F |
| Fifth
letter of a Nasdaq stock symbol specifying that the issue is a foreign company. |
FASB |
| See:
Financial Accounting Standards Board |
FCIA |
| See:
Foreign Credit Insurance Association |
FCM |
| See:
Futures commission merchant |
FDI |
| See:
Foreign direct investment |
FDIC |
| See:
Federal Deposit Insurance Corporation |
FFO |
| See:
Funds from operations |
FIRREA |
| See:
Financial Institutions Reform, Recovery and Enforcement Act of 1989 |
FOK |
| See:
Fill or kill order |
FRA |
| See:
Forward rate agreement |
FRN |
| See:
Floating-rate note |
FSC |
| See:
Foreign Sales Corporation |
Face-amount certificate |
| A
debt security issued by face amount. The holder makes payments periodicaly to the issues, and the issuer promies to pay the purchaser the face value at maturity or the surrended value if the security is presented by the maturity specified in the certificate. |
Face value |
| See:
Par value |
Factor |
| A financial institution that buys a firm's accounts receivable and collects the accounts. |
Factor analysis |
| A
statistical procedure that seeks to explain a certain phenomenon, such as the return on a common
stock, in terms of the behavior of a set of predictive factors. |
Factor model |
| A
way of decomposing the forces that influence a security's
rate of return into common and firm-specific influences. |
Factor portfolio |
| A
well-diversified portfolio constructed to have a beta of 1.0 on one factor
and a beta of zero on any other factors. |
Factoring |
| Sale
of a firm's accounts receivable
to a financial institution known as a factor. |
Fade |
| Refers
to over-the-counter trading. Fill another OTC
dealer's bid
for or offer of stock. |
Fail |
| A
deal is said to fail if on the settlement
date either the seller does not deliver
securities in proper form or the buyer does not to deliver funds in proper form. |
Fair-and-equitable test |
| A
set of requirements for a plan of reorganization to be approved by the bankruptcy court. |
Fair game |
| An
investment prospect that has a zero risk
premium. |
Fair
market price |
| Amount at which an asset would change hands between two parties, that both have knowledge of the relevant facts. Also referred to as market price. |
Fair price |
| The
equilibrium price for futures contracts.
Also called the theoretical futures price,
which equals the spot price
continuously compounded at the cost of carry rate for some time interval. |
Fair price provision |
| See:Appraisal rights |
Fair rate of return |
| The
rate of return that state governments allow a public utility to earn on its investments and expenditures. Utilities then use these profits to pay investors
and provide service upgrades to their customers. |
Fair value |
| In
the context of futures, the equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously
compounded at the cost of carry rate
for some time interval. More generally, fair value for any asset simply refers to the perception that it is neither underpriced (too cheap) nor overpriced (too expensive). |
Fairness opinion |
| An
investment banker's professional opinion as to the price an acquiring firm is offering
in a takeover or merger. |
Fall Down |
| In
the context of general equities, may not be able to produce as indicated in one's advertised market, due to less help (than anticipated) from other parties or due to changing market conditions. |
Fall out of bed |
| A
sudden drop in a stock's
price resulting from failed or poor business deals gone bad or falling through. |
Fallen angels |
| Bonds that at the time of issue were considered investment grade but that have dropped below that rating over time. |
Fallout risk |
| A
type of mortgage pipeline risk
that is generally created when the terms of the loan
to be originated are set at the same time the sale terms are established. The risk is that either of the two parties, borrower or investor, fails to close and the loan "falls out" of the pipeline. |
Fama, Eugene F. |
| Finance
professor at the University of Chicago. Developer of the Efficient Markets Hypothesis. |
Far month |
| Used
in the context of option or futures to refer to the trading
month of the contract that is farthest away. Antithesis of nearest month. |
Farther
out; farther in |
| Used in the context of options to refer to the relative length of option contract
maturities. |
FASB No. 8 |
| U.S.
accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by the temporal method; that is reporting gains and losses from currency fluctuations in current income. It was in effect between 1975 and 1981 and became the most controversial accounting standard in the U.S. It was replaced by FASB No. 52 in 1981. |
FASB No. 52 |
| The
U.S. accounting standard that replaced FASB
No. 8. U.S. companies are required to translate foreign accounts in terms of the current rate and report the changes from currency fluctuations in a cumulative translation adjustment account in the equity section of the balance
sheet. |
Fast
market |
| Excessively rapid trading in a specific security
that causes a delay in the electronic updating of its last sale and market conditions, particularly in options. |
Favorable
trade balance |
| Condition that total exports of a nation exceed total imports, creating a net export. |
Feasible portfolio |
| A
portfolio that an investor
can construct, given the assets
available. |
Feasible set of portfolios |
| The
collection of all feasible portfolios. |
Feasible target payout ratios |
| Payout ratios that are consistent with the level of excess funds available to make cash dividend payments. |
FED Pass |
| A
Federal Reserve action adding more reserves
to the banking system, increasing the money available for lending, and making credit easier to attain. |
Federal agency securities |
| Securities issued
by corporations and agencies
created by the U.S. government, such as the Federal
Home Loan Bank Board and Ginnie Mae. |
Federal Agricultural Mortgage Corporation (Farmer Mac) |
| A
federal agency chartered in 1988 to provide a secondary
market for farm mortgage
loans. |
Federal credit agencies |
| Agencies of the federal government set up to supply credit to various classes
of institutions and individuals, e.g., S&Ls, small business firms, students, farmers, and exporters. |
Federal deficit (surplus) |
| When
federal government expenditures are exceeded by federal government revenue. |
Federal Farm Credit Bank |
| An
institution created by the government with the purpose of uniting the financing activities of the federal land banks, the federal intermediate credit banks, and the banks for cooperatives. See: Federal Farm Credit System. |
Federal Farm Credit System |
| A
system chartered in 1971 through the farm credit act providing farmers with credit services through a federal land bank, a federal intermediate credit bank, and a bank for cooperatives. See: Federal Farm Credit Bank. |
Federal Deposit Insurance Corporation (FDIC) |
| A
federal institution that insures bank deposits. |
Federal Financing Bank |
| A
federal institution that lends to a wide array of federal credit agencies
funds it obtains by borrowing from the U.S. Treasury. |
Federal funds |
| Noninterest-bearing
deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess
reserves lent by banks to each other. |
Federal funds market |
| The
market in which banks can borrow or lend reserves,
allowing banks temporarily short
of their required reserves
to borrow reserves from banks that have excess reserves. |
Federal funds rate |
| The
interest rate that banks with excess reserves at a Federal
Reserve district bank charge other banks that need overnight loans. The Fed funds rate, as it is called, often points to the direction of U.S. interest rates. The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount
rate. |
Federal gift tax |
| A
federal tax imposed on assets
conveyed as gifts to individuals. |
Federal Home Loan Banks |
| The
institutions that regulate and lend to savings
and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis member commercial banks. |
Federal Home Loan Mortgage Corporation (FHLMC) |
| See:
Freddie Mac |
Federal Housing Administration (FHA) |
| Federally
sponsored agency chartered in 1934 whose stock
is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures the lenders against loss. |
Federal Housing Finance Board (FHFB) |
| U.S.
government agency chartered in 1989 to assume the responsibilities formerly held by the Federal Home Loan Bank system. |
Federal Intermediate Credit Bank |
| A
bank sponsored by the federal government to provide funds to institutions making loans to farmers. |
Federal Land Bank |
| A
bank administered under the U.S. Farm Credit Administration that provides long-term mortgage credit to farmers for agriculture-related expenditures. |
Federal
National Mortgage Association (Fannie
Mae) |
| A publicly owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some nongovernment-backed mortgages. |
Federal Open Market Committee (FOMC) |
| The
body that is responsible for setting the interest
rates and credit policies of the Federal
Reserve System. |
Federal Reserve Bank |
| One
of the 12 member banks constituting the Federal
Reserve System that is responsible for overseeing the commercial and savings banks of its region to ensure their compliance with regulation. |
Federal Reserve Board (FRB) |
| The
seven-member governing body of the Federal
Reserve System, which is responsible for setting reserve requirements, and the discount rate, and making other key economic decisions. |
Federal Reserve System |
| The
monetary authority of the U.S., established in 1913, and governed by the Federal Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding companies, international operations of U.S. banks, and U.S. operations of foreign banks. |
Federal Savings and Loan Association |
| An
institution chartered by the federal government whose primary function is to collect savings deposits and to provide mortgage loans. |
Federally related institutions |
| Arms
of the federal government exempt from SEC
registration whose securities
are backed by the full faith and credit of the U.S. government (with the exception of the Tennessee Valley Authority). |
Fedwire |
| A
wire transfer system for high-value payments operated by the Federal Reserve System. |
FHA prepayment experience |
| The
percentage of loans in a pool of mortgages
outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages. |
Fiat money |
| Nonconvertible
paper money. |
FICO |
| See:
Financing corporation |
Fictitious credit |
| A
margin account's credit balance. Fictitious credit exists after the proceeds from a short sale are accounted for with respect to the margin requirement. The proceeds from the short sale are reflected as a credit, but must stay in the account to serve as security
for the loan of securities made in a short sale, and are therefore inaccessible to the client for withdrawal. |
Fidelity bond |
| See:
Blanket fidelity bond |
Field warehouse |
| Warehouse
rented by a company on another firm's premises. |
FIFO |
| See:
First in, first out |
Figure |
| Refers
to details about price including the bid and ofter. See: Handle |
Figuring
the tail |
| Calculating the yield at which a future money
market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo. |
Fill |
| The price at which an order is executed. |
Fill or kill order (FOK) |
| A
trading order
that is cancelled unless executed
within a designated time period. A market
or limited price order that is to be executed in its entirety as soon as it is represented in the trading crowd, and, if not so executed, is to be treated as cancelled. For purposes of this definition, a stop is considered an execution. Equivalent to AON and IOC
simultaneously. |
Filter |
| A
rule that stipulates when a security
should be bought or sold according to its price
action. |
Finance |
| A
discipline concerned with determining value and making decisions. The finance function allocates resources, including the acquiring, investing, and managing of resources. |
Finance charge |
| The
total cost of credit a customer must pay on a consumer loan, including interest. |
Finance company |
| A
company whose business and primary function is to make loans to individuals, while not receiving deposits like a bank. |
Financial Accounting Standards Board (FASB) |
| Board
composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). |
Financial adviser |
| A
professional offering financial advice to clients for a fee and/or commission. |
Financial
analysis |
| Analysis of a company's financial statement, often by financial analysts. |
Financial analysts |
| Also
called securities analysts and investment analysts,. Pofessionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks. |
Financial assets |
| Claims
on real assets. |
Financial control |
| The
management of a firm's costs and expenses in relation to budgeted amounts. |
Financial distress |
| Events
preceding and including bankruptcy,
such as violation of loan contracts. |
Financial
distress costs |
| Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs). |
Financial engineering |
| Combining
or carving up existing instruments
to create new financial products. |
Financial future |
| A
contract entered into now that provides for the delivery of a specified asset
in exchange for the selling price at some specified future date. |
Financial guarantee insurance |
| Insurance
created to cover losses from specified financial transactions. |
Financial institution |
| An
enterprise such as a bank whose primary business and function is to collect money from the public and invest it in financial assets such as stocks
and bonds. |
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) |
| Legislation
that established the Office of Thrift Supervision, which was created in the wake of the savings and loan crisis of the late 1980s. |
Financial intermediaries |
| Institutions
that provide the market function of matching borrowers and lenders or traders. |
Financial lease |
| Long-term,
noncancellable rental agreement. |
Financial leverage |
| Use
of debt to increase the expected
return on equity. Financial leverage is measured by the ratio of debt to debt plus equity. |
Financial leverage clientele |
| A
group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy. |
Financial leverage ratios |
| Common
ratios are debt divided by equity a debt divided by the sum of debt plus equity. Related: capitalization ratios. |
Financial market |
| An
organized institutional structure or mechanism for creating and exchanging financial assets. |
Financial needs approach |
| A
method of establishing the amount of life
insurance required by an individual by estimating the financial needs of dependents in the event of the individual's death. |
Financial objectives |
| Goals
related to returns that a firm will strive to accomplish during the period covered by its financial plan. |
Financial plan |
| A
blueprint relating to the financial future of a firm. |
Financial planning |
| Evaluating
the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan. |
Financial position |
| The
account status of a firm's or individual's assets, liabilities,
and equity positions
as reflected on its financial statement. |
Financial press |
| Media
devoted to reporting financial news. |
Financial public relations |
| Public
relations division of a company charged with cultivating positive investor relations and proper disclosure information. |
Financial pyramid |
| A
risk structure that spreads
investor's risks across low-, medium-, and high-risk vehicles. The bulk of the assets are in safe, low-risk investments that provide a predictable return (base of the pyramid). At the top of the pyramid are a few high-risk ventures that have a modest chance of success. |
Financial ratio |
| The
result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focusing on specific relationships. |
Financial risk |
| The
risk that the cash
flow of an issuer
will not be adequate to
meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm uses debt and equity. |
Financial structure |
| The
way in which a company's assets
are financed, such as short-term borrowings,
long-term debt, and ownership equity. Financial structure differs from capital structure in that capital structure accounts for long-term debt and equity
only. |
Financial
supermarket |
| A company offering a wide variety of financial services such as a combination of banking services, stock, and insurance brokerage. |
Financial tables |
| Tables
found in newspapers listing prices, dividends,
yields, price-earnings
ratios, trading volume,
and other important data on stocks,
bonds, mutual
funds, and futures contracts. |
Financial Times (F-T)-Actuaries indexes |
| Share
price indexes for U.K. companies The denominator in the index formula is the market capitalization at the base date, adjusted for all capital changes affecting the particular index since the base date. See: Footsie (FTSE) (procounced footsie). |
Financing Corporation (FICO) |
| A
government agency chartered in 1987 to bail out the Federal Savings and Loan Insurance Corporation (FSLIC) by issuing bonds. |
Financing decisions |
| Decisions
concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as a decision to issue bonds. |
Finder's fee |
| A
fee a person or company charges for service as an intermediary in a transaction. |
FINEX |
| The
financial futures and options division of the New York Cotton Exchange (NYCE), with a trading floor in Dublin, FINEX Europe, creating a 24-hour market in most FINEX contracts. |
Finish |
| Used
in the context of general equities. See: Fill. |
Finite-Life Real Estate Investment Trust (FREIT) |
| A
Real Estate Investment Trust
whose priority is to sell its holdings within a specified period to realize capital gains. |
Firewall |
| The
legal barrier between banking and broker/dealer operations within a financial
institution created to prevent the exchange of inside information. |
Firm |
| Refers
to an order to buy or sell that can be executed without confirmation for some fixed period. Also, a synonym for company. |
Firm commitment underwriting |
| An
underwriting in which an investment banking firm commits to buy and sell an entire issue of stock and assumes all financial responsibility for any unsold shares. |
Firm market |
| In
the context of general equities, prices
at which a security can actually be bought or sold in decent sizes, as compared to an inside market with very little depth. See: Actual market. |
Firm order |
| In
the context of general equities, (1) order
to buy or sell for the proprietary account of the broker-dealer
firm; (2) buy or sell order not conditional upon the customer's confirmation. |
Firm quote |
| A
definite price on a round-lot
bid or offer
declared by a market maker on a given security and not identified as a nominal quotation (therefore is not negotiable). |
Firm-specific risk |
| See:
Diversifiable risk or unsystematic
risk |
Firm's net value of debt |
| Total
firm value minus total firm debt. |
First board |
| The
Chicago Board of Trade's established dates for delivery on futures
contracts. |
First
call |
| With collateralized
mortgage obligation (C.M.O.s), the start of the cash flow cycle for the cash flow window. |
First call date |
| A
date stated in an indenture,
that is the first date on which the issuer may redeem a bond either partially or completely. |
First In, First Out (FIFO) |
| An
accounting method for valuing the cost of goods sold that uses the cost of the oldest item in inventory first. |
First mortgage |
| A
type of mortgage that through a lien gives precedence to the lender of the first mortgage
over all other lenders in case of default. |
First notice day |
| The
first day, varying by contracts
and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities
against futures are authorized. |
First-pass regression |
| A
time series regression to estimate the betas of securities
portfolios. |
First preferred stock |
| A
type of preferred stock
that has priority over other preferred issues
and common stock when claiming dividends and assets. |
Fiscal agency agreement |
| An
alternative to a bond trust deed.
Unlike the trustee, the fiscal agent acts as a representative of the borrower. |
Fiscal policy |
| Government
spending and taxing for the specific purpose of stabilizing the economy. |
Fiscal year (FY) |
| Accounting
period covering 12 consecutive months over which a company determines earnings and profits. The fiscal year serves as a period of reference for the company and does not necessarily correspond to the calendar year. |
Fisher effect |
| A
theory that nominal interest rates
in two or more countries should be equal to the required real rate of return
to investors plus compensation for the expected amount of inflation in each country. |
Fisher's separation theorem |
| Thte
notion that a firm's choice of investments is separate from its owner's attitudes toward investments. Also referred to as portfolio separation theorem. |
Fit |
| The
matching of the investor's
requirements and needs such as risk
tolerance and growth potential preference with a specific investment. |
Fitch
sheet |
| Used in the context of general equities. Chronological listing of trades in a security
showing the price, size, exchange,
and time (to the second) of the trades; obtained by hitting "#M" on Quotron. |
Five Cs of credit |
| Five
characteristics that are used to form a judgment about a customer's creditworthiness: character, capacity, capital, collateral,
and conditions. |
Five hundred dollar rule |
| A
rule of the Federal Reserve
that excludes deficiencies of $500 or less in margin
requirements as a necessary reason for the firm to liquidate the client's account to cover a margin
call. |
Five percent rule |
| A
rule of the National Association of Securities Dealers
providing ethical guidelines for spreads
created by market makers and commissions charged by brokers. |
Fixation |
| The
process of setting a price of a commodity,
whether in the present or the future. See: Gold
fixing. |
Fixed
asset |
| Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition. |
Fixed asset turnover ratio |
| The
ratio of sales to fixed assets. |
Fixed annuities |
| Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. |
Fixed benefits |
| Payments
to a beneficiary that are paid in fixed preset amounts and are not variable. |
Fixed-charge coverage ratio |
| A
measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest
charges paid plus long-term lease
payments) to (interest charges paid plus long-term lease payments). |
Fixed cost |
| A
cost that is fixed in total for a given period of time and for given production levels. |
Fixed dates |
| In
the Euromarket,
the
standard periods for which Euros
are traded (one month out to a year out) are referred to as the fixed dates. |
Fixed-dollar obligations |
| Conventional
bonds for which the coupon
rate is set at a fixed percentage of the par
value. |
Fixed-dollar security |
| A
nonnegotiable debt security
that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds. |
Fixed
exchange rate |
| A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket
of currencies. |
Fixed income equivalent |
| Also
called a busted convertible.
Convertible security
that is trading like a straight security
because the optioned common
stock is trading well below the conversion
price. |
Fixed income instruments |
| Assets that pay a fixed dollar amount, such as bonds and preferred
stock. |
Fixed income market |
| The
market for trading bonds
and preferred stock. |
Fixed premium |
| Payments
of a fixed, equal amounts paid to an insurance company for insurance or an annuity. |
Fixed
price basis |
| An offering of securities at a fixed price. |
Fixed-price tender offer |
| A
one-time offer to purchase a stated number of shares at a stated fixed price, usually at a premium over the current market
price. |
Fixed-rate
loan |
| A loan
whose rate is fixed for the life of the loan. |
Fixed-rate payer |
| In
an interest rate swap, the counterparty who pays a fixed
rate, usually in exchange for a floating-rate
payment. |
Fixed-term reverse mortgage |
| A
mortgage in which the lending
institution provides payments to a homeowner for a fixed number of years. |
Fixed trust |
| A
unit investment trust consisting of securities that were agreed upon at the time of investment and do not change. |
Flag |
| A
pattern reflecting price fluctuations within a narrow range, generating a rectangular area on a graph both prior to and after sharp rises or declines. |
Flash |
| Value
of a security displayed, or flashed across the tape, when the tape display cannot keep up with volume on an exchange
and lags the current price is lagged more than approximately five minutes. |
Flat |
| Convertibles:
Earning interest on the date of payment only. General:
Having neither a short nor a long position in a stock. Clean. Market: Characterized by horizontal price movement, usually the result of low activity. Equities:
To execute without commission
or markup. |
Flat benefit formula |
| Method
used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit. |
Flat price (also clean price) |
| The
quoted newspaper price of a bond
that does not include accrued interest.
The price paid by the purchaser is the full
price. |
Flat price risk |
| Taking a position either long
or short that does not involve spreading. |
Flat
scale |
| The pattern for new issues where shorter- and longer-term yields display very little difference over the bond's maturity
range. |
Flat
tax |
| A tax which is levied at the same rate on all levels of income. Antithesis of progressive tax. |
Flat trades |
| A
bond in default
trades flat; that is, the price quoted covers both principal and unpaid accrued
interest. Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat. |
Flattening of the yield curve |
| A
change in the yield curve when the spread between the yield
on long-term and short-term Treasuries
has decreased. Compare steepening of the yield curve
and butterfly shift. |
Flexible budget |
| A
budget that shows how costs vary with different rates of output or at different levels of sales volume and projects revenue based on these different output levels. |
Flexible expenses |
| Expenses
for an individual or corporation that can be adjusted or completely dispessed with, e.g., luxury goods. |
Flexible mutual fund |
| Fund
that invests in a variety of securities
in varying proportions in order to maximize shareholder
returns while maintaining a low level of risk. |
Flight
to quality |
| The tendency of investors to move toward safer investments (often government bonds) during periods of high economic uncertainty. |
Flip-flop note |
| Note that allows investors to switch between two different types of debt. |
Flip
side |
| In the context of general equities, opposite side to a proposition or position (buy, if sell is the proposition and vice versa). |
Flipping |
| Buying
shares in an initial
public offering (IPO), and then selling the shares immediately after the start of public trading to turn an immediate profit. |
Float |
| Currency: Exchange rate policy that does not limit the range of the market rate. Equities:
Number of shares of a corporation that are outstanding and available for trading by the public, excluding insiders or restricted
stock on a when-issued basis. A stock's volatility is inversely correlated to its float. |
Floater |
| A
bond whose interest
rate varies with the interest rate
of another debt instrument, e.g., a bond that has the interest
rate of the Treasury bill
+.25%. |
Floating debt |
| Short-term
debt that is renewed and refinanced contantly to fund capital needs of a firm or institution. |
Floating exchange rate |
| A
country's decision to allow its currency
value to change freely. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market. |
Floating lien |
| General
attachment against a company's assets
or against a particular class
of assets. |
Floating-rate
contract |
| An guaranteed investment instrument whose interest payment is tied to some variable (floating)
interest rate benchmark, such as a specific-maturity Treasury
yield. |
Floating-rate note (FRN) |
| Note whose interest
payment varies with short-term interest
rates. |
Floating-rate
payer |
| In an interest
rate swap, the counterparty
who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment. |
Floating-rate preferred |
| Preferred stock paying dividends that vary with short-term interest rates. |
Floating securities |
| Securities bought in a broker's
name and resold quickly to attain a profit
in a short amount of time. |
Floating
supply |
| The aggregate of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell. |
Floor |
| The
area of a stock exchange where active trading occurs. Also the price at which a stop order is activated (when the price drops low enough to activate such an order). |
Floor broker |
| Member
of an exchange who is an employee of a member firm and executes
orders, as agent,
on the floor of the exchange
for clients. |
Floor official |
| An
employee of a stock exchange
who settles disputes related to the auction process on the floor of the stock exchange. |
Floor picture |
| Details
of the trading crowd for a stock, such as the major players, their sizes, and the outside market +/- an eighth. |
Floor planning |
| Arrangement
used to finance inventory. A finance company buys the inventory, which is then held in trust for the user. |
Floor ticket |
| Summary
of a stock or commodities exchange
order ticket by the registered representative on receipt of a buy or sell order from a client; gives the floor broker the information needed to execute a securities
transaction. |
Floor
trader |
| A stock exchange member who generally trades
only for his own account or
for an account controlled by him, or who has such a trade made for him. Also referred to as a "local." |
Flotation (roatation) cost |
| The
costs associated with creating capital
through the issue of new stocks or bonds,
including the compensation earned by the investment
banker plus legal, accounting and printing expenses. |
Flow of funds |
| In
the context of municipal bonds,
refers to the statement displaying the priorities by which municipal revenue will be applied to the debt. In
the context of mutual funds,
refers to the movement of money into or out of a mutual
funds or between or amoung various fund sectors. |
Flow-through basis |
| An
account for an investment credit
to show all income statement
benefits of the credit in the year of acquisition,
rather than spreading them over the life of the asset. |
Flow-through method |
| The
practice of reporting to shareholders
using straight-line depreciation
but using accelerated depreciation
for tax purposes and "flowing through"
the lower income taxes actually paid to financial statements prepared for shareholders. |
Flower bond |
| Government bonds that when owned at the time of death are acceptable at par in payment of federal estate taxes. |
Fluctuation |
| A
price or interest rate change. |
Fluctuation limit |
| The
limit created by the commodity
exchange that halts trading
on a future if the price of the future changes, in either direction, more than a previously set amount. |
Flurry |
| A
drastic volume increase in a specific security. |
Focus
list |
| Used in the context of general equities. Investment banks published list of buy and sell recommendations from its research department; signified by a flashing "F" on Quotron. |
Footsie (FTSE) |
| Financial Times (F-T)-Actuaries 100
index: "Dow
average" of London. |
For/At |
| Used in the context of general equities. Conjunctions used in an order, market summary, or trade
recap that signify a bid or an offer, respectively. See: On. |
For a number |
| Used
in the context of general equities. Implies that the quantity mentioned is not his total but instead is only approximate, and to open him up more will obligate one to participate. |
For your information (FYI) |
| A
prefix to a security price indicating that the quote is for information purposes only, and not an offer to trade. |
Forbes 500 |
| Forbes
magazine's list of the largest publicly owned corporations in the United States according to sales, assets, profits,
and market value. |
Force majeure risk |
| The
risk that there will be prolonged interruption of operations for a project finance enterprise due to fire, flood, storm, or some other factor beyond the control of the project's sponsors. |
Forced conversion |
| Occurs
when a convertible security
is called in by the issuer,
usually when the underlying stock is selling well above the conversion price. The issuer thus assures the bonds will be retired without requiring any cash payment. Upon conversion into common, the carrying value of the bonds becomes part of a corporation's equity, thus strengthening the balance sheet and enhancing future debt capability. |
Forecasting |
| Making
projections about future performance on the basis of historical and current conditions data. |
Foreclosure |
| Process
by which the holder of a mortgage
seizes the property of a homeowner who has not made interest and/or principal
payments on time as stipulated in the mortgage
contract. |
Foreign banking market |
| That
portion of domestic bank loans
supplied to foreigners for use abroad. |
Foreign bond |
| A
bond issued
on the domestic capital market
of another company. |
Foreign
bond market |
| In the domestic
bond market Issues floated
by foreign companies or government. |
Foreign corporation |
| A
corporation conducting business in another country from the one it is chartered in and that abides by the laws of another country. See: Alien corporation. |
Foreign Corrupt Practices Act |
| An
amendment to the Securities Exchange Act created to sanction bribery of foreign officials by publicly held U.S. companies. |
Foreign Credit Insurance Association (FCIA) |
| A
private consortium of U.S. insurance companies that offers trade credit
insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank. |
Foreign crowd |
| NYSE members who trade
in foreign bonds on the floor. |
Foreign currency |
| Money
of another country from one's own. |
Foreign
currency forward contract |
| Agreement
that obligates its parties to exchange given quantities of currencies at a prespecified exchange rate on a certain future date. |
Foreign currency futures contract |
| Standardized
and easily transferable obligation between two parties to exchange currencies at a specified rate during a specified delivery month; standardized contract on specified underlying currencies, in multiples of standard amounts. Purchased and traded on a regulated exchange
on which margins are posted. |
Foreign currency option |
| An
option that conveys the right (but not the obligation) to buy or sell a specified amount of foreign currency at a specified price within a specified time period. |
Foreign currency translation |
| The
process of restating foreign currency
accounts of subsidiaries into the reporting
currency of the parent company in order to prepare consolidated financial statements. |
Foreign direct investment (FDI) |
| The
acquisition abroad of physical assets
such as plant and equipment, with operating control residing in the parent corporation. |
Foreign equity market |
| Issues floated
by foreign companies in the domestic equity market. |
Foreign exchange |
| Currency
of another country. Abbreviated Forex. |
Foreign exchange controls |
| Various
forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. |
Foreign exchange dealer |
| A
firm or individual that buys foreign exchange
from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or the spread. |
Foreign exchange risk |
| The
risk that a long
or short position in a foreign
currency might have to be closed out at a loss due to an adverse movement in exchange rates. |
Foreign exchange swap |
| An
agreement to exchange stipulated amounts of one currency
for another currency at one or more future dates. |
Foreign market |
| Part
of a nation's internal market,
representing the mechanisms for issuing
and trading securities
of entities domiciled outside that nation. Compare external market and domestic
market. |
Foreign market beta |
| A
measure of foreign market risk that is derived from the capital asset pricing model. |
Foreign Sales Corporation (FSC) |
| A
special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods. |
Foreign tax credit |
| Home
country credit against domestic income tax. Received in return for foreign taxes paid on foreign derived earnings. |
Forex |
| See: Foreign exchange |
Forfaiter |
| Purchaser
of promises to pay issued by importers. |
Forfeiture |
| The
loss of rights to an asset
outlined in a legal contract
if a party fails to fulfill obligations of the contract. |
Form 8-K |
| The
form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. |
Form 4 |
| The
form required by the SEC for a change in the holdings of an individual owning 10% or more of the outstanding stock
or in the holdings of a company officer. |
Form T |
| The
form required by the NASD to report equity transactions
after the market's regular hours. |
Form 10-K |
| A
report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. |
Form 3 |
| A
form required by the SEC and the stock exchange from all holders of 10% or more of a company's stock and all directors and officers, which details securities owned. |
Formula basis |
| A
method of selling a new issue
of common stock in which the S.E.C. declares the registration
statement effective on the basis of a price formula rather than on a specific range. |
Formula investing |
| A
formula-based investment technique in which investment decisions are made using predetermined timing or asset allocation models, e.g., dollar cost averaging. |
Fortune 500 |
| Fortune
magazine's listing of the top 500 U.S. corporations determined by an index of 12 variables. |
48-hour rule |
| PSA
Unifor Practices requirement that all pool information in a to be announced (T.B.A.) transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48 hours prior to the agreed-upon trade date. |
Forward |
| See: Forward contract |
Forward contract |
| A
contract that specifies the price and quantity of an asset to be delivered on in the future. Forward contracts are not standardized and are not traded on organized exchanges |
Forward cover |
| The
purchase in the cash market of the difference between what you are obligated to deliver in a forward contract and the amount of the asset you own. For example, if you agreed to sell 100,000 bushels of corn in September in a forward contract, but you only have 60,000, you need to purchase 40,000 to cover your obligation. |
Forward delivery |
| A
transaction in which the settlement
will occur on a specified date in the future at a price agreed upon on the trade date. |
Forward
differential |
| Annualized percentage difference between spot and forward
rates. |
Forward discount |
| A
currency trades at a forward discount when its forward
price is lower than its spot price. |
Forward exchange rate |
| Exchange rate fixed today for exchanging currency at some future date. |
Forward exchange transaction |
| Foreign currency purchase or sale at the current exchange rate but with payment or delivery of the foreign currency at a future date. |
Forward Fed funds |
| Fed funds traded
for future delivery. |
Forward forward contract |
| In
Eurocurrencies, a contract
under which a deposit of fixed maturity
is agreed to at a fixed price for future delivery. |
Forward interest rate |
| Interest rate fixed today on a loan to be made at some future date. |
Forward-looking multiple |
| A
truncated expression for a P/E
ratio that is based on forward
(expected) earnings rather than on trailing earnings. |
Forward market |
| A
market in which participants agree to trade
some commodity, security,
or foreign exchange at a fixed price for future delivery. |
Forward
premium |
| A currency
trades at a forward premium
when its forward price is higher than its spot price. |
Forward
pricing |
| Practice mandated by the SEC that open-end investment
companies establish all incoming buy and sell orders on the next net asset
valuation of fund shares. |
Forward rate |
| A
projection of future interest rates
calculated from either spot rates
or the yield curve. |
Forward rate agreement (FRA) |
| Agreement
to borrow or lend at a specified future date at an interest rate that is fixed
today. |
Forward
sale |
| A method for hedging price risk
that involves an agreement between a lender
and an investor to sell particular kinds of loans at a specified price and future time. |
Forward trade |
| A
transaction for which settlement
will occur on a specified date in the future at a price agreed upon on the trade date. |
Fourth market |
| Refers
to the practice of institutional investors
trading large blocks
of securities directly to avoid brokerage commissions. See: Instinet. |
Fractional discretion order |
| A
type of order that gives the broker discretion to alter the price, up or down, within a specific fractional range in order to guarantee an execution. |
Fractional
share |
| Stocks
ammounting to less than one full share,
usually resulting from splits, acquisitions, exchanges, or dividend reinvestment programs. |
Frankfurt Stock Exchange |
| The
largest of Germany's eight securities
exchanges, operated by Deutsche Borse AS. |
Freddie Mac (Federal Home Loan Mortgage Corporation) |
| A
Congressionally chartered corporation that purchases residential mortgages in the secondary
market from S&Ls, banks, and mortgage bankers and securitizes these mortgages for sale in the capital markets. |
Free on board (FOB) |
| Implies
that distribution services like transport and handling performed on goods up to the customs frontier (of the economy from which the goods are classed as merchandise.) are included in the price. |
Free box |
| A
bank vault or other suitable storage place for the securities of a firm's customer. |
Free cash flows |
| Cash
not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in working capital. In terms of a formula:
Free
cash flows =
Sales (Revenues from operations) -
COGS (Cost of goods sold-labor, material, book depreciation) -
SG&A (Selling, general administrative costs) EBIT
(Earnings before interest and taxes or Operating Earnings) -
Taxes (Cash taxes) EBIAT (Earnings before interest after taxes) +
DEP (Book depreciation) - CAPX (Capital expenditures) -
ChgWC (Change in working capital) C (Free cash flows)
|
Free delivery |
| Securities industry procedure whereby delivery of securities sold is made to the buying customer's bank without requiring immediate payment; thus a credit agreement of sorts. Antithesis of delivery vs. payment. |
Free float |
| An
exchange rate system characterized by the absence of government intervention. Also known as clean float. |
Free
reserves |
| Excess
reserves minus member bank borrowings at the Fed. |
Free rider |
| A
follower who avoids the cost and expense of finding the best course of action simply by mimicking the behavior of a leader who made these investments. |
Free-riding |
| A
forbidden practice in which the member of an underwriting
syndicate retains a portion of an initial
public offering (IPO) and resells the securities at a higher price determined by the market at a later time. Also forbidden is a brokerage customer's rapid buying and selling of a security without putting up money for the purchase. |
Free right of exchange |
| An
investor's right to transfer securities from one name to another name without paying charges that accompany a sales transaction. |
Free
stock |
| A stock
that is paid for in full and is not pledged in any way as collateral. |
Free
to trade |
| Used in the context of general equities. Not subject to any internal (restricted list) or external restrictions on trading; hence, the trader is free to solicit interest. |
Freed up |
| A
term used to indicate that an underwriting syndicate's
members are no longer restricted to the fixed price agreed upon in the agreement among underwriters and are permitted to trade the security on a free market
basis. |
Freeze
out |
| The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares
after a takeover. |
FREIT |
| See:
Finite-Life Ral Estate Investment Trust |
Frequency distribution |
| The
organization of data to show how often certain values or ranges of values occur. |
Fresh picture |
| Updated
estimation of a stock or market,
usually following recent trading activity or news that has changed the previous look. |
Fresh
signal |
| Piece of information (fundamental or technical)
leading one to believe a stock will move in a certain manner. |
Friction costs |
| Costs,
both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction. |
Frictional
cost |
| The difference between an index fund return
and the index it represents. The typically lower rate of return from the fund results from transactions costs. |
Frictions |
| The
"stickiness" involved in making transactions;
the total process including time, effort, money, and tax effects of gathering information and making a transaction such as buying a stock or borrowing money. |
Friendly takeover |
| Merger
when the target firm's management and board of directors is in favor of the takeover. Antithesis of hostile
takeover. |
Front-end
load |
| The fee applied to an investment at the time of initial purchase, e.g., on a mutual fund purchased from a broker or mutual fund company. |
Front fee |
| The
fee initially paid by the buyer upon entering a split-fee
option contract. |
Front office |
| Refers
to revenue generating sales personnel in a brokerage, insurance, or other financial services operation. |
Front running |
| Entering
into options or futures
contracts with advance knowledge of a block transaction that will influence the price of the underlying security to capitalize on the trade. This practice is expressly forbidden by the SEC. |
Frozen
account |
| A disciplinary action taken by the Federal Reserve Board for some violation of Regulation T, an individual investor
cannot sell securities until they are paid for in full and certificates delivered. |
Fry a bigger fish |
| Used
in the context of general equities. Work on a trade
of larger size than a trade just disclosed. |
Full |
| Handle. |
Full
coupon bond |
| A bond
with a coupon equal to the going market rate; the bond is therefore selling at par. |
Full
disclosure |
| Describes exchange and government regulations providing for the release and free exchange of all information pertinent to a given security. |
Full
faith-and-credit obligations |
| The
security pledges for larger municipal bond issuers,
such as states and large cities that have diverse funding sources. |
Full-payout lease |
| See:
Financial lease |
Full price |
| Also
called dirty price; the price of a bond including accrued
interest. Related: Flat price. |
Full-service broker |
| A
broker who provides clients an all-inclusive selection of services such as advice on security selection and financial planning. |
Full-service lease |
| Also
called rental lease. Arrangement in which lessor promises to maintain and insure the equipment leased. |
Full trading authorization |
| Indication
that a broker with a discretionary account
can operate free of all trading
guidelines from the client. |
Fully
depreciated |
| An asset
that has already been charged with the maximum amount of depreciation allowed by the IRS for accounting purposes. |
Fully diluted earnings per shares |
| Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised. |
Fully distributed |
| A
new stock issue that has been completely resold to the investing public and is no longer held by dealers. |
Fully
invested |
| Used to describe an investor whose assets
are totally committed to investments,
typically stock. |
Fully modified pass-throughs |
| Agency pass-throughs that guarantee the timely payment of both interest and principal.
Related: Modified pass-throughs. |
Fully valued |
| Used
in the context of general equities. Said of a stock that has reached a price at which analysts think the underlying
company's fundamental earnings power has been fully recognized by the market. |
Functional
currency |
| As defined by FASB No. 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and expends cash. |
Fund family |
| Set
of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost. |
Fund of funds |
| A
mutual fund or hedge fund that invests in other funds. |
Fund manager |
| The
person whose responsibility it is to oversee the allocation of the pool of money invested in a particular mutual fund. The fund manager is charged with investing the money to attain the returns and level of risk of the mutual fund investors. |
Fund switching |
| Moving
money within a mutual fund family from one mutual
fund to another. |
Fun
money |
| Money that can be used to invest in risky investments
with high potential return. |
Fundamental analysis |
| Security analysis that seeks to detect misvalued securities through an analysis of the firm's business prospects. Research often focuses on earnings, dividend
prospects, expectations for future interest
rates, and risk evaluation of the firm. Antithesis of technical analysis. In macroeconomic analysis, information such as interest rates, GNP, inflation, unemployment, and inventories is used to predict the direction of the economy, and therefore thestock market. In microeconomic analysis, information such as balance sheet, income statement, products, management, and other market items is used to forecast a company's imminent success or failure, and hence the future price action of the stock. |
Fundamental beta |
| The
product of a statistical model to predict the fundamental risk of a security
using not only price data but also other market-related
and financial data. |
Fundamental
descriptors |
| In the model for calculating fundamental beta, ratios in risk
indexes other than market variability, which rely on financial data other than price data. |
Funded debt |
| Debt maturing
after more than one year. |
Funded
pension plan |
| A pension
plan in which all liabilities,
including payments to be made to pensioners in the immediate future, are completely funded. |
Funding |
| Used
to describe the refinancing of a debt
prior to its maturity (the same as refunding). In corporate
finance refers to the floating of bonds
to raise finance and levels of capital.
See also: refunding. |
Funding ratio |
| The
ratio of a pension plan's assets to its liabilities. |
Funding risk |
| Related:
Interest rate risk |
Funds From Operations (FFO) |
| Used
by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation
and amortization added back. A similar term increasingly used is funds available for distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages. |
Fungibility |
| The
substitutability of listed options,
which is dependent upon their common expiration
dates and strike prices.
The congruence of expiration dates and strike prices lets investors close positions
by offsetting transactions
through the options clearing corporation. |
Furthest month |
| Used
in the context of commodities
or options trading
to refer to the month that is away from the contract's
date of settlement. |
FUTOP |
| The
Danish derivatives market, merged with the Copenhagen
Stock Exchange in 1997. |
Future |
| A
term used to designate all contracts
covering the sale of financial instruments
or physical commodities for future delivery
on a commodity exchange. |
Future investment opportunities |
| The
identification of additional, more valuable, investment opportunities in the future that result from a current opportunity or operation. |
Futures |
| A
term used to designate all contracts
covering the sale of financial instruments
or physical commodities for future delivery
on a commodity exchange. |
Futures commission merchant (FCM) |
| A
firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to provide margin
for any resulting trades or contracts. The FCM must be licensed by the CFTC. Related: Commission
house, omnibus account. |
Futures contract |
| Agreement
to buy or sell a set number of shares
of a specific stock in a designated future month at a price agreed upon today by the buyer and seller. The contracts themselves are often traded on the futures
market. A futures contract differs from an option
because an option is the right to buy or sell, while a futures contract is the promise to actually make a transaction. A future is part of a class of securities
called derivatives, so named because such securities
derive their value from the worth of an underlying
investment. |
Futures contract multiple |
| A
constant set by an exchange,
which when multiplied by the futures price
gives the dollar value of a stock index
futures contract. |
Futures market |
| A
market where contracts for future delivery of a commodity
or a security are bought or sold. |
Futures option |
| An
option on a futures
contract. Related: Options on physicals. |
Futures price |
| The
price at which parties to a futures contract
agree to transact upon the settlement date. |
Future value |
| The
amount of cash at a specified date in the future that is equivalent in value to a specified sum today. |
FVO (for valuation only) |
| See:
For your information |