|
A/B Structure - A
two-tranche liability position consisting of senior and subordinated
securitized loans.
Abandonment
option - The option of terminating an investment earlier than planned.
Abnormal returns - The aspect of a return
that is not due to market wide influences. I.E. An abnormal return is
above that predicted by the market movement alone.
Absolute Call Privilege - The right of an
issuer to redeem a bond at any time without any preconditions.
Absolute priority - The aspect of a
return that is not due to market wide influences. I.E. An abnormal
return is above that predicted by the market movement alone.
Absolute Rate - The fixed interest rate
of a swap expressed as a percentage return rather than as a premium or
discount to a reference rate such as LIBOR.
Absolute Risk - A measure of volatility
of an asset's absolute return as opposed to its target return.
Absolute Swap Yield - The fixed rate in
an interest rate swap. Expressed as a percentage rate.
Absorbed - Used in context of general
equities. A securities can be "absorbed" as long as there are existing
orders to buy and sell.
Accelerated cost recovery system
(A.C.R.S.)- - The schedule of depreciation rates allowed for tax
purposes
Accelerated depreciation - A depreciation
method that creates larger deductions for depreciation in the early
years of an asset's life.
Acceleration Covenant - Condition in
which a debt instrument or swap agreement has an early payment because
of a default or credit downgrade.
Account Executive - A NASD-registered
securities representative or, in general terms, a stockbroker or
salesperson
Accounting earnings - A companies
earnings as reported on its income statement
Accounting exposure - Fluctuation in the
value of a firm's foreign currency denominated accounts due to a change
in current exchange rates.
Accounting insolvency - A companies
earnings as reported on its income statement
Accounting liquidity - The ability to
convert assets to cash in a rapid manner
Accounting Risk - Potential for loss
resulting from an inappropriate indication given by an accounting
requirement.
Accounting Standards Board (ASB) -
Organization with principal responsibility for accounting standards in
the United Kingdom and Canada.
Accounts payable - The amount of money
owed to suppliers.
Accounts receivable - The amount of money
owed by customers
Accounts receivable turnover - A measure
of the accounts receivable which is defined by the ratio of net credit
sales to average accounts receivable.
Accredited Investor - An investors who
generally maintains a net worth of at least $1 million or earning at
least $200,000 per year, with the privilege of investing in risky
private stock sales and other securities. As defined under Regulation D
of the Securities Act
Accreting Principal Swap (APS) - Swap
where the notional principal amount is growing for the life of the swap.
Accretion - In relations to a discount.
In accounting, accretion is a straight-line accumulation of capital
gains on a discount bond in anticipation of receipt of par at maturity.
Accretion Directed (AD) Bond - A
collateralized mortgage obligation that pays principal from specified
accretions of accrual bonds.
Accrual bond - A bond on which interest
accrues, but is not paid during the time of accrual. The accrued
interest is added to the principal and paid at maturity
Accrual Swap - A swap in which the
interest is earned and paid on one side is determined by the level of a
particular index rate.
Accrued interest - Interest that has
accumulated between the most recent payment and the sale of a
fixed-income security or bond. At the time of sale, the buyer pays the
seller the bond's price plus "accrued interest," this is calculated by
multiplying the coupon rate by the fraction of the coupon period that
has elapsed since the last payment.
Accumulated Benefit Obligation (A.B.O.) -
The liability of a pension plan (approximate measure) in the event of a
termination at the date the calculation is performed
Accumulation - A technical term used by
analysts to describe a stock whose price is holding in a stable range,
and demonstrating that investors are willing purchase or "accumulate"
shares at this price
Acid Test Ratio - (Current assets minus
inventories) divided by current liabilities.
Acquisition of assets - - The situation
where an acquirer purchases the selling firm's assets
Acquisition of stock - - A situation
where an acquirer purchases the acquiree's stock
Acquisition- - A company buys another
company.
Act of God Bond - Different types of
bonds issued by an insurance company with principal and/or interest
changes directly related to the company’s losses as a result of
disaster.
Active Manager - A portfolio manager who
decides securities and risk management in an attempt to improve a
portfolio’s return.
Active Market - Referring to stocks or
other securities that trade with a relatively high degree of liquidity
Active portfolio strategy - The strategy
where available information and forecasting techniques are used to
enhance the portfolio performance.
Actuals - The physical commodity
underlying a futures contract
Actuarial Rate - The return rate
estimated by a pension plan actuary from the calculation of liability
coverage and coverage caps.
Actuary - Cerified professional who uses
probability and statistics to calculate insurance premiums, pension fund
contributions and insurance and pension plan liabilities
Add-On - A percentage of the estimated
value of a loan, a security, an OTC derivative contract, or some other
position charged to a financial institution's regulatory capital.
Add-On Yield - Annualized interest
divided by original principal and expressed as a percent. Standard yield
calculated for Eurodollars.
Adjustable rate - Refers to interest rate
or dividend which is adjusted periodically, usually based on a standard
market rate outside the control of the bank or savings institution, such
as that prevailing on Treasury bonds or notes
Adjustable rate mortgage (ARM) - A type
of mortgage that features preset adjustments of the loan interest rate
at regular intervals based on an established index.
Adjustable rate preferred stock (A.R.P.S.)-
- Publicly traded issues that may be collateralized by mortgages
Adjusted Futures Price - The equivalent
of the underlying cash market instrument price that is reflected in the
current futures price.
Adjusted Strike Price - When any change
affects the shares subject to a stock option, the strike price and the
number of shares of the option are adjusted to reflect the change. For
example, if a stock is split 2 for 1 and the original strike price of an
option is $60, the adjusted strike price is $30, and the option becomes
an option on 200 shares of the split stock.
Administrative Law - Regulatory decisions
under the jurisdiction of regulatory agencies as opposed to the judicial
system.
Admitted Assets - The assets of an
insurance company stated at the values permitted by insurance
regulators.
Advance Corporation Tax (ACT) - A
dividend payout tax for companies in the United Kingdom.
Advance Decline Ratio - The number of
issues in a market or index that have increased in price divided by the
number of issues that decline in price. Used as a measure of market
sentiment or tone.
Advance Pricing Agreement - A tax
agreement from two countries' tax agencies on how the taxes on earnings
from a financial transaction or series of transactions will be allocated
between the countries.
Advance Refunding - Sale or offering of
new bonds to holders in advance of the maturity or call of an old bond.
After-Acquired Clause - A condition of a
mortgage bond agreement that allows issuance of additional bonds subject
to the same mortgage.
After-Market - The market for a security
after an initial public offering on over-the-counter or on an exchange.
After-tax profit margin - The ratio of
net income to net sales.
Agency - 1.Term used to describe a
security issued by a U.S. Government agency. 2. A stockbroker buying or
selling a security without taking a financial risk. A broker handles the
transaction between the buyer and seller for a commission.
Agency basis - Compensation for the
broker of a trade solely on the basis of commission established through
bids submitted by various brokerage firms.
Agency cost- - - The costs of having an
agent make decisions for a principal
Agency Relationship - Means of business
by which a broker finds a trading counterparty for the client rather
than trade for it’s own account.
Aggregate Exercise Price - The strike
price of an option contract multiplied by the number of units of the
underlying security covered by the option contract.
Aging schedule - A table of accounts
receivable broken down into age categories (30,60,90) which is used to
determine if customer payments are up to date.
Agio - A bond's market value premium over
par, valued as a percent.
Agreement Value - The market value of a
swap, based on the cost to reestablish the swap position in the current
market environment. The market value is determined by reference to prior
sources of price or swap rate quotations.
Algorithm - A formula used to solve a
problem. Ex. cost-of-carry model for futures contracts.
All or None Order - An order which is to
be executed in its entirety or not at all.
All or None Underwriting - The situation
where a security issue is canceled if the underwriter is unable to
re-sell the entire issue
All-In Cost - The total cost of a
transaction or including interest, spreads, commissions and fees.
All-In Premium - The warrant premium
valued as a percentage of the current price of the underlying.
All-Ordinaries Share Price Riskless Index
Notes - Low or zero coupon equity index-linked notes with minimum
redemption at par and specified participation in the Australian
All-Ordinaries stock index.
Alligator Spread - Security with the
difference unusually wide in the bid and ask price.
Allotment - In a securities offering, the
quantity of securities allocated to a syndicate member or selling group
by the underwriter.
Alpha - A measure of performance on a
risk adjusted basis
Alternative Currency Option - A currency
option which can be exercised and and settled in any one of two or more
currencies at the discretion of the option holder. Each currency has its
own strike rate and the holder chooses the currency with the greatest
option value at the time of exercise.
Alternative Minimum Tax (AMT) - A tax
calculation designed to insure that wealthy individuals and corporations
pay a minimum percentage of their income in taxes in spite of any tax
shelters or tax-exempt investments they may have.
American Depository Receipts (ADR)- -
Negotiable receipt for a given number of shares of stock in a foreign
corporation. A popular form of owning shares of foreign companies, ADRs
are subject to the securities laws of the United States and the rules of
the member exchanges
American Exchange Rate Quotation
Convention - In currency markets, the practice of quoting exchange
relationships in terms of the number of dollars per unit of the foreign
currency.
American Stock Exchange (AMEX) - The
third largest U.S. stock exchange, located in New York. Shares trade in
a similar auction manner as the NYSE as opposed to "market making" that
occurs on the NASDAQ exchange. The majority of trading on the American
Stock Exchange consists of index options.
American Window - A modified
American-style option with an exercise period at the end of the option's
life.
American-style option - A contract that
can be exercised at any time between the purchase date and the
expiration date.
Americus Trust - Sponsor of a technique
to separate certain common stocks into a five-year warrant and a
five-year covered call warrant writer's position at relatively low cost.
No Americus Trust instruments have been created since 1987.
Amortization - Loan repayment by
installments.
Amortizing Cap - An interest rate cap
with individual caplets covering declining notional principal amounts.
This structure usually reflects repayment of principal on an underlying
instrument.
Amortizing Collar - An interest rate
collar which covers declining notional principal amounts. This structure
usually reflects repayments of principal on an underlying instrument.
Amortizing Instrument - Any financial
instrument with a declining notional principal or with repayments of
principal on a predetermined or contingent schedule prior to ultimate
maturity.
Amortizing Option - An interest rate or
swap option which covers declining notional principal amounts. This
structure usually reflects repayments of principal on an underlying
instrument.
Amortizing Swap - An interest rate swap
with a declining notional principal amount reflecting the principal
amortization of an underlying fixed or floating rate instrument. If the
actual amortization schedules of the swap and the underlying are not set
at identical levels in advance, the fixed rate receiver faces
significant prepayment or extension risk.
Amount at Risk - The present value of a
replacement swap in a swap agreement.
AMTEL - In-house message system displayed
through Quotron A page
Analyst- - Party that purports to serve
as an authority on the evaluation of a security for investment
consideration
Analytical - A problem solving approach
that relies on equations rather than trial and error.
Anchoring - Use of unrelated information
as a reference point when estimating some unknown value.
Andy - gorges
Angel - A term used to describe
individuals or parties providing venture capital.
Announcement date - Date on which
particular news concerning a particular company is announced publicly.
Annual percentage rate (APR) - Periodic
rate x number of periods in a year.
Annual Report - A proprietary publication
distributed annually by public corporations to inform shareholders of
company progress and to attract potential investors
Annualization - Conversion of data or a
rate calculation for part of a year or more than a year into an annual
rate.
Annuity - Contract between an individual
and an insurance company, providing lifetime income to the person on
whose life the contract is based in return for either a lump-sum or
periodic payment to the insurance company.
Annuity Bond or Note - A fixed rate bond
or note which pays the investor an equal amount of cash each year over
the life of the issue. Payments will contain increasing amounts of
principal and declining amounts of interest.
Annuity Swap - A currency swap with an
exchange of coupons or interest payments only.
Anomaly - An unexplained or unexpected
price or rate relationship that seems to offer an opportunity for an
arbitrage-type profit.
Anti-Crash Warrant - Call-type index
warrant with a strike price equal to the lower of the index level at
issuance or the index level at a predetermined future date.
Anticipatory Hedge - A long or short
hedging position taken to provide participation or protect against a
decline in an equity.
Antidilution Clause - A provision of a
convertible security that provides for adjustment of the conversion
ratio in the event of stock dividends or stock splits, and sometimes in
the event of a sale of stock below market value.
Any or All - Where the acquirer offers to
pay a set price for all outstanding shares of the equity in question.
Application - A prearranged block trade
within the current bid-asked range on the Paris Bourse.
Appraisal - Evaluation of an asset.
Appraisal Ratio - Calculated as
portfolio's incremental return relative to a relative standard, divided
by its incremental risk.
Arbitrage - Profiting from a difference
in price. Arbitrage can apply to buying and selling currencies across
different markets to take advantage of price discrepancies.
Arbitrage Bond - Usually a municipal bond
which faces loss of its tax-exempt status because too much of the
proceeds are invested in U.S. Treasuries or other taxable debt
instruments.
Arbitrage Pricing Theory (APT) -
Suggestion that if the returns of a portfolio of assets can be described
by a factor structure or model, the expected return of each asset in the
portfolio can be described by a linear combination of the factors with
the returns of the asset. Used to assemble portfolios that follow a
market index, to estimate and monitor the risk of an asset allocation
strategy, or to estimate the likely response of a portfolio to economic
developments.
Arithmetic Average - The probability
weighted sum of a set of values.
Arizona Stock Exchange - An electronic
market for common stocks used primarily by institutional investors.
Arkansas Best v. Commission, 485 U.S. 212
(1988) - Case which set a precedent which complicated many taxable
entities' risk management systems because capital losses are not fully
deductible against ordinary income for United States taxpayers. Later
case (Fannie mae) nullified many unfavorable guidelines Arkansas case
had.
Arrangement Fee - A commission-like
charge paid to a brokerage firm or other intermediary for its role in
initiating or implementing a transaction.
Arrearage - Unpaid dividends which must
be paid to holders of cumulative preferred stock before common stock
dividends can be paid.
Arrow-Debreu Security - An instrument
with a fixed payout of one unit in a specified state and no payout in
other states.
As-You-Like Warrant - A warrant with a
provision permitting the purchaser to assign it as either a call or put
warrant for a limited period after the offering date. In general, the
option to treat the warrant as a put is of relatively little value. The
underlying asset will have to decline substantially before a put will be
worth more than the initial value of the call.
Asian option - Option based on the
average price of the underlying assets during the life of the option.
Ask - The ask is the lowest price a
dealer will accept to sell a stock.
Asset - Anything that an individual or a
corporation owns.
Asset Allocation - A strategy entailing
investments in multiple markets in order to best fill the client’s
investment objective.
Asset Class - An investment sector with a
positive expected return which is not conditional on the return of
another sector.
Asset Manager - A portfolio manager or
individual responsible for management of the risks and returns
associated with a portfolio of securities or other instruments.
Asset Swap - A fixed-for-floating
interest rate swap.
Asset turnover - The ratio of net sales
to total assets.
Asset-Backed Commercial Paper (ABCP) - A
technique for securitizing assets that might have served as collateral
for a bank loan or been sold to a factor in an earlier generation.
Asset-backed security - A security that
has been collateralized by leases, loans, or installment contracts on
personal property.
Asset-or-Nothing Option - An option with
a payout equal to the value of the underlying asset if the price of the
asset surpasses the strike price at expiration. If the value of the
asset is below the strike, the holder of the option receives nothing.
Asset/equity ratio - The ratio of total
assets to equity.
Asset/Liability Gap - Any projected
shortfall in the ability of a financial institution to meet its
contractual obligations from current holdings.
Asset/Liability Management - Techniques
calculated to coordinate the management of an entity's assets with the
management of its liabilities.
Asset/Liability Management Committees (ALCOs)
- Risk management organizations at banks and other financial
institutions whose concentration is asset/liability matching through the
management of interest rates and market risks.
Assignment - The receipt of an exercise
notice by an option writer or seller that obligates him to sell (in the
case of a call) or purchase (in the case of a put) the underlying
security at the specified strike price.
Asymmetrical Margining Agreement - A
collateralization agreement between the counterparties to a swap or
other contract that requires more stringent margin coverage from one
counterparty, due to a difference in credit rating.
At the bell - At the opening or close.
At the Money - A term used to describe
options. An option is at-the-money if the strike price of the option is
equal to the market price of the underlying security.
At-Market Swap - A swap without up-front
payments by either party.
Auction markets - A market where the
price is determined through of prospective buyers and sellers.
Auction Rate Note - A type of floating
rate note with an interest rate reset which correlates with the bids
received at a Dutch auction conducted near the end of each rate period.
Auction Rate Preferred Stock (ARPS) - A
floating rate preferred with the dividend date reset by Dutch auction,
typically every 49 days. The interest rate is usually subject to a
maximum and the issue is puttable at each auction.
Audit - Examination of a company's
financial statements and control practices by a firm of accountants and
auditors that confirm the accuracy of published financial statements.
Auditor Report - A part of the annual
report containing the auditor's opinion about the accuracy of financial
statements.
Authorized Futures and Option Funds (AFOFs)
- Publicly offered funds that invest in derivatives and interest-
bearing deposits. Regulated by the Securities & Investment Board in the
United Kingdom.
Authorized shares - Number of shares
authorized for issuance under a charter.
Auto-Correlation - A condition in which
the technical and fundamental observations in a series are not
independent of each other. If the direction and magnitude of today's
price change has implications for tomorrow, the statistician must
exercise more care in making inferences from the data-and the technician
cannot be discredited.
Auto-Quote System - A computer-based
algorithm which automatically generates quotes for exchange-traded or
frequently traded over-the-counter options based on voliatility
relationships of the underlying.
Auto-Regressive Conditional
Heteroskedasticity (ARCH) - A statistical procedure in which the
dependent variable in a regression equation is modeled as a function of
the time-varying properties of the error term.
Auto-Regressive Moving Average (ARMA)
Models - A family of time series forecasting models that depend on a
tendency of the next item in some series to relate to a moving average
of prior values.
Automated Pit Trading (APT) - A
screen-based after-hours trading system on the London International
Financial Futures Exchange.
Automatic Exercise - The practice of
exercising in the money options upon expiration automatically, without
direct instruction from the option holder.
Average Downside Magnitude - The
estimated average shortfall when an investor’s target return does not
reach his minimum return target.
Average Maturity - Refers to the average
maturity of all bonds held in a portfolio and is weighted by the dollar
value of those holdings.
Average Price System (APS) - A service
provided by many securities and futures exchanges, which provides an
average price paid for a security given the transaction history. This
allows money managers to distribute positions appropriately in their
various accounts.
Average Rate Cap - A maximum interest
rate over a set period of time based on the average rate during that
time period rather than the rate on one specific date.
Average rate of return (ARR) - The ratio
of the average cash inflow to total amount invested.
Average Strike Rate Option (ASRO) - An
option which has a value at settlement based on the difference between
the option’s rate at expiration and the average strike price, which is
the rate determined over the life of the option. This feature is most
commonly a part of employee stock purchase and pension plans.
Average tax rate - Total taxes divided by
total taxable income. Taken as a fraction of total income.
Avoir Fiscal - A dividend tax credit
permitted to certain holders of French equities.
Axe - A trading preference in relation to
positions taken by a trader, that would reduce risk and/or help lock in
profits. |
