the current exchange rate but with payment or delivery of the foreign currency at a future date.
Fed funds traded for future delivery.
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to at a fixed price for future delivery.
Interest rate fixed today on a loan to be made at some future date.
A market in which participants agree to trade some commodity, security, or foreign exchange at a fixed price for future delivery.
A currency trades at a forward premium when its forward price is higher than its spot price.
Practice mandated by the SEC that open-end investment companies establish all incoming buy and sell orders on the next net asset valuation of fund shares.
A projection of future interest rates calculated from either spot rates or the yield curve.
Agreement to borrow or lend at a specified future date at an interest rate that is fixed today.
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.
A transaction for which settlement will occur on a specified date in the future at a price agreed upon on the trade date.
A truncated expression for a P/E ratio that is based on forward (expected) earnings rather than on trailing earnings.
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Refers to the practice of institutional investors trading large blocks of securities directly to avoid brokerage commissions. See: Instinet.
See: Forward rate agreement
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.
Stocks ammounting to less than one full share, usually resulting from splits, acquisitions, exchanges, or dividend reinvestment programs.
An entity that has been licensed to sell the product of a manufacturer or to offer a particular service in a given area.
The largest of Germany's eight securities exchanges, operated by Deutsche Borse AS.
A Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securitizes these mortgages for sale in the capital markets.
A bank vault or other suitable storage place for the securities of a firm's customer.
Cash not required for operations or for reinvestment. 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. In terms of a formula:
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. Antithesis of delivery vs. payment.
An exchange rate system characterized by the absence of government intervention. Also known as clean float.
Implies that distribution services like transport and handling performed on goods up to the customs frontier (of the economy from which the goods are classed as merchandise.) are included in the price.
Excess reserves minus member bank borrowings at the Fed.
A follower who avoids the cost and expense of finding the best course of action simply by mimicking the behavior of a leader who made these investments.
An investor's right to transfer securities from one name to another name without paying charges that accompany a sales transaction.
A stock that is paid for in full and is not pledged in any way as collateral.
Used in the context of general equities. Not subject to any internal (restricted list) or external restrictions on trading; hence, the trader is free to solicit interest.
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. Also forbidden is a brokerage customer's rapid buying and selling of a security without putting up money for the purchase.
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.
The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares after a takeover.
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An account used with the periodic inventory method for recording the costs of transporting into a firm all purchased merchandise intended for sale; added to purchases in calculating cost of goods sold.
See: Finite-Life Ral Estate Investment Trust
The organization of data to show how often certain values or ranges of values occur.
Updated estimation of a stock or market, usually following recent trading activity or news that has changed the previous look.
Piece of information (fundamental or technical) leading one to believe a stock will move in a certain manner.
Costs, both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction.
The difference between an index fund return and the index it represents. The typically lower rate of return from the fund results from transactions costs.
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.
Merger when the target firm's management and board of directors is in favor of the takeover. Antithesis of hostile takeover.
See: Floating-rate note
The fee initially paid by the buyer upon entering a split-fee option contract.
Refers to revenue generating sales personnel in a brokerage, insurance, or other financial services operation.
Entering into options or futures contracts with advance knowledge of a block transaction that will influence the price of the underlying security to capitalize on the trade. This practice is expressly forbidden by the SEC.
The fee applied to an investment at the time of initial purchase, e.g., on a mutual fund purchased from a broker or mutual fund company.
A disciplinary action taken by the Federal Reserve Board for some violation of Regulation T, an individual investor cannot sell securities until they are paid for in full and certificates delivered.
Used in the context of general equities. Work on a trade of larger size than a trade just disclosed.
See: Foreign Sales Corporation
A bond with a coupon equal to the going market rate; the bond is therefore selling at par.
Describes exchange and government regulations providing for the release and free exchange of all information pertinent to a given security.
The security pledges for larger municipal bond issuers, such as states and large cities that have diverse funding sources.
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Also called dirty price; the price of a bond including accrued interest. Related: Flat price.
Indication that a broker with a discretionary account can operate free of all trading guidelines from the client.
See: Financial lease
A broker who provides clients an all-inclusive selection of services such as advice on security selection and financial planning.
Also called rental lease. Arrangement in which lessor promises to maintain and insure the equipment leased.
An asset that has already been charged with the maximum amount of depreciation allowed by the IRS for accounting purposes.
Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised.
A new stock issue that has been completely resold to the investing public and is no longer held by dealers.
Used to describe an investor whose assets are totally committed to investments, typically stock.
Agency pass-throughs that guarantee the timely payment of both interest and principal. Related: Modified pass-throughs.
Used in the context of general equities. 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.
Money that can be used to invest in risky investments with high potential return.
The currency in which a subsidiary conducts most of its business; generally, but not always, the currency of the country where it does most of its spending and earning.
Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.
The person whose responsibility it is to oversee the allocation of the pool of money invested in a particular mutual fund. The fund manager is charged with investing the money to attain the returns and level of risk of the mutual fund investors.
A mutual fund or hedge fund that invests in other funds.
Moving money within a mutual fund family from one mutual fund to another.
Security analysis that seeks to detect misvalued securities through an analysis of the firm's business prospects. Research often focuses on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm. Antithesis of technical analysis. In macroeconomic analysis, information such as interest rates, GNP, inflation, unemployment, and inventories is used to predict the direction of the economy, and therefore thestock market. In microeconomic analysis, information such as balance sheet, income statement, products, management, and other market items is used to forecast a company's imminent success or failure, and hence the future price action of the stock.
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.
In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data.
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Debt maturing after more than one year.
A pension plan in which all liabilities, including payments to be made to pensioners in the immediate future, are completely funded.
The ratio of a pension plan's assets to its liabilities.
Related: Interest rate risk
Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. A similar term increasingly used is funds available for distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages.
Used in the context of commodities or options trading to refer to the month that is away from the contract's date of settlement.
The Danish derivatives market, merged with the Copenhagen Stock Exchange in 1997.
The identification of additional, more valuable, investment opportunities in the future that result from a current opportunity or operation.
The amount of cash at a specified date in the future that is equivalent in value to a specified sum today.
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to provide margin for any resulting trades or contracts. The FCM must be licensed by the CFTC. Related: Commission house, omnibus account.
Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon today by the buyer and seller. The contracts themselves are often traded on the futures market. 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. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.
A constant set by an exchange, which when multiplied by the futures price gives the dollar value of a stock index futures contract.
A market where contracts for future delivery of a commodity or a security are bought or sold.
An option on a futures contract. Related: Options on physicals.
The price at which parties to a futures contract agree to transact upon the settlement date.
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