P |
| Fifth
letter of Nasdaq stock symbol specifying issue is the company's first class of preferred shares. |
P2P |
| Business
slang, usually used in reference to startups or internet startup, refers to "path to profitability." |
PAC |
| See:
Planned amortization class |
PAC |
| See:
Preauthorized checks |
PAD |
| See:
Preauthorized electronic debits |
PBGC |
| See:
Pension Benefit Guaranty Corporation |
PC |
| See: Participation certificates. |
PEFCO |
| See:
Private Export Funding Corporation |
PEG Ratio |
| See:
Prospective earnings growth ratio |
PERC |
| See:
Preferred equity redemption stock |
PERLS |
| Principal Exchange-Rated-Linked Securities |
PHLX |
| See:
Philadelphia Stock Exchange |
PIBOR |
| See:
Paris Interbank Offer Rate |
PIK |
| See:
Payment-in-kind bond |
PLC |
| See:
Project loan certificate |
PN |
| See: Project notes |
PO |
| See:
Principal only |
PVBP |
| See:
Price value of a basis point |
PAC Bond |
| Stands
for Planned Amortization Class bond. A tranche
class offered by some CMOs
that has a sinking fund schedule and an ability to make principal payments that are not subordinated to other classes. |
Pacific Stock Exchange |
| Used
for listed equity securities. Regional exchange
located in Los Angeles and San Francisco; only U.S. exchange open between 4:00 and 4:30. |
Pac-Man strategy |
| Takeover defense strategy in which the prospective acquiree retaliates against the acquirer's tender
offer by launching its own tender
offer for the other firm. |
Package
mortgage |
| A mortgage
on a house and property in the house. |
Paid-in capital |
| Capital
received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. It would also include surplus resulting from recapitalization. |
Paid in surplus |
| See:
Paid-in capital |
Paid up |
| When
all payments that are due have been made. |
Paid-up policy |
| A
life insurance policy in which all premiums that are due have been paid. |
Painting the tape |
| Illegal
practice by traders who manipulate the market by buying and selling a security to create the illusion of high trading activity and to attract other traders who may push up the price. |
Paired off |
| Used
for listed equity securities. Matched buy
and sell market orders, usually pertaining to the pre-opening market picture
in a stock, or MOC
orders (especially relating to futures/options expirations). |
Paired shares |
| Stock of two companies under the same management that are sold as one unit with one certificate. |
Pairoff |
| A
buyback to offset and effectively liquidate a prior sale of securities. |
Panic buying or selling |
| Rapid
trading of stocks
or bonds in high volume
in anticipation of sharply rising or falling prices, usually after unexpected news is released. |
Paper |
| Money market instruments,
commercial paper, and other. |
Paper dealer |
| A
brokerage firm that buys and sells commercial
paper to make a profit. |
Paper gain (loss) |
| Unrealized
capital gain (loss) on securities
held in a portfolio based on a comparison of current market price to original cost. |
Par |
| Equal
to the nominal or face value
of a security. A bond
selling at par is worth an amount equivalent to its original issue value or its value upon redemption at maturity-typically $1000/bond. See: Discount, premium. |
Par bond |
| A
bond trading
at its face value. |
Par value |
| Also
called the maturity value or face value; the amount that an issuer agrees to pay at the maturity date. |
Par value of currency |
| The
official exchange rate between two countries' currencies. |
Parallel loan |
| A
process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans. |
Parallel shift in the yield curve |
| A
shift in economic conditions in which the change in the interest rate on all maturities is the same number of basis points. In other words, if the three month T-bill increases 100 basis points (one %), then the 6-month, 1-year, 5-year, 10-year, 20-year, and 30-year rates all increase by 100 basis points as well. Related: Non-parallel shift in the yield curve. |
Parameter |
| A
model is a combination of variables, such as GDP growth, and coefficients which multiply these variables. The coefficients are often estimated from the data. The coefficients are called parameters. |
Parent company |
| A
company that controls subsidiaries through its ownership of voting stock, as well as runs its own business. |
Paris Bourse |
| National
stock market of France. |
Paris Interbank Offer Rate (PIBOR) |
| The
deposit rate on interbank transactions in the Eurocurrency
market quoted in Paris. |
Parity |
| For convertibles, level at which a convertible security's market
price equals the aggregate
value of the underlying common
stock; value/worth of the convertible
bond considered only as an equity
instrument (Conversion
ratio times common price). See: Conversion
value. For international parity, US$ price of a foreign stock's last sale in an overseas market (Local currency stock
price times forex rate times ADR ratio). For listed parity, condition whereby no party has floor priority, and matching thus occurs. For options parity, dollar amount by which an option is in the money. See: Intrinsic
value. |
Parity
value |
| Related: Conversion
value |
Parking |
| Putting
money into safe investments
such as money market investments while deciding where to invest the money. |
Parking violation |
| Often
used in risk arbitrage. Illegal holding of stock
by a third party, or the financing of such a stock, in which the third party's sole reason for holding the stock is to conceal ownership or control of a raider, thus sidestepping the Williams Act requirements of 5% holding limits. See: Rule 13d. |
Partial |
| Used in the context of general equities. Trade whose size is only part of the total customer indication/order, usually made to avoid a compromise in price and also to get some business instead of losing the customers inquiry/order to a competitor. |
"Participate but do not initiate" |
| Used
for listed equity securities. "Participate in the side of the market indicated by the order,
but do not initiate the interest that causes the trade
to take place." This kind of order can cause one to "miss stock" because the broker of investor is at the mercy of the player who does initiate the trade. See: Market order go along, percentage
order. |
Participating
buyer/seller |
| Used for listed equity securities. (1) Customer willing to buy/sell in
line with market. (2) Buyer/seller who goes along with another buyer/seller in a percentage order. |
Participating convertible preferred stock |
| Preferred stock
that
can be converted into common stock
at the option of the holder. In contrast, to the usual preferred stock, the value of the preferred stock is refunded to the holder. That is, one gets conversion plus the value of the stock. |
Participating dividend |
| Dividend received from ownership of participating preferred stock. |
Participating fees |
| The
portion of total fees in a syndicated
credit that go to the participating banks. |
Participating GIC |
| A
guaranteed investment contract
whose policyholder is not guaranteed a crediting
rate, but instead receives a return
based on the actual experience of the portfolio
managed by the life insurance company. |
Participating life insurance policies |
| Life insurance that pays dividends
to policyholders depending on the company's success as provided by few claims and profitable underwritings
and investments. |
Participating preferred stock |
| Preferred stock that provides the holder with a specified dividend plus the right to additional earnings under specified conditions. |
Participation certificates (PC) |
| Used
in the context of general equities. Investments representing an interest in a pool of funds or in other instruments, such as foreign securities, that allow participation in the rise or fall of a security or group of securities. |
Participation loan |
| A
large loan made by a group of lenders, that enables a borrower to obtain financing above the legal lending limit of an individual lender. |
Partner |
| Business
associate who shares equity
in a firm. |
Partnership |
| Shared
ownership among two or more individuals, some of whom may, but do not necessarily, have limited liability with respect to obligations of the group. See: General partnership, limited
partnership, and master limited partnership. |
Partnership agreement |
| A
written agreement among partners detailing the terms and conditions of participation in a business ownership arrangement. |
Pass the book |
| The
process of transferring responsibility for a brokerage firm's trading account from one office to another around the world in order to benefit from trading 24 hours a day. |
Pass-through coupon rate |
| The
interest rate paid on a securitized
pool of assets, which is less than the rate paid on the underlying loans
by an amount equal to the servicing and guaranteeing fees. |
Pass-through rate |
| The
net interest rate passed through to investors after deducting servicing, management, and guarantee fees from the gross mortgage coupon. |
Pass-through securities |
| A
pool of fixed income securities
backed by a package of assets
(i.e., mortgages) where the holder receives the principal
and interest payments. Related: Mortgage pass-through security |
Passive |
| Income
or loss from business activities in which a person does not materially participate, such as a limited partnership. |
Passive Activity Loss (PAL) |
| A
loss incurred in participating in passive investing. |
Passive bond |
| A
bond without any interest
yield. |
Passive
Income Generator (PIG) |
| An
investment that favors passive income, such as an income-oriented real estate limited partnership. |
Passive investing |
| Putting
money into a profitable business opportunity that is deemed passive by the IRS and thus benefits from tax
deductions. |
Passive investment management |
| Buying
a well diversified portfolio
to represent a broad-based market
index without attempting to search out mispriced securities. |
Passive
investment strategy |
| See: Passive investment management. |
Passive portfolio |
| A
market index
portfolio. |
Passive portfolio strategy |
| A
strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index.
A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities, and therefore, does not attempt to find mispriced securities. Related: Active portfolio
strategy. |
Patent |
| The
exclusive right to use documented intellectual property in producing or selling a particular product or using a process for a designated period of time. |
Path-dependent option |
| An
option whose value depends on the sequence of prices of the underlying asset rather than just the final price of the asset. |
Pattern |
| A technical chart formation used to make market predictions by following the price movements of securities. |
Pay-as-you-go basis |
| A
method of paying income tax
in which the employer deducts a portion of an employee's monthly salary to remit to the IRS. |
Pay-to-play |
| Attempts
by municipal bond underwriting
businesses to gain influence with political officials who decide which underwriters are awarded the municipality's business. |
Pay-up |
| The
loss of cash resulting from a swap
into higher-priced bonds
or the need/willingness of a bank or other borrower to pay a higher rate of interest to get funds. Used in the context of general equities. (1) When an investor who wants to buy
a stock at a particular price hesitates and the stock begins to rise; instead of letting the stock go, he "pays up" to buy the shares at the higher prevailing price. (2) Buy shares in a high-quality company at what is felt to be a high, but supportable, price due to its quality. |
Payable through drafts |
| A
method of making payment that is used to maintain control over payments made on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft to the payer, which must approve it and return it to the bank before payment can be received. |
Payables |
| Related:
Accounts payable |
Payback |
| The
length of time it takes to recover the initial cost of a project, without regard to the time value of money. |
Pay-down |
| In
a Treasury refunding, the amount by which the par value of the securities
maturing exceeds that of those sold. In the context of general equities, paying a lower price in an accumulation of stock. Antithesis of pay-up. |
Payee |
| A person receiving payment through any form of money transfer method. |
Payer |
| The
person making a payment to a payee. |
Paying agent |
| An
agent who makes principal
and interest payments to bondholders on behalf of the issuer. |
Payment date |
| The
date on which shareholders
of record will be sent a check for the declared dividend. |
Payment float |
| Company-written
checks that have not yet cleared. |
Payment-in-kind (PIK) bond |
| A
bond that gives the issuer
an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds. |
Payments
netting |
| Reducing fund transfers between affiliates to only a netted amount. Netting can occur on a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together). |
Payments pattern |
| Describes
the collection pattern of receivables.
The pattern might describe the probability that a 72-day-old account will still be unpaid when it is 73 days-old. |
Payoff diagram |
| In
option pricing, a graph of the value of the option position at expiration
as a function of the underlying asset
price. |
Payout
ratio |
| Generally, the proportion of earnings paid out to the common
stockholders as cash dividends.
More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period. |
P-coast |
| Refers
to west coast listed equity securities. See: Pacific
Stock Exchange. |
P/E |
| See: Price/earnings ratio |
P/E effect |
| That
portfolios with low P/E
stocks exhibit higher average risk-adjusted returns than those with high P/E stocks. Related: Value manager. |
P/E ratio |
| Current
stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings. |
Peak |
| The
high point at the end of an economic expansion until the start of a contraction. |
Pecking-order view (of capital structure) |
| The
argument that external financing transactions
costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, followed by new debt, and debt-equity
hybrids. Finally, new equity is at the least preferred source. |
Pegging |
| Making
transactions in a security,
currency, or commodity in order to stabilize or target its value through market intervention. |
Penalty clause |
| A
clause found in contract agreements that provides for a penalty in the event of default. |
Pennant |
| A
chart pattern resembling a pointed flag, with the point facing to the right, which shows a diminishing variance of price. |
Penny stock |
| Used
in the context of general equities. Stock
that typically sells for less than $1 a share,
although it may rise to as much as $10/share after the initial public offering, usually because of heavy promotion. All are traded OTC,
many of them in the local markets of Denver, Vancouver, or Salt Lake City. |
Pension Benefit Guaranty Corporation (PBGC) |
| A
federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation). |
Pension fund |
| A
fund set up to pay the pension benefits of a company's workers after retirement. |
Pension parachute |
| A
form of poison pill providing that in the event of a hostile takeover attempt, any excess pension plan assets
can be used to benefit pension plan
participants. This prevents the raiding firm from using the pension assets to finance the takeover. |
Pension plan |
| A
fund that is established for the payment of retirement benefits. |
Pension reversion |
| Termination
of an overfunded defined benefit pension
plan and replacement of it with a life
insurance company-sponsored fixed annuity
plan. |
Pension
sponsors |
| Organizations that have established a pension plan. |
Penultimate
profit prospect (PPP) |
| The
second-lowest-priced of the ten highest-yielding
stocks in the Dow
Jones Industrial Average that is said (by authors O'Higgins and Downes) to be the Dow stock with the best possibility of outperforming the average as a whole. |
People pill |
| A
form of poison pill providing that the entire management threatens to resign in the event of a takeover. |
Per
capita debt |
| The total bonded debt
of a municipality divided by the population of the municipality. |
Percent to double |
| Percentage
that the stock price has to rise (fall) to double the price of the call (put). |
Percentage order |
| Used
for listed equity securities. Market
limited price order to buy/sell
a specified percentage (usually 50%) of shares
traded (sometimes after a fixed number of shares of the stock have already traded). See: participating buyer/seller, "Participate but do not initiate." |
Percentage premium |
| Applies
mainly to convertible securities. Premium
over parity of a convertible
bond divided by parity. |
Perfect capital market |
| A
market in which there are never any arbitrage opportunities. |
Perfect competition |
| An
idealized market environment in which every market participant is too small to affect the market price by acting on its own. |
Perfect hedge |
| A
situation in which the profit and loss from the underlying
asset and the hedge position
are equal. |
Perfect market view (of capital structure) |
| Analysis
of a firm's capital structure
decision, which shows the irrelevance of capital structure in a perfect capital market. |
Perfect market view (of dividend policy) |
| Analysis
of a decision on dividend policy,
in a perfect capital market
environment, that shows the irrelevance of dividend policy. |
Perfected first lien |
| A
first attachment on an asset that is duly recorded with the relevant government body so that the lender will be able to act on it should the borrower default. |
Perfectly
competitive financial markets |
| Markets in which no trader
has the power to change the price of goods or services. Perfect capital markets are characterized by certain conditions: (1) Trading is costless, and access to the financial markets is free; (2)information about borrowing and lending opportunities is freely available; and (3) there are many traders, and no single trader can have a significant impact on market prices. |
Performance attribution analysis |
| The
decomposition of a money manager's
performance results to explain the reasons why those results were achieved. This analysis seeks to answer questions such as: (1) What were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was market timing statistically significant? and (4), was security selection statistically significant? |
Performance bond |
| A
surety bond between two parties, insuring one party against loss if the terms of a contract are not fulfilled. |
Performance evaluation |
| The
assessment of a manager's results, which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis). |
Performance fund |
| A
growth-oriented mutual fund
investing in growth stock and performance stock with low dividends
and high risk. |
Performance measurement |
| Calculation
of the return a money
manager realizes over some time interval. |
Performance shares |
| Shares of stock
given to managers on the basis of performance as measured by earnings per share and similar criteria. A control device shareholders sometimes use to tie management to the self-interest of shareholders. |
Performance stock |
| High-growth stock in a company that retains earnings for further growth and therefore pays no dividends, but that an investor
feels has significant future potential. |
Period-certain annuity |
| An
annuity that provides guaranteed payments to an annuitant for a specified period of time. |
Period of digestion |
| The
time period of often high volatility
after a new issue is released when the trading price of the security is established by the market. |
Periodic
payment plan |
| Accumulation of capital in a mutual
fund by making regular payments on a monthly or quarterly basis. |
Periodic purchase deferred contract |
| A
fixed or variable annuity contract for which fixed-amount premiums are paid either monthly or quarterly, and that does not begin paying out until a time elected by the annuitant. |
Periodic rate |
| The
monthly effective interest rate.
For example, the periodic rate
on a credit card with an 18% annual percentage rate
is 1.5% per month. |
Permanent
financing |
| Long-term financing using either debt or equity. |
Perpendicular spread |
| Option strategy involving the purchase of options with similar expiration
dates and different exercise prices. |
Perpetual bond |
| Nonredeemable
bond with no maturity
date that pays regular interest rates
indefinitely. |
Perpetual inventory |
| Recordkeeping
system in which book inventory is updated daily. |
Perpetual warrants |
| Warrants that have no expiration
date. |
Perpetuity |
| A
constant stream of identical cash flows
without end, such as a British consol. |
Perquisites |
| Personal
benefits, including direct benefits, such as the use of a firm car or expense account for personal business, and indirect benefits, such as up-to-date office decoration. |
Personal article floater |
| Insurance
policy attachment designed to cover specified personal valuables. |
Personal exemption |
| Amount
of money a taxpayer can exclude from personal income for each member of the household in calculation of a tax obligation. |
Personal income |
| Total
income received from all sources, including wages, salaries, or rents, and the like. |
Personal inflation rate |
| The
inflation rate as it affects a specific individual. |
Personal property |
| Any
assets other than real estate. |
Personal tax view (of capital structure) |
| The
argument that the difference in personal tax rates between income from debt and income from equity
eliminates the disadvantage of the double taxation (corporate and personal) of income from equity. |
Personal trust |
| An
interest in an asset held by a trustee for the benefit of another person. |
Phantom income |
| Income
from a limited partnership that creates taxability without generating cash flow. |
Phantom
stock plan |
| An incentive scheme that awards management bonuses based on increases in the market price of the company's stock. |
Philadelphia Board of Trade (PBOT) |
| A
subsidiary of the Philadelphia Stock Exchange that trades currency futures. |
Philadelphia Stock Exchange (PHLX) |
| A
securities exchange
trading American and European foreign
currency options on spot exchange rates. |
Philippine Stock Exchange |
| Stock exchange based in the Philippines, which operates two trading floors, at Manila and Makati. |
Phillips Curve |
| A
graph that supposedly shows the relationship between inflation and unemployment. It is conjectured that there is a simple trade-off between inflation and unemployment (high inflation and low unemployment, and low inflation and high unemployment). Named after A.W. Phillips. Obviously, the relation between these important macroeconomic variables is more complicated than this simple graph would suggest. For a modern treatment, see work of Robert Lucas. |
Phone switching |
| Transferring
money between funds in the same mutual fund family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a participating broker/dealer. |
Physical commodity |
| See:
Commodity |
Physical
verification |
| A procedure auditors use to ensure that inventory recorded in the book
is correct by actually checking out the physical inventory. |
P & I |
| Stands
for principal and interest
on bonds or mortgage-backed
securities. |
Pickup |
| The
gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds. |
Pickup
bond |
| A bond
with a relatively high coupon
that is close to the date at which it is callable,
meaning that a fall in interest rates
will most likely cause early redemption
of the bond at a premium. |
Picture |
| Describes
bid and asked
prices a broker
quotes for a given security.
Used for listed equity securities. Bid and ask prices and quantity information from a specialist or from a dealer
regarding a particular security (i.e., "IBM's 1/4 to 1/2, 5m by 10m"). |
Piece |
| Apply
mainly to convertible securities. Increment of bonds
that trade in portions of $1000 minimum. Not all bonds can be traded in "pieces," and the increments can vary. |
Pie model of capital structure |
| A
model of the debt-equity ratio
of the firms, graphically depicted in slices of a pie that represent the value of the firm in the capital markets. |
Piggyback registration |
| When
a securities underwriter allows existing holdings of shares in a corporation to be sold in combination with an offering of new public shares. |
Piggybacking |
| A
broker who trading
stocks, bonds or commodities
in a personal account following a trade just made for a customer. The broker assumes that the customer is making the trade on valuable inside information. |
Illegal. PIK (Payment-in-kind) securities |
| Highly
speculative bonds or preferred
stock that pay interest
or dividends through additional bonds or preferred stock. |
Pink sheets |
| Refers
to over-the-counter trading.
Daily publication of the national quotation bureau that reports the bid and ask
prices of thousands of OTC
stocks, as well as the market makers
who trade each stock. |
Pip |
| Used
for listed equity securities. Smallest unit of a currency
(i.e., cents for U.S. dollars). |
Pipeline |
| The
underwriting process that must be completed with the SEC before a security
can be offered for sale to the public. |
Pit |
| A
specific area of the trading
floor that is designed for the trading of commodities,
individual futures, or option
contracts. |
Pit committee |
| A
committee of the exchange that determines the daily settlement price of futures
contracts. |
PITI |
| Stands
for principal, interest, taxes, and insurance, the four main parts of monthly mortgage obligations. |
Pivot |
| Price
level established as being significant by market's
failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level. |
P&L |
| Profit
and loss statement for a trader. |
Place |
| The
marketing of new securities,
usually through sales to institutional investors.
See: Float. |
Placement |
| A
bank depositing Eurodollars
with (selling Eurodollars to) another bank is often said to be making a placement. |
Placement ratio |
| The
percentages of last week's new municipal
bond offerings that have been bought from the underwriters, according to the Bond Buyer newspaper. |
Plain vanilla |
| A
term that refers to a relatively simple derivative
financial instrument, usually a swap or other derivative that is issued with standard features. |
Plan participants |
| Employees
or other beneficiaries who are eligible to receive benefits from a company's employee benefit plan. |
Plan for reorganization |
| A
plan for reorganizing a firm during the Chapter 11 bankruptcy process. |
Plan sponsors |
| The
entities that establish pension plans,
including private business entities acting for their employees; state and local entities operating on behalf of their employees; unions acting on behalf of their members; and individuals representing themselves. |
Planned amortization class (PAC) |
| (1)
The class of CMO
that has the most stable cash flows
and the lowest prepayment risk of any class of CMO Because of a stable cash flow, it is considered the least risky CMO (2) A CMO bond
class that stipulates cash flow
contributions to a sinking fund. A PAC directs principal
payments to the sinking fund
on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience. |
Planned capital expenditure program |
| Budgeted
or projected outlays for major expenditures on permanent or fixed assets as outlined in the corporate financial plan. |
Planned financing program |
| Budgeted
or projected ways need for reasons or to obtain short-term and long-term financing as outlined in the corporate financial plan. |
Planning horizon |
| The
length of time a model or investor or plan projects into the future. |
Plant |
| The
assets of a business including land, buildings, machinery, and all equipment permanently employed. |
Player |
| Used
in the context of general equities. Customer or trader
who is actively involved in a particular stock
or the market in general. |
Playing the market |
| Trading
in high, uncalculated risk
usually refers to actions of amateur investors. |
Pledging |
| See:
Hypothecation |
Plow back |
| To
reinvest earnings in a business rather than pay out them out as dividends. Common practice in high-growth companies. |
Plowback rate |
| Related:
Retention rate |
Plug |
| A
variable that handles financial slack in the financial plan. |
Plus |
| Used
to quote a price in 64ths. Dealers
in government bonds normally give price quotes in 32nds. To quote a bid or offer
in 64ths, they use pluses; a dealer
who bids 4+ is bidding the handle
plus 4/32 + 1/64, which equals the handle plus 9/64. |
Plus a match |
| Used
for listed equity securities. Floor indication
that someone is on the floor with equal priority
standing who wants to buy/sell at least the same number of shares at the same price as one's own order. Outside.
See: Matched orders. Compare to ahead. |
Plus tick |
| Used
in the context of general equities. Trade
occurring at a price higher than the previous sale. Uptick. Antithesis of minus tick. See: Short sale. |
Plus
tick seller |
| Used for listed equity securities. A short seller (referring to the regulation requiring a plus tick to short). |
Point |
| The
smallest unit of price change quoted, or one one-hundredth of a percent. Related: Minimum price fluctuation and tick. |
Point
and figure chart |
| A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is used solely to record changes in price. |
Poison pill |
| Anti-takeover device that gives a prospective acquiree's shareholders
the right to buy shares
of the firm or shares of anyone who acquires the firm at a deep discount to their fair market
value. Named after the cyanide pill that secret government agents are said to be instructed to swallow if capture is imminent. |
Poison put |
| A
covenant allowing the bondholder
to demand repayment in the event of a hostile takeover. |
Policy asset allocation |
| Way
in which an investor seeks to assess an appropriate long-term "normal" mix of assets that represents an ideal blend of controlled risk and enhanced return. |
Policy limit |
| The
maximum dollar amount of coverage provided by an insurance company for a certain policy. |
Policy loan |
| A
loan often made at a below-market interest rate from an insurance company to a policyholder that is secured by the cash surrender value of a life insurance policy. |
Policyholder |
| An
individual who owns an insurance policy. |
Policyholder loan bonds |
| Packaged
loans acquired by policyholders
that are secured by the cash surrender value of the policies, and are offered by a broker/dealer as bonds. |
Political risk |
| Possibility
of negative events such as expropriation of assets,
changes in tax policy, restrictions on the exchange
of foreign currency, or other changes in the business climate of a country. |
Pool |
| In
capital budgeting, the concept that investment projects are financed out of a pool of bonds, preferred
stock, and common stock,
and a weighted-average cost of capital
must be used to calculate investment returns. In insurance, a group of insurers who share premiums and losses in order to spread risk. In investments, the combination of funds for the benefit of a common project, or a group of investors who use their combined influence to manipulate prices. |
Pool factor |
| The
outstanding principal
balance divided by the original principal balance with the result expressed as a decimal. Pool factors are published monthly by the Bond Buyer newspaper for Ginnie Mae, Fannie
Mae, and Freddie Mac (Federal Home Loan Mortgage Corporation)
MBSs. |
Pooling of interests |
| An
accounting method for reporting acquisitions
accomplished through the use of equity.
The combined assets of the merged entity are consolidated using book value, as opposed to the purchase method, which uses market value. The merging entities' financial results are combined as though the two entities have always been a single entity. |
Porcupine provision |
| Often
used in risk arbitrage. See: Shark repellent. |
Portability |
| The
character of benefits that may be carried from a previous job to the next. |
Portfolio |
| A
collection of investments, real and/or financial. |
Portfolio beta |
| Used
in the context of general equities. The beta
of a portfolio is the weighted sum of the individual asset betas, According to the proportions of the investments in the portfolio. E.g., if 50% of the money is in stock A with a beta of 2.00, and 50% of the money is in stock B with a beta of 1.00,the portfolio beta is 1.50. Portfolio beta describes relative volatility of an individual securities
portfolio, taken as a whole, as measured by the individual stock betas
of the securities making it up. A beta of 1.05 relative to the S&P 500 implies that if the S&P's excess return increases by 10% the portfolio is expected to increase by 10.5%. |
Portfolio insurance |
| A
strategy using a leveraged portfolio
in the underlying stock
to create a synthetic put option.
The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level. |
Portfolio internal rate of return |
| The
rate of return computed by first determining the cash flows for all the bonds
in the portfolio and then finding the interest rate that will make the present value of the cash flows equal to the market value of the portfolio. |
Portfolio management |
| Related:
Investment management |
Portfolio manager |
| Used
in the context of general equities. Professional responsible for the securities portfolio
of an individual or institutional investor,
such as a mutual fund, pension
fund, profit-sharing plan, bank trust department, or insurance company. In return for a fee, the manager has the fiduciary responsibility to manage the assets prudently and choose which asset types are most appropriate over time. Related: Investment manager. |
Portfolio opportunity set |
| The
expected return/standard
deviation pairs of all portfolios
that can be constructed from a given set of assets. |
Portfolio R2 |
| Used
in the context of general equities. Number between 0 and 1 that measures the strength of correlation of movement between the portfolio/stock and the index.
Indeed, the R2 is the square of the correlation. For hedging purposes, the higher the R2,
the better. |
Portfolio
restructuring |
| Applies to derivative products. Recomposition of a portfolio's asset
mix by selling off undesired asset types (equities,
debt, or cash)
or specific securities within that class, while simultaneously buying desired types or securities. Often a firm is asked to bid on an old portfolio and give an offering of the desired portfolio. See: Program trading. |
Portfolio separation theorem |
| Theory
that an investor's choice of a risky investment portfolio
is separate from his attitude towards risk.
Related: Fisher's separation theorem. |
Portfolio theory |
| See:
Modern portfolio theory. |
Portfolio turnover rate |
| For
an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average of portfolio
assets. |
Portfolio
variance |
| Weighted sum of the covariance and variances
of the assets in a portfolio. |
Position |
| A
market commitment; the number of contracts bought or sold for which no offsetting transaction has been entered into. The buyer of a commodity is said to have a long position, and the seller of a commodity is said to have a short position. Related: Open
contracts. |
Position building |
| Buying
shares to build up a long
position or selling shares
to create a short position
in a particular security or group of securities. |
Position diagram |
| Diagram
showing the possible payoffs from a derivative
investment. |
Position limits |
| Applies
to derivative products. Maximum position
available in any one future
or option contract
for a given institution. For "bona fide" futures hedgers,
there are no position limits. |
Position
self |
| Used in the context of general equities. Going long or short
in anticipation of a stock's
movement. |
Position sheet |
| Used
in the context of general equities. List of long
and short positions for an individual trader or desk, at times accompanied by the trades from the previous trading
session that brought these closing positions. |
Position trader |
| A
commodities trader
who takes a long-term approach in maintaining positions
in the market and does not close out of these positions until close to the delivery date. |
Positive
carry |
| Related: Net
financing cost |
Positive
convexity |
| A property of option-free bonds that the price appreciation for a large downward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates. |
Positive covenant (of a bond) |
| A
bond covenant that specifies certain actions the firm must take. Also called an affirmative covenant. |
Positive float |
| See:
Float |
Positive yield curve |
| When
long-term debt interest
rates are higher than short-term debt rates (because of the increased risk involved with long-term
debt security). |
Possessions corporation |
| A
type of corporation permitted under the U.S. tax code whose branch operation in a U.S. possession can obtain tax benefits as though it were operating as a foreign subsidiary. |
Post |
| Particular place on the floor of an exchange where transactions in stocks listed
on the exchange occur. |
Post-audit |
| A
set of procedures for evaluating a capital
budgeting decision after the fact. |
Post-dated check |
| A
check that becomes payable and negotiable on a future date specified. |
Postponement option |
| The
option of deferring a project without eliminating the possibility of undertaking it. |
Postponing income |
| Purposely
delaying receipt of income to a later year in order to reduce current tax liability. |
Post-trade
benchmarks |
| Prices
after the decision to trade. |
Pot |
| The
portion of stock or bond
issue that is returned to the managing underwriter by the participating investment bankers for sale to institutional investors. |
Pot is clean |
| Phrase
used when managing underwriter
has sold the entire pot. |
Power of attorney |
| A
written authorization allowing a person to perform certain acts on behalf of another, such as moving of assets between accounts or trading for a person's benefit. |
Prearranged trading |
| Possibly
fraudulent practice whereby commodities
dealers carry out risk-free
trades at predetermined prices to acquire tax advantages. |
Preauthorized checks (PAC) |
| Checks
that are authorized by a payer in advance, and written either by the payee or by the payee's bank and then deposited in the payee's bank account. |
Preauthorized electronic debits (PAD) |
| Debits
to a bank account in advance by the payer. The payer's bank sends payment to the payee's bank through the Automated Clearing House (ACH)
system. |
Precautionary demand (for money) |
| The
need to meet unexpected or extraordinary contingencies with a buffer stock of cash. |
Precautionary
motive |
| A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay. |
Precedence |
| The
established system of priorities of trades
in an exchange. For example, the highest bid and lowest offer
have highest precedence; the first bid
or first offer at a price has highest priority, and large orders have priority over smaller orders. |
Precious metals |
| Gold,
silver, platinum, and palladium, which are used for their intrinsic value or for their value in production. These may be traded either in their physical state or by way of futures and options
contracts, mining company stocks,
bonds, mutual
funds, or other instrument. |
Precompute |
| Method
of charging interest in which the annual interest is either deducted from the face amount of the loan when the funds are distributed or is added to the total amount and divided into the regular payments. |
Preemptive right |
| Common stockholders'
right to anything of value distributed by the company. |
Preference |
| Refers
to over-the-counter trading. Selection of a dealer
to handle a trade despite the dealer's market not being the best available. Often the "preferenced dealer" will then move his market in line. |
Preference
stock |
| A security
that ranks junior to preferred
stock but senior to common stock
in the right to receive payments from the firm; essentially junior preferred stock. |
Preferred dividend coverage |
| Net
income after interest and taxes (before common stock dividends)
divided by preferred stock dividends. |
Preferred equity redemption stock (PERC) |
| Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor
receives. |
Preferred
habitat theory |
| A biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. The theory rejects the assertion that the risk premium must rise uniformly with maturity, but instead profits that to the extent that the demand for and supply of funds do not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances, as long as they are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk. |
Preferred shares |
| Preferred
shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. |
Preferred stock |
| A
security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders,
on earnings and also generally on assets in the event of liquidation.
Most preferred stock pays a fixed dividend
that is paid prior to the common stock
dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. Preferred stock has characteristics of both common stock and debt. |
Preferred
stock agreement |
| A contract
for preferred stock. |
Preferred stock ratio |
| Preferred stock at par value divided by total capitalization,
which gives the portion of capitalization that consists of preferred stock. |
PREG |
| Financial
ratio defined as stock price divided by sales over earnings growth. Often used in the valuation of Internet stocks. Related: PSSG. |
Preliminary prospectus |
| An
initial or tentative version of a prospectus. |
Premium |
| (1)
A bond sold above its par
value. (2) The price of an option
contract; also, in futures
trading, the amount by which the futures
price exceeds the price of the spot commodity.
For convertibles, amount by which the price of a convertible exceeds parity, and is usually expressed as a percentage. If a stock is trading at $45, and the bond convertible at $50 is trading at 105, the premium is $15, or 16.66% (15/90). If the premium is high, the bond trades like any fixed income bond; if low, like a stock. See: Gross parity, net
parity. For futures, excess of fair value of future over the spot index, which in theory will equal the Treasury bill yield
for the period to expiration
minus the expected dividend yield
until the future's expiration. For options, price of an option in the open market
(sometimes refers to the portion of the price that exceeds parity). For straight equity, price higher than that of the last sale or inside market. Related: Inverted
market premium payback period.
Also called break-even time;
the time it takes to recover the premium per share
of a convertible security. |
Premium bond |
| A
bond that is selling for more than its par value. |
Premium income |
| The
income received by an investor
who sells an option. |
Premium raid |
| An
attempt to acquire a large portion of a company's stock to gain control by offering stockholders a premium
over the market value for their shares. |
Prepackaged
bankruptcy |
| A bankruptcy
in which a debtor and its creditors pre-negotiate a plan of reorganization and then file it along with the bankruptcy petition. |
Prepaid interest |
| An
asset account showing interest
that has been paid in advance, which is expensed and charged to the borrower's P & L statement. |
Prepayment penalty |
| A
fee a borrower pays a lender
when the borrower repays a loan
before its scheduled time of maturity. |
Prepayment speed |
| Also
called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. |
Prepayments |
| Payments
made in excess of scheduled mortgage
principal repayments. |
Prerefunded bond |
| Refunded
bond. |
Prerefunding |
| Procedure
of floating a second bond
at a lower interest rate in order to pay off the first bond at the first call
date and to reduce overall borrowing
costs. |
Presale order |
| An
order to purchase part of a new municipal bond issue
that is accepted by an underwriting syndicate
before an official public offering. |
Present value |
| The
amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. To determine the present value, each future cash flow is multiplied by a present value factor. For example, if the opportunity cost of funds is 10%, the present value of $100 to be received in one year is $100 x [1/(1 + 0.10)] = $91. |
Present value factor |
| Factor
used to calculate an estimate of the present
value of an amount to be received in a future period. If the opportunity cost of funds is 10% over next year, the factor is [1/(1 + 0.10)]. |
Present value of growth opportunities |
| Net present value (NPV) of investments the firm is expected to make in the future. |
President |
| Highest-ranking
officer in a corporation after the chief
executive officer. |
Presidential
election cycle theory |
| A
theory that stock market trends can be predicted and explained by the four-year presidential election cycle. |
Pre-sold issue |
| An
issue that is sold out before the coupon announcement. |
Pre-tax earnings or profits |
| Net
income before federal income taxes are subtracted. |
Pre-tax rate of return |
| Gain
on a security before taxes. |
Pre-trade benchmarks |
| Prices occurring before or at the decision to trade. |
Previous balance method |
| Method
of calculating finance charges based on the account balance at the end of the previous month. |
Price of admission |
| Used
in the context of general equities. Cost to become a player in a stock
in an inordinately aggressive
market (i.e., locking
on one side, size or price concessions); trader
becomes aggressive in order to break the domination of customer activity by another dealer. |
Price-book ratio |
| Compares
a stock's market
value to the value of total assets
less total liabilities (book
value). Determined by dividing current stock
price by common stockholder
equity per share (book
value), adjusted for stock splits. Also called Market-to-Book. |
Price change |
| Increase
or decrease in the closing price of a security
compared to the previous day's closing price. |
Price compression |
| The
limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed
at the call price. |
Price discovery process |
| The
process of determining the prices
of assets in the marketplace through the interactions of buyers and sellers. |
Price-earnings ratio |
| Shows
the multiple of earnings at which a stock sells. Determined by dividing current stock price by current earnings
per share (adjusted for stock splits). Earnings per share for the P/E ratio are determined by dividing earnings for past 12 months by the number of common shares outstanding.
Higher multiple means investors have higher expectations for future growth, and have bid up the stock's price. |
Price elasticities |
| The
percentage change in quantity divided by a percentage change in the price. Answers the question: How much will the demand for my product decrease if I raise prices by 10%? |
Price gap |
| A
term used when the price of a stock
rockets or dives in a direction away from its last price range, such as a stock with a trading range of $10-$12 that closes at $12 and climbs to $14 the next day. |
Price give |
| Used
in the context of general equities. Willingness of a buyer or seller to negotiate on price, within reason, from the price at the last sale or the indicated level. See: Takes price. |
Price impact costs |
| Related:
Market impact costs |
Price indexes |
| See:
Consumer price index and producer price index |
Price leadership |
| A
price charged by the dominant producer that becomes the price adopted by all the other producers. |
Price momentum |
| Related:
Relative strength |
Price persistence |
| Related:
Relative strength |
Price range |
| The
interval between the high and low prices over which a stock has traded
over a particular period of time. |
Price risk |
| The
risk that the value of a security (or a portfolio)
will decline in the future. Or, a type of mortgage
pipeline risk created in the production segment when loan terms are set for the borrower in advance of setting terms for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell the originated loans at a discount. |
Price-sales
ratio |
| Determined by dividing current stock price by revenue per share (adjusted for stock
splits). Revenue per share for the P/S
ratio is determined by dividing revenue for past 12 months by number of shares outstanding. |
Price-specie flow mechanism |
| Adjustment
mechanism under the classic gold standard allowing disturbances in the price level in one country to be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments into balance. |
Price spread |
| An
options strategy that involves buying and selling two options on the same security
with the same expiration month, but with different exercise prices. |
Price support |
| Government
intervention to set an artificially high price through the use of a price floor designed to aid producers. |
Price takers |
| Individuals
who respond to rates and prices
by acting as though prices have no influence on them. |
Price value of a basis point (PVBP) |
| Also
called the dollar value of a basis point; a measure of the change in the price of a bond if the required
yield changes by one basis point. |
Price-volume relationship |
| A
relationship espoused by some technical analysts
that signals continuing rises or falls in security
prices that are related to changes in volume traded. |
Price-weighted
index |
| An index
giving a greater influence to higher-valued stocks
by weighting all component stocks by their price. |
Prices (of equity) |
| Price
of a share of common
stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price. |
Priced out |
| The
market has already incorporated information, such as a low dividend, into the price of a stock. |
Pricey |
| Term
used for an unrealistically low bid
price or unrealistically high offer
price. |
Pricing
efficiency |
| Also called external efficiency; a market characteristic that prices
at all times fully reflect all available information that is relevant to the valuation of securities. |
Primary dealer |
| Usually refers to the select list of securities firms that are authorized to deal in new issues of government bonds. |
Primary distribution |
| Sale
of a new issue of stock or bonds, as distinguished from a secondary distribution. |
Primary earnings per (common) share |
| Earnings available for the payment of dividends to common
stockholders divided by the number of common
shares outstanding. |
Primary market |
| Where
a newly issued security
is first offered. All subsequent trading
of this security occurs is done in the secondary
market. |
Primary offering |
| Direct/Sale
of a firm's newly issued shares by the firm to investors. |
PRIME |
| Stands
for prescribed right to income and maximum equity, a certificate that entitles the owner to the dividend/income from an underlying
security, but not to the capital
appreciation of that security. |
Prime paper |
| The
highest-quality, investment-grade
debt of corporations as decided by rating
agencies such as Moody's. |
Prime rate |
| The
interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate. |
Prime rate fund |
| A
mutual fund that buys portions of corporate loans from banks and pays the interest to shareholders. |
Primitive security |
| An
instrument such as a stock
or bond for which payments depend only on the financial status of the issuer. |
Principal |
| (1)
The total amount of money being borrowed or lent. (2) The party affected by agent decisions in a principal-agent relationship. |
Principal-agent relationship |
| Occurs
when one person, an agent, acts on the behalf of another person, the principal. |
Principal
amount |
| The face amount of debt; the amount borrowed or lent. Often called principal. |
Principal Exchange-Rated-Linked Securities (PERLS) |
| A
debt instrument with its principal
and interest denominated in U.S. dollars, but with principal repayment depending on the exchange rate of the U.S. dollar against a foreign currency. |
Principal-only (PO) |
| A
mortgage-backed security (MBS)
whose holder receives only principal
cash flows on the underlying
mortgage pool. All the principal
distribution due from the underlying
collateral pool is paid to the registered holder of the stripped MBS on the basis of the current face value of the underlying collateral pool. |
Principal stockholder |
| A
stockholder who owns 10% or more of the voting stock of a company. Such stockholders must report all trading in the stock to the SEC pursuant insider
trading rules. |
Principle
of diversification |
| That portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets. |
Print |
| Used
in the context of general equities. As a verb execute
a trade, evidenced by its printing on the ticker tape. As a noun, a trade. |
Prior-lien bond |
| A
bond usually arising from reorganization with precedence over another bond of the same issuing company that is equally secured. |
Prior-preferred stock |
| Preferred stock that has a higher claim on all dividends and assets
in liquidation than claims of other preferred stock. |
Priority |
| Used
for listed equity securities. System used in an auction market, in which the first bid
or offer price is executed
before other bid and offer prices, even if subsequent orders are larger. NYSE
rules stipulate that the bid made first should be executed first, or if two bids came in at once, the bid for the large number of shares receives "priority." The bid not executed is then turned to the broker, who informs the customer that the trade was not completed because there was stock ahead. See: Standing. |
Private Export Funding Corporation (PEFCO) |
| Company
that mobilizes private capital for financing the export of big-ticket items by U.S. firms by purchasing at fixed interest rates the medium- to long-term debt obligations of importers of U.S. products. |
Private-label pass-throughs |
| Related:
Conventional pass-throughs. |
Private letter ruling |
| A
ruling by the IRS in response to a request for interpretation of a tax law. |
Private limited partnership |
| A
limited partnership with no more than 35 participants that is not registered with the SEC. |
Private market value (PMV) |
| The
break-up market value of all divisions of a company if divisions were each independent and established their own market stock
prices. |
Private Mortgage Insurance (PMI) |
| Policy
protecting the holder against loss resulting from default on a mortgage
loan. |
Private placement |
| The
sale of a bond or other security directly to a limited number of investors. For example, sale of stocks, bonds,
or other investments directly to an institutional
investor like an insurance company, avoiding the need for SEC registration
if the securities are purchased for investment as opposed to resale. Antithesis of public offering. |
Private-purpose bond |
| A
municipal bond allowing more than 10% of the proceeds go to private activities. |
Private unrequited transfers |
| Resident
immigrant workers' remittances to their country of origin as well as, e.g., gifts, dowries, inheritances, prizes, charitable contributions. |
Privatization |
| The
transfer of government-owned or government-run companies to the private sector, usually by selling them. |
Pro forma capital structure analysis |
| A
method of analyzing the impact of alternative possible capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully. |
Pro forma financial statements |
| A
firm's financial statements as adjusted to reflect a projected or planned transaction. "What-if" analysis. |
Pro forma statement |
| A
financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows. |
Probability |
| The
relative likelihood of a particular outcome among all possible outcomes. |
Probability density function |
| The
function that describes the change of certain realizations for a continuous random variable. |
Probability distribution |
| A
function that describes all the values a random variable can take and the probability associated with each. Also called a probability function. |
Probability function |
| A
measure that assigns a likelihood of occurrence to each and every possible outcome. |
Proceeds sale |
| OTC securities
sale whose revenue is used to buy another security. |
Producer Price Index (PPI) |
| Index measuring changes in wholesale prices, published by the U.S. Bureau of Labor Statistics every month. |
Product cycle |
| The
time it takes to bring new and/or improved products to market. |
Product
risk |
| A type of mortgage
pipeline risk that occurs when a lender has an unusual loan in production or inventory but does not have a sale commitment at a prearranged price. |
Production-flow commitment |
| An
agreement by the loan purchaser to allow a monthly loan quota to be delivered in batches. |
Production payment financing |
| A
method of nonrecourse asset-based financing
in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service. |
Production
rate |
| The coupon
rate at which a pass-through security
guaranteed by Ginnie Mae is issued. |
Productivity |
| The
amount of output per unit of input, such as the quantity of a product produced per hour of capital employed. |
Profile buyer/seller |
| Trader trying to get involved in a stock who presents self as a buyer/seller to draw a call from a customer. That is the trader has nothing real, or natural. |
Profit |
| Revenue
minus cost. The amount one makes on a transaction. |
Profit center |
| A
division of an organization held responsible for producing its own profits. |
Profit
forecast |
| A prediction of future profits of a company, which may affect investment decisions. |
Profit margin |
| Indicator
of profitability. The ratio of earnings
available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage. Also known as net profit margin. |
Profit-sharing plan |
| An
incentive system providing that employees share in company profits through a cash fund or a deferred plan used to buy stock or bonds. |
Profit taking |
| Action
by short-term securities traders
to cash in on gains created by a sharp market
rise, which pushes prices down temporarily but implies an upward market trend.
See: Ring the [cash] register. |
Profitability index |
| The
present value of the future cash flows divided by the initial investment. Also called the benefit-cost ratio. |
Profitability ratios |
| Ratios
that focus on how well a firm is performing. Profit
margins measure performance with relation to sales. Rate of return ratios measure performance relative to some measure of size of the investment. |
Program trades |
| Orders requiring the execution
of trades in a large number of different stocks at as near the same time as possible. Also called basket trades. Related: Block
trade |
Program
trading |
| Trades
based on signals from computer programs, usually entered directly from the trader's computer in to the market's computer system and executed automatically. Applies to derivative products. A process of electronic execution of trading of a basket of stocks simultaneously, for index arbitrage, portfolio
restructuring, or outright buy/sell
interests. See: super dot. |
Progress payments |
| Periodic
payments to a supplier, contractor, or subcontractor for work as it is completed as desired, in order to reduce working capital requirements. |
Progress review |
| A
periodic review of a capital investment project to evaluate its continued economic viability. |
Progressive tax system |
| A
tax system providing that the average tax rate increases for some increases in income, but never decreases with an increase in income. |
Project financing |
| A
form of asset-based financing
in which a firm finances a discrete set of assets
on a stand-alone basis. |
Project
link |
| An econometric model forecasting and describing the effects of changes in different economies on other economies. |
Project loan certificate (PLC) |
| A
primary program of Ginnie Mae
for securitizing FHA-insured and coinsured multifamily, hospital, and nursing home loans. |
Project loans |
| Usually
FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes, nursing homes, hospitals, and other special development. |
Project loan securities |
| Securities
backed by a variety of FHA-insured loans-primarily multifamily apartment buildings, hospitals, and nursing homes. |
Project notes (PN) |
| Notes
issued by municipalities to finance federally sponsored programs in urban renewal and housing and guaranteed by the U.S. Department of Housing and Urban Development. |
Projected benefit obligation (PBO) |
| A
measure of a pension plan's liability
at the calculation date assuming that the plan is ongoing and will not terminate in the foreseeable future. Related: Accumulated benefit obligation. |
Projected maturity date |
| With
CMOs, the date at the end of the estimated cash flow window where final payment is made. |
Projection |
| The
use of econometric models to forecast the future performance of a company, country, or other financial entity using historical and current information. |
Promissory note |
| Written
pledge to pay. |
Property inventory |
| A
list of personal property with corresponding values and initial costs often used to substantiate insurance claim and tax losses. |
Property rights |
| Rights
of individuals and companies to own and use property as they see fit and to receive the stream of income that their property generates. |
Property tax |
| A
tax levied on real property based on its use and its assessed value. |
Proportional representation |
| A
method of stockholder voting that allows minority shareholders and groups of small shareholders to have a better chance of getting representation on a board of directors than under statutory voting. |
Proprietary trading |
| Principal trading in which firm seeks direct gain rather than commission dollars. |
Proprietorship |
| An
unincorporated business that is owned and operated by only one person who has complete liability for all assets,
and complete rights to all profits. |
Prospective Earnings Growth (PEG Ratio) |
| Based
on forecasts from proprietary sources such as Institutional
Brokers' Estimate System (IBES), First Call, or Zach's. Growth is forecast of earnings minus current earnings divided by current earnings. Forward-looking measure rather than typical earnings growth measures, which look back in time (historical). |
Prospectus |
| Formal
written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe fund objectives, risks, and other essential information. |
Protect |
| Assure
the salesperson or trader that interest, buy or sell, will be attended to, given any change in the trading circumstances, as follows: At
a price: If the stock trades at a certain price or price range, the trader will show this market
to the salesperson and thus allow participation under these favorable circumstances. Floor
protection: Representation of a client on the floor of the exchange-so that if size
were to trade at his price or a better price, salesperson would participate. Volume
(OTC): If a certain amount of volume trades (that parallels the protectee's interest), trader assures salesperson of reasonable participation in the trading activity. The extent of this protection depends on liquidity, number of market makers, and other aspects of the stock. |
Protectionism |
| Notion
that governments should protect domestic industry from import competition by means of tariffs, quotas, and other trade barriers. |
Protective covenant |
| A
part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to protect the lender's interests. |
Protective put buying strategy |
| A
strategy that involves buying
a put option on the underlying
security that is held in a portfolio.
Related: Hedge option
strategies. |
Provision for income taxes |
| An
amount on the P & I
statement that estimates a company's total income
tax liability for the year. |
Provisional call feature |
| A
stipulation in a convertible issue
that allows the issuer to call the issue during the noncall period if the price of the stock reaches a certain level. In the case of convertible securities, right of an issuer to accelerate the first redemption date if the underlying
common should trade at or above a certain level for a sustained period. Most typical terms are 150% of conversion price for 20 consecutive days. Note that under these circumstances the security has appreciated, at a minimum, 50% since being issued. |
Proxy |
| Authorization,
whether written or electronic, that shareholders' votes may be cast by others. Shareholders can and often do give management their proxies, delegating the right and responsibility to vote their shares as specified. |
Proxy contest |
| A
battle for the control of a firm in which a dissident group seeks, from the firm's other shareholders, the right to vote those shareholders' shares in favor of the dissident group's slate of directors. Also called proxy fights. |
Proxy fight |
| Often
used in risk arbitrage. Technique used by an acquiring company to attempt to gain control of a takeover target. The acquirer tries to persuade the shareholders of the target company that the present management of the firm should be ousted in favor of a slate of directors favorable to the acquirer, thus enabling the acquiring company to gain control of the company without paying a premium price. |
Proxy statement |
| Document
intended to provide shareholders
with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Information required by the SEC that must be provided to shareholders who wish to vote for directors and on other company decisions by proxy. |
Proxy
vote |
| Vote cast by one person or entity on behalf of another. |
Prudent-man rule |
| A
common law standard against which those investing the money of others (fiduciaries) are judged. |
P&S |
| Purchase
and sale statement. A statement provided by the broker
showing change in the customer's net ledger balance after the offset of any previously established positions. |
PSA
Prepayment Rate |
| The Bond Market Trade Association's Mortgaged Asset-Backed Securities Division's prepayment model based on an assumed rate of prepayment each month of the then unpaid principal balance of a pool of mortgages. PSA is used primarily to derive an implied prepayment speed of new production loans. 100% PSA assumes a prepayment rate of 2% per month in the first month following the date of issue, increasing at 2% percentage points per month thereafter until the 30th
month. Thereafter, 100% PSA is the same as 6% CPR (Constant prepayment rate). |
PSSG |
| Financial
ratio defined as stock price divided by sales over sales growth. Often used in the valuation of Internet stocks. Related: PREG. |
Public
debt |
| Issues
of debt by governments to compensate for a lack of tax revenues. |
Public housing authority bond |
| Bonds of local public housing agencies that are secured by the federal government and whose proceeds are used to provide low-rent housing. |
Public limited partnership |
| A
limited partnership with an unlimited number of partners that is registered with the SEC and is available for public trading by broker/dealers |
Public offering |
| Used
in the context of general equities. Offering
to the investment public, after compliance with registration
requirements of the SEC, usually by an investment banker or a syndicate made up of several investment bankers, at a price agreed upon between the issuer and the investment bankers. Antithesis of private placement. See: Primary
distribution and secondary distribution. |
Public offering price |
| The
price of a new issue of securities
at the time that the issue is offered to the public. |
Public ownership |
| The
portion of a company's stock
that is held by the public. |
Public-purpose bond |
| A
specific type of municipal bond
used to finance public projects such as roads or government buildings. Interest on municipal bonds is federal income tax-free. |
Public Securities Administration (PSA) |
| The
trade association for primary dealers
in U.S. government securities, including MBSs. |
The Public |
| Individual
investors who trade
single securities independently or invest in intermediaries such as mutual funds, as opposed to professional investors. |
Public
Utility Holding Company Act of 1935 |
| Legislation
intended to eliminate many holding company abuses by reorganizing the financial structures of holding companies in the gas and electric utility industries and regulating their debt and dividend
policies. |
Public warehouse |
| Storage
facility operated by an independent warehouse company on its own premises. |
Publicly held |
| Describes
a company whose stock is held by the public, whether individuals or business entities. |
Publicly traded assets |
| Assets that can be traded in a public market, such as the stock
market. |
Puke |
| Slang
for a trader selling a position,
usually a losing position, as in, "When in doubt, puke it out." |
Pull |
| Used
in the context of general equities. See: Cancel. |
Pullback |
| The
downward reversal of a prolonged upward price trend. |
Pulling in their horns |
| Investors selling off positions after a stock or bond
market has increased sharply or setting up hedging positions
to guard against a negative turn of the market. |
Purchase |
| Buy; be long;
have an ownership position. |
Purchase accounting |
| Method
of accounting for a merger
that treats the acquirer as having purchased the assets and assumed the liabilities
of the acquiree, which are then written up or down to their respective fair market values. The difference between the purchase price and the net assets acquired is attributed to goodwill. |
Purchase
agreement |
| Used in connection with project financing; an agreement to purchase a specific amount of project output per period. |
Purchase fund |
| Resembles
a sinking fund, except that money is used to purchase bonds only if they are selling below their par value. |
Purchase
group |
| See: Underwriting
syndicate |
Purchase loan |
| A
consumer loan taken to finance a purchase. |
Purchase method |
| Accounting
for an acquisition using market
value for the consolidation of the two entities' net assets on the balance
sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the pooling
method resulting in lower net income. |
Purchase-money mortgage |
| A
mortgage given by a buyer in lieu of cash when the buyer is unable to borrow commercially for the purchase of property. |
Purchase order |
| A
written order to buy specified goods at a stipulated price. |
Purchase and sale |
| A
method of securities distribution in which a firm purchases securities from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale. |
Purchasing power |
| The
amount of credit available for securities trading in a margin
account, after taking margin requirements
into consideration. |
Purchasing
power of the dollar |
| The amount of goods and services that can be exchanged for a dollar as compared with amount of a previous time period. |
Purchasing power parity |
| The
notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. |
Purchasing power risk |
| Related:
Inflation risk |
Pure discount bond |
| A
bond that will make only one payment of principal and interest.
Also called a zero-coupon bond
or a single-payment bond. |
Pure expectations theory |
| A
theory that asserts that forward rates
exclusively represent the expected future rates. In other words, the entire term structure reflects the market's expectations of future short-term rates. For example, an increasing slope to the term structure implies increasing short-term interest rates. Related: Biased expectations theories. |
Pure index fund |
| A
portfolio that is managed so as to perfectly replicate the performance of the market portfolio. |
Pure monopoly |
| A
market in which only one firm has total control over the entire market for a product due to some sort of barrier to entry for other firms, often a patent held by the controlling firm. |
Pure play |
| A
company involved in only one line of business. |
Pure yield pickup swap |
| Moving
to higher yield-bonds. |
Purpose loan |
| A
loan that is backed by securities
and that is used to buy other securities
under certain government regulations. |
Purpose statement |
| A
form filed by a borrower that describes the use of a loan backed by securities,
and guarantees that the funds lent will not be used illegally to buy securities against Federal
Reserve regulations. |
Put |
| An option
granting the right to sell the underlying
futures contract. Opposite of a call. |
Put
bond |
| A bond
that the holder may choose either to exchange for par value at some date or to extend for a given number of years. If the price is above par, the put is a "premium put." |
Put-call parity |
| Applies
to derivative products. Option
pricing principle that says, given a stock's
price, a put and call
of the same class must have a static price relationship because arbitrage opportunities or activities will always reestablish such a relationship. |
Put-call parity relationship |
| The
relationship between the price of a put
and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underlying stock and buying a put
will deliver the exact payoff as buying one call and investing the present
value (PV) of the exercise price.
The call value equals C = S + P - PV(k). |
Put-call ratio |
| The
ratio of the volume of put
options traded to the volume of call
options traded, which is used as an indicator of investor sentiment (bullish
or bearish). |
Put guarantee letter |
| A
bank's letter certifying that the person writing a put option has sufficient funds in an account to cover the exercise price if required. |
Put on |
| Used
for listed equity securities. Trade,
or cross, a block
of stock at the designated price and quantity. See: Print. |
"Put
it on " |
| Used for listed equity securities. "Go to the floor to transact." See: Print. |
Put option |
| This
security gives investors
the right to sell (or put) a fixed number of shares at a fixed price within a given period. An investor, for example, might wish to have the right to sell shares of a stock
at a certain price by a certain time in order to protect, or hedge, an existing investment. |
Put an option |
| To
exercise a put
option. |
"Put
pants on it " |
| Used in the context of general equities. "Elaborate on your intentions or your inquiry," especially with respect to size, side, and price. See: Open up. |
Put
price |
| The price at which an asset will be sold if a put
option is exercised. Also called the strike or exercise
price of a put option. |
Put provision |
| Gives
the holder of a floating-rate bond
the right to redeem the note at par
on the coupon payment date. |
Put to seller |
| Exercise
a put option; require that the option writer to purchase the stock at the strike
price. |
Put swaption |
| A
financial instrument giving the buyer the right, or option, to enter into a swap
as a floating-rate payer. The writer of the swaption
therefore becomes the floating-rate receiver/fixed-rate
payer. |
Put up |
| See:
Print |
Pyramid
scheme |
| An illegal, fraudulent scheme in which a con artist convinces victims to invest by promising an extraordinary return but instead simply uses newly invested funds to pay off any investors who insist on terminating their investment. |