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I - When the fifth letter of the NASDAQ stock symbol is
an I, the represented item is the third preferred bond of the company.
I-I Page - Referring to over-the-counter trading, Quotron display page
showing new listed inquiries and/or orders received after the block
call.
Idiosyncratic Risk - A risk that is not correlated to the overall market
risk, but it specific to a certain firm.
Illiquid - Term referring to a security that cannot be easily sold in
the open market.
Imbalance Of Orders - Referring to listed equity securities, situation
when there are too many orders of one kind.
Immediacy Cost - In trading, the cost associated with the decision to
trade quickly rather than attempt to attain a better price by entering a
limit order.
Immediacy Demand - The need to trade quickly.
Immediate Or Cancelled Order - Referring to general equities, an order
that must be executed in whole or in part as soon as such order is
represented in the trading crowd. Any portion not executed is cancelled.
Immediate Repackaging of a Perpetual (IRP) - Combining a newly issued
continuous floating rate instrument with a fixed rate or zero coupon
bond to create cash flow for investors.
Immediate Settlement - Settlement and delivery of securities
immediately, within five business days.
Immunization - Strategy of constructing a combination of assets and
liabilities that is subject to offsetting changes in value
Immunization Strategy - Referring to bond portfolios, an approach with
the goal of eliminating portfolio risk in regard to a change in interest
rates.
Impact Forward - A collared forward contract.
Implied Binomial Tree - The expected probability distribution of the
underlying asset based on the relationship between the option’s
volatility and strike prices.
Implied Call - A homeowner’s right to prepay, or call their mortgage.
Implied Distribution - A probability distribution developed from prices
of various at- and out-of-the- money options with a common expiration
date.
Implied Duration - An estimate of a futures contract on a portfolio
based on the duration of the underlying bond.
Implied Forward Interest Rate - The interest rate for a forward period
computed from the incremental period return in adjacent instruments on
the spot zero coupon yield curve.
Implied Repo Rate - Rate that a futures contract seller can earn by
buying and then delivering an issue of the settlement date.
Implied Volatility - Expected volatility in a return derived from a
stock’s option price, maturity date, riskless rate of return, and
exercise price.
Implied Zero Coupon Swap Curve - A yield curve for zero coupon notes
used to value fixed rate swap payments.
Import-Substitution Development Strategy - A strategy used by many Latin
American countries for economic growth involving import substitution.
Imputation Tax System - When investors who receive a dividend also get a
tax credit for taxes the firm has paid.
In And Out - Slang expression meaning day trading in a security; bought
and sold in the same day.
In Arrears - Late in making payments.
In Between - Referring to general equities, A price that is higher than
the bid price and lower than the offer price.
In Hand - Referring to general equities, said when a company has control
of an order.
In Option - An option that begins to exist as a conventional option when
a barrier price is reached prior to the expiration date of the option.
In Play - Referring to risk arbitrage, term used for a company that has
become a takeover target and whose stock has then become speculative.
In The Box - A term referring to a securities transaction meaning that
an effective delivery has been made.
In The Hole - Referring to general equities, when a stock is selling at
a large discount.
In The Middle - Referring to general equities, when a price is between
the bid and offer prices.
In The Money - Referring to options trading, a term used to describe a
client when that client holds a position that would result in a profit.
In The Tank - Referring to general equities, a slang term used when
market prices decline at a fast pace.
In Touch With - Referring to general equities, when a broker has a sell
inquiry in a particular stock.
In-Arrears Swap - A swap agreement in which the floating rate is based
on the reference index rate at the end of the reset period and applied
retroactively to the entire period.
In-House - Referring to general equities, keeping an activity within a
company; finding a buyer within the company.
In-House Processing Float - The period of time it takes for a firm to
receive a check, processes the payment, and deposit it in the bank.
In-Line - Referring to general equities, term used when earnings are
close to what the analyst’s expectations were for that particular
security.
In-Substance Defeasance - Defeasance in which a debt is not cancelled,
but is removed from the balance sheet.
In-The-Money - Term used to describe a put option with a strike price
that is higher than the underlying futures price. Also used to describe
a call option that has a strike price lower than the underlying futures
price.
In-the-Money Lookback Option - A lookback option that pays off based on
the better of an initial in the money strike or a more profitable strike
reached during the life of the option.
Incentive Fee - An investment management fee that based on the manager's
performance.
Incentive Stock Options - Long-term call options offered by a firm to
key employees to increase their compensation and improve their
performance.
Incentive Trade - A pre-trade agreement between an institutional
customer and a broker which enables the broker to share in any gain from
a better than average order execution and to be penalized for a poor
execution.
Inchoate Instrument - An incomplete financial instrument that can be
completed by the addition of a payee's name or an amount.
Income Beneficiary - Person or entity who received income from a trust.
Income Bond - Bond allowing for the payment of interest contingent on
sufficient earnings, often used during the reorganization of a failed
company, or a bond that will repay principal in full upon maturity.
Income Fund - A type of mutual fund that seeks to provide a stable
current income from investments in interest-paying securities.
Income Statement - A report or statement showing revenues, income, and
expenses of a firm over a specific fiscal period.
Income Stock - A common stock with a high dividend yield.
Income Warrants - Warrants that have an exercise right and pay interest.
Increasing Rate Notes (IRNs) - Debt obligations on which the coupon rate
increases by predetermined amounts or to predetermined levels at
specified time intervals.
Incremental Cash Flows - Firm cash flows resulting from a project.
Incremental Costs And Benefits - Costs and benefits that would occur if
a particular course of action were taken.
Incremental Internal Rate Of Return - Internal rate of return on
incremental investment in a large project.
Indenture - Document that details the terms of the agreement between
bond issuer and bondholder.
Independent Project - A project whose acceptance is not dependent on
that of other projects.
Index - Often referring to derivative products, a statistical composite
measuring changes in the economy or financial markets.
Index Allocated Principal (XAC) Bond - A collateralized mortgage
obligation whose principal paydown is distributed according to the value
of some index.
Index Amortizing Note - A debt obligation in which the time the
principal is repaid is dependent on market interest rates and how those
rates affect mortgage prepayment rates.
Index Amortizing Swap - An interest rate swap agreement with a notional
principal amount that declines as a function of a short-term money rate.
Index And Option Market - Market for trading stock options and index
products.
Index Arbitrage - Trading approach that utilizes divergences between
actual and theoretical futures prices.
Index Fund - A mutual fund that has a portfolio matching that of an
index, therefore having a performance that mirrors the market that is
represented by the index.
Index Growth-Linked Units (IGLUs) - A combination of a note and a collar
position with the underlying is as an index or a small group of stocks.
Index Model - Model used to analyze stock returns representing common
risk factors as a market index.
Index Option - An option based on a stock market index.
Index Participation Certificate - Note which provides more or less than
100 percent participation in the movement of the index and less or more
than a full return of principal at maturity.
Index Participations - Instruments that provided small investors with a
low cost way to obtain an index equivalent portfolio. The index
participations were delisted because the participations were interpreted
as futures contracts and therefore could not be traded on an exchange.
Index Portfolio - A portfolio intended to track the performance of a
specific index.
Index Range Note - A note with a coupon determined by an embedded range
accumulation option. Equity indexes, currency exchange rates and
interest rates are among the underlying indexes, prices or rates that
determine the payoff.
Index Tracking - Comparison of performance between a portfolio's return
and the return on a benchmark index.
Index Warrant - A corporate stock index option issued as part of a
security offering and guaranteed by an option-clearing corporation.
Index-Linked Bonds or Notes - Debt instruments with principal and
interest payments linked to the performance of an inflation or stock
market index.
Indexation - Strategy that attempts to imitate the return of a benchmark
index in a fund.
Indexed Bond - A bond whose payment is linked to a certain index.
Indexed Coupon Note - A debt instrument with a fixed principal due at
maturity, but with coupons payments dependent on the rate or price
movement of an interest rate, equity, currency, commodity, inflation or
other index.
Indexed Currency Option Notes (ICONs) - Dual currency bond with all
payments in one currency but with the principal payment indexed to a
currency exchange rate at maturity.
Indexed Notes - The general combination of a zero coupon bond and an
embedded index option feature which provides the holder of the note with
participation in the performance of the index.
Indexed Principal Swap (IPS) - An amortizing fixed-for-floating rate
swap with a fixed rate which is greater than the market rate for a
constant notional principal swap, and an amortization rate that
decreases as rates rise and increases as rates fall.
Indexed Strike Cap - Cap which gives investors modified interest rate
protection at reduced cost.
Indexing - A strategy utilizing a portfolio of stocks designed to track
the performance of a stock index.
Indicated Dividend - Would-be total amount of dividends paid on a share
of stock over the ensuing year if each dividend were to be the same
amount at the most recent dividend.
Indicated Yield - The yield (based on the most recent quarterly rate)
multiplied by four.
Indication - Document given to express interest in buying or selling
stock.
Indicative Price - Bid and offer price provided by a market maker for
evaluation or information purposes only. Not to be interpreted as a firm
bid.
Indicator - Referring to general equities, measurement used to forecast
a market’s direction.
Indifference Curve - Curve on a graph where the horizontal axis
represents risk and the vertical axis represents expected return
Indirect Quote - Referring to foreign exchange, the number of foreign
currency units needed to buy one US dollar.
Individual Equity Future (IEF) - A futures contract based on individual
stocks.
Individual Retirement Account (IRA) - A Private pension account that
allows individuals to save and invest on a tax-deferred basis.
Industrial Revenue Bond - Bond issued by the local government on behalf
of corporations.
Industry - Category describing a company’s primary business.
Infinite Ladder Option - A ladder option without a limit on the minimum
payout on the ladder.
Inflation - Rate at which consumer prices for goods and services is
rising in a given economy.
Inflation Derivative - A derivative with a producer or consumer price
index used as the basis for a swap or other index rate payment.
Inflation Risk - Risk that inflation will negatively effect the return
an investor realizes.
Inflation Uncertainty - The fact that future inflation rates are not
certain.
Inflation-Escalator Clause - A clause in a contract that allows for
increases and decreases based on inflation (consumer price
fluctuations).
Information Asymmetry - Situation where information that is only known
to a portion of participants.
Information Coefficient - The measurement of the correlation between
predicted and actual stock returns.
Information Costs - Costs associated with the assessment of an
investment’s merits.
Information Services - A company or organization that provides
information to other firms.
Information-Content Effect - Rise in the stock price after a dividend
signal.
Information-Motivated Trades - Transaction made when one believes that
he or she has information not yet reflected in a stock’s price.
Informational Efficiency - The accuracy and rate of speed at which
prices reflect new information.
Informationless Trades - Transactions made as a result of either an
implementation of a certain strategy or the reallocation of wealth.
Initial Margin - Referring to general equities, money or securities
required as a deposit with a broker before engaging in margin
transactions.
Initial Margin Requirement - Referring to the purchase of securities on
margin, amount of cash and securities that an investor must have in
their account before trading on margin.
Initial Public Offering (IPO) - The first sale of stock by a company to
the public, when a company goes public.
Initiate Coverage - Canceling out a short position by purchasing the
underlying stock.
Input-Output Tables - Tables used to illustrate how much one industry
requires of another for its production.
Inquiry - Referring to general equities, seeking information about a
particular stock.
Inside Market - Term referring to the trading between dealers who are
trading for their own inventories, as opposed to the "retail market".
Insider Information - Privileged information about a company that is not
yet public but will affect stock prices. It is illegal to use inside
information to make trades.
Insider Trading - Trading by insiders of a company.
Insiders - A person, generally a corporate officer, who has access to
privileged information about a company. This sometimes includes
shareholders who own more than 10% of the company’s voting shares.
Insolvency Risk - The possibility that a company will not be able to pay
its debts.
Insolvent - Condition of a firm that is not able to satisfy its debts
because its liabilities are greater than its assets.
Installment Option - Similar to a standard option, installment option
premiums are paid periodically over the life of the option and the
holder has the right to cease payments on, thereby terminating the
option at any time. This is usually done when the option is not worth
making the remaining payments.
Installment Sale - A sale where an asset is given in exchange for a
series of payments.
Instinet - Abbreviated term for the Institutional Networks Corporation;
computerized service that allows subscribers to display bids and offers
and to complete trades electronically, thus bypassing brokers.
Institution - An organization such as a mutual fund or investment trust
that invests on behalf of other parties.
Institutional Brokers' Estimate System - Service that provides analysts’
estimates of future earnings for publicly traded companies.
Institutional Investors - Institutions such as investment companies and
mutual funds that invest as a company in large volumes of securities as
opposed to individuals investing.
Institutional Net Settlement (INS) System - An obsolete London Stock
Exchange settlement system.
Institutional Regulation - Regulation of all the roles associated with a
financial institution.
Institutionalization - The domination of the markets by institutional
investors.
Instrike - The trigger price at which an in option becomes a
conventional option.
Instruments - Another term for financial securities.
Insurable Interest - A necessary relationship between an insurance
policy holder and the risk covered by the policy.
Insurance (options) - A characteristic of options that limits price or
rate movements through a predetermined price in exchange for payment of
an option premium.
Insurance Principle - Idea that the average outcome for many independent
trials of an experiment will eventually reach the expected value of the
experiment.
Insurance Risk - The ratio of annual premium income to total capital and
surplus for a property casualty insurer.
Insured Bond - Municipal bond backed by a commercial insurance policy.
Insured Plans - Pension plans that are backed by life insurance
products.
Intangible Asset - A legal claim to an asset that is abstract or can not
be seen, for example, intellectual property.
Integer Programming - Linear programming that requires the solution
values to be expressed as whole numbers.
Integrity Risk - Trading of a portfolio that contains one or more
positions not easily tradable that increase execution cost and risk.
Intellectual Risk - The risk that the employees that play a significant
role in a firm's business will leave the firm.
Inter-Bank On-Line System (IBOS) - A London-based currency payment
system.
Inter-Dealer Broker (IDB) - A brokerage firm operating in the
over-the-counter derivatives market which acts as an agent between major
dealers to assist trades that can help dealers balance their books.
Interchangeable Bond - A coupon bond that can be changed to registered
form, or vice versa.
Intercompany Loan - A loan made by one unit or division of a firm to
another.
Intercompany Transaction - A transaction that is conducted between two
units or divisions of the same company.
Interest - The price paid for borrowing money expressed as a percentage
rate. This term is also used meaning a title in property.
Interest Coverage Ratio - A measurement of a company’s ability to pay
interest, expressed as a ratio of earnings before interest and taxed to
annual interest expense.
Interest Coverage Test - A debt limitation that prohibits a firm from
acquiring additional long-term debt if the issuer’s interest coverage
would fall below a specified minimum.
Interest Equalization Tax - A tax that is no longer in existence; a tax
on US residents with foreign investments.
Interest Expense - Money a company pays out in interest on loans.
Interest On Interest - Interest earned on the reinvestment of interest
payments.
Interest Only (IO) Obligation - A tranche of a collateralized mortgage
obligation whose owner receives only the interest or part of the
interest paid on mortgages.
Interest Payment - A debt payment based a principal loan amount and the
coupon rate of interest.
Interest Rate - Monthly effective interest rate.
Interest Rate Agreement - A contract whereby one party compensates the
other at a specified time if a designated interest rate differs from the
strike rate, in turn for a prepaid premium.
Interest Rate Cap - Agreement whereby payments are made when the
designated interest rate exceeds the strike rate; also called the
interest rate ceiling.
Interest Rate Collar - Collar in which the buyer purchases the cap
option to limit the maximum interest rate he will pay and sells the
floor option to receive a premium to pay for the cap. This is primarily
used to confine interest rate payments to a range bounded by the strike
prices of the cap and floor options.
Interest Rate Contingent Option - An option on an equity, physical
commodity or foreign exchange rate that is conditional upon a particular
interest reference rate being within a certain range.
Interest Rate Differential (DIFF) - The yield spread between two debt
instruments valued in different currencies.
Interest Rate Floor - Agreement whereby payments are made when the
designated interest rate falls below the strike rate.
Interest Rate Guarantee (IRG) - A call (lender)or a put (borrower)on a
forward or futures rate.
Interest Rate On Debt - The cost of debt capital.
Interest Rate Option - A right to pay or receive a specific interest
rate on a predetermined principal for a set interval.
Interest Rate Parity Theorem - Principle stating that the interest rate
differential between the rates of two countries is equal to the
difference between the spot rate and the forward foreign exchange rate.
Interest Rate Reset Notes - Long-term notes with reset provisions on the
interest rates in order to protect the buyer from loss of principal due
to rising interest rates or a decline in the issuer’s debt rating.
Interest Rate Risk - Possibility that a security’s value will be
affected by a change in interest rates.
Interest Rate Swap - A contract between two parties to exchange periodic
interest payments on a predetermined principal, or the notional
principal amount.
Interest Subsidy - Allowance for a firm to deduct interest payments made
from its earnings before calculating its tax bill.
Interest Tax Shield - The reduction in income taxes due to the interest
subsidy, or the deduction of interest payments.
Interest-Only Strip (IO) - A security that is based on the interest
payments from a pool of mortgages.
Intermarket Sector Spread - The difference between the interest rates
offered in two sectors of the bond market for issues of the same
maturity.
Intermarket Spread Swap - The exchange of one bond for another based on
the projected realignment of spreads among sectors of the bond market.
Intermarket Surveillance Group (ISG) - Committee consisting of
twenty-three self-regulatory organizations from five countries that
regulates the sharing of confidential market information.
Intermarket Trading System - Electronic system that links the trading
floors of seven exchanges in order to permit trading among the various
Intermediate-Term - Period of time usually between one and ten years.
Intermediation - The use of a financial institution in order to invest.
Internal Finance - Finance that is generated within a firm by retained
earnings and depreciation.
Internal Growth Rate - The rate at which growth is generated by means of
cash flow retained by a company.
Internal Market - The market for mechanism for trading within a nation
which includes both the domestic and foreign market.
Internal Measure - The period of days that a firm can finance operations
without additional cash income.
Internal Rate Of Return - The dollar-weighted rate of return.
International Arbitrage - The trading of foreign securities in order to
benefit from potential profits created by time and currency
inconsistencies across international borders.
International Association of Financial Engineers - An organization of
financial economists and practitioners who meet to share their knowledge
and skills.
International Bank For Reconstruction And Development - The "World Bank"
which makes loans to countries for projects deemed to be of high
economic priority.
International Banking Facility - A branch of an American bank that
conducts Eurocurreny transactions.
International Bonds - Term referring to global bonds and foreign bonds,
as well as Eurobonds.
International Depository Receipt - A document that is issued by a bank
as evidence of ownership of shares of the underlying stock of a foreign
company that the bank holds in trust.
International Diversification - An investment approach in which a
company invests in more than one national market in an attempt to reduce
risk.
International Finance Corporation - A World Bank corporation that
produced a number of stock indexes for emerging markets.
International Finance Subsidiary - A corporate subsidiary with the sole
purpose of issuing debentures overseas and then investing the proceeds
in foreign operations. The interest is then paid to foreign bondholders
not subject to US withholding tax. However, since the US corporate
withholding tax was abolished, there is no longer a need for this type
of subsidiary.
International Fisher Effect - Theory stating that the interest rate
differential between two countries should be an objective predictor of
the future change in the spot rate (the rate on currency for immediately
delivery).
International Fund - A mutual fund that only invests outside of the US.
International Monetary Fund - An organization that supervises exchange
arrangements of member countries and lends currency reserves to members
with short term balance problems.
International Monetary Market - A division of the Chicago Mercantile
Exchange with the purpose of trading financial futures.
International Organization of Securities Commissions (IOSCO) - An
organization of securities administrators from more than sixty countries
that is responsible for the coordination of international securities
regulation and to promote consistency in regulation across borders.
International Security Market Association - Zurich association that
establishes uniform trading procedures for the international bond
market.
International Spread Option, Warrant, or Note - An instrument with a
return pattern associated to foreign interest rate spreads.
International Swap Dealers Association - Association formed with the
purpose of promoting uniformity in the derivatives markets.
Intramarket Sector Spread - The difference between two issues of the
same maturity within a market sector.
Intrinsic Value Of A Firm - The value of a company’s expected future net
cash flows discounted by the rate of return.
Intrinsic Value Of An Option - The degree to which an option is "in the
money".
Invariance Propositions - Theories that the value of a firm is invariant
to its capital structure and dividend policy.
Inventory - The quantity of any security owned by a trader, or,
referring to the items owned by a company, specifically, items such as
raw material and finished product.
Inventory Loan - A short-term loan taken in order to purchase inventory.
Inventory Turnover - The speed at which a firm’s inventory is produced
and sold.
Inverse Floating Rate Note - A security with a variable rate whose
coupon rate goes up as a benchmark interest rate goes down.
Inverted Curve Enhancement Swap (ICE Swap) - A swap agreement that
places a floor under the floating rate in exchange for a higher fixed
rate.
Inverted Market - Condition of a futures market occurring when the
nearer months are selling at higher prices than the more distant months.
Investment Bank - A person or financial institution that performs varied
services including facilitating mergers and reorganizations, aiding in
the sale of securities, and acting as a broker. Investment bankers often
provide financing for companies, often before the company holds an
initial public offering.
Investment Company - A company that offers mutual funds and is regulated
by the Investment Company Act of 1940.
Investment Decisions - Determinations made concerning a firm’s assets
and the investment of those assets.
Investment Grade - Bonds considered to be high quality and therefore
desirable for conservative investors. Credit rating companies grade them
in four categories.
Investment Grade Consensus - A bond rated Baa, BBB or higher by two or
more rating agencies.
Investment Income - The income, or revenue, derived from invested
assets.
Investment Management - The process of managing money and investments.
Investment Management Regulatory Organization (IMRO) - A self-regulatory
organization in the United Kingdom whose members manage investment
portfolios.
Investment Manager - A person who manages a particular portfolio of
investments.
Investment Product Line - A group of investment products offered by an
investment institution.
Investment Tax Credit - A tax credit that was abolished in 1986. This
credit allowed for a proportion of new capital investment to be used as
a deduction.
Investment Trust - A fund that has a fixed number of shares to be traded
in the secondary markets. These are closed-end funds.
Investment Value - Often refers to dealer securities, the fixed income
value of a convertible.
Investments - The trading of assets with the intention of gaining money
during the course of those transactions.
Investor - One who owns a financial asset.
Investor Fallout - Referring to mortgage lending, the possibility of a
loan originator committing terms to the borrower and getting commitments
from investors at the time of closing.
Investor Relations - Communications between a corporation an its
investors.
Investor's Equity - The money that an investor owns, the balance of a
margin account.
Invoice - A document submitted to a seller of goods and service to the
buyer requesting payment.
Invoice Billing - Billing system that relies on the sending out of
invoices for payment, one invoice per transaction.
Invoice Date - The date of an invoice, generally, the date that goods
are shipped.
Invoice Price - The amount that a futures contract buyer pays when a
Treasury bond is delivered.
Involuntary Liquidation Preference - A premium paid to preferred
stockholders when the issuer of a stock faces involuntary liquidation.
IRA/Keogh Accounts - Tax-deferred accounts that allow for savings and
investment. Taxes do not apply until money is withdrawn.
Irrational Call Option - A call option that is considered irrational or
unsound because it is not exercised when it is "in the money".
Irredeemable Debt Instrument - A bond with a fixed maturity which cannot
be redeemed by the issuer.
Irrelevance Result - A theory stating that a company’s capital structure
can not be considered in regard to determining the company’s value.
Issue - A financial asset, a group of shares offered by a corporation.
Issued Share Capital - The total amount of a firm’s shares that are in
issue.
Issued Stock - Shares of a company’s stock that has been sold to the
public.
Issuer - The corporation or other municipality that is offering a
security for sale, also, the entity that has created an option.
Issuer's Option Bond - A debt instrument which gives the issuer the
option to put the bond, requiring the issuer to accept the issuer’s
stock for the bond’s principal at maturity or retire the issue with cash
and new bonds.
Itayose - A call market at the exchange opening which treats all orders
as if they arrived at the same time. Application primarily used in
Japan.
Iterative Solution - A solution that is arrived at by trial and error in
determining a theoretical value of an option. |
