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D - When D is the fifth letter of a NASDAQ stock symbol,
the stock is a new issue.
Daily Adjustable Tax- Exempt Securities (DATES) - Variable rate
municipals that are remarketed daily at a market clearing rate.
Daily Earnings at Risk (DEaR) - A measure of value at risk for a daily
period.
Daily Price Limit - A price limit imposed by the exchange on
commodities, futures, and options, the maximum amount that they are
allowed to rise and fall in a day.
Daily Settlement - The daily cash payment associated with most of the
world's futures contracts. Futures market participants are charged for
losses or credited with gains at the end of each trading day.
Daisy Chain - Creating the illusion of trading activity in a stock
through collusion of a number of brokers or brokerage offices. This is
an illegal act.
Data Mining - Analysis of different financial variables, until the
researcher finds one or more variables or relationships with predictable
ability but which, in fact, may result from the random arrangement of
data.
Date Of Payment - Date that dividend checks are mailed to shareholders.
Date Of Record - Date on which stockholders are designated to be
recipients of either stock rights or dividends.
Day Around Order - Referring to general equities, Order that changes a
previous order by altering the size or price limit.
Day Order - Referring to general equities, An order to buy or sell stock
that if not executed, expires at the end of the trading day on which it
was entered.
Day Trader - Buyer or seller securities for the purpose of speculating
on short-term price changes rather than long-term appreciation
Day Trading - Establishing and liquidating the same position during one
day of trading.
Daylight OverDraft (DOD) - Debit acquired by Federal Reserve member
banks on an intraday basis in order to monitor an individuals bank’s
risk exposure more often.
Daylight Risk Exposure - Occurs when a party faces possible loss between
the time a settlement payment is made and a payment is received on the
same business day. More frequent in exchange of different currencies.
Days In Receivables - The average collection period for accounts
receivable.
Dead Cat Bounce - Refers to a slight upward movement in a bear market.
Deal Stock - A stock that is prone to merger or acquisition.
Dealer - Referring to general equities, entity acting as a principal in
a transaction in securities.
Dealer Loan - A collateralized loan made by a money market bank to a
dealer in order to finance the dealer’s position, a loan made overnight.
Dealer Market - A market where traders buy and sell commodities for
their own accounts
Dealer Options - Options offered Over-the-counter by security dealers
backed by the government or mortgages.
Death Put - Permits the estate of an original beneficial holder to put
small bonds to the issuer at par upon the death of the holder.
Debenture Bond - An unsecured bond. The bondholder has the claim of a
general creditor on all assets not securing other debts.
Debit Spread - Referring to derivative products, Difference in value
when the value of a purchased option exceeds the value of a sold option.
Debt - Money that has been borrowed.
Debt Capacity - The capacity or ability of a firm to borrow money.
Debt Displacement - The phenomenon that occurs when a company leases a
large amount, therefore having to borrow less money.
Debt Instrument - An asset that required fixed payment amounts, for
example, government bonds.
Debt Limitation - A limit on the amount of debt that a firm can incur
placed on the firm by a bond covenant,
Debt Market - Market for trading debt instruments.
Debt Ratio - The total of a firm’s debt divided by its total assets.
Debt Securities - Debt created through loans transactions including bank
CDs, bonds, etc.
Debt Service - Retirement of debt through repayments of principal and
payment of interest.
Debt Service Costs - Annual cash requirements to meet interest and
repayment on debt. Measured against earnings to indicate a debtor’s
ability to pay.
Debt Swap - A transaction in which a company purchases a country’s
dollar bank debt at a discount and then swaps the debt with the central
bank for local currency, allowing the company to then acquire local
equity.
Debt with a Mandatory Common Stock Purchase Contract - Debt issue with a
contract requiring holders of the debt instrument to buy adequate common
stock from the issuer to pay the debt issue in full at its scheduled
maturity date.
Debt with Springing Warrants - Provision where holders of deep discount
bonds may exercise warrants when a triggering event like a hostile
takeover attempt occurs.
Debt-Equity Swap - A refinancing swap which gives a debt holder an
equity position in exchange for cancellation of the debt.
Debt-Service Coverage Ratio - Earnings calculated before income tax and
interest, plus 1/3 rental charges, divided by interest expense added to
the quantity of principal payments divided by 1 less the tax rate.
Debt/Equity Ratio - Ratio determined by dividing long-term debt by
common stockholder equity, a financial measure.
Debtor In Possession - A firm that has filed Chapter 11 bankruptcy and
is operating under it.
Debtor-In-Possession Financing - Financing or additional debt obtained
by a company while in the Chapter 11 bankruptcy process.
Decay Factor - The rate at which a variable's value erodes through time.
Decile Rank - A scale used to compare the returns of mutual funds.
Declaration Date - The date that a company’s directors announce the date
and amount of a dividend.
Decoupling - Term where the relationship trends in asset class returns
may deviate in certain economic and financial environments.
Decoupling Trade - Any transaction designed to profit from a change in
the correlation between or among two or more indexes, rates or other
financial relationships.
Dedicated Capital - The number of shares issued multiplied by the par
value of each share.
Dedication Strategy - Multi-period cash flow matching.
Deep Pockets - Reliance by an investor, creditor or litigant on the
financial strength of an obligated parent or affiliate of the issuer,
borrower or law suit counterparty.
Deep-Discount Bond - A bond selling at a price far below par value and
with a very low or no coupon.
Default - Failure to make timely payment on a debt security or to
otherwise comply with the bond indenture provisions.
Default Exposure - Market participant’s reduction on market value if its
counterparty failed to meet it’s requirements.
Default Payment - The value of the payout of a credit derivative.
Default Premium - A compensation for an investor for the risk inherent
in purchasing a corporate bond that entails some risk.
Default Risk - The risk that a bond issuer may not be able to make
timely payments, credit risk.
Defeasance - A practice where the borrower removes cash or bonds
sufficient to service a debt, setting aside cash or bonds.
Deferred Call - A rule that prohibits a firm from calling a bond before
a specified date.
Deferred Coupon Note or Bond - Debt instrument which pays no interest
for a fixed period and then pays high rate of interest after the fixed
period.
Deferred Equity - Convertible bonds are often called this because of
their equity component and the fat that the are usually ultimately
converted into shares of common stock.
Deferred Futures - The most distant months of a futures contract, a bond
that sells at a discount and does not pay interest for a period of time.
Deferred Interest Bond - A bond that pays interest only at a future date
(zero coupon bond) or dates.
Deferred Nominal Life Annuity - A monthly payment of a fixed amount
beginning at retirement age.
Deferred Pay Securities - Instruments whose value accrues for sometime
before the issuer has to part with cash.
Deferred Payment American Option - Permits an option holder to freeze
the underlying price at which an option will be exercised prior to the
option's maturity. The intrinsic value payment is deferred until the
expiration of the option.
Deferred Payment Note or Bond - A bond issued to investors with payment
to the issuer deferred for a fixed period, usually to use the investor's
use of the bond as collateral for a loan.
Deferred Premium Option - An option without an upfront premium that is
paid or netted against the upfront premium at expiration. The premium
for a deferred premium option will be higher than standard option
premiums by at least the interest cost of carrying the premium.
Deferred Start Option - Any of a variety of options which are traded
before their effective lives start and, perhaps, even before their
strikes and other terms are set.
Deferred Start Swap - A swap with a forward start date.
Deferred Swap - Any swap in which, for tax and accounting purposes, some
or all payments are delayed for a specific period.
Deferred Taxes - A non-cash expense used to provide free cash flow,
amount allocated to be used meet tax requirements not yet met.
Deferred-Annuities - Life insurance products that offers a tax
advantage.
Deficiency Letter - Notification form the SEC to an issuer that a
prospectus or other contemplated filing needs to be modified before
being accepted.
Deficit - An excess of liabilities over assets.
Defined Benefit Plan - A pension plan in which the sponsor (firm) agrees
to make payments of specified amounts to qualifying employees.
Defined Contribution Plan - A pension plan in which the sponsor (firm)
agrees to make contributions for specified amounts on the behalf of
qualifying employees.
Degenerate Swap - A swap based on only one forward rate. A contract
might include unusual timing or calculation of payments of interest.
Delayed Convertible - A convertible security which cannot be converted
immediately.
Delayed Issuance Pool - Mortgage backed securities that are
collateralized by seasoned loans originated prior to the pool of
mortgage backed securities’ issue date.
Delayed Opening - Referring the listed equity securities, delay of the
start of trading in a certain stock until a gross imbalance in buy and
sell orders is corrected.
Delayed Settlement/Delivery - Referring to general equities, transaction
in which the contract is settled in excess of five full business days.
Delayed Start Swap - A swap with a forward start date.
Deleveraged Constant Maturity-linked Floating Rate - A floating rate
note with the interest payment set relative to a constant maturity swap
or sovereign rate. Deleveraging refers to the fact that the effective
rate on one side of the swap is a fraction of the constant maturity rate
or a fraction of that rate plus a spread.
Deleveraged Instrument - Any note, swap or even option in which the
participation rate in an interest rate or other index change is less
than 100%.
Deliverable Instrument - In a forward contract, an asset that will be
delivered in the future at an agreed upon price,
Delivery - The act of transferring security ownership from seller to
buyer in order to settle a futures contract.
Delivery Date - The date one must deliver, or fulfill the obligations of
a futures contract.
Delivery Factor - In the U.S., delivery factors for interest rate
contracts are based on an eight percent yield.
Delivery Options - The options available to the seller of an interest
rate futures contract.
Delivery Points - Points that are designated by the exchange on a
futures contract at which the commodity may be delivered in fulfillment
of such contract.
Delivery Price - Price at which the futures contract is settled when
deliveries are made.
Delivery Risk - In a currency transaction, the full principal amount of
the transaction is at risk for a short period, primarily because both
sides do not settle simultaneously.
Delivery Specifications - The provisions of a futures, forward, or
option contract that detail the characteristics of the financial
instrument or commodity that are accepted in settlement of the contract
at expiration or exercise.
Delivery Versus Payment - Transaction that requires the buyer’s payment
at the time of delivery.
Delta - Referring to derivative products, the ratio of the change in
price of a call option to that of the underlying stock.
Delta Hedge - A strategy that uses options with continuous adjustment of
the number of options used, in conjunction with the delta of the option.
Delta Neutral - Where the value of a portfolio is not affected by
changes in the value of the asset on which its options are written.
Delta-Gamma-Kappa-Rho Hedge - A hedge involving at least two
options-with different expiration dates. Designed to eliminate exposure
to the sensitivity risks of these options.
Delta/Gamma Hedge - A risk offsetting position-consisting in part of
short-term option contracts- that neutralizes the market risk of an
underlying position in an instrument with some embedded option features.
Demand Deposits - A checking account that can be withdrawn upon demand,
paying no interest.
Demand Line Of Credit - A line of credit offered by a bank that allows
the customer to borrow on a daily or on-demand basis.
Demand Master Notes - Securities that are short-term, repayable upon
demand by the holder.
Demand Shock - Any event that has an effect on demand for goods and
services.
Dematerialization - Replacement of a physical or item with electronic
registration.
Department of Trade and Industry (DTI) - The regulatory body in the
United Kingdom responsible for the overseeing insurance companies,
enforcement of corporate legislation and prosecution of insider trading
cases.
Dependent - Relationship between capital budget projects where one is
accepted contingent on the acceptance of another.
Depletion - Cost of acquiring and developing a natural asset such as oil
or minerals that is or has been amortized as an expense much like
depreciation. Depletion is reflected as a reduction in the carrying
value of the natural resource on the balance sheet.
Depo Rate - A deposit rate in the interbank market.
Deposit - Money or other liquid assets left at a financial institution
to earn a return.
Deposit Notes - A term deposit in a bank may serve as the basis for an
equity or currency-linked risk management structure.
Depositary Receipt -
Depository Institution - A financial institution which accepts cash
deposits for which it pays interest or provides services in return for
the opportunity to invest or lend the proceeds from the deposits at a
higher return.
Depository Preferred - Often referring to convertible securities, a
financial device enabling an issuer to circumvent a corporate limit on
the number of preferred shares that are issuable.
Depository Transfer Check - Check payable to a particular person or
company from a local bank.
Depository Trust Company (DTC) - Referring to general equities, a
user-owned securities depository and a member of the Federal Reserve
System: A self regulating organization that serves as a clearinghouse
for transfer agents.
Depreciate - To spread the expense for the purchase of an asset over the
life of the asset.
Depreciation - An accounting concept for the lessening in value of an
asset over time: Allocation during the period to amortize the cost of
acquiring long term assets over the useful life of the assets.
Depreciation Tax Shield - Tax write off on depreciation of plant and
equipment.
Derivative Instruments - Contracts whose prices are derived from the
price of the underlying asset, such as options and futures.
Derivative Markets - Markets for derivative instruments such as options
and futures contracts.
Derivative Security - A financial security whose value is determined in
part from the value and characteristics of another security, the
underlying security.
Derivatives Operating Subsidiary - Designed to avoid some of the
regulatory and capital restrictions that its bank or investment bank
parent might face in certain derivatives markets.
Derivatives Product Company (DPC) - A special purpose credit-enhanced
financial corporation designed to serve as a counterparty for swaps and
other derivative instruments.
Derivatives Trading Manager (DTM) - The manager of a hedge fund
specializing in derivative instruments.
Designated Investment Exchange (DIE) - Any non-U.K. exchange recognized
by U.K. regulators as suitable for use by U.K. investors.
Designated Order Turnaround (DOT) System - An electronic order entry
system developed and used by the New York Stock Exchange to expedite the
execution of small market and limit orders by routing them directly to
the specialist post on the floor for automatic executions.
Designated Primary Market Maker (DPM) - A floor trader who maintains a
two-sided market for a specific product on the Chicago Board Options
Exchange.
Designated Time Net Settlement (DTNS) - A funds settlement system used
in the Bank of Japan's BOJNET fund wire in which net settlements are
debited or credited to participating banks at designated times based on
their net debts to, or credits from, other banks.
Destructured Asset Swap - A structured note combined with a swap
structure that converts the note to a floating rate note.
Detachable Warrant - A warrant that may be sold separately from the
package it was originally issued with, often a bond.
Detrend - Done periodically in statistics to remove the general drift or
tendency of a set of data to bias in one direction or another.
Deutsche Börse AG (DBAG) - A company that conducts operations for the
German cash and derivative markets.
Devaluation - A decrease in the spot price of a country’s currency.
Dichotomous Variable - Variable that classifies data into two groups.
Diff or Difference Option - Spread or outperformance option with a
payout related to the price or difference between two underlying
securities.
Difference Check - The form of payment for a net settlement under a swap
agreement where obligations are netted against each other.
Difference From S&P - A mutual fund’s return less the change in the
Standard and Poors 500 Index.
Differential Disclosure - The situation that occurs when a firm’s
official corporate
Differential Swap - A transaction involving a swap between two L.I.B.O.R.
rates of interest.
Diffusion Process - An assumption that a stock’s price takes on all
immediate values, affecting the way the stock’s price changes.
Digits Deleted - Referring to general equities, designation on
securities exchange tape meaning that some digits have been dropped
because of a tape delay,
Dilequant - A financial analyst who dabbles in quantitative analysis but
whose knowledge of the concept is superficial.
Dilution - Reduction in earnings per share of a common stock that occurs
as a result of an issuance of additional shares by the company.
Dilution Protection - Often referring to convertible securities,
provision allowing for the conversion ratio to be changed accordingly in
the case of a stock dividend or extraordinary distribution to avoid
dilution.
Dilutive Effect - Where earnings per common share has been decreased.
Dip - Referring to general equities, small drop in securities prices
following an upward trend.
Direct Estimate Method - A technique used for cash budgeting based on
detailed estimates of cash receipts and disbursements.
Direct Lease - Lease where new equipment is leased from the manufacturer
by the lessor and then is leased to the lessee.
Direct Paper - Commercial paper sold directly to investors by an issuer.
Direct Placement - Selling a new issue by placing it with an
institutional investor as opposed to offering if for sale publicly.
Direct Quote - The number of US dollars needed to equal one unit of a
foreign currency.
Direct Registration of Securities (DRS) - Registration in which
securities are held in a registrar account for the beneficial owner.
Shareholders do not hold certificates which would have to be turned in
to effect a transfer.
Direct Search Market - A market where buyers and sellers seek each other
directly and transact directly.
Direct Stock-Purchase Programs - Programs where investors purchase
securities directly from the issuer.
Directed Brokerage - Referring to general equities, a brokerage house
that has been requested to be used in executing an order.
Directorship - Referring to general equities, stock status whereby a
trader may not maintain positions in the security in order to avoid a
conflict of interest.
Dirty Float - Floating exchange rate system in which the government
sometimes intervenes in order to change the direction of the value of
the country's currency.
Dirty Hedge Instrument - A derivative security whose exposure cannot be
fully hedged with exchange- traded securities and whose risk changes in
response to changes in a secondary underlying variable.
Dirty Price - The price paid by a bond buyer, the bond price including
accrued interest.
Disbursement Float - Where the amount of cash on a firm’s books is
decreased, but the amount of bank cash is not immediately decreased
because of checks written.
Disclaimer Of Opinion - A disclaimer made by an auditor in regard to a
firm’s financial condition.
Disclosure Document - Published by the Options Clearing Corporation,
this outlines the risks related to various kinds of options trading and
positions. To be approved for option trading, a disclosure document must
be given to clients at or prior to approval.
Disclosure Risk - The risk that disclosure of company information will
put an enterprise at a disadvantage when it needs to make future
transactions to adjust its financial position.
Discontinuity Risk - Exposure to loss from failure of market prices or
rates follow a continuous route.
Discount - Referring to general equities: Convertible: difference
between gross parity and a given convertible price. General: information
that has already been taken into account.
Discount Bond - A debt that is sold for some amount less that its
principal value. Discount bonds that have no coupon are called "zero
coupon" bonds.
Discount Currency - A currency whose debt market consists of interest
rates greater than the existing rates in the investor's domestic
currency.
Discount Factor - The present value of money received at a future date.
Discount Period - The period of time when a deduction in the amount owed
can be take by the customer when making payment.
Discount Rate - The rate of interest charged by the Federal Reserve to
banks when they borrow funds in order to meet short-term liquidity
needs.
Discount Securities - Instruments such as US Treasury bills that do not
bear interest, are issued at a discount, and are redeemed at maturity
for full face value.
Discount Swap - A swap in which, based on the size of the discount of
the bond, the fixed rate payer may make a balloon payment at maturity
rather than add a spread to the fixed rate payment.
Discount Window - Where member banks can borrow reserves against
collateral from the Fed.
Discount Yield - Annual discount divided by par value.
Discounted Basis - To sell at a level below maturity value so that the
difference makes up the interest either in part or in full.
Discounted Cash Flow (DCF) - Used in order to obtain present values,
future cash flows multiplied by discount factors.
Discounted Dividend Model - Using the present value of all expected
future dividends in an effort the estimate the intrinsic value of a
firm.
Discounted In/By Market - Referring to general equities, unannounced
information that is anticipated therefore is already taken into account
in the pricing.
Discounted Payback Period Rule - When the cash flows are discounted and
the payback rule is applied on these discounted cash flows.
Discounting - The opposite of compounding, the present value of a future
amount.
Discrete Average - An estimate based on the mean of a group of fixed
points rather than on a nonstop series.
Discrete Compounding - Compounding money’s time value for discrete time
intervals.
Discrete Payoff Bull Note - A high fixed rate note with repayment of
principal at par or below par, depending on the level of a specified
foreign rate.
Discrete Random Variable - A variable that can only be one of a set of
certain discrete possible values.
Discretionary Account - An account where a person or organization (other
than the entity has authority to execute transactions.
Discretionary Cash Flow - Cash flow available after the funding of all
positive net present value capital investment projects.
Discretionary Order - Order placed at the discretion of an account
manager without having to obtain specific permission from the client.
Discriminant Analysis - A process using statistics linking the default
probability to a specified set of financial ratios.
Disintermediation - The act of withdrawing funds from a financial
institution in order to directly invest them.
Distributed - When issues are sold after a Treasury auction by a dealer.
Distribution - The sale of securities by dealers to investors.
Distribution-Free Test - A statistical test that does not rely on any
assumption about the distribution of the population from which a test is
drawn.
Divergence - When two or more indices to not show confirming trends.
Diversification - Dividing investment funds among a variety of varying
securities in an effort to minimize unsystematic risk.
Dividend - A portion of a company's profit paid to common and preferred
shareholders.
Dividend Arbitrage - Methods used to obtain part or all of an investor's
return in the form of dividend payments.
Dividend Capture Program - Stretegies designed to take advantage of the
favorable tax breaks for corporate dividends.
Dividend Clawback - An arrangement where sponsors of a project agree to
contribute any prior dividends received from the project as equity. This
is done to cover any cash deficiencies.
Dividend Clientele - A group of shareholders that prefer the firm follow
a certain policy in regard to dividends.
Dividend Cross-Over Method - Estimates the date when the dividend of a
underlying stock will be equivalent to the coupon of the convertible
(deep in the money) bond.
Dividend Discount Model - A model based on the present value of a firm’s
expected future dividends, for valuing the firm’s common stock.
Dividend Enhanced Convertible Stock (DECS) - A preferred stock issue
with a higher than market dividend rate and is convertible into common
stock.
Dividend Growth Model - A model that assumes that dividends are growing
at a constant rate in perpetuity.
Dividend Limitation - A limitation placed by a bond covenant that
somehow restricts the firm’s ability to pay cash dividends.
Dividend Payout Ratio - The percentage of earnings that are paid out as
dividends.
Dividend Policy - A firm’s policy used to determine the amount of money
it will pay shareholders as dividends.
Dividend Rate - A rate paid on preferred stock based on par value, fixed
or floating.
Dividend Reinvestment Plan (DRP) - A reinvestment plan where the company
automatically invests shareholder’s dividends in more shares of the
company’s stock. Most company’s that have such a plan do not charge for
the transactions. Often referred to as a DRIP.
Dividend Rights - The shareholders' rights to receive per-share
dividends
Dividend Stripping - Process by which German investors have benefited
from the favorable tax treatment of German corporate dividends received
by domestic investors.
Dividend Swap - A transaction in which an investor exchanges an
underlying stock or index's current dividend to for a call option.
Dividend Trade Roll/Play - Referring to equity securities, buying and
selling stocks near their ex-dividend dates in order to collect the
dividend offset by a taxable capital loss.
Dividend Yield - The interest derived from the payment of a dividend.
Dividends Per Share - Calculated by dividing the dividend paid over the
past year by the number of common shares outstanding.
Doctrine Of Sovereign Immunity - Doctrine that states the fact that one
country can not be tried in the courts of another without its consent.
Documented Discount Notes - Commercial paper that is backed by a letter
of credit from a bank as well as normal bank lines.
Dollar Bond Index-Linked Securities (Dollar BILS) - Floating rate, zero
coupon notes with an effective interest rate which measures the total
return on a long-term bond.
Dollar Bonds - Municipal revenue bonds for which quotes are stated in
dollar prices.
Dollar Cost Averaging - Strategy where in order to achieve an average
cost, the same security is purchased periodically.
Dollar Price Of A Bond - The percentage of face value at which a bond is
quoted.
Dollar Risk Premium - The expected return on a foreign asset translated
at the current exchange rate into US dollars for an investor with
exposure to currency exchange risks.
Dollar Roll - A simultaneous agreement to sell a security held in a
portfolio with purchase of a similar security at a future date for an
agreed price.
Dollar Safety Margin - The safety cushion for a portfolio in a
contingent immunization strategy expressed in dollars.
Dollar-Weighted Return - The rate of return of a portfolio that
discounts the terminal value and interim cash flows back to its initial
value. Not a reliable measuring stick of performance because it is
manipulated by contributions and withdrawals of assets in the account.
Dollarization - Utilization of the U.S. dollar to assess value and to
use as a vehicle of exchange in an economy with an unstable currency.
Dollarized Bull Note - A fixed rate medium-term note denominated in
dollars, but with principal payments indexed to the performance of a
non-dollar interest rate.
Dollarized Derivative Security - An instrument with all cash flows
denominated and paid in US dollars.
Dollarized Yield Curve Note (DYCN) - A medium-term note in which the
yield is a function of a specified non-dollar interest rate, but, all
interest and principal payments are made in dollars at an exchange rate.
Domestic International Sales Corporation (DISC) - A firm that receives a
tax incentive for export activities, a US company.
Domestic Market - The portion of a nation’s internal market for trading
securities of entities domiciled within that nation.
Don't Know (DK) - A refusal to settle a trade by one counterparty
because its operation department has no record of or instructions to
complete the trade. In a volatile market, DK's can be an important
source of settlement risk.
Double Auction Market - Referring to listed equity securities, a market
where securities are bought and sold though brokers on the security
exchanges, as opposed to the Over-the-counter market.
Double Barrier Option - An option which has two instrikes, outstrikes,
or trigger prices.
Double Bottom - Term describing a pattern where the price of a security
hits a low point, rises moderately, and then hits a similar low point
again.
Double Dip - Referring to listed equity securities, A dividend roll
where the dividend "capturer" already owns the stock cum dividend and is
improving his/her yield through a second dividend.
Double Option - An option to buy (call) or sell (put) but not both.
Exercise of the call causes the put to expire and exercise of the put
causes the call to expire.
Double Top - Term describing a pattern where the price of a security
hits a high point, drops moderately, and then hits a similar high point
again.
Double-Declining-Balance Depreciation - A method for accelerating
depreciation.
Double-Dip Lease - A lease that "crosses borders" because the rules of
the lessor’s and the lessee’s countries allow both parties be treated as
the owner of the leased equipment
Double-Tax Agreement - An agreement between two nations that taxes paid
abroad can be offset against domestic taxes levied against foreign
dividends.
Doubling Option - A provision in regard to sinking funds that could
allow repurchase of twice the required number of bonds at the sinking
fund call price.
Dow Jones Industrial Average - A US index of stocks that contains 30
stocks of industrial companies that trade on the New York Stock
Exchange. Perhaps the most well known and quoted measure of market
performance.
Dow Theory - Referring to general equities, Opinion that a major trend
in the stock market must be confirmed by simultaneous movement of the
Dow Jones Industrial Average and the Dow Jones Transportation Average to
new highs or lows.
Down-And-In Option - Barrier option that comes into existence when an
asset price hits a barrier.
Down-And-Out Option - Barrier option that expires when an asset price
hits a barrier.
Downgrade - A negative change in ratings for a security.
Downgrade Risk - Risk that an issuer's debt securities' ratings will be
lowered because of a decline in its financial state.
Downside Probability - The likelihood that an investor will not achieve
a target (minimum) return.
Downside Put - An out-of-the-money put option.
Downtick - Also called a "minus tick"; a term used to describe the
situation when a security trades at a price that is lower than that of
the previous trade.
Draft - Used in regard to import/export transactions, an order in
writing stating that the importer’s agent must pay the amount specified
on demand or at a fixed future date.
Dragon Bonds - Debt instruments sold for the most part in and through
Hong Kong but priced in U.S. dollars.
Draw A Call - Referring to general equities, encouraging a customer
order by setting an attractive market or doing large portions of the
volume in a stock.
Drawdown - Percentage loss measured from the highest value of an account
or fund.
Dressed - A hedged position.
Drift - A measurement of the difference in duration and price change
between two instruments.
Drop - Referring to over-the-counter trading, no longer making a market
in a security.
Drop Lock - In regard to an interest rate on a floating rate note or
preferred stock, a lower limit that if reached, locks in the interest
rate
Drop-Lock Floating Rate Note - A floating rate note that converts into a
fixed rate note when the reference index rate hits a trigger rate.
Drop-Lock Swap - An interest rate swap agreement with a stipulation that
resets the fixed rate payment if rates change by an arranged amount.
DTC - Abbreviation for the Depository Trust Company
Dual Coupon Swap - An interest rate swap agreement with a call option
giving one party the right to require that periodic payments be made in
an alternate currency if exchange rates move against the base currency
used in the swap.
Dual Currency Bond - Generically, a fixed income instrument which pays a
coupon in the currency the investor utilizes and the principal in a
different currency the issuer utilizes.
Dual Currency Option - An option that can settles in either of two
currencies at the choice of the option holder.
Dual Currency Swap - A swap used to reduce the risk of a dual currency
bond that incorporates an option and other components to transfer the
unnecessary features of the dual currency bond from the issuer to a
financial intermediary who repair the components.
Dual Index Floater or Note - A debt instrument with coupon rates
associated with the spread between two market indexes.
Dual Listing - Referring to listed equity securities, when a security is
listed on more than one exchange in order to increase its exposure and
therefore the competition for bid and offer prices.
Dual Option Bonds - A bond with an option giving the investor a choice
of currencies for interest and principal payments.
Dual Syndicate Equity Offering - An international equity placement where
the offering is split into two tranches: foreign and domestic.
Dual Trading - When a floor trader trades for her firm's account as well
as for the accounts of customers.
Dual-Currency Issues - Eurobonds that pay the principal in one currency
but pay coupon interest in another currency.
Due Bill - A document or instrument indicating the obligation of a
seller to deliver securities sold to the buyer.
Due Diligence - An audit process conducted by the acquiring firm whereby
the target firm’s internal books are reviewed.
Duet Bond - A bond with interest and principal payments associated to
the exchange rate between two currencies on the date of payment.
Dumbbell Strategy - A strategy that attempts to take advantage of the
profile of the yield curve to enhance it’s performance while meeting an
average duration target with a combination of instruments which have
shorter and longer durations than the target duration.
Dumping - Referring the general equities, when large amounts of stock
are offered with little or no concern for price or market effect.
Dupire-Derman-Rubinstein Models - Application used to reduce by reducing
hedging costs when utilizing standard and non-standard options.
Duplicative Portfolio - Often refers to derivative products, a group of
"basket" of stocks that imitates the price movements of another set of
securities.
Dupont System Of Financial Control - A philosophy that focused on the
fact that return on assets can be expressed in terms of asset turnover
and profit margins.
Duration - An indicator of the level to which the price of a fixed
income asset is sensitive to a change in interest rates.
Duration Bogey - The extent of asset or liability duration desired in
the portfolio.
Duration Gap - The spread between the duration of a portfolio’s assets
and liabilities.
Duration Risk Management - The use of measuring the effects of a change
in interest rates for a group of assets and/or liabilities to control
exposure.
Duration-Weighted Swap - A swap with one of the payments dependent on
the effective rate at more than one point on the yield or swap curve
over the life of the instruments.
Durbin Watson Statistic - A test for correlation between successive
values in the residuals of a regression analysis.
Dutch Auction - An auction where the lowest price necessary to sell the
entire offering becomes the price at which all securities offered are
sold.
Dutch Auction Interest and Dividend Reset - Provisions that determines
rates by reoffering the securities in the market place on each reset
term. The group controlling the Dutch auction accepts bids and
distribute notes to successful bidders at the highest market price.
Dynamic Asset Allocation - A strategy that involves quantitatively
shifting the asset mix in response to changing conditions in the market.
Dynamic Hedging - Insuring the value of a portfolio using a synthetic
put option, rebalancing hedge positions as dictated by changes in market
conditions.
Dynamic Overwriting - A call option writing strategy which requires an
increase in the strike price of a short call position as the price of
the underlying stocks rises. |
