D |
| Fifth
letter of a Nasdaq stock symbol specifying that it is a new issue, such as the result of a reverse split. |
DCF |
| See:
Discounted cash flows |
DDM |
| See:
Discounted dividend model |
DISC |
| See:
Domestic International Sales Corporation |
DNR Order |
| See:
Do Not Reduce Order |
DOT |
| See:
Designated order turnaround system |
DRP |
| See:
Dividend reinvestment plan |
DTC |
| See:
Depository transfer check |
DTC |
| See:
Depository Trust Company |
Daily price limit |
| The
level at which many commodity, futures,
and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract. |
Daisy
chain |
| Manipulation of the market by traders
to create the illusion of active volume
to attract investors. |
Date of issue |
| Used
in the context of bonds to refer to the date on which a bond is issued
and when interest accrues to the bondholder. Used in the context of stocks to refer to the date trading begins on a new stock
issued to the public. |
Date of payment |
| Date
dividend checks are mailed. |
Date of record |
| Date
on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock
rights. |
Dated date |
| The
date one uses to calculate accrued interest
on various debt instruments,
specifically bonds. |
Dates convention |
| Treating
cash flows as being received on exact dates-date 0, date 1, and so forth-as opposed to the end-of-year convention. |
Dating |
| Credit extension beyond normal terms of a credit supplier. |
Dawn raid |
| A
term of British origin used to describe the purchase of all available shares of a target
company at the market's
open by a raider.
A dawn raid is a surprise technique that allows the raider to gain a substantial share of the target company before the target company knows what is happening |
Day around order |
| A
day order that supersedes (cancels and replaces) the previous order by altering its size or price limit. |
Day
of deposit to day of withdrawal account |
| A
bank account that pays interest according to the number of days that the money is actually on deposit. |
Day loan |
| A
loan from a bank to a broker
prior to the delivery of securities.
Upon the delivery of the securities,
a day loan becomes a regular broker
call loan for which securities
serve as collateral. |
Day order |
| In
the context of general equities, request from a customer to either buy or sell stock, that, if not cancelled or executed
the day it is placed, expires automatically. All orders are day orders unless otherwise specified. Traders often make calls before the opening to check for renewals. |
Day trading |
| Establishing
and liquidating the same position
or positions within one day's trading. |
Days in receivables |
| Average
collection period. |
Days'
sales in inventory ratio |
| The
average number of days' worth of sales that is held in inventory. |
Days'
sales outstanding |
| Average collection period. |
De facto |
| Existing
in actual fact although not by official recognition. |
Dead cat bounce |
| A
small upmove in a bear market. |
Deal flow |
| In
investment banking, the rate at which new deals are referred to a brokerage firm. |
Deal stock |
| Stock subject to merger
or acquisition, either publicly announced or rumored. |
Dealer |
| An
entity that stands ready and willing to buy a security
for its own account (at its bid
price) or sell from its own account (at its ask price). Individual or firm acting as a principal in a securities transaction. Principals are market
makers in securities, and thus trade for their own account and risk. Antithesis of broker.
See: Agency. |
Dealer loan |
| Overnight,
collateralized loan
from a money market bank made to a dealer financing his position
by borrowing. |
Dealer market |
| Where
traderss specializing in particular commodities buy and sell assets
for their own accounts. |
Dealer
options |
| Over-the-counter
options, such as those offered by government and mortgage-backed securities dealers. |
Dealer's spread |
| See:
markdown; underwriting
spread. |
Dear money |
| British
term for tight money. |
Death-backed bonds |
| Bonds backed by loans of a policyholder against a life
insurance policy. The policyholder will repay the loans while alive or with the benefits from the insurance policy upon death. |
Death play |
| A
stock strategy that buys stock
on the belief that a key executive will die, the company will be dissolved, and shares will command a higher price at their private market value. |
Death Valley Curve |
| In
venture capital, refers to the period before a new company starts generating revenues, when it is difficult for the company to raise money. |
Debenture |
| Any
debt obligation backed strictly by the borrower's integrity, e.g. an unsecured bond. A debenture is documented in an indenture. |
Debenture bond |
| An
unsecured bond whose holder has the claim of a general creditor on all assets
of the issuer not pledged specifically to secure other debt. Compare subordinated
debenture bond and collateral trust bonds. |
Debenture stock |
| A
type of stock that makes fixed payments at scheduled intervals of time. Debenture stock differs from a debenture in that it has the status of equity, not debt,
in liquidation. |
Debit balance |
| The
amount that is owed to a broker
by a margin customer for loans the customer uses to buy securities. |
Debit spread |
| Applies
to derivative products. Difference in the value of two options, when the value of the option bought exceeds the value of the one sold. One buys a "debit spread." Antithesis of a credit spread. |
Debt |
| Money
borrowed. |
Debt bomb |
| A
default on debt
and obligations by a major financial institution that disrupts the stability of the economic system. |
Debt capacity |
| Ability
to borrow. The amount a firm can borrow up to the point where the firm value no longer increases. |
Debt ceiling |
| See:
Debt limit |
Debt
displacement |
| The amount of borrowing that leasing displaces. Firms that do a lot of leasing are curtailed in their debt capacity. |
Debt/equity ratio |
| Indicator
of financial leverage. Compares assets provided by creditors
to assets provided by shareholders.
Determined by dividing long-term debt
by common stockholder equity. |
Debt instrument |
| An
asset requiring fixed dollar payments, such as a government or corporate bond. |
Debt
leverage |
| Amplification of the return earned on equity when an investment or firm is financed partially with borrowed money. |
Debt limit |
| The
maximum amount that a municipality can borrow. |
Debt limitation |
| A
bond covenant
that restricts the firm's ability to incur additional indebtedness in some way. |
Debt market |
| The
market for trading debt
instruments. |
Debt
ratio |
| Total debt
divided by total assets. |
Debt relief |
| Reducing
the principal and/or interest
payments on Less developed country loans. |
Debt retirement |
| The
complete repayment of debt. See: Sinking fund. |
Debt securities |
| IOUs
created through loan-type transactions-commercial paper, bank CDs,
bills, bonds, and other instruments. |
Debt service |
| Interest payment plus repayments of principal to creditors
(retirement of debt). |
Debt service coverage |
| The
ratio of cash flow available to the borrower to the annual interest and principal
payments on a loan or other debt. |
Debt-service coverage ratio |
| Earnings before interest
and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate. |
Debt service parity approach |
| Payment
alternatives that provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal). |
Debt swap |
| A
set of transactions in which a firm buys a country's dollar bank debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local equity. Also called a debt-equity swap. |
Debtholder |
| See:
Bondholder |
Debtor |
| Borrower
of money. |
Debtor in possession |
| A
firm that continues to operate under the Chapter 11 bankruptcy process. |
Debtor-in-possession financing |
| New
debt obtained by a firm during the Chapter 11 bankruptcy process. |
Decile rank |
| Performance
over time, rated on a scale of 1-10. 1 indicates that a mutual fund's return
is in the top 10% of funds being compared; while 3 means the return is in the top 30%. |
Decimal trading |
| The
quotation and trading of stock prices in decimals, as opposed to the quotation of stock prices in fractions of a dollar. |
Decision tree |
| Schematic
way of representing alternative sequential decisions and the possible outcomes from these decisions. |
Declaration date |
| The
date on which a firm's directors meet and announce the date and amount of the next dividend. |
Declare |
| The Board of Directors motion to authorize dividend payments. |
Dedicated capital |
| Total
par value (number of shares issued, multiplied by the par value of each share). Also called dedicated value. |
Dedicating a portfolio |
| Related:
Cash flow matching |
Dedication strategy |
| Refers
to multiperiod cash-flow matching. |
Deduction |
| An
expense that is allowable as a reduction of gross taxable income by the IRS e.g., charity donations. |
Deductive reasoning |
| Using
known fact to draw a conclusion about a specific situation. |
Deed of trust |
| See:
Indenture |
Deep-discount
bond |
| A bond
issued with a very low coupon
or no coupon that sell at a price far below par value. A bond
that has no coupon is called a zero-coupon
bond. |
Deep in/out of the money |
| A
call option with an exercise
price substantially below the underlying
stock's market price (deep in the money) or substantially above the market price (deep out of the money). Also put option with an exercise
price substantially above the underlying
stock's market price (deep in the money) or substantially below the underlying stock's market
price (deep out of the money). |
Default |
| Failure to make timely payment of interest or principal
on a debt security or to otherwise comply with the provisions of a bond indenture. |
Default premium |
| A
differential in promised yield
that compensates the investor for the risk
inherent in purchasing a corporate bond
that entails some risk of default. |
Default risk |
| The
risk that an issuer
of a bond may be unable to make timely principal and interest
payments. Also referred to as credit
risk (as gauged by commercial rating companies). |
Defeasance |
| The
setting aside by a borrower of cash or bonds
sufficient to service the borrower's debt.
Both the borrower's debt and the offsetting
cash or bonds are removed from the balance sheet. |
Defensive
securities |
| Low-risk
stocks or bonds that will provide a predictable and safe return on an investor's
money. |
Deferred account |
| A
type of account that delays taxes on that account until some later date. |
Deferred annuities |
| Tax-advantaged
life insurance products. Deferred annuities
offer deferral of taxes with the option of withdrawing one's funds in the form of life annuity. |
Deferred
call |
| A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected. |
Deferred charge |
| An
expenditure treated as an asset
that carries forward until it becomes pertinent to the business at hand, e.g., advance rent payment. |
Deferred compensation |
| An
amount that has been earned but is not actually paid until a later date, typically through a payment plan, pension, or stock option plan. |
Deferred
equity |
| A common term for convertible bonds, which recognizes their equity component and the expectation that the bond will ultimately be converted into shares of common stock. |
Deferred futures |
| The
most distant months of a futures contract. |
Deferred interest bond |
| A
bond that pays interest
at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero
coupon bond. |
Deferred
nominal life Annuity |
| A
monthly fixed-dollar payment
beginning at retirement age. It is nominal
because the payment is fixed in a dollar amount at any particular time, up to and including retirement. |
Deferred
payment annuity |
| An annuity
that stipulates payments be made to the annuitant at a later date, such as when the annuitant reaches a certain age. |
Deferred taxes |
| A
non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid. |
Deficiency letter |
| Notification
from the SEC to a prospective issuer of securities
that revisions or additions need to be made to the preliminary prospectus. |
Deficit |
| An
excess of liabilities over assets, of losses over profits,
or of expenditure over income. |
Deficit
spending |
| When government spending overwhelms government revenue resulting in government borrowing. See: Deficit financing. |
Defined asset fund |
| A
unit investment trust consisting of a fixed portfolio of securities,
including blue chips, REITs,
or high-yielding stocks on a major exchange such as the NYSE
or FTSE. |
Defined
benefit plan |
| A pension
plan obliging the sponsor to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan |
Defined contribution plan |
| A
pension plan whoae sponsor
is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan |
Deflation |
| Decline
in the prices of goods and services. Antithesis of inflation. |
Deflator |
| A
statistical factor used to convert current dollar purchasing power into inflation-adjusted purchasing power. Enabling the comparison of prices while accounting for inflation in two different time periods. |
Delayed issuance pool |
| Refers
to mortgage backed securities (MBS)
that at the time of issuance were collateralized
by seasoned loans originated prior to the MBS pool issue date. |
Delayed
opening |
| Postponement of the start of trading in a stock until correction of a gross imbalance in buy and sell orders. Such an imbalance is likely to follow on the heels of a significant event such as a takeover offer.
See: Suspended trading. |
Delayed settlement/delivery |
| In
the context of general equities, transaction in which a contract is settled in excess of five full business days. Seller's option. See: Dividend
play, settlement. |
Delinquency |
| Failure
to make a payment on a debt
or obligation by the specified due date. |
Delisting |
| Removal
of a company's security from listing on an exchange because the firm has not abided by specific regulations. |
Deliver |
| The
sale of a futures or forward
contract may require the seller to deliver
the commodity. |
Deliverable bills |
| The
Treasury bills that fulfill a set of guidelines set forth by the exchange on which the bills are traded. |
Deliverable
instrument |
| The asset
in a forward contract that will be delivered in the future at an agreed-upon price. |
Delivery |
| The tender and receipt of an actual commodity or financial instrument
in settlement of a futures
contract. |
Delivery
date |
| Date by which a seller must fulfill the obligations of a forward or futures
contract. |
Delivery
notice |
| The written notice given by the seller of its intention to make delivery against an open,
short futures position
on a particular date. Related: Notice
day. |
Delivery options |
| The
options available to the seller of an interest
rate futures contract, including the quality option, the timing
option, and the wild card option.
Delivery options mean that the buyer is uncertain of which Treasury bond will be delivered or when it will be delivered. |
Delivery points |
| Locaations
designated by futures exchanges at which the financial instrument or commodity
covered by a futures contract
may be delivered in fulfillment of such a contract. |
Delivery price |
| The
price fixed by the clearinghouse
at which deliveries on futures
are invoiced; also the price at which the futures
contract is settled when deliveries are made. |
Delivery versus payment |
| A
transaction in which the buyer's payment for securities
is due at the time of delivery
(usually to a bank acting as agent
for the buyer) upon receipt of the securities. The payment may be made by bank wire, check, or direct credit to an account. |
Delta |
| The
ratio of the change in price of a call
option to the change in price of the underlying
stock. Also called the hedge ratio.
Applies to derivative products. Measure of the relationship between an option price and the underlying futures contract or stock price.
For a call option, a delta of 0.50 means a half-point rise in premium for every dollar that the stock goes up. As options near expiration, in-the-money
call option contracts approach a delta
of 1.0, while in the money put options
approach a delta of -1. See: hedge ratio,
neutral hedge. |
Delta hedge |
| A
dynamic hedging strategy using options that calls for constant adjustment of the number of options used, as a function of the delta of the option. |
Delta neutral |
| Describes
value of a portfolio not affected by changes in the value of the asset on which the options
are written. |
Demand
deposits |
| Checking accounts that pay no interest and from which funds can be withdrawn upon demand. |
Demand line of credit |
| A
bank line of credit that enables a customer to borrow on a daily or on-demand basis. |
Demand loan |
| A
loan which can be called by the lender at any time and carries no set maturity date. |
Demand master notes |
| Short-term
securities that are repayable immediately upon the holder's demand. |
Demand-pull inflation |
| A
theory of inflation or price increases resulting from so-called excess demand. Related: Cost-push inflation. |
Demand shock |
| An
event that affects the demand for goods and services in an economy. |
Denomination |
| Corresponds
to the face value of currency units, coins, and securities. |
Dependent |
| Acceptance
of a capital budgeting project contingent on the acceptance of another project. |
Deposit insurance |
| See:
FDIC: Federal Deposit Insurance Corporation |
Depository Institutions Deregulation and Monetary Control Act |
| The
1980 federal legislation that ended the regulation of the banking industry. |
Depository preferred |
| Device
enabling an issuer to circumvent an arbitrary corporate limit on the number of preferred shares issuable.
Applies mainly to convertible securities. |
Depository receipt |
| See:
ADR American Depository Receipt |
Depository transfer check (DTC) |
| Check
made out directly by a local bank to a particular firm or person. |
Depository Trust Company (DTC) |
| DTC
is a user-owned securities depository that accepts deposits of eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in its custody, and provides for withdrawals of securities from its custody. Central securities repository where stock and bond
certificates are exchanged.
Most of these exchanges now take place electronically, and few paper certificates actually change hands. The DTC is a member of the Federal Reserve System and is owned by most of the brokerage houses on Wall Street and the NYSE |
Depreciate |
| To
allocate the purchase cost of an asset
over its life. |
Depreciated cost |
| In
terms of economics: The measure of cost of capital
consumption during production, e.g., machine and equipment wear. In
terms of finance: The process of amortization
of fixed assets (equipment) to spread the cost over the depreciable life of the assets. |
Depreciation |
| A
non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring long-term assets over the useful life of the assets. |
Depreciation tax shield |
| The
value of the tax write-off on depreciation
of plant and equipment. |
Depressed
market |
| Market
in which supply overwhelms demand, leading to weak and lower prices. |
Depressed price |
| In
the context of stocks, stock
whose market price is low in comparison to stocks in its sector. |
Depression |
| Period
when excess aggregate supply overwhelms aggregate demand, resulting in falling prices, unemployment problems, and economic contraction. |
Deregulation |
| The
reduction of government's role in controlling markets,
which lead to freer markets,
and presumably a more efficient marketplace. |
Derivative instruments |
| Contracts
such as options and futures
whose price is derived from the price of an underlying
financial asset. |
Derivative markets |
| Markets
for derivative instruments. |
Derivative security |
| A
financial security such as an option or future
whose value is derived in part from the value and characteristics of another security, the underlying asset. |
Descending tops |
| A
chart pattern which in which each successive peak in a security's price is lower than the preceding peak over a period of time. Antithesis of ascending tops. |
Designated order turnaround system (DOT) |
| Computerized
order entry system that allows orders to buy or sell large baskets of stock to be transmitted immediately to the specialist on the exchange, where execution will occur quickly, depending on the basket size. Also used for odd-lot
transactions to occur at the prices
and quantities available. See: AOS. |
Desk |
| The
New York Federal Reserve Bank's trading
desk (or securities department) where all transactions of the Federal
Reserve System are executed
in the money market or the government securities market. |
Detachable warrant |
| A
warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond). |
Deterministic models |
| Liability-matching models that assume that the liability payments and the asset cash flows
are known with certainty. Related: Stochastic
models. |
Detrend |
| To
remove the general drift, tendency, or bent of a set of statistical data as related to time. Often accomplished by regressing a variable or a time index and perhaps time-squared and capturing the residuals. |
Deutsche Börse AG (DBAG) |
| Deutsche
Börse AG (DBAG) is the operating company for the German cash and derivatives markets. It has four subsidiaries: Deutsche Börse Clearing AG, Deutsche Börse Systems AG, Frankfurter Wertpapierbörse (FWB), and the derivatives market, EUREX Deutschland (formerly the Deutsche Terminbörse ). |
Devaluation |
| A
decrease in the spot price
of a currency. Often initiated by a government announcement. |
Diagonal spread |
| An
options strategy requiring a long and a short
position in the same class
of option at different strike
prices and different expiration dates.
For example, two puts or two calls in the same stock. See: Calendar spread; vertical
spread. |
Dialing and smiling |
| See:
Cold calling |
Dialing for dollars |
| A
term used to describe the practice of cold
calling, but which has negative implications as it is frequently applied to salespeople selling speculative or fraudulent investments. |
Diamonds |
| Units
of interest in the diamonds trust, a unit
investment trust that serves as an index
to the Dow Jones Industrial Average
in that its holdings consist of the 30 component stocks of the Dow. |
Diff |
| Short
version of Euro rate differential, which is a Chicago
Mercantile Exchange Futures contract
that is founded on the interest rate
spread between the U.S. dollar and the British pound, the German mark, or the Japanese yen. |
Difference from S&P |
| A
mutual fund's return
minus the change in the Standard & Poor's
500 index for the same time period. A notation of -5.00 means the fund return is 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P have the same return. |
Differential |
| A
small charge, typically 1/8 point, added to the purchase price and subtracted from the selling price by the dealer for odd-lot quantities. |
Differential disclosure |
| The
practice of reporting conflicting or markedly different information in official corporate statements including annual and quarterly reports and 10-Ks and 10-Qs. |
Differential swap |
| Swap between two LIBOR
rates of interest, e.g., yen LIBOR for dollar LIBOR Payments are in one currency. |
Diffusion process |
| A
conception of the way a stock's
price changes that assumes that the price takes on all intermediate values. |
Digits deleted |
| Designation
on securities exchange tape
meaning that because the tape has been delayed, some digits have been dropped (e.g., 26 1/2 becomes 6 1/2). |
Dilution |
| Diminution
in the proportion of income to which each share
is entitled. |
Dilution protection |
| Standard
provision that changes the conversion ratio
in the case of a stock dividend
or extraordinary distribution to avoid dilution
of a convertible bondholder's
potential equity position.
Adjustment usually requires a split
or stock dividend in excess of 5% or issuance of stock below book value. |
Dilutive
effect |
| Result of a transaction that decreases earnings per common share (EPS). |
Dip |
| Slight
drop in securities prices after a sustained uptrend. Analystsoften advise investors to buy on dips, meaning to buy when a price is momentarily weak. See: Correction, break,
crash. |
Direct
estimate method |
| A method of cash budgeting based on detailed estimates of cash receipts and cash disbursements category by category. |
Direct investment |
| The
purchase of a controlling interest
in a company or at least enough interest
to have enough influence to direct the course of the company. |
Direct lease |
| Contract
in which a lessor purchases new equipment from the manufacturer and leases it to the lessee. |
Direct
overhead |
| A fraction of overhead costs devoted to the manufacturing sector of a firm
to cover expenses such as rent and utilities. |
Direct paper |
| Commercial paper sold directly by the issuer to investors. |
Direct participation program |
| An
investment program enabling investors to directly participate in the cash_flow and tax benefits of the partnership invested in by the investor, typically a form of passive investment. |
Direct placement |
| Selling
a new issue not by offering it for sale publicly, but by placing it with one of several institutional investors. |
Direct quote |
| For
foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency. |
Direct search market |
| Buyers
and sellers seek each other directly and transact directly. |
Direct stock-purchase programs |
| Investors purchase securities
directly from the issuer. |
Director |
| See:
Board of directors. |
Directorship |
| Used
in the context of general equities. Stock
status whereby a trader may not maintain positions in the security,
due to an investment bank employee serving as a director on the corporation's board of directors done to avoid conflicts of interest; signified by a flashing "D" on Quotron. Contrast to restricted. |
Dirty float |
| A
system of floating exchange rates
in which a government may intervene to change the direction of the value of the country's currency. |
Dirty price |
| Bond price including accrued
interest, i.e., the price paid by the bond buyer. |
Dirty stock |
| A
stock that fails to fulfill prerequisites to attain good delivery status. |
Disability income insurance |
| An
insurance policy that insures a worker in the event of an occupational mishap resulting in disability. Insurance benefits compensate the injured worker for lost pay. |
Disbursement float |
| A
decrease in book cash but no immediate change in bank cash, generated by checks written by the firm. |
Discharge of bankruptcy |
| The
termination of bankruptcy proceedings, resulting in cancellation of the debtor's obligations. |
Discharge
of lien |
| An order
terminating a lien on property. |
Disclaimer of opinion |
| An
auditor's statement that does not express any opinion regarding the company's financial condition. |
Disclosure |
| A
company's release of all information pertaining to the company's business activity, regardless of how that information may influence investors. |
Discontinued
operations |
| Divisions of a business that have been sold or written off and that no longer are maintained by the business. |
Discount |
| Convertible:
Difference between gross parity
and a given convertible price.
Most often invoked when a redemption is expected before the next coupon payment, making it liable for accrued interest. Antithesis of premium. General: Information that has already been taken into account and is built into a stock or market. Straight equity: Price
lower than that of the last sale or inside
market. |
Discount
bond |
| Debt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero
coupon bond. |
Discount
broker |
| A brokerage house featuring relatively low commission rates in comparison to a full-service broker. |
Discount factor |
| Present value of $1 received at a stated future date. |
Discount period |
| The
period during which a customer can deduct the discount from the net amount of the bill when making payment. |
Discount rate |
| The
interest rate that the Federal
Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings. |
Discount
securities |
| Non-interest-bearing money market instruments
that are issued at a discount
and redeemed at maturity for full face value, e.g., U.S. Treasury bills. |
Discount window |
| Facility
provided by the Fed enabling member banks to borrow reserves against collateral in the form of governments or other acceptable paper. |
Discount yield |
| The
yield or annual interest
rate on a security sold to an investor at a discount.
A bond that is sold at $4875 that matures to $5000 has a discount of $125. To calculate the discount yield: (discount divided by the face
value of the security) multiplied by the (number of days in the year divided by the number of days to maturity). |
Discounted
basis |
| To sell below maturity value, so that the difference makes up all or part of the interest. |
Discounted cash flow (DCF) |
| Future
cash flows multiplied by discount factors to obtain present values. |
Discounted dividend model (DDM) |
| A
formula to estimate the intrinsic value
of a firm by figuring the present value of all expected future dividends. |
Discounted
payback period rule |
| An investment decision rule in which cash flows are discounted at an interest rate and one determines how long it takes for the sum of the discounted cash flows to equal the initial investment. |
Discounted in/by market |
| Unannounced
information that is widely accepted or anticipated, and hence is already taken into account in the pricing of the security/ market
(e.g., poor earnings). |
Discounting |
| Calculating
the present value of a future amount. Discounting is opposite to compounding. |
Discounting
the news |
| An adjustment of a stock's price as speculators bid
the price up or down in anticipation of news about the company, whether good or bad. |
Discrete compounding |
| Compounding the time
value of money for separate time intervals. |
Discrete random variable |
| A
random variable that can take only a certain specified set of individual possible values-for example, the positive integers 1, 2, 3, . . . |
Discrete variable |
| Variable like 1, 2, 3. Bond
ratings are examples of discrete classifications. |
Discretionary account |
| Accounts
over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control. |
Discretionary cash flow |
| Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects; it is available for paying cash dividends, repurchasing
common stock, retiring
debt, and so on. |
Discretionary income |
| The
amount of income a consumer has available after purchasing essentials such as food and shelter. |
Discretionary order |
| A
type of buy order that gives the broker the freedom and power to make the execution at any time and price that is seen fit and reasonable, given the investor's goals. |
Discretionary trust |
| In
the context of mutual funds,
refers to a mutual fund or unit trust whose management decides on the best way to use the assets without restriction to a specific type of security. In the context of trusts, refers to a personal trust in which a trustee has the power of decision as to how much income or principal each beneficiary receives. |
Discriminant analysis |
| A
statistical process that links the probability of default to a specified set of financial ratios. |
Dishonor |
| A
refusal to pay. |
Disinflation |
| A
decrease in the rate of inflation. |
Disintermediation |
| Withdrawal
of funds from a financial institution in order to invest them directly. |
Disinvestment |
| A
reduction in capital investment
reflected by a decrease in capital goods
and a company's decision not to replace depleted capital
goods. |
Disposable income |
| The
amount of personal income an individual has after taxes and government fees, which can be spent on necessities, or non-essentials, or be saved. |
Distress sale |
| The
selling of assets under adverse conditions, e.g., an investor may have to sell securities
to cover a margin call. |
Distributed |
| As
new Treasury issues in dealers'
hands are said to be distributed. |
Distributing
syndicate |
| A syndicate
consisting of a number of brokerage firms or investment
bankers that work together to sell and disperse a large lot of securities. |
Distribution |
| Selling
a large lot of a security in such a way that the security price is not heavily influenced. |
Distribution area |
| An
established price range in which a stock has been trading in for a significant amount of time. See: Accumulation area. |
Distribution period |
| The
few days between the board of directors' declaration of a stock dividend (declaration date) and the date of record, or the date an individual must own shares to be entitled to a dividend. |
Distribution plan |
| A
mutual fund's plan to charge distribution costs such as advertising to the investors of the fund. |
Distribution stock |
| A
small amount of a specific stock that forms part of a larger block of stock
that is sold small amount by small amount so as not to disrupt the stock's market price. |
Distributions |
| Payments
from fund or corporate cash flow.
May include dividends from earnings, capital
gains from sale of portfolio
holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some corporations offer Dividend Reinvestment Plans (DRP). |
Divergence |
| When
two or more averages or indexes fail to show confirming trends. |
Diversifiable risk |
| Related:
Unsystematic risk |
Diversification |
| Dividing
investment funds among a variety of securities
with different risk, reward, and correlation statistics so as to minimize unsystematic risk. |
Diversified investment company |
| An
investment vehicle such as a mutual fund that invests in an assortment of securities. |
Divestiture |
| A
complete asset or investment
disposal such as outright sale or liquidation. |
Dividend |
| A
portion of a company's profit
paid to common and preferred
shareholders. A stock
selling for $20 a share with an annual dividend of $1 a share yields the investor
5%. |
Dividend in arrears |
| Accumulated dividends on cumulative
preferred stock that are deemed payable to the current holder. |
Dividend capture |
| See:
Dividend rollover plan |
Dividend clawback |
| An
arrangement under which sponsors of a project agree to contribute as equity any prior dividends
received from the project to the extent necessary to cover any cash deficiencies. |
Dividend clientele |
| A
group of shareholders who prefer that the firm follow a particular dividend policy. Such a preference may be based on comparable tax situations. |
Dividend Discount Model (DDM) |
| A
method to value the common stock
of a company that is based on the present
value of the expected future dividends. |
Dividend growth model |
| An
approach that assumes dividends
grow at a constant rate in perpetuity. The value of the stock equals next year's dividends divided by the difference between the required rate of return and the assumed constant growth rate in dividends. |
Dividend limitation |
| A
bond covenant
that restricts in some way the firm's ability to pay cash dividends. |
Dividend payout ratio |
| Percentage
of earnings paid out as dividends. |
Dividend policy |
| Standards
by which a firm determines the amount of money it will pay as dividends. |
Dividend rate |
| The
fixed or floating rate paid on preferred stock based on par value. |
Dividend
record |
| S&P
publication stating companies' payment histories and corporate policies. |
Dividend Reinvestment Plan (DRP) |
| Automatic
reinvestment of shareholder
dividends in more shares
of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market
price. Dividend
reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder. |
Dividend requirement |
| The
annual earnings minimum required for payment of dividends on a preferred
stock. |
Dividend rights |
| A
shareholder's rights to receive per-share dividends identical to those other shareholders receive. |
Dividend rollover plan |
| An
investment strategy that entails the purchase and selling of a stock right before its ex-dividend date in order to collect the dividends paid out by the stock and capture a trade profit. |
Dividend trade roll/play |
| Used
for listed equity securities. Method of buying and selling stocks around their ex-dividend dates so as to collect the dividend (which is 80% tax-exempt) offset by a fully-taxable capital loss. Predicated on the 80% current exemption that some corporations receive on dividend income. |
Dividend yield (Funds) |
| Indicated yield represents return
on a share of a mutual fund
held over the past 12 months. Assumes fund was purchased a year ago. Reflects effect of sales charges (at current rates), but not redemption charges. |
Dividend yield (Stocks) |
| Indicated yield represents annual dividends divided by current stock price. |
Dividends payable |
| The
declared dividend
dollar amount that a company is obligated to pay. |
Dividends per share |
| Dividend paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term. |
Dividends-received deduction |
| A
corporate tax deduction on income allowed by company A that is in ownership of shares of company B and receives dividends on the shares
of company B. |
DM |
| Deutsche
(German) marks. |
Deutsche Terminbörse (DTB) |
| Formerly
the German financial futures and options market. Merged with the Swiss Options and Financial Futures Exchange (SOFFEX) in 1998 to form EUREX, the European derivatives exchange. |
Divisor |
| Used
in construction of stock indices. Suppose you have
10 stocks in an index, each worth $10 and the index
is at 100. Now suppose you want to replace one of the
stocks with another stock (reshuffling happens). Suppose
that the new stock to be included is worth $20. So
the total value of the
index is 110 after the swapping. But we really shouldn't have an increase in value because nothing has happened - other than switching two constituents. So, what people do is to change the divisor. In this case, the divisor goes from 1 to 1.10. Notice that the value of the index, 110/1.1 is now exactly 100 - which is where we began from. |
Do Not Increase (DNI) |
| A
restriction that an investor
places on a good til' cancelled order
to prevent an order increase in the case of a stock dividend or stock
split. |
Do
Not Reduce Order (DNR Order) |
| Limit order to buy or to sell, or a stop limit order to sell that is not to be reduced by the amount of an ordinary cash dividend on the ex-dividend
date. A "do not reduce order" applies only to ordinary cash dividends, and not stock
dividends or rights. |
Doctrine of sovereign immunity |
| Principle
that a nation may not be tried in another country without its consent. |
Documented discount notes |
| Commercial paper backed by normal bank lines of credit plus a letter of credit from a bank stating that it will pay off the paper at maturity if the borrower defaults. Such paper is also referred to as L.O.C. paper. |
Dogs of the Dow |
| T
10 stocks of the 30 on the Dow Jones Industrial Average with the most depressed prices and consequently the highest yields. The investor
buying these stocks speculates that they will bounce back over a one-year period. |
Dollar bears |
| Traders who capitalize on a falling dollar by buying other foreign currencies directly. |
Dollar bonds |
| Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with "U.S. Dollar" bonds, a common term of reference in the Eurobond market. |
Dollar cost averaging |
| See:
Constant dollar plan |
Dollar drain |
| The
impact of importing from foreign countries more than exporting to them. The money required to finance the import purchases removes dollars from the importing nation. |
Dollar duration |
| The
product of modified duration
and the initial price. |
Dollar price of a bond |
| Percentage
of face value at which a bond
is quoted. |
Dollar return |
| The
return realized on a portfolio
for any evaluation period, including (1) the change in market value of the portfolio and (2) any distributions made from the portfolio during that period. |
Dollar roll |
| Similar
to the reverse repurchase agreement-a
simultaneous agreement to sell a security
held in a portfolio with purchase of a similar security at a future date at an agreed-upon price. |
Dollar safety margin |
| The
dollar equivalent of the safety cushion
for a portfolio in a contingent
immunization strategy. |
Dollar
shortage |
| Results when a nation importing U.S. goods cannot pay for them without the aid of the United States. |
Dollar-weighted rate of return |
| Also
called the internal rate of return;
the interest rate that makes the present value of the cash flows from all the subperiods in an evaluation period plus the terminal
market value of the portfolio
equal to the initial market value
of the portfolio. |
Domestic corporation |
| A
corporation that is conducting business and is based in the country in which it is established, as opposed to a foreign corporation. |
Domestic International Sales Corporation (DISC) |
| A
US corporation that receives a tax incentive for export activities. |
Domestic market |
| A
nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign
market. |
Donor |
| One
who gives property or assets
to someone else through the vehicle of a trust. |
Don't fight the tape |
| Phrase
advising not to trade against the market trend.
If stock prices are rising, do not sell. |
Don't know (DK, DKed) |
| "Don't
know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. |
Double auction market |
| Systems
by which listed securities are bought and sold through brokers on the securities exchanges, as distinguished from the OTC market, where trades are negotiated. Unlike the conventional auction with one auctioneer and many buyers, double auction markets consist of many sellers and many buyers. |
Double auction system |
| A
market consisting of many sellers and many buyers, as opposed to a conventional auction with one market maker and many buyers. |
Double-barreled |
| Describes
backing of the principal and interest of a smaller municipal
revenue bond the large municipal entity. |
Double bottom |
| A
term used in technical analysis
to refer to the drop of a stock's price, a rebound, and then a drop back to the same level as the original drop. |
Double-declining-balance depreciation method (DDB) |
| An
accounting methodology in which depreciation
is accelerated to twice the rate of annual depreciation
by the straight-line method. |
Double-declining-balance
depreciation |
| Method of accelerated depreciation. |
Double dip |
| Used
for listed equity securities. Dividend
roll in which the "dividend capturer" already owns the stock cum dividend . |
Double-dip lease |
| A
cross-border lease in which the different rules of the lessor's and lessee's
countries let both parties be treated as the owner of the leased equipment for tax purposes. |
Double-tax agreement |
| Agreement
between two countries that taxes paid abroad can be offset against domestic taxes levied on foreign dividends. |
Double taxation |
| Government
taxation of the same money twice; specifically, taxation of earnings at the corporate level and dividends at the stockholder
level. |
Double top |
| A
term used in technical analysis
to refer to the rise of a stock's price, a drop, and then a rise back to the same level as the original rise. |
Double up |
| A
stock buying strategy that doubles the risk
when the price moves in the opposite direction from the direcetion the investor hoped for. For example, an investor with confidence in ABC buys 1000 shares at $100 and another 1000 shares when the price declines to $90. |
Double witching day |
| A
trading day when of two related classes of options
and futures expire, resulting in a variety of arbitrage strategies to close out positions. |
Doubling
option |
| A sinking
fund provision that may allow repurchase of twice the required number of bonds at the sinking fund call price. |
Dow
dividend theory |
| See: Dogs of the Dow. |
Dow Jones Industrial Average |
| The
best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including, stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing. There are hundreds of investment indexes around the world for stocks, bonds,
currencies, and commodities. |
Dow Theory |
| Used
in the context of general equities. Technical theory that a major trend in the stock
market must be confirmed by simultaneous movement of the Dow Jones Industrial Average and the Dow Jones Transportation Average to new highs or lows. |
Down round |
| Refers
to a round of venture capital financing that is raised at a lower firm valuation than the previous round. |
Down-and-in option |
| Barrier option that comes into existence if asset price hits a predetermined price level. |
Down-and-out option |
| Barrier option that expires if asset price hits a predetermined price level. |
Downgrade |
| A
negative change in ratings for a stock, or other rated security. |
Downside risk |
| The
risk that a security
will decline in value in includng the implications of risk. |
Downsizing |
| A
company's reduction in the number of employees, number of bureaucratic levels, and overall size in an attempt to increase efficiency and profitability. |
Downstream |
| The
transfer of corporate activity from the larger parent
to the smaller subsidiary. |
Downtick |
| Move
down in a particular stock. On U.S. stock exchanges, you cannot sell a stock short on a downtick. |
Downturn |
| The
transition point between a rising, expanding economy to a falling, contracting one. |
Draining reserves |
| Federal Reserve System's course of action to tighten the money supply by (1) raising a bank's minimum reserve requirements, (2) selling bonds in the open
market, (3) raising the rate at which banks borrow from the Fed. |
Draft |
| An
unconventional order in writing-signed by a person, usually the exporter, and addressed to the importer-ordering the importer or the importer's agent to pay, on demand (sight draft) or at a fixed future date (time draft) the amount specified on the face of the draft. |
Draw a call |
| In
the context of general equities, provoking a customer indication/inquiry/order
by up or doing large amount of the volume in a stock. |
Drawback |
| A
tax or duty rebate on imported goods that are exported at a later date. |
Dressing up a portfolio |
| Money managers' strategy to make transactions for the sole purpose of making a portfolio look good to the investor near the end of a reporting period. See: Window dressing |
Drip feed |
| The
continual investment of capital
in a small and growing company as the company needs it, rather than investing a lump sum at the company's inception. |
Drive-by VC |
| A
type of venture capitalist. In the usual model, the venture capitalist (VC) is involved in management and mentoring of the startup. A drive-by VC invests in a portfolio of startups and is often quick to exit. |
Drop |
| Refers
to over-the-counter trading. Remove from O.T.C.
trading list; hence, no longer making a market
in a security. |
Drop, The |
| In
a dollar roll transaction, the difference between the sale price of a mortgage-backed
pass-through, and its repurchase price on a future date at a predetermined price. |
Drop-dead day |
| The
date on which a deadline is final, with no exceptions. |
Drop-dead fee |
| A
term of British origin referring to fee that must be paid if a deal falls through because of financing issues. |
Drop
lock |
| The fixing of the interest rate on a floating-rate
note or preferred stock
if it falls to a specified level. |
Dual
banking |
| Describes United States custom in which a bank is chartered by the state or federal government. |
Dual-currency issues |
| Eurobonds that pay coupon
interest in one currency
but pay the principal in a different currency. |
Dual listing |
| Listing
of a security on more than one exchange, thus increasing the competition for bid and offer
prices, the liquidity
of the securities, and the length time the stock can be traded daily (if listed on both the east and west coasts.) See: Listed security. |
Dual-purpose fund |
| A
closed-end fund
consisting of two classes of shares. The two classes
are preferred shares, on which shareholders receive all the dividends and interest
from the portfolio, and common
shares, on which shareholders
receive all the capital gains. |
Dual syndicate equity offering |
| An
international equity placement that splits the offering is split into two tranches - domestic and foreign - and each tranche is handled by a separate lead manager. |
Dual trading |
| The
custom of a trader on the commodities market
to deal for its own account
and the investor's account
at the same time. |
Due
bill |
| An instrument
evidencing the obligation of a seller to deliver securities
sold to the buyer. Occasionally used in the bill market. |
Due date |
| Date
on which a debt must be paid. |
Due dilengence |
| An
internal audit of a target frim by an acquiring firm. Offers are often made contingent upon resolution of the due diligence process. |
Due diligence meeting |
| Meeting
legally required to be held by an underwriter
to enable brokers to question a new issuer about an upcoming issue. |
Due-on-sale clause |
| A
mortgage contract clause stipulating that the borrower to pay off the full remaining principal on a mortgage
if the mortgaged property is sold before the mortgage is paid off. |
Dumping |
| In
the context of general equities, offering
large amounts of stock with little or no concern for price or market
effect. |
Duplicative portfolio |
| Applies
mainly to derivative products. Basket
of stocks that imitates the price movement of another set of securities (e.g., S&P
500 index). |
Dupont system of financial control |
| Expressing
return on assets (ROA) in terms of the profit margin and asset
turnover. |
Duration |
| A
common gauge of the price sensitivity of a fixed income asset or portfolio
to a change in interest rates. |
Dutch auction |
| Auction in which the lowest price necessary to sell the entire offering becomes the price at which all securities offered are sold. This technique has been used in Treasury auctions. Often used in risk arbitrage. The price of an item (stock) is gradually lowered until it elicits a responsive bid (government T-bills) or offer (corporate repurchase) and is sold. In a corporate repurchase, the company sets a range of prices within which shareholders are invited to tender their shares. The tender offer is open for a specific period of time (i.e., 20 days), and the quantity of stock to be purchased is stated as well, subject to prorating if more shares are tendered than can be legally purchased under the stated terms (often an additional amount equal to 20% of outstanding shares can be purchased). Compare to double auction system. |
Dutch auction preferred stock |
| A
form of adjustable-rate preferred
stock in which the dividend
is ascertained in a Dutch auction
process by corporate bidders every seven weeks. |
Duty |
| A
tax on imports, exports, or consumption goods. |
Dwarfs |
| Fannie
Mae-issued mortgage-backed
securities pool that has an original maturity
of 15 years. |
Dynamic asset allocation |
| An
asset allocation strategy in which the asset mix is shifted in response to changing market conditions, as in a portfolio
insurance strategy, for example. |
Dynamic hedging |
| A
strategy that involves rebalancing hedge
positions as market
conditions change; a strategy that seeks to insure the value of a portfolio using a synthetic
put option. |