Accounting & Investement Dictionary
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An alphabetical listing of General terms and items. |
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Fifth letter of a Nasdaq stock symbol specifying a beneficial interest.
A domestic corporation that is recognized as a regular corporation under state law but is granted special status for federal income tax purposes.
Standard & Poor's Corporation.
Index of 500 widely held common stocks that measures the general performance of the market.
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.
Rating service provided by S&P that indicates the amount of risk involved with different securities.
SaaS = Software as a services
The software as a service model is a way of providing the same software to different customers via a network, usually the Internet. In other words, the software is not hosted on the customers' individual computers. Under the SaaSmodel, a vendor is responsible for the creation, updating, and maintenance of software. Customers buy a subscription to access it, which includes a separate license, or seat, for each person that will use the software.
Often used in risk arbitrage as a form of shark repellent. A target company acquires a business so onerously regulated that it makes the target less attractive, giving it, in effect, a safe harbor.
A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the lessee, if the lessee could not use them, to a lessor that could use them.
Holding by a bank of bonds and money market instruments. For a fee, the bank clips coupons and presents for payment at maturity.
In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.
The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
See: Savings Association Insurance Fund
Payment for work, usually calculated in periods of a week or longer. Salary is usually tied to the completion of specific duties over a minimum but not maximum number of hours. (See Wage.)
A temporary halt to increases in salary due to financial difficulties experienced by a company.
A plan allowing employees to contribute pre-tax income to a tax-deferred retirement plan.
An agreement between a buyer and a seller on the price to be paid for a security, followed by delivery.
Sale of an existing asset to a financial institution that then leases it back to the user. Related: Lease.
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. It represents the difference, if any, between the share purchase price and the share net asset value.
A reduction in the selling price that is allowed if payment is received within a specified period.
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A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors.
A special journal in which credit sales are recorded.
Material written by an institution selling a product, which informs potential buyers of the product and its benefits.
See: Sales charge
A contra-revenue account in which the return of, or allowance for, reduction in the price of merchandise previously sold is recorded.
A percentage tax on the selling price of goods and services.
Money collected from customers for sales taxes, that must be remitted to local governments and other taxing authorities.
The leasing out of a firm's own equipment, such as a printing company leasing its own presses, thereby competing with an independent leasing company.
See: Student Loan Marketing Association
A top-down, float capitalization-weighted index used to measure the performance of fixed-income and equity markets. It includes approximately 6000 companies in 22 countries.
Scrap value of plant and equipment.
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 U.S. government securities, short-term municipal notes, medium-term commercial paper notes, CMOs, and other instruments.
Offsetting changes in a margin account during the day that result in no overall change in the balance of the account.
A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: Bulldog bond and Yankee bond.
The foreign market in Japan.
Seasonal rise in stock prices in the last week of the calendar year, between Christmas and New Year's Day.
See: Bolsa de Valores de Sao Paulo
Often used in risk arbitrage. Sudden attempt by one company to take over another by making a public tender offer.
Technical chart pattern depicting a security whose price has reached bottom and is moving up.
The process of setting aside money until a future date instead of spending it today. The goal of saving is to provide funds for emergencies, short-term goals, and investments.
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Accounts at financial institutions that allow regular deposits and withdrawals. The minimum required deposit, fees charged, and interest rate paid varies among providers.
National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.
A government organization that replaced the Federal Savings and Loan Insurance Corporation as the provider of deposit insurance for thrift institutions.
An institution that primarily accepts consumer savings deposits and to make home mortgage loans.
A bond is a certificate representing a debt. A U.S. Savings Bond is a loan to the government. The government agrees to repay the amount borrowed, with interest, to the bondholder. Two types of savings bonds are Series EE and inflation-adjusted I bonds. Savings bonds are often purchased through payroll deduction or at financial institutions in denominations of $50 to $10,000.
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.
Used in the context of life insurance, the cash value built up in a policy, which equals the amount of premium paid minus the cost of protection. This excess is invested by the insurance company, and the returns are tax-deferred inside the policy.
Personal savings as a percentage of disposable personal income.
Payment of different rates of interest on CDs of varying maturities. A bank is said to "post a scale." Commercial paper dealers also post scales.
Gradually taking a position in a security or market over time.
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.
Describes a project that is in the same risk class as the whole firm. That is, the project allows the firm to grow larger in the context of their current business rather than diversify into new businesses.
To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day.
Used for listed equity securities. Unconcentrated buy or sell interest.
The use of horizon analysis to project total returns under different reinvestment rates and future market yields.
Disclosure form required when more than 5% of any class of equity securities in a publicly held corporation is purchased.
Describes membership requirements and procedures of NASD, in its bylaws.
The mortgage principal and interest payments due to be paid under the terms of the mortgage, not including possible prepayments.
Often used in risk arbitrage. Any technique a company that has become the target of a takeover attempt uses to make itself unattractive to the acquirer. For example, it may agree to sell off its crown jewels, or schedule all debt to become due immediately after a merger.
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.
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To analyze various stocks in search of stocks that meet predetermined criteria. For example, a simple value screen would sort all stocks by their price-to-book ratio and pick the stocks with the lowest ratios as candidates for the value portfolio.
A temporary document that represents a portion of a share of stock, often issued after a stock split or spin-off.
Collecting stock and bond certificates for their scarcity, rather than for their value as securities.
See: Special drawing rights
See: Stock Exchange Automated Quotation System
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: Information costs.
Mathematically adjusted by moderating a macroeconomic indicator (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year.
In the case of equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; in the case of convertibles, having traded for at least 90 days after issue in Europe, and thus available for sale legally to U.S. investors.
Extended credit for customers who order goods in periods other than peak seasons.
Issue of a security for which there is an existing market. Related: Unseasoned issue.
A new issue of stock after the company's securities have previously been issued. A seasoned new issue of common stock can be made using a cash offer or a rights offer.
Position of membership on a securities or commodity exchange, bought and sold at market prices.
SEC (Securities and Exchange Commission): The government body responsible for regulating the financial reporting practices of most publicly owned corporations in connection with the buying and selling of stocks and bonds.
Small fee the SEC charges to sellers of equity securities on an exchange.
Loans secured by real estate previously pledged in a first mortgage.
A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.
Stage of venture capital financing following the start-up and first round stages and before the mezzanine level stage.
Preferred stock issue that has less priority in claiming dividends and assets in liquidation than another issue of preferred stock.
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.
Public sale of previously issued securities held by large investors, usually corporations or institutions, as distinguished from a primary distribution, where the seller is the issuing corporation. 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 stock.
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(1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock.
The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market. The New York Stock Exchange, as well as all other stock exchanges and the bond markets, are secondary markets. Seasoned securities are traded in the secondary market.
Buying and selling existing mortgage loans, which are often pooled and traded as mortgage-backed securities.
Stocks with smaller market capitalization, less quality and more risk than blue chip issues that behave differently than larger corporations' stocks.
A formal plan to provide tax savings by reducing employee medical premiums from gross salary prior to calculation of federal income and social security taxes, as allowed under Internal Revenue Code (IRC) Section 125.
U.S. Department of Treasury regulations governing transfer prices.
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
An active asset management strategy certain sectors, that tactically overweights and underweights depending on expected performance. Sometimes called rotation.
Long-term time frame (10-50 years or more).
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture .
Bonds for which assets have been pledged in order to guarantee repayment.
Debt that has first claim on specified assets in the event of default.
A federal agency that regulates the U.S. financial markets. The SEC also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.
First law designed to regulate securities markets, requiring registration of securities and disclosure.
Legislation to encourage the establishment of a national market system together with a system for nationwide clearing and settlement of securities transactions.
Related: Financial analysts
Exchanges on which securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.
Rules enacted by the SEC to assist in the regulation of U.S. financial markets.
Legislation that created the SEC, outlawing dishonest practices in the trading of securities.
The only stock market in Thailand, based in Bangkok.
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An association of broker-dealers who sell taxable securities, which lobbies the government, records industry trends, and keeps records of broker profits.
A private group that provides mediation services in case of customer complaints against securities firms.
A nonprofit corporation that insures customers' securities and cash held by member brokerage firms against the failure of those firms.
The loan of securities between brokers, often to cover a client's short sale; or a loan secured by marketable securities.
Organized exchanges plus over-the-counter markets in which securities are traded.
Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. 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.
Piece of paper that proves ownership of stocks, bonds, and other investments.
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. The slope of this line is the security's beta.
Synonymous with the term margin. A cash amount that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: Margin.
Entity that executes automated DOT orders.
Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.
A plane that shows the relationship between expected return and the beta coefficient of more than one factor.
Commercial rating agencies' assessment of the credit and investment risk of securities.
See: Security selection decision
Choosing the particular stocks or bonds or other investment instruments to include in a portfolio.
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. See: Mezzanine level and second round.
Search for a securities buyer or seller.
Strategy to provide an internal check on performance through separation of custody of assets from accounting personnel, separation of authorization of transactions from custody of related assets, separation of operational responsibilities from record keeping responsibilities.
SEC rules to dictate how customers' securities may be used by broker-dealers in broker loans.
See: Stock Exchange of Hong Kong
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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.
The set of rules governing the selling group in an underwriting.
Mortgage whose entire principal is paid off in a specified period of time with regular interest and principal payments.
An IRA that the account holder can after appointing a custodian manager to carry out investment instructions.
Taxable income of a person involved in a sole proprietorship or other sort of free-lance work.
A tax self-employed people must pay to qualify them to receive Social Security benefits at retirement.
Loan to finance current assets. The sale of the current assets provides the cash to repay the loan.
Organizations that enforce fair, ethical, and efficient practices in the securities and commodity futures industries, including all national securities and commodities exchanges and the NASD.
Consequence of a contract that induces only one group to participate.
Bonds sold to finance a project that will produce enough revenue through tolls or other charges to retire the debt . See: revenue bond.
Related: short hedge.
Conditional trading order that indicates that a security may be sold at the designated price or higher. Related: Buy limit order.
Sale of securities under pressure. See: Dumping.
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.
Liquidation of a margin account after a customer has failed to bring an account to a required level by producing additional equity after a margin call.The selling of securities by a broker when a customer fails to pay for them.The complete sale of all securities in a new issue.
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. (In a limit order, sale cannot be lower than the limit, regardless of tick.)
Used for listed equity securities. 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. The term derives from the specialist's book - the record of all the buy and sell orders members have placed in the stock one handles. In this scenario, the buyers potentially include those in the specialist's book, the specialist for its own account, and broker-dealers.
A financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers. Also called a Wall Street analyst.
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.
Market in which demand exceeds supply. As a result, the seller can dictate the price and the terms of sale.
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Delayed settlement/delivery in a transaction.
A sudden drop in security prices as sellers dump their holdings.
The discount underwriters offer the selling group on securities in a new issue.
Inducing a prospective customer to buy shares in order to profit from a dividend scheduled in the near future.
All banks involved in selling or marketing a new issue of stock or bonds.
A strategy of selling stock shortly after a company announces good news and the stock price rises. Investors believe that the price is as high as it can go and is on the brink of going down.
Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Selling short stock that is actually owned by the seller but held in the box, meaning it is held in safekeeping. 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.
A spread whose option to be sold is trading at a higher premium than the option to be bought.
Expenses such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries.
A form of pricing efficiency that profits the price of a security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak-form efficiency and strong-form efficiency.
Debt whose terms in the event of bankruptcy, require it to be repaid before subordinated debt receives any payment.
A bond that, in the event of bankruptcy, will be redeemed before any other bonds are repaid.
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.
A security that, in the event of bankruptcy, will be redeemed before any other securities.
The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.
A market that reacts to a great extent to good or bad news.
Analysis of the effect on a project's profitability of changes in sales, cost, and so on.
The general feeling of investors about the state of the market, such as whether they are bullish or bearish.
Method of allocating insurance by the Securities Investor Protection Corporation. Each account that is under the name of a different person or group of people is entitled to maximum protection.
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Tax returns of married persons who choose to file their returns individually, usually because this approach produces lower overall tax payments.
The property that portfolio choice can be divided into two independent tasks: (1) Determination of the optimal risky portfolio, which is a purely mathematical problem, and (2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset, which depends on a person's degree of risk aversion.
Theory that the value of an investment to an individual is not dependent on consumption preferences. That is, investors will want to accept or reject the same investment projects by using the NPV rule, regardless of personal preference.
The covariance between a variable and the lagged value of the variable; the same as autocorrelation.
Business person that successfully starts (does not kill) a number of different businesses.
The redemption of a serial bond.
Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares that have common characteristics, such as rights to ownership and voting, dividends, or par value. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.
Bond that may be issued in several series under the same indenture document.
A local and state tax-free bond issued by the U.S. government from 1941 to 1979, which was then replaced by Series HH bonds.
See: Savings bond
See: Savings bond
View of corporation as a set of contracting relationships among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal construct that serves as the nexus for the contracting relationships.
Applies mainly to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.
A percentage of a municipal or corporate bond underwriting that is allocated for handling by a minority-owned broker/dealer firm.
When payment is made for a trade.
The date on which payment is made to settle a trade. For stocks traded on U.S. exchanges, settlement is currently three business days after the trade. For mutual funds, settlement usually occurs in the U.S. the day following the trade. In some regional markets, foreign shares may require months to settle.
The various possibilities open to a beneficiary under a life insurance policy as to how the benefit will be paid out.
A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: Closing range.
The rate suggested in Financial Accounting Standards Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring the pension plan wishes to terminate its pension obligation.
The risk that one party will deliver and the counterparty will not be able to pay and vice versa.
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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.
A backlog of securities issues registered with the SEC, awaiting the determination of an offer date.
First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.
A dramatic change in market conditions that forces speculators to sell their positions, often at a loss.
A business transaction, such as a limited partnership, that is entered into for the sake of avoiding tax.
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.
Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since repurchase reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
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.
Person or entity that owns shares or equity in a corporation.
shareholders (stockholders): Individuals or organizations that own a portion (shares of stock) of a corporation.
This is a company's total assets minus total liabilities. A company's net worth is the same thing.
A section of an annual report where one can find general overall discussion by management of successful and failed strategies. Provides guidance for looking at specific parts of the report.
Certificates or book entries representing ownership in a corporation or similar entity.
The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding.
Often used in risk arbitrage. Examples are golden parachutes, poison pills, safe harbor, and scorched-earth policy. Porcupine provision. Amendment to company charter intended to protect it against takeover.
Often used in risk arbitrage. Firm specializing in the early detection of takeover activity. Such a firm, whose primary business is usually the solicitation of proxies for client corporations, monitors trading patterns in a client's stock and attempts to determine the identity of parties accumulating shares.
A statistically created benchmark that adjusts for a manager's index-like tendencies. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
Offering of registered securities covered by a prospectus whose distribution is not underwritten on a firm commitment basis. The shares may be sold in one block or in small amounts from time to time in agency or principal transactions. See: Rule 415.
A procedure that allows firms to file one registration statement covering several issues of the same security. SEC Rule 415, adopted in the 1980s, allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. 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.
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An incorporated company with no significant assets or operations, often formed to obtain financing before beginning actual business, or as a front tax evasion.
The tendency to do less work when the return is smaller. Owners may have more incentive to shirk if they issue equity as opposed to debt, because they retain less ownership interest in the company and therefore may receive a smaller return. Thus, shirking is considered an agency cost of equity.
See: Circuit breakers
Dollar bond issued in Japan by a nonresident.
Venture capital jargon. Refers to two or more venture capital firms fighting for the startup.
Wall Street slang for a firm.
Sell inquiry that has been seen by or shown to other dealers before coming to an investment bank.
Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position. Related: Long.
Bonds with short (not much time to maturity) current maturities.
See: Unmatched book.
A bond payment covering less than six-months' interest, because the original issue date is less than six months from the first scheduled interest payment. A bond with a short time to maturity, usually two years or less.
Used in the context of general equities. Actual purchase of securities by a short seller to replace those borrowed at the time of a short sale.
Used for listed equity securities. A special trading situation where a short sale is allowed on a minustick. The owners of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming they have the firm intention to convert.
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. Related: Long hedge.
Total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. 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 are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales.
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.
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will drop.
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). There are various interpretations of this ratio. When people short, it is usually (but not always) because they are pessimistic about the security's future performance. Shorting involves buying at some point however. 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.
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.
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Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.
Trade settlement made prior to the standard five-day period due to customer request.
When a lack of supply tends to force prices upward. 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. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
A straddle involves both purchase and sale. In short straddle one put and one call are sold.
Practice prohibited by SEC that involves the use of borrowed stock to respond to a tender offer.
Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
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.
A repealed IRS restriction, that used to limit profits from short-term trading, which three months, to 30% of gross income. The penalty for exceeding this limit would be the loss of certain tax-free benefits.
Any investments with a maturity of one year or less.
A bond mutual fund holding short to intermediate-term bonds that have maturities of three to five years.
Debt obligations, recorded as current liabilities, requiring payment within the year.
A financial plan that covers the coming fiscal year.
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.
Services that assist firms in making short-term investments.
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 securities issued by states, municipalities, and quesi-government entities such as local housing and urban renewal agencies.
Costs that fall with increases in the level of investment in current assets.
The risk of falling short of any investment target.
Used in the context of general equities. Block list which is full of real customer indications (rather than profile).
Used in the context of general equities. 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. See: Bidding buyer.
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A legal barrier, such as a scorched-earth policy or shark repellant system, that firms use to prevent a takeover.
Discrepancy between a firm's actual inventory and its recorded inventory due to theft, deterioration, loss, or clerical problems.
Used for listed equity securities. Exclude a public bid or offer from participation in a print.
See: Security Industry Automated Corporation
See: Standard Industrial Classification
Effects of a proposed project on other parts of the firm.
Trading a security and an option on the same security on the same exchange.
Hypothetical position referring to noninvolvement in a stock; merely watching.
See: Horizontal price movement
Demand for immediate payment.
To convey information through a firm's actions. The more costly it is to provide a signal, the more credibility it has. For example, to call a press conference and tell everyone that the firm's prospects have improved is less effective than saying the same thing and raising the dividend.
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. This theory is also called the asymmetric information approach.
A good faith loan that is unsecured and requires only the borrower's signature on the loan application.
The holding of a large portion of the equity of a corporation, usually at least 20%, which gives the holder a significant amount of control over the corporation. This degree of holding must be recorded in a firm's financial statements.
Influence presumed if a company owns between 20% and 50% of another company.
An order to buy or sell a large enough quantity of securities that the price of the security may be affected. Institutional investors usually spread out such an order over a few days or weeks to avoid adverse pressures on the buy or sell price.
A large number of buy or sell orders for a stock that cause an abnormally wide spread between bid and offer prices, and often causes the exchange to halt the sale of the stock until significant balance has been reestablished.
A partner in a business who has no role in management but shares in the liability, tax responsibility, and cash flow.
See: Singapore International Monetary Exchange
Calculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values.
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Interest credited daily, monthly, quarterly, semiannually, or annually on principal only, not previously credited interest.
A salary deduction plan for retirement benefits provided by some small companies with no more than 100 employees.
A regression analysis between only two variables, one dependent and the other explanatory.
An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
The mean, calculated at any time over a past period of fixed length.
An investment opportunity in which only two outcomes are possible.
The return from investments figured by dividing income plus capital gains by the amount of capital invested. The effect of compounding is not taken into account.
A pension plan in which both the employee and the employer contribute to an individual retirement account. Also available to the self-employed.
The use of a mathematical model to imitate a situation many times in order to estimate the likelihood of various possible outcomes. See: Monte Carlo simulation.
A leading futures and options exchange in Singapore.
A single put option or call option, as opposed to a spread or straddle, which involves multiple puts and calls.
A mutual fund that invests in individual countries outside the United States.
A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: Factor model.
A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors. Related: Market Model
A bond that makes only one payment of principal and interest.
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.
A whole life insurance policy requiring one premium payment, which accrues cash value much more quickly than a policy paid in installments.
A mutual fund investing only in government obligations within a single state, with state tax-free dividends, but taxed capital gains.
A bond with interest and principal payments coming from the proceeds of a 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.
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A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Directive from the trader to the customer to be patient, emphasizing that one's piece of business will be executed.
Refers to the magnitude of an offering, an order, or a trade. Large as in the size of an offering, the size of an order, or the size of a trade. Size is relative from market to market and security to security. "I can buy size at 102-22," means that a trader can buy a significant amount at 102-22. Small is 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.
Overt action to exclude a public bid or offer from participation in a print through trading a larger size in the book. Can never size out a market order. See: Priority, shut out the book.
Probability distribution in which an unequal number of observations lie below (negative skew) or above (positive skew) the mean.
Negative skewness means there is a substantial probability of a big negative return. Positive skewness means that there is a greater-than-normal probability of a big positive return.
Settling a trade one business day beyond what is normal.
A mortgage contract clause giving borrowers the right to skip payments if they are ahead of schedule.
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.
Stock in which there is little investor interest but that has significant potential to gain in price once its attractions are recognized. Antithesis of high flyer.
Often used in risk arbitrage. Potential takeover target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash, or undervalued real estate or other assets.
The difference between estimated transactions costs and actual transactions costs. The difference usually represents revisions to price difference or spread and commission costs.
A temporary fall in performance, often describing consistently falling security prices for several weeks or months.
An individual person investing in small quantities of stock or bonds. This group of investors makes up a minimal fraction of total stock ownership.
Securities issues that involve less than $1.5 million are not required to file a registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief offering statement is needed.
Three-tiered system of automatic execution of an order at the best price. Size is either 200, 500, or, most often, 1000 shares.
A stock with a small capitalization, meaning a total equity value of less than $500 million.
The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).
Investors who make consistent profits in the market, regardless of the investing environment, by making wise, educated moves.
See: Stripped mortgage backed securities
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Small amount of price, usually +/- 1/8 or 1/4.
A revision to the Bretton Woods international monetary system that was signed at the Smithsonian Institution in Washington, D.C., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.
Used in the context of general equities. 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.
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.
A mutual fund that does not invest in companies that have interests in socially unacceptable markets or produce harmful products or by-products, such as high levels of environmental pollution.
A dedicated computer network to support funds transfer messages internationally between over 900 member banks world-wide.
See: Small Order Execution System
A money of a country that is expected to drop in value relative to other currencies.
The value of research services that brokerage houses supply to investment managers "free of charge" in exchange for the investment manager's business commissions.
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.
A buyer's market in which supply exceeds demand, causing little trading activity and wide bid-ask spreads.
Stocks or groups of stocks that remain weak in a strong market.
Tropical commodities such as coffee, sugar, and cocoa.
Refers to over-the-counter trading. Having sold stock to another dealer before making the present offering.
Unavailability of a futures contract in a particular commodity or maturity date because of contract executions and limited offerings.
A business owned by a single individual. A sole proprietor pays no corporate income tax but has unlimited liability for business debts and obligations.
A company's long-run ability to meet all financial obligations.
A bond issue that has defaulted on interest or principal payments, and will thus trade at a large discount and a poor credit rating.
Customer seller of stock for the purpose of raising cash for other purchases. Such a seller will sell only at advantageous prices, and not aggressively.
See: Statement of cash flows
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Electronic futures and options exchange based in South Africa.
The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of FX contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it.
To cover all contingencies within a specified range.
SPDRs (Spiders) are designed to track the value of the Standard & Poor's 500 Composite Price Index. Stands for Standard & Poor's Depositary Receipt. They trade on the American Stock Exchange under the symbol SPY. SPDRs are similar to closed-end funds but are formally known as, a unit investment trust. One SPDR unit is valued at approximately one-tenth (1/10) of the value of the S&P 500. Dividends are disbursed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. See: Mid-cap SPDR.
A margin account with lower cash requirements, reserved for transactions that are hedged by an offsetting position in futures or options.
A municipal bond with interest paid by the taxes of the community benefiting from the bond-funded project.
A method of purchasing a large block of stock on the NYSE by advertising a client's large buy order, and matching it up with a number of other traders' smaller sell orders.
A special broker margin account used only for transactions in U.S. government bonds, municipals, and eligible listed and unlisted non-convertible corporate bonds.
Also referred to as an extra dividend. Dividend that is unlikely to be repeated.
A form of international reserve assets, created by the IMF in 1967, whose value is based on a portfolio of widely used currencies.
A book of original entry for recording similar transactions that occur frequently.
An order that may be priced below the normal price in order to utilize excess capacity and thereby contribute to company profits.
On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock). Member of a stock exchange who maintains a "fair and orderly market" in one or more securities. Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers in the OTC market. Major functions include executing limit orders on behalf of other exchange members for a portion of the floor broker's commission, and buying or selling for the specialist's own account to counteract temporary imbalances in supply and demand and thus prevent wide swings in stock prices.
Purchase of a large number of securities by a specialist for himself or to pass on to another floor trader or block buyer.
Market in a stock made solely by the specialist, as no public orders, and henceforth no depth, exist in the market.
A specialist who maintains a stable market by acting as a principal and agent for other brokers in one or many stocks.
Chronological record maintained by a specialist that includes the specialist's own inventory of securities, market orders to sell short, and limit orders and stop orders that other stock exchange members have placed with the specialist.
The percentage of the total short sales of stock sold short by specialists.
A method of valuing inventory and determining cost of goods sold whereby the actual costs of specific inventory items are assigned to them.
The market in which dealers reverse in securities they wish to short.
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See: Unique risk
A dealer doing business with retail but concentrating more on acquiring and financing its own speculative positions.
Purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss. A profitable strategy over the long term if undertaken by professionals who hedge their portfolios to control the amount of risk.
The need for cash to take advantage of investment opportunities that may arise.
A desire to hold cash in order to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
Bond rated BA or lower by Moody's, or BB or lower by S&P, or an unrated bond.
One who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing, or handling of a product. See: Trader.
Related: Prepayment speed
See: SPDRs
Order ticket that shows the stock, price, number of shares, type, and account of the order. Origin: Practice of placing the ticket on a metal spike upon execution or cancellation.) Spike is also a sudden, drastic increase in a company's share price.
A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.
Stands for Standard & Poor's 500 Index Subordinated Notes.
Sometimes, companies split their outstanding shares into more shares. If a company with 1 million shares executes a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. 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.
A commission shared between a broker and a financial adviser or other professional who brought the customer to the broker.
A municipal bond issue that is made up of serial bonds and term maturity bonds.
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.
Block trade printed at two different prices. Often used in dividend rolls to get an average price equal to the dividend.
Two different ratings given to the same security by two important rating agencies.
(1) Purchases or sales shared with others. (2) Division of the outstanding shares of a corporation into a large number of shares. Ordinarily, splits must be proposed by directors and approved by shareholders.
A bond that begins as a zero-coupon bond paying no interest and converts to an interest paying bond on a future date.
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An option on an option. 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.
A tax system that taxes retained earnings at a higher rate than earnings that are distributed as dividends.
Amount of opposite demand (placement) or supply (availability) the trader has in efforts to cross the stock. Not open.
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.
A commodity that is traded with the expectation of actual delivery, as opposed to a commodity future that is usually not delivered.
Exchange rate on currency for immediate delivery. Related: Forward exchange rate.
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.
Interest rate fixed today on a loan that is made today. Related: Forward interest rates.
Originating mortgages by processing applications taken directly from prospective borrowers.
Related: Cash markets
The nearest delivery month on a futures contract.
The current market price of the actual physical commodity. Also called cash price. Current delivery price of a commodity traded in the spot market, in which goods are sold for cash and delivered immediately. Antithesis of futures price.
The theoretical yield on a zero-coupon Treasury security.
The graphical depiction of the relationship between the spot rates and maturity.
Secondary distribution that may not require an SEC registration statement and may be attempted without delay. An underwriting discount is normally included in these offerings.
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
An individual retirement account in the name of an unemployed spouse.
A fixed-term trust from which income is distributed to the beneficiary (such as a child of the grantor) to take advantage of a lower tax bracket, and that at the end of the term passes to the grantor's spouse.
(1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.
Also called margin income, the difference between income and cost. 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).
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A position consisting of the purchase of one option and the sale of another option on the same underlying security with a different exercise price and/or expiration date.
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.
The status of an account after a spread order has been carried out.
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. Also called spreading.
A computer program that organizes numerical data into rows and columns in order to calculate and make adjustments based on new data.
A trust in which the trustee decides how to distribute trust income among a group of designated people.
Applies to derivative products. Symbol for the S&P 500 index.
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.
Securities sales speaker box that transmits to all investment banks' regional trading and sales desks.
The action undertakes a country when it buys and sells its own currency to protect its exchange value.Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders follow a plus tick and buy orders a minus tick.Actions a managing underwriter undertake so that the market price does not fall below the public offering price during the offering period
Speculator who buys and sells stocks to hold for short intervals to make quick profits.
A period of slow economic growth and high unemployment with rising prices (inflation).
Occurs when a portion of directors are elected periodically, instead of all at once. 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.
Hedging against interest rate movements by investment in short-, medium-, and long-term bonds.
A period of slow economic growth, or, in securities trading, a period of inactive trading.
All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government.
Applies mainly to international equities. Taxes on foreign transactions, usually a percentage of total transaction amount, that can be unilateral or bilateral in nature.
Make a good-sized market in the trader's own bid and offering prices. Hence, "standing up" to the bid signifies the trader's willingness to buy size (i.e., 50m) volume at the advertised bid, even if the customer buyer/seller falls down.
Investment approach that advocates a firm should accept or reject a project by comparing it with securities in the same risk class.
The IRS-specified amount by which a taxpayer is entitled to reduce income an alternative to itemizing deductions.
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The square root of the variance. A measure of dispersion of a set of data from its mean.
In statistics, a measure of the possible error in an estimate. Plus or minus 2 standard errors usually provides a 95% confidence interval.
A code system that designates a unique business activity classified by industry.
Audit report indicating that all auditing conditions have been met, no significant misstatements have been discovered and remain uncorrected, and the auditors feel the financial statements are fairly stated in accordance with generally accepted accounting principles.
A normal distribution with a mean of 0 and a standard deviation of 1.
Also called the normal deviate, the distance of one data point from the mean, divided by the standard deviation of the distribution.
In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.
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.
Amount paid to an underwriter who agrees to purchase any stock that is not purchased by public investors in a rights offering.
Level of priority in the trading crowd.
Contract by which the bidding firm in a takeover attempt agrees to limit its holdings of another firm.
The earliest stage of a new business venture.
A bank authorized in a specific state by a state-based charter, with generally the same functions as a national bank.
The interest rate expressed as a per year percentage, by which interest payments are determined. See: Annual percentage rate.
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.
For the CMO tranche, the date the last payment would occur at zero CPR.
The rate of interest printed on the bond.
A nominal value assigned to no-par stock by the board of directors of a corporation.
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.
The financial statement that shows an entity's cash inflows (receipts) and outflows (payments) during a period of time.
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A document describing the status of assets, liabilities, and equity of a person or business at a particular time.
statement of earnings (income statement): The financial statement that summarizes the revenues generated and the expenses incurred by an entity during a period of time.
The currency translation standard currently used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial Accounting Standards No. 8.
The is a currency translation standard once used by U.S. accounting firms. See: Statement of Accounting Standards No. 52.
A report that shows the changes in the Retained Earnings account during a period of time.
A method of cash budgeting that is organized along the lines of the statement of cash flows.
Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.
Used in the context of general equities. Standard deviation of the difference between the portfolio return and the desired investment benchmark return.
An investment that a trustee is authorized to make under state law.
A merger in which one corporation remains as a legal entity, instead of a new legal entity being formed.
The surplus of an insurance company determined by the accounting treatment of both assets and liabilities as established by state statutes.
The standard rule in most corporations that there is one vote per share in elections of the board of directors.
The ability of an investor to stay in the market and not to sell out of a position when an investment has fallen in value.
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.
1/16 (0.0625) of one full point in price. Often used in negotiations to compromise an eighth difference, and in options trading. See: Teenyo.
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.
Allow a block to trade at a price at which you do not care to participate in the trade.
To increase, as in step up the tax basis of an asset.
A floating-rate note whose interest rate declines after a specified period of time.
A bond that pays a lower coupon rate for an initial period, and then increases to a higher coupon rate. Related: Deferred-interest bond, payment-in-kind bond.
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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.
A new securities issue that may be difficult to sell because of problems in the market or underlying problems with the corporation.
Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models.
A computerized tool measuring overbought and oversold conditions in a stock over a certain period.
Ownership of a corporation indicated by shares, which represent a piece of the corporation's assets and earnings.
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. NYSE rules stipulate that the bid made first should be executed first, or, if two bids come in at once, the bid for the larger number of shares receives priority. 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." See: Ahead.
A plan used as an incentive that rewards employee performance with stock in the company.
A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share.
A document issued by a corporation to stockholders evidencing ownership in the corporation.
A pro rata distribution of additional shares of stock to shareholders.
London's Nasdaq system.
Only stock exchange located in Hong Kong.
The only stock exchange in Singapore.
The only stock exchange in Thailand.
Formerly the Bombay stock exchange, the BSE accounts for more than one-third of Indian trading volume.
Formal organizations, approved and regulated by the Securities and Exchange Commission (SEC), that are made up of members who use the facilities to exchange certain common stocks. The two major national stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona Stock Exchange is an after-hours electronic marketplace where anonymous participants trade stocks via personal computers.
Index like the Dow Jones Industrial Average that tracks a portfolio of stocks.
A security that uses composite stock indexes to allow investors to speculate on the performance of the entire market, or to hedge against losses in long or short positions. The settlement of the contracts is in cash.
An option in which the underlying is a common stock index.
An insurance company owned by a group of stockholders, who are not necessarily policyholders.
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A stock broker who frequently buys and sells shares in a client's portfolios.
The department within a stock exchange that oversees compliance with listing requirements and exchange regulations.
Also called the equity market, the market for trading equities.
An option whose underlying asset is the common stock of a corporation.
A power of attorney form giving ownership of a security to another person, brokerage firm, bank, or lender after it has been sold or pledged to that party.
A plan allowing employees of a company to purchase shares of the company, often at a discount or with matching employer funds.
An evaluation by a rating agency of the expected financial performance or inherent risk of common stocks.
The accounting a brokerage firm keeps of all securities held in inventory.
A strategy for enhancing a portfolio's return, used when the futures contract is expensive according to its theoretical price. The strategy involves a swap between the futures and a Treasury bill and stock portfolio.
A firm's repurchase of outstanding shares of its common stock.
Another terminology for a stock option.
An active portfolio management technique that focuses on advantageous selection of particular stock rather than on broad asset allocation choices.
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. For example, if IBM trades at $100 before a two-for-one split, after the split it will trade at $50, and holders of the stock will have twice as many shares as they had before the split. See: Split.
A letter designation assigned to securities and mutual funds that trade on U.S. financial exchanges.
A computerized service that monitors and investigates trading activity on the NYSE in order to identify any unusual activity or security movement that might be caused by rumors or illegal activities.
See: Registered representative
See: Shareholder.
Set of books kept by firm management for its annual report that follows Financial Accounting Standards Board rules. The tax books follow IRS tax rules.
Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid-in surplus, and retained earnings.
Stockholder whose name is registered on the books of a corporation and thus will receive dividends from the corporation.
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The residual claims that stockholders have against a firm's assets, calculated by subtracting all current liabilities and debt liabilities from total assets.
The annual report and other reports given to stockholders to inform them of the company's financial standing and developments.
stockholders (shareholders): Individuals or organizations that own a portion (shares of stock) of a corporation.
The only official equity trading market in Sweden.
Running out of inventory.
Refers to over-the-counter trading. Method of entering an OTC trade into the trader's position without reporting the trade on the OTC tape.
An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
An order given a depository institution not to pay out cash for a check; often used when the check has been stolen or lost.
A stop order that designates a price limit. Unlike the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order.
An order to sell a stock when the price falls to a specified level.
The lowest auction price at which Treasury bills are sold.
Guaranteed a specific price on the customer's working order while the dealer tries to obtain a better one. Stopped against one's self involves a customer order and a firm's own account, not two customers. One can cancel an order even after being stopped by another party.
A purchase or sale that is executed under a stop order at the stop price specified by the customer.
A curve showing the refunding rates for different times at which the expected value of refunding immediately equals the expected value of waiting to refund.
A refunding rate that falls on the stopping curve.
A highly complex security that requires a long "story" so that investors may understand the corporation and be persuaded of its merits.
Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: Spread.
Direct telephone line, compared to an outside line that requires a telephone number to be dialed.
Term life insurance policy providing a fixed-amount death benefit over a certain number of years.
Also called investment value, the value of a convertible security without the conversion option.
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Allows shareholder to cast all of the shareholder's votes for each candidate for the board of directors.
Amortizing or apportioning an equal dollar amount of depreciation in each accounting period.
Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underlying instrument's price.
Acquisition of another firm in order to realize some operational benefits which will result in increased earnings.
A method of constructing a replicating portfolio that classifies the stocks in the index into strata, and represents each stratum in the portfolio.
Dividing an index into cells, each representing a different characteristic of the index, such as duration or maturity.
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.
(1) Not a member of the participating party in the trade at hand; (2) not a meaningful indication of a customer's desire to take a sizable position or be involved in a stock.
Means Wall Street financial community; brokers, dealers, underwriters, and other knowledgeable participants.
Registration under which securities maybe held by a broker on behalf of a client but be registered in the name of the Wall Street firm.
For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. The strike index is converted to a dollar value by multiplying by the option's contract multiple. Related: Strike price.
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Variant of a straddle. A strip is two puts and one call on a stock. A strap is two calls and one put on a stock. The puts and calls have the same strike price and expiration date. See: Strap.
Ownership interests in specified mortgages purchased by Freddie Mac from a single seller in exchange for separate instruments representing interests in the same mortgages.
Bond that can be subdivided into a series of zero-coupon bonds.
Securities that redistribute the cash flows from the underlying generic MBS collateral into the principal and interest components of the MBS to enhance their attaractiveness to different groups of investors.
Applies mainly to convertible securities. Return on the debt portion of a bond/warrant unit after subtracting the value of the issued warrant segment.
When the dollar can be exchanged for a large amount of foreign currency, benefiting travelers but hurting exporters.
A form of pricing efficiency, that posits that the price of a security reflects all information, whether or not it is publicly available. Related: Weak-form efficiency, semi-strong form efficiency.
A self-funding, self-hedged series of transactions that usually use mortgage-backed securities (MBS) as the primary assets.
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Debt that has been customized for the buyer, often by incorporating unusual options.
A derivative investment that will change in value with movements of an underlying index; or a note whose issuer makes swap arrangements to alter its required cash flows.
Desigining a portfolio to achieve a level of performance that matches some predetermined liabilities that must be paid out in the future.
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.
Often used in risk arbitrage. Piece of equity security left over from a major cash or security distribution from a recapitalization.
A publicly traded corporation established by federal action that increases availability of educational loans by guaranteeing student loans traded in the secondary market. Also known as Sallie Mae.
An IRS regulation dealing with investment companies and real estate investment trusts that avoid double taxation by distributing interest, dividends, and capital gains directly to shareholders, who are taxed individually.
IRS regulation that gives a corporation with 35 or fewer shareholders the option of being taxed as a partnership to escape corporate income taxes.
Refers to a bid or offer that cannot be executed without confirmation from the customer. In other words, not firm, but a bid/offer that needs additional information/confirmation before becoming firm and is therefore still negotiable.
Quote in which prices are subject to confirmation. See: Fast market.
Contingent upon trader's ability to cancel an order (on the indicated exchange).
Contingent on execution of a trade because the picture in the stock has not been materially altered.
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.
Probabilities that are determined subjectively (for example, on the basis of judgment rather than statistical sampling).
An unsecured bond that ranks after secured debt, after debenture bonds, and often after some general creditors in its claim on assets and earnings. Related: Debenture bond, mortgage bond, collateral trust bonds.
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt claims are paid in full.
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.
Special category of foreign-source "unearned" income that is currently taxed by the IRS whether or not it is remitted to the U.S.
The return of a portfolio over a shorter period of time than the evaluation period.
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.
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Agreement to buy new issue of securities.
An application reviewed by the general partner to join a limited partnership.
Price that current shareholders pay for a share of stock in a rights offering.
The right of current shareholders of a corporation to buy newly issued shares before they are available to the public.
See: Subscription privilege
Applies to derivative products. 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. Warrant.
A wholly or partially owned company that is part of a large corporation. A foreign subsidiary is a separately incorporated entity under the host country's law.
A company owned or controlled by another company, known as the parent company.
A grouping of individual accounts that in total equal the balance of a control account in the General Ledger.
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.
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but that offers a higher yield.
A hostile takeover prevention tactic that could destroy the target company. Taking on a large amount of debt to prevent the takeover might cause bankruptcy, for example.
Policies and guidelines that brokers must use to ensure that investors have the financial means to assume risks that they wish to undertake. These are enforced by the NASD and other self-regulatory organizations.
Method of accelerated depreciation.
Costs that have been incurred and cannot be reversed.
Growth industries in an economy that may become leaders in the market in the future.
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. If a team from the old pre-1990 National Football League wins the Super Bowl, stock prices will increase in the coming year.
Super DOT provides faster execution than regular DOT and focuses on large-size trades and baskets. See: Program trading.
See: Autex
Usually a home financing bond, but also any other bond that has long-term coupons but short maturity; the mortgages may be prepaid, and the holders may receive the long-term yield after a short period of time.
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Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve certain changes, such as a merger.
Often used in risk arbitrage. Corporate amendment requiring that a substantial majority (usually 67% to 90%) of stockholders approve important transactions, such as mergers.
An analyst who is qualified to approve publicly distributed research reports on the NYSE.
A Social Security program established to help the blind, disabled, and poor.
Materials used in a business that do not generally become part of the sales product and were not purchased to be resold to customers.
An event that influences production capacity and costs in an economy.
A theory of economics that reductions in tax rates will stimulate investment and in turn will benefit the entire society.
A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a security tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the stock has bottomed out in the past.
An additional levy added to some charge.
An individual or corporation that guarantees the performance or actions of another.
Cash flow available after payment of taxes in a project.
Related: Asset management
A tax added to the normal tax paid by corporations or individuals who have earned income above a certain level.
A department that monitors trading activity on an exchange in order to identify any unusual activity that may indicate illegal practices.
A Eurobond issued by a Japanese corporation.
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.
An account used temporarily to record receipts and disbursements that have yet to be classified.
Maximum rate of growth a firm can sustain without increasing financial leverage.
An arrangement in which two entities lend to each other on different terms, e.g., in different currencies, and/or at different interest rates, fixed or floating.
Related: Swap sale
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The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
See: Exchange fund
See: Swaption. Related: Quality option.
The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.
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.
Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.
An increase in equity created by the labor of the owner.
Account providing that a bank invest all the excess available funds at the close of each business day for the firm.
A feature of a security that makes it more attractive to potential purchasers.
See: Society for Worldwide Interbank Financial Telecommunications
Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper with eurocommercial paper.
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.
The Swiss derivatives market with the first fully electronic trading system in the world, now called Eurex Zurich AG.
Slang for the Swiss franc.
Order for the purchase (sale) of one stock and the sale (purchase) of another stock at a stipulated price difference. Contingent order, swap.
Liquidating a position and simultaneously reinstating a position in another futures contract of the same type.
sum-of-the-years'-digits (SYD) depreciation method: The accelerated depreciation method in which a constant balance (cost minus salvage value) is multiplied by a declining depreciation rate.
The derivatives market of Australia.
Letters used to identify companies on the consolidated tape and other locations.
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Illiquid, inactively traded stock not familiar market
An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, reducing the cost of funding liabilities.
Information available at the same time. To test option-pricing models, the price of the option and of the underlying should be synchronous and reflect the same moment in the market.
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.
See: Managing underwriter
A violation of value-additivity in that the value of a combination is greater than the sum of the individual values.
Combination of usable bonds and warrants (that expire on or after the bonds' maturity) that resembles convertible bond.
Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument. It is a combination of security holdings that mimics the price movement of another single security (i.e., 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).
Common to all businesses.
An approach involving regular investments in order to take advantage of dollar-cost averaging.
Also called undiversifiable risk or market risk.
Only the systematic portion of risk matters in large, well-diversified portfolios. Thus, expected returns must be related only to systematic risks.
A provision of certain mutual funds to pay out to the shareholder specified amounts after specified periods of time. Back to top |
