A |
| Fifth
letter of a Nasdaq stock symbol specifying Class A shares. |
AAII |
| See:
American Association of Individual Investors |
ABO |
| See:
Accumulated Benefit Obligation |
ABS |
| See:
Automated Bond System |
ACAT |
| See:
Automated Customer Account Transfer |
ACES |
| See:
Advance Computerized Execution System |
ACH |
| See:
Automated Clearing House |
ACRS |
| See:
Accelerated cost recovery system |
ACU |
| See:
Asian currency units |
ADB |
| See:
Adjusted Debit Balance |
ADR |
| See:
American Depository Receipt |
ADS |
| See:
American Depository Share |
AEX |
| See:
Amsterdam Exchange |
AFM |
| See:
Amman Financial Market |
AIBD |
| Association
of International Bond Dealers |
AON |
| See:
All or none order |
AOS |
| See:
Automated Order System |
AMEX |
| See:
American Stock Exchange |
AMPS |
| See:
Auction Market Preferred Stock |
APR |
| See:
Annual Percentage Rate |
APT |
| See:
Arbitrage Pricing Theory |
APT |
| See:
Automated Pit Trading |
APV |
| See:
Adjusted Present Value |
APY |
| See:
Annual Percentage Yield |
ARM |
| See:
Adjustable-rate mortgage |
ARPS |
| See:
Adjustable-rate preferred stock |
ARPS |
| See:
Auction rate preferred stock |
ARR |
| See:
Average rate of return |
ASE |
| See:
Athens Stock Exchange. |
ASX |
| See:
Australian Stock Exchange |
ATP |
| See:
Arbitrage Trading Program |
Abandonment |
| Controlling
party giving up rights to property voluntarily. |
Abandonment option |
| The
option
of terminating an
investment earlier than originally planned. |
ABC agreement |
| A
contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee. |
Ability to pay |
| Refers
to the borrower's ability to make interest and principal
payments on debts. See: Fixed
charge coverage ratio. In context of municipal
bonds, refers to the issuer's
present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values. In
context of taxation, notion that tax rates should be determined according to income or wealth. |
Abnormal returns |
| The
component of the return
that is not
due to systematic influences (market-wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: excess returns. |
Above par |
| See:
Par. |
Absolute
priority |
| Rule in bankruptcy
proceedings
requiring senior creditors
to be paid in full before junior creditors receive any payment. |
Absorbed |
| Used
in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy
and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: Sell the book. |
Abusive
tax shelter |
| A limited
partnership that the IRS
judges to be claiming tax deductions
illegally. |
Accelerated
cost recovery
system (ACRS) |
| Schedule of depreciation
rates allowed for tax purposes. |
Acceleration
clause |
| A contract
stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time. |
Accelerated depreciation |
| Any
depreciation
method that
produces larger deductions for depreciation in the
early years of a
asset's life. Accelerated cost recovery system (ACRS),
which is a depreciation schedule allowed for tax purposes, is one such example. |
Acceptance |
| Contractual
agreement instigated when the drawee of a time
draft "accepts" the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter
of credit and banker's acceptance. |
Accommodative monetary policy |
| Federal Reserve System policy to increase the amount of money available to banks for lending. See: Monetary policy. |
Account |
| In
the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities,
income, and expenses are represented. In the context of investment banking, refers to the status of securities sold and owned or the relationship between parties to an underwriting syndicate.
In the context of securities,
the relationship between a client and a broker/dealer firm
allowing the firm's employee to be the client's buying and selling agent. See: Account
executive; account statement. |
Account balance |
| Credits minus debits at the end of a reporting period. |
Account executive |
| The
brokerage firm employee who handles stock
orders for clients. See: Broker. |
Account
reconciliation |
| The reviewing and adjusting of the balance in a personal checkbook to match your bank statement. |
Account statement |
| In
the context of banking, refers to a summary of all balances. In
the context of securities, a summary of all transactions and positions
(long and short)
between a broker/dealer
and a client. See also: Option agreement. |
Accountant's opinion |
| A
signed statement from an independent public accountant after examination of a firm's records and accounts. The opinion may be unqualified or qualified. See: Qualified opinion. |
Accounting earnings |
| Earnings of a firm as reported on its income statement. |
Accounting exposure |
| The
change in the value of a firm's foreign
currency-denominated accounts due to a change in exchange rates. |
Accounting insolvency |
| Total
liabilities
exceed total
assets. A firm with a negative net worth is insolvent
on the books. |
Accounting liquidity |
| The
ease and quickness with which assets
can be converted to cash. |
Accounts payable |
| Money
owed to suppliers. |
Accounts receivable |
| Money
owed by customers. |
Accounts
receivable financing |
| A
short-term financing method in which accounts
receivable are collateral
for cash advances. See: Factoring. |
Accounts receivable turnover |
| The
ratio of net credit sales to average
accounts receivable, which is a measure of how quickly customers pay their bills. |
Accredited investor |
| Refers
to a wealthy investor (net worth $7 million or annual income >200,000) who does not count to the maximum of 35 people allowed to invest in a private limited partnership. |
Accretion (of a discount) |
| In
portfolio accounting, a straight-line accumulation of capital gains on a discount
bond in anticipation of receipt of par
at maturity. |
Accrual basis |
| In
the context of accounting, practice in which expenses and income are accounted for as if they are earned or incurred, whether or not they have been received or paid. Antithesis of cash basis accounting. |
Accrual bond |
| A
bond on which interest
accrues but is not paid to the investor
during the time of accrual. The amount of accrued
interest is added to the remaining principal
of the bond and is paid at maturity. |
Accrued benefits |
| The
pension benefits earned by an employee accourding to the years of the employee's service. |
Accrued interest |
| Applies
mainly to convertible securities. Interest
that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon
payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.) |
Accrued market discount |
| The
rise in the market value of a discount bond as it approaches maturity (when it is redeemable
at par) and not because of falling market interest rates. |
Accumulate |
| Broker/analyst
recommendation that could mean slightly different things
depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security that might skyrocket. A buy recommendation, but not an urgent buy. |
Accumulated Benefit Obligation (ABO) |
| An
approximate measure of the liability
of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation. |
Accumulated dividend |
| A
dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock. |
Accumulated profits tax |
| A
tax on earnings kept in a firm
to prevent the higher personal income
tax rate that would obtain if profits were paid out as dividends to the owners. |
Accumulation |
| In
the context of corporate finance,
refers to profits that are added to the capital base of the company rather than paid out as dividends. See: Accumulated
profits tax. In the context of investments,
refers to the purchase by an institutional broker
of a large number of shares
over a period of time in order to avoid pushing the price of that share up. In
the context of mutual funds,
refers to the regular investing of a fixed amount while reinvesting dividends and capital
gains. |
Accumulation
area |
| A price range
within which a buyer accumulates shares
of a stock. See: On-balance
volume and distribution area. |
Acid test ratio |
| Also
called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities. |
Acquired surplus |
| The
surplus acquired when a company is purchased in a pooling of interests combination, i.e. the net worth not considered to be capital stock. |
Acquiree |
| A
firm that is being acquired. |
Acquirer |
| A firm or individual that is acquiring something. |
Acquisition |
| When
a firm buys another firm. |
Acquisition
cost |
| Refers to the price (including the closing costs) to purchase another company or property. In
the context of investments,
refers to price plus brokerage commissions,
of a security, or the sales charge applied to load funds. See: Tax
basis. |
Acquisition
of assets |
| A merger
or consolidation in which an acquirer purchases the selling firm's assets. |
Acquisition
of stock |
| A merger
or consolidation in which an acquirer purchases the acquiree's stock. |
Across
the board |
| Movement or trend in the stock
market that affects almost all stocks in all sectors
to move in the same direction. |
Acting
in concert |
| Investors
working together and performing identical actions to attain the same investment goal. |
Act of state doctrine |
| This
doctrine says that a nation is sovereign within its own borders, and its domestic actions may not be questioned in the courts of another nation. |
Active |
| A
market in which there is frequent trading. |
Active
account |
| Refers to a brokerage account in which many transactions
occur. Brokerage firms may levy a fee if an account generates an inadequate level of activity. |
Active bond crowd |
| Refers
to members of the bond department of the NYSE who trade
the most bonds. Antithesis of cabinet crowd. |
Active
box |
| Securities
that are held in safekeeping and are available as collateral for securing brokers'
loans or customers' margin positions. |
Active portfolio strategy |
| A
strategy that uses available information and forecasting techniques to seek better performance than a buy and hold portfolio. Related: Passive
portfolio strategy. |
Actual market |
| Used
in context of general equities. Firm
market. Antithesis of Subject market. |
Actuals |
| The
physical commodities underlying
a futures contract. Cash
commodity, physical asset. |
A-D |
| Advance-Decline, or measurement of the number of issues trading
above their previous closing prices less the number trading below their previous closing prices over a particular period. As a technical measure of market breadth, the steepness of the A-D line indicates whether a strong bull or bear
market is under way. |
Additional
bonds test |
| A test for ensuring that bond issuers
can meet the debt service requirements of issuing any new additional bonds. |
Additional hedge |
| A
protection against borrower fallout risk
in the mortgage pipeline. |
Adequacy of coverage |
| A
test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging. |
Adjustable rate |
| Applies
mainly to convertible securities. Refers to interest
rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes.
Typically, such issues have a set floor or ceiling, called caps and collars
that limits the adjustment. |
Adjustable-rate mortgage (ARM) |
| A
mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin,
over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps. |
Adjustable-rate preferred stock (ARPS) |
| Publicly
traded issues
that may be
collateralized by mortgages
and MBS |
Adjusted balance method |
| Method
of calculating finance charges that uses the account balance remaining after adjusting for all transactions posted during the given billing period as its basis. Related: Average daily balance method, previous balance method, past due balance method. |
Adjusted basis |
| Price
from which to calculate and derive capital
gains or losses upon sale of an asset. Account actions such as any stock splits that have occurred since the initial purchase must be accounted for. |
Adjusted debit balance (ADB) |
| The
account balance for a margin account
that is calculated by combining the balance owed to a broker with any outstanding balance in the special miscellaneous account, and any paper profits on short
accounts. |
Adjusted exercise price |
| Term
used in options on Ginnie
Mae (Government National Mortgage Association) contracts. The final exercise
price of the option accounts for the coupon rates carried on Ginnie Mae mortgages.
For example, if the standard GNMA mortgage
has an 9% yield, the price of GNMA pools with 13% mortgages in them is altered so that the investor receives the same yield. |
Adjusted gross income (AGI) |
| Gross income less allowable adjustments, is the income on which an individual is taxed by the federal government. |
Adjusted present value (APV) |
| The
net present value analysis of an asset if financed solely by equity (present value of unlevered cash flows), plus the present
value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly leveraged transactions such as a leveraged buyout. |
Adjustment bond |
| A
bond issued in exchange for outstanding bonds when a corporation facing bankruptcy is recapitalized. |
Administrative pricing rules |
| IRS
rules used to allocate income on export sales to a foreign sales corporation. |
Advance |
| Increase
in the market price of stocks,
bonds, commodities,
or other assets. |
Advance commitment |
| A
promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk
by purchasing a futures contract
to fix the sales price approximately. |
Advance Computerized Execution System (ACES) |
| Refers
to the Advance Computerized Execution System, run by Nasdaq. ACES automates trades
between order entry and market
maker firms that have established trading relationships with each other. Securities are designated as specified for automatic execution. |
Advance
funded pension plan |
| A pension plan in which funds are set aside in advance of the date of retirement. |
Advance refunding |
| In
the context of municipal bonds,
refers to the sale of new bonds
(the refunding issue)
before the first call date of old bonds (the issue
to be refunded). The refunding issue usually specifies a rate lower than the issue to be refunded, and the proceeds are invested, usually in government securities, until the higher-rate bonds become callable. See: Refunding
escrow deposits. |
Adverse
opinion |
| An independent auditor's opinion expressing that a firm's financial statements do not reflect the company's position accurately. See also: Qualified opinion. |
Adverse selection |
| Refers
to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product quality. |
Advisory letter |
| A
newsletter offering financial advice to its readers. |
Affiliate |
| Relationship
between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent
company. |
Affiliated corporation |
| A
corporation that is an affiliate
to the parent company. |
Affiliated person |
| An
individual who possesses enough influence and control in a corporation as to be able to alter the actions of the corporation. |
Affirmative covenant |
| A
bond covenant
that specifies
certain actions the firm must take. |
Affordability
index |
| An index
that measures the financial ability of consumers to purchase a home. |
After acquired clause |
| A
contractual clause in a mortgage
agreement stating that any additional mortgageable property attained by the borrower after the mortgage
is signed will be regarded as additional security
for the obligation addressed in the mortgage. |
After-hours dealing or trading |
| Securities trading
after regular trading hours on organized exchanges. |
Aftermarket |
| See:
Secondary market. |
After-tax basis |
| The
comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. |
After-tax profit margin |
| The
ratio of net income to net
sales. |
After-tax real rate of return |
| The
after-tax rate of return minus the inflation
rate. |
Against the box |
| See:
Selling short against the box. |
Aged fail |
| An
account between two broker/dealers that remains intact after 30 days after the settlement date. The receiving firm must adjust its capital
as it can no longer treat this account as an assets. |
Agencies |
| See:
Federal agency securities. |
Agency |
| In
context of general equities, buying or selling for the account and risk of a customer. Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the service. The broker represents a customer buyer/seller to a customer seller/buyer and does not act as principal for the firm's own trading account. Antithesis of principal. See: Dealer. |
Agency bank |
| A
form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank. It is also the financial institution that issues ADRs
to the general market. |
Agency basis |
| A
means of compensating the broker
of a program trade solely on the basis of commission established through bids submitted by various brokerage firms. |
Agency cost view |
| The
argument that specifies that the various agency
costs create a complex environment in which total agency costs are at a minimum with some, but less than 100%, debt financing. |
Agency costs |
| The
incremental costs of having an agent
make decisions for a principal. |
Agency incentive arrangement |
| A
means of compensating the broker of a program
trade using benchmark prices for issues
to be traded in determining commissions
or fees. |
Agency
pass-throughs |
| Mortgage
pass-through securities whose principal
and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (Ginnie Mae),
Federal Home Loan Mortgage Corporation (Freddie Mac),
and Federal National Mortgage Association(Fannie Mae). |
Agency problem |
| Conflicts
of interest among stockholders,
bondholders, and managers. |
Agency securities |
| Securities issued
by federally related institutions and U.S. government-sponsored entities. Such agencies were created to reduce borrowing costs for certain sectors of the economy, such as agriculture. |
Agency theory |
| The
analysis of principal-agent relationships,
in which one person, an agent,
acts on behalf of another person, a
principal. |
Agent |
| The decision-maker in a principal-agent relationship. |
Aggregate exercise price |
| The
exercise price multiplied by the number of shares in a put
or call contract.
The option premium is excluded in the aggregate exercise price. In tje case of options traded on debt
instruments, the aggregate exercise price is the exercise price of the underlying
security multiplied by its face
value. |
Aggregation |
| Process
in corporate financial planning
whereby the smaller investment proposals of
each of the firm's operational units are aggregated and effectively treated as a whole. |
Aggressive growth mutual fund |
| A
mutual fund designed for maximum capital appreciation
that places its money in companies with high growth rates. |
Aggressively |
| Used
in context of general equities. For a customer it means working to buy or sell one's stock,
with an emphasis on execution over price. For a trader
it means acting in a way that puts the firm's capital at higher risk through paying a higher price, selling cheaper, or making a larger short sale or purchase
than the trader would under normal circumstances. |
Aging schedule |
| A
table of accounts receivable
broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer payments are keeping close to schedule. |
Agreement among underwriters |
| A
contract amoung participating members of a syndicate that defines the members' proportionate liability, which is usually limited to and based on the participants' level of involvement. The contract outlines the payment schedule on the settlement date. Compare: Underwriting
agreement. |
Ahead of itself |
| In
context of general equities, refers to equities that are overbought or oversold
on a fundamental basis. |
Ahead of you |
| Used
for listed equity securities. At the same price but entered ahead of your order/interest, usually referring to the specialist's book. See: Behind,
matched orders, priority,
stock ahead. |
AIMR Performance Presentation Standards Implementation Committee |
| The
Association for Investment Management and Research (AIMR) Performance Presentation Standards Implementation Committee is charged with the responsibility to interpret, revise, and update the AIMR Performance Presentation Standards (AIMR-PPS(TM) for portfolio performance presentations. |
Air pocket stock |
| A
stock whose price drops precipitously, often on the unexpected news of poor results. |
Alien corporation |
| A
company incorporated under the laws of a foreign country regardless of where the company conducts its operations. |
All equity rate |
| The
discount rate that reflects only the business risks of a project, distinct from the effects of financing. |
All in |
| Refers
to an issuer's interest
rate after accounting for commissions
and various related expenses. |
All
Ordinaries Index |
| The major index of Australian stocks comprising 330 of the major companies listed on the Australian Stock Exchange. |
All or none order (AON) |
| Used
in context of general equities. A limited
price order that is to be executed
in its entirety or not at all (no partial transaction), and thus is testing the strength/conviction of the counterparty. Unlike an FOK order, an AON order is not to be treated as cancelled if not executed as soon as it is represented in the trading crowd, but instead remains alive until executed or cancelled. The making of "all or none" bids or offers
in stocks is prohibited, and the making of "all or none" bids or offers
in bonds is subject to the restrictions of Rule 61. AON orders are not shown on the specialist's book because they cannot be traded in pieces. Antithesis of any-part-of order. See: FOK
order. |
All-in cost |
| Total
costs, explicit and implicit. |
All-or-none
underwriting |
| An arrangement whereby a security issue
is cancelled if the underwriter
is unable to resell
the entire issue. |
Allied
member |
| A partner or stockholder of a firm
that is a member of the NYSE,
the partner or stockholder is not personally a member of the NYSE. |
Alligator spread |
| The
term used to describe a spread
in the options market that generates such a large commission that the client is unlikely to make a profit even if the markets
move as the investor anticipated. |
Allotment |
| The
number of securities assigned to each of the participants in an underwriting syndicate. |
Alpha |
| Measure
of risk-adjusted performance. An alpha is usually generated by regressing the security or mutual
fund's excess return on the S&P 500 excess return. The beta adjusts for the risk
(the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 25%, and the short-term interest rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected excess return given the risk is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also known as the Jensen Index. Related: Risk-adjusted
return. |
Alpha
equation |
| Regression usually run over 36-60 months of data: Return-Treasury bill= alpha + beta (S&P 500 - Treasury bill) + error. The alpha is the intercept. Note that the benchmark does not necessarily have to be the S&P 500. A mutual
fund specializing in international investment might be benchmarked to a broader world market index, such as the MSCI World Index. |
Alphabet stock |
| Categories
of common stock of a corporation associated with a particular subsidiary resulting from acquisitions
and restructuring. The various alphabetical categories have different voting rights and pay dividends
tied to the operating performance of the particular divisions. See also: Tracking stocks. |
Alternative Minimum Tax (AMT) |
| A
federal tax aimed at ensuring that wealthy individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding adjusted gross income to tax
preference items. |
Alternative
mortgage
instruments |
| Variations of mortgage instruments
such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations. |
Alternative order |
| Used
in context of general equities. Order
giving a broker a choice between two courses of action, either to buy or sell, never both. Execution
of one course automatically eliminates the other. An example is a combination buy limit/buy stop order, where the buy limit is below the current market and the buy stop is above. If the order is for one unit of trading, when one part of the order is executed on the occurrence of one alternative, the order on the other alternative is to be treated as cancelled. If the order is for an amount of more than one unit of trading, the number of units executed determines the amount of the alternative order to be treated as cancelled. See: Either-or order. |
American Association of Individual Investors (AAII) |
| A
not-for-profit organization to educate individual investors about stocks,
bonds, mutual
funds, and other financial instruments. |
American
Depository Receipt
(ADR) |
| Certificates
issued by a U.S. depository bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADR "Unsponsored" ADRs do not receive such assistance. ADRs are subject to the same currency, political, and economic risks as the underlying foreign share. Arbitrage keeps the prices of ADRs and underlying foreign shares, adjusted for the SDR/ordinary ratio essentially equal. American depository shares (ADS)
are a similar form of certification. |
American Depository Receipt Fees |
| Fees
associated with the creating or releasing of ADRs
from ordinary shares, charged by the commercial banks with correspondent banks in the international sites. |
American Depository Receipt Ratio |
| The
number of ordinary shares into which an ADR can be converted. |
American Depository Share (ADS) |
| Foreign
stock issued in the U.S. and registered in the ADR system. |
American option |
| An
option that may be exercised at any time up to and including the expiration date. Related: European
option |
American shares |
| Securities
certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities. |
American Stock Exchange (AMEX) |
| Stock exchange with the third highest volume of trading in the U.S. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on AMEX consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-sized companies are predominant. Recently merged with Nasdaq See: Curb. |
American-style option |
| An
option contract
that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded
options are American style. |
Amman Financial Market (AFM) |
| Established
in 1976, the AFM is the only stock exchange
in Jordan. |
Amortization |
| The
repayment of a loan by installments. |
Amortization factor |
| The
pool factor implied by the scheduled amortization assuming no prepayments. |
Amortizing interest rate swap |
| Swap in which the principal
or notional amount rises (falls) as interest rates rise (decline). |
Amsterdam Exchange (AEX) |
| Exchange
that comprises the AEX-Effectenbeurs, the AEX-Optiebeurs (formerly the European Options Exchange or EOE)
and the AEX-Agrarische Termijnmarkt. AEX-Data Services is the operating company responsible for the dissemination of data from the Amsterdam Exchange via its integrated Mercury 2000 system. |
AMTEL |
| Used
in context of general equities. In-house message system entered and displayed through Quotron A page. |
Analyst |
| Employee
of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on stocks of these companies. Most specialize in a specific industry. |
And
interest |
| An indication that the buyer will receive accrued interest in addition to the price quoted for a bond. |
Angel |
| An
investment-grade bond. Antithesis to fallen angel. In the context of venture capital, the first investor. |
Angels |
| Individuals
providing venture capital. |
Ankle biter |
| Stock issued with a market
capitalization of less than $500 million. |
Announcement date |
| Date
on which particular news concerning a given company is announced to the public. Used in event studies, which researchers use to evaluate the economic impact of events of interest. |
Annual basis |
| The
technique in statistics of taking a figure covering a period of less than one year and extrapolating it to cover a full one year period. The process is known as annualizing. |
Annual effective yield |
| See:
Annual percentage yield. |
Annual exclusion |
| A
tax rule allowing the deduction
of certain income from taxation. |
Annual
fund operating expenses |
| For
investment companies, the management fee
and "other expenses," including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are also included. |
Annual percentage rate (APR) |
| The
periodic rate times the number of periods in a year. For example, a 5% quarterly return has an A.P.R. of 20%. |
Annual percentage yield (APY) |
| The
effective, or true, annual rate of return.
The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12 -1). |
Annual rate of return |
| There
are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The annual percentage yield (APY), includes the effect of compounding interest. |
Annual renewable term insurance |
| See:
Term insurance. |
Annual report |
| Yearly
record of a publicly held company's financial condition. It includes a description of the firm's operations, as well as balance sheet, income
statement, and cash flow statement information. SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K. |
Annualized
gain |
| If stock X appreciates 1.5% in one month, the annualized gain for that stock over a twelve month period is 121.5% = 18%. Compounded over the 12 month period, the gain is (1.015)^12 -1 = 19.6%. |
Annualized holding-period return |
| The
annual rate of return that when compounded t times generates the same t-period
holding return as actually occurred from period 1 to period t. |
Annualizing |
| See:
Annual basis. |
Annual meeting |
| Meeting
of stockholder held once a year at which the managers of a company report to the stockholders on the year's results. |
Annuitant |
| An
individual who receives benefits from an annuity. |
Annuitize |
| To
commence a series of payments from the capital
that has accumulated in an annuity.
The payments may be a fixed amount, for a fixed period of time, or for a lifetime. |
Annuity |
| A
regular periodic payment made by an insurance company to a policyholder for a specified period of time. |
Annuity certain |
| An
annuity that pays a specific amount on a monthly basis for a set amount of time. |
Annuity due |
| An
annuity with n payments, where the first payment is made at time t
= 0, and the last payment is made at time t = n - 1. |
Annuity factor |
| Present value of $1 paid for each of t
periods. |
Annuity in arrears |
| An
annuity with a first payment one full period hence, rather than immediately. |
Annuity starting date |
| The
date when an annuitant starts receiving payments from an annuity. |
Anticipated
holding
period |
| The period of time an individual expects to hold an asset. |
Anticipation |
| Paying
what is owed before it is due (usually to save interest charges). |
Antidilutive effect |
| Result
of a transaction that increases earnings
per common share (e.g., by decreasing the number of shares outstanding). |
Antitrust laws |
| Legislation
established by the federal government to prevent the formation of monopolies and to regulate trade. |
Any-interest-date |
| A
call provision in a municipal
bond indenture that establishes the right of redemption for the issuer
on any interest payment due date. |
Any-or-all bid |
| Often
used in risk arbitrage. Takeover
bid in which the acquirer offers to pay a set price for all outstanding shares of the target
company, or any part thereof; contrasts with two-tier bid. |
Any-part-of order |
| In
context of general equities, order to buy
or sell a quantity of stock
in pieces if necessary. Antithesis of an all-or-none
order (AON). |
Appraisal
ratio |
| The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
deviation. |
Appraisal
rights |
| A right of shareholders in a merger
to demand the payment of a fair price for their shares,
as determined independently. |
Appreciation |
| Increase
in the value of an asset. |
Appropriation request |
| Formal
request for funds for capital investment project. |
Approved list |
| A
list of equities and other investments that a financial institution or mutual fund is approved to make. See: Legal list. |
APS |
| Auction
Preferred Stock. A type of Dutch Auction Preferred Stock
(Goldman Sachs product). |
Arbitrage |
| The
simultaneous buying and selling of a security
at two different prices in two different markets, resulting in profits
without risk. Perfectly efficient
markets present no arbitrage opportunities. Perfectly efficient markets seldom exist, but, arbitrage opportunities are often precluded because of transactions costs. |
Arbitrage bonds |
| Municipality issued
bonds issued intended to gain an interest rate advantage by refunding a higher-rate bond in ahead of their call
date. Lower-rate refunding
issue proceeds are invested in Treasuries until the first call
date of the higher-rate issue. |
Arbitrage-free option-pricing models |
| Yield curve option-pricing models. |
Arbitrage Pricing Theory (APT) |
| An
alternative model to the capital asset pricing model
developed by Stephen Ross and based purely on arbitrage
arguments. The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted performance or alpha. |
Arbitrage Trading Program (ATP) |
| See:
Program trading. |
Arbitrageur |
| One
who profits from the differences in price when the same, or extremely similar, security, currency,
or commodity is traded
on two or more markets. The Arbitrageur profits by simultaneously purchasing and selling these securities to take advantage of pricing differentials (spreads) created by market conditions. See: Risk arbitrage, convertible
arbitrage, index arbitrage,
and international arbitrage. |
Are you open? |
| Used
in context of general equities. "Can a new customer still participate on opposing side of the trade from that which the first customer initiated?", Inquiring as to whether any portion of that trade is still available See: Open. |
Arithmetic
average (mean)
rate of return |
| Arithmetic
mean return. |
Arithmetic mean return |
| An
average of the subperiod
returns, calculated by summing the subperiod returns and dividing by the number of subperiods. |
Arm's length price |
| The
price at which a willing buyer and a willing unrelated seller would freely agree to transact. |
Arms index |
| Also
known as a trading index (TRIN)
(total up volume)/(total down volume). An advance/decline market indicator. Less than 1.0 indicates bearish demand, while above 1.0 is bullish. The index often is smoothed with a simple moving average. |
Around
us |
| Used in context of general equities. See: Away from you. |
Arrearage |
| In
the context of investments,
refers to the amount by which interest
on bonds or dividends
on cumulative preferred stock
is due and unpaid. |
Articles of incorporation |
| Legal
document establishing a corporation and its structure and purpose. |
Artificial currency |
| A
currency substitute, e.g., special drawing rights
(SDRs). |
Ascending
tops |
| A chart pattern
that depicts that each peak in a security's
price over a period of time is higher than the preceding peak. Antithesis of descending tops. |
Asian Currency Units (ACU) |
| Dollar
deposits held in Singapore or other Asian centers. |
Asian option |
| Option based on the average price of the underlying assets during the life of the option. |
Ask |
| This
is the quoted ask, or the lowest price an investor
will accept to sell a stock.
Practically speaking, this is the quoted offer
at which an investor can buy shares
of stock; also called the offer price. |
Asked price |
| In
context of general equities, price at which a security
or commodity is offered
for sale on an exchange or in the OTC Market. |
Asked
to bid/offer |
| Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy)
stock, usually asking for a capital commitment from an investment bank. |
Aspirin |
| Australian
Stock Price Riskless Indexed Notes. Zero-coupon
four-year bonds repayable at face value plus the percentage increase by which the Australian stock index of all ordinaries (common stocks) rises above a predefined level during the given period. |
Assay |
| Metal
purity test to confirm that the metal meets the standards for trading on a commodities
exchange (commodities exchange center). |
Assessed valuation |
| The
value assigned to property by a municipality
for the purpose of tax assessment. Such an assessed valuation is important to investors in municipal
bonds that are backed by property taxes. |
Asset |
| Any
possession that has value in an exchange. |
Asset activity ratios |
| Ratios that measure how effectively the firm is managing its assets. |
Asset allocation decision |
| The
decision regarding how an institution's funds should be distributed among the major classes of assets in which it may invest. |
Asset allocation mutual fund |
| A
mutual fund that rotates amoung stocks, bonds,
and money market securities to maximize return on investment
and minimize risk. |
Asset-backed security |
| A
security that is collateralized
by loans, leases,
receivables, or installment contracts
on personal property, not real estate. |
Asset-based financing |
| Methods
of financing in which lenders
and equity investors look principally to the cash
flow from a particular asset
or set of assets for a return
on, and the return of, their financing. |
Asset classes |
| Categories
of assets, such as stocks,
bonds, real estate, and foreign securities. |
Asset-coverage test |
| A
bond indenture restriction that permits additional borrowing if the ratio of assets to debt
does not fall below a specified minimum. |
Asset Depreciation Range System |
| A
range of depreciable lives the IRS
allows for particular classes
of assets. |
Asset/equity
ratio |
| The ratio of total assets to stockholder
equity. |
Asset for asset swap |
| Creditors exchange the debt
of one defaulting borrower for the debt of another defaulting borrower. |
Asset/liability management |
| The
task of managing the funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities.
Also called surplus management. |
Asset management account |
| Account
at a brokerage house, bank, or savings institution that integrates banking services and brokerage features. |
Asset play |
| A
company with assets that are not believed to be accurately reflected in its stock price, making it an attractive buy or play. |
Asset pricing model |
| A
model for determining the required or expected rate of return on an asset.
Related: Capital asset pricing model
and arbitrage pricing theory. |
Asset stripper |
| A
corporate raider (company A) that takes over a target company (company B) in order to sell large assets of company B to repay debt. Company A calculates that the net selling of the assets and paying off the debt, will leave the raider with assets that are worth more than what it paid for company B. |
Asset substitution |
| Occurs
when a firm invests in assets
that are riskier than those that the debtholders
expected. |
Asset
substitution problem |
| Arises
when the stockholders substitute riskier assets
for the firm's existing assets and expropriate value from the debtholders. |
Asset
swap |
| An interest
rate swap used to alter the cash
flow
characteristics of an
institution's assets in order to provide a better match with its liabilities. |
Asset turnover |
| The
ratio of net sales to total assets. |
Asset value |
| The
net market value of a corporation's assets on a per-share basis,
not the market value of the shares. A company is undervalued in the market when asset value exceeds market value. |
Assets |
| A
firm's productive resources. |
Assets
requirements |
| A common element of a financial plan that describes projected capital spending and the proposed uses of net working capital. |
Assignment |
| The
receipt of an exercise notice by an options writer
that requires the writer to sell (in the case of a call) or purchase
(in the case of a put) the underlying security
at the specified
strike price. |
Assimilation |
| The
public absorption of a new issue
of stocks once the stock has been completely sold by underwriter. See: Absorbed. |
Assumed interest rate |
| Rate
of interest used by an insurance
company to calculate the payout on an annuity
contract. |
Assumption |
| Becoming
responsible for the liabilities
of another party. |
ASX
Derivatives and Options Market (ASXD) |
| Options market trading
options on more than 50 of Australia's and New Zealand's leading companies. |
Asymmetric information |
| Information
that is known to some people but not to other people. |
Asymmetric taxes |
| When
participants in a transaction have different net tax rates. |
Asymmetric volatility |
| Phenomenon
that volatility is higher in down markets than in up markets. |
Asymmetry |
| A
lack of equivalence between two things, such as the
unequal tax
treatment of interest expense
and dividend payments. |
"At"/"for" |
| Used
in context of general equities. Paramount terms used to differentiate an offering. Stock is offered at; stock is bid for. In an offering, the trading syntax followed is "Quantity-at-Price"; in a bid, the syntax followed is "Price-for-Quantity." |
At par |
| A
price equal to nominal or face value
of a security. See: Par. |
At risk |
| The
exposure to the danger of economic loss. Frequently used in the context of claiming tax deductions. For example, a person can claim a tax deduction in a limited
partnership if the taxpayer can show it is at risk of never realizing a profit
and of losing its initial investment.
See: Value at risk. |
At the bell |
| In
context of general equities, at the opening
or close of the market. See: MOC Order. |
At
the close order |
| In the context of securities, an all
or none market order that is to be executed at the closing price of the security on the exchange.
If the execution cannot be made under this condition, the order is to be treated as cancelled. In
the context of futures and options, refers to a contract
that is to be executed on some exchanges during the closing
period, a period in which there is a range
of prices. |
At
the figure |
| In context of general equities, at the whole integer price (excluding the fraction) closest to the side of the market (bid/ask)
being discussed. At the full. |
At the full |
| Used
in context of general equities. At
the figure. |
At the market |
| See:
Market order. |
At-the-money |
| An
option
is at the money if the
strike price of the option is equal to the market price of the underlying
security. For example, if xyz stock is trading at 54, then the xyz 54 option is at the money. |
At the opening order |
| In
context of general equities, market order
or limited price order that is to be executed at the opening
(and corresponding price) of the stock
or not at all, and any such order
or portion thereof not so executed is to be treated as cancelled. |
Attribute
bias |
| The tendency of stocks
preferred by the
dividend discount model
to share certain equity attributes such as low price-earnings ratios, high dividend yield, high book
value ratio, or membership in a particular industry
sector. |
Athens
Stock Exchange (ASE) |
| Greece's
principal stock exchange. |
Auction Market Preferred Stock (AMPS) |
| A
type of Dutch Auction Preferred Stock
(A Merrill Lynch product). |
Auction markets |
| Markets
in which the prevailing price
is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange. |
Auction rate preferred stock (ARPS) |
| Floating-rate
preferred
stock, whose dividend is adjusted every seven weeks through a Dutch auction. |
Audit |
| An
examination of a company's accounting records and books conducted by an outside professional in order to determine whether the company is maintaining records according to generally accepted accounting principles.
See: aAcountant's opinion. |
Audit trail |
| Resolves
the validity of an accounting entry by a step-by-step record by which accounting data can be traced to their source. |
Auditor's certificate |
| See:
Accountant's opinion. |
Auditor's report |
| A
section of an annual report
that includes the auditor's opinion about the veracity of the financial statements. |
Aunt Millie |
| An
unsophisticated investor. |
Australian Stock Exchange (ASX) |
| Established
in 1987 following the amalgamation of the six independent stock exchanges operating in the Australian state capitals. The ASX is the tenth-largest stock exchange
in the world on the basis of domestic capitalization. |
Autex |
| Video
communication network through which brokerage houses alert institutional investors of their desire to transact block business (a purchase or sale) in a given security. Indications
transmit small, medium, and large sizes only, with occasional limits mentioned. Supers are messages with specific size and price included. Both "indications" and "supers" can be only seen by customers (institutional subscribers to Autex). Trade recaps, advertised block trades entered by the dealer/subscribers, are also displayed, but can be seen by both institutions and dealers. See: Expunge, size. |
Authentication |
| In
the context of bonds, refers to the validation of a bond certificate. |
Authority bond |
| A
bond issued by a government agency or a corporation created to manage a revenue-producing public enterprise. The difference between an authority bond and a municipal bond is that margin
protections may be incorporated in the authority bond contract as well as in the legislation that enables the authority. |
Authorized shares |
| Number
of shares authorized for issuance by a firm's corporate charter. |
Autocorrelation |
| The
correlation of a variable
with itself over successive time intervals. Sometimes called serial correlation. |
Automated bond system (ABS) |
| The
computerized system that records bids
and offers for inactively traded bonds
until they are cancelled or executed on the NYSE. |
Automated Clearing House (ACH) |
| A
collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float. |
Automated Customer Account Transfer (ACAT) |
| For
transfers of securities from a non-equity trading account to your equity trading account with your broker. |
Automated Order System (AOS) |
| Investment banks, computerized order entry system that sends single order entries to DOT (Odd-Lot) or to investment
banks, floor brokers on the exchange. See: Round
lot, GTC orders. |
Automated Pit Trading (APT) |
| Introduced
in 1989, APT is the LIFFE
screen-based trading system that replicates the open
outcry method of trading
on screen. A.P.T. is used to extend the trading day
for the major futures
contracts as well as to provide a daytime trading environment
for non-floor
trading products. |
Automatic
extension |
| An automatic extension of time granted to a taxpayer to file a tax return. |
Automatic funds transfer |
| A
transfer of funds from one account or investment
vehicle to another using electronic or telecommunications technology. |
Automatic investment program |
| A
program in which an investor
can invest or withdraw funds automatically. A mutual
fund, for example, automatically withdraw a pre determined specified amount from the investor's bank account on a regular basis. |
Automatic reinvestment |
| See:
Constant dollar plan. |
Automatic stay |
| The
restricting of liabilityholders from collection efforts related to collateral seizure. Automatically imposed when a firm files for bankruptcy under Chapter 11. |
Automatic withdrawal |
| A
mutual fund that gives shareholders
the right to receive a fixed payment from dividends
on a quarterly or monthly basis. |
Autoquote |
| Autoquote
indicative prices are generated for many of the financial options contracts traded at LIFFE
using standard mathematical models as derived by Black
and Scholes and Cox, Ross, Rubinstein. Autoquote calculates prices for all series by processing variables captured in real-time from other systems and trading members each time the underlying price changes. Autoquotes indicate where a series may trade,
given the current level of the underlying
instrument. |
Autoregressive |
| Using
past data or variable of interest to predict future values of the same variable. |
Availability float |
| Checks
deposited by a company that have not yet been cleared. |
Available on the way in |
| In
context of general equities, stock
is available to new customer as trade
initiated by another customer is about to be consummated (on the exchange floor). Usually said to an inquiring salesperson. See: Open. |
Average |
| An arithmetic mean return
of selected
stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow
Jones
Industrial Average, which adds the current prices
of the 30 DJIA stocks, and divides the results by a predetermined number, the divisor. |
Average accounting return |
| The
average project earnings
after taxes and depreciation
divided by the average book value
of the investment during its life. |
Average
(across-day) measures |
| An
estimation of price that uses the average
or representative price of a large number of trades. |
Average age of accounts receivable |
| The
weighted-average age of all the firm's outstanding invoices. |
Average collection period, or days' receivables |
| The
ratio of accounts receivables
to sales, or the total amount of credit
extended per dollar of daily sales (average AR/sales 365). |
Average cost |
| In
the context of investing, refers to the average cost of shares or stock
bought at different prices over time. |
Average cost of capital |
| A
firm's required payout to bondholders
and stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital. |
Average daily balance |
| A
method for calculating interest
in which the balance owed each day by a customer is divided by the number of days. See also: Adjusted balance method and previous
balance method. |
Average
down |
| A strategy used by investors to reduce the average
cost of shares, in which the investor purchases more shares with a fixed amount of capital as the price of the shares decrease. The investor receives more shares per dollar and decreases the average price per share. |
Average equity |
| A
customer's average daily balance
in a trading account at a brokerage firm. |
Average life |
| Also
referred to as the weighted-average life (WAL).
The average number of years that each dollar of unpaid principal due on the mortgage
remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns. |
Average maturity |
| The
average time to maturity
of securities held by a mutual
fund. Changes in interest
rates have greater impact on funds with longer average maturity. |
Average rate of return (ARR) |
| The
ratio of the average cash inflow to the amount invested. |
Average tax rate |
| Taxes
as a fraction of income; total taxes divided by total taxable income. |
Average up |
| A
strategy used by investors
to lower the overall cost of shares
by buying as many shares with a given amount of capital
in an increasing market. Buying $1000 worth of shares at $30, $35, $40, and $45, for instance, will make the average cost of the shares $37.50. |
Averaging |
| See:
Constant dollar plan. |
Away |
| A
trade, quote, or market
that does not originate with the dealer
in question, e.g., "the bid
is 98-10 away from me." |
Away from the market |
| In
context of general equities, out of line with the inside market at this time, such as when a bid on a limit
order is lower or the offer price
is higher than the current market price
for the security; held by the specialist for later execution
unless FOK. Antithesis of in-line. |
Away from us |
| Used
in context of general equities, to characterize role of a competing broker/dealer.
Trading away from us signifies that stock
is bought and/or sold with institutions using other trading firms. |
Away from you |
| Used
for listed equity securities. See: Outside
of you. |
Axe to grind |
| Used
in context of general equities. Involvement in a security,
whether through a position,
order, or inquiry. |