|
L - When the fifth letter of a NASDAQ stock symbol is an
L, the represented stock is of a class such as third preferred class of
warrants, or preferred when issued stock.
Ladder Cap - Cap structure in which the periodic coupon increase is
based on the highest rate achieved instead of the rate at the previous
reset date.
Ladder Option or Note - An option or note that resets its minimum payout
when the underlying touches or trades through threshold levels even if
the instrument declines.
Ladder Strategy - Investment strategy utilizing a bond portfolio
constructed to have equal amounts invested in each maturity within a
given range.
Ladder Trade - The purchase of one option and the sale of two other
options at succeeding higher strike prices for calls or lower strike
prices for puts.
Lag - A late or delayed payment of a financial obligation; also meaning
the number of periods that a variable in a model is held back in an
effort to predict the dependent variable.
Lag Response Of Prepayments - The lag or passage of time between the
time that a weighted average coupon of a mortgage backed security pool
has crossed the threshold for refinancing and the time that an
acceleration in the prepayment speed is noticeable.
Lambda - The proportional measure between a change in an option price
and a small change in an option’s volatility.
Large-Cap Investment Manager - A portfolio manager who concentrates
primarily in large companies.
Last Split - In the event of a stock split; the number of shares given
for each held share and the date of the distribution of those stocks.
Last Trading Day - The last day according to an exchange’s rules during
which trading may take place in a particular contract.
Last-In-First-Out - An inventory-valuing method that utilizes the cost
of the most recently inventoried item first.
Latent Call Option - An option by the issuer of a bond or preferred
stock which, when exercised, obligates the holder to redeem it for a
predetermined value or to convert it to common stock.
Latent Warrant - A warrant in a convertible bond or preferred stock
which makes these instruments convertible.
Lattice - The system of lines created in the development of a binomial
or trinomial option pricing model.
Law Of Large Numbers - Rationale stating that the mean of a random
sample approaches the expected value of the larger population as the
sample grows.
Law Of One Price - A rule in economics stating that any given security
must have the same price regardless of what means were used to create
that security.
Layoff - Referring to general equities, the act of eliminating all or
part of a position by finding another dealer, or customer to take them.
Layup - Referring to general equities, an order that is easily executed.
Lead - An early payment of a financial obligation.
Lead Manager - The investment bank that has primary responsibility for
organizing syndicated bank credit or bond issues.
Lead Pipe - Referring to general equities, an easy trade, one that is
certain to take place.
Lead Underwriter - The lead or head of an association of firms that are
sponsoring an initial public offering of securities.
Leading Economic Indicators - Measures of the economy that indicate the
direction in which the economy is going.
Leading The Market - Referring to general equities, the lead stocks that
are moving with the market as a whole, but are still in advance of the
general market.
Leakage - Information that is released to a relatively small group of
people before it is announced publicly.
LEAPS - Abbreviation for long term equity anticipation securities, or
long term options.
Lease - One form of long-term debt, a rental agreement that covers a
long period of time.
Lease Rate - The payment per period specified in a lease contract.
Least Squares Regression Line - Line that minimizes the sum of squared
deviations of the observed data from the line.
Leaves - Referring to general equities, the remaining number of
securities to be purchased or sold after a partial order has been
executed.
Ledger Cash - The cash balance in a company’s financial statements.
Leg - Component of a combination option.
Leg Up - Referring to general equities, having an advantage going into a
trade over the opposing side.
Legal Bankruptcy - A procedure for reorganizing a failing company.
Legal Capital - The value given to a firm’s shares in the firm’s books.
Legal Defeasance - The deposit of assets into an irrevocable trust.
These assets (in the form of cash and securities) must be sufficient
enough to enable the issuer to completely discharge obligations under
the bond issue.
Legal Investments - Investments that are permitted by a governing
authority.
Legal List - A list of a limited number of assets which may be purchased
and held by a financial intermediary or a specific purpose fund.
Legal Opinion - Attorney’s opinion in regard to a security’s compliance
with the law.
Legal Risk - Risk that a counterparty is not legally capable of making a
binding agreement.
Legitimate - Referring to general equities, sincere interest in trading.
Lend - The provision of money for a temporary period of time with the
condition that it is repaid, usually with interest.
Lender - Business or entity that provides loans to other entities.
Lender Option - A floor on a floating rate agreement.
Lender's Option- Borrower's Option (LOBO) - A floating rate instrument
which allows the lender to designate a adjusteded rate at periodic reset
dates, and lets the borrower decide whether to pay the rate or redeem
the bond.
Less Developed Countries - Countries said to have emerging markets,
countries that are in a stage of development that is somewhere behind
that of the major industrialized nations.
Lessee - A firm, person, or other entity that leases or borrows assets
from another entity.
Lessor - A firm, person, or other entity that leases or lends an asset
to another entity.
Letter Of Comment - A letter from the SEC suggesting that a firm make
changes to their registration statement.
Letter Of Credit - A guarantee of payment issued by a
Letter Of Intent - A document expressing an agreement to do business,
but not a binding contract to do so.
Letter Stock - Common stock that is privately placed and not intended
for resale.
Level - Referring to general equities, price standard of an indication.
Level Coupon Bond - Bond which has coupon payments that do not vary
throughout its life.
Level One - Service provided by NASDAQ that shows current quotes on
over-the-counter (OTC) stocks.
Level Pay - Schedule of mortgage principal and interest payments
structured so that the total monthly payment does not change as the
principal amount goes up while the interest amount goes down.
Level Payment Swap - Converts the cash flows from an amortizing debt
instrument into a fixed swap payment.
Level Three - Service provided by NASDAQ that allows for electronic
trading.
Level Two - Service provided by NASDAQ that shows all current quotes in
a particular stock.
Leverage - The relation of debt to equity in a corporate financial
capital structure; also the act of controlling more than one device of a
security (for example buying a stock on margin) through another device
with the idea of improving returns.
Leverage Clientele - Shareholders who seek to invest in corporations
that maintain a level of corporate leverage close to their own.
Leverage Factor - The actual percentage price change in value of an
option in response to a percentage change in the cash value of the
underlying.
Leverage Ratios - Proportionate measure of a company’s debt and its
total value.
Leverage Rebalancing - The act of readjusting a company’s leverage ratio
in order to get it to a target level.
Leveraged Beta - The beta as adjusted for the amount of leverage in the
firm’s capital structure.
Leveraged Buyout - Buying assets through the use of debt.
Leveraged Equity - Stocks or ownership in a company that relies on
financial leverage.
Leveraged Floating Rate Note - A variable rate note with the floating
rate set at a multiple of the reference index rate less a fixed rate.
Leveraged Lease - A contract whereby a lessor borrows the funds needed
to purchase the asset, and also grants the lender a lien on the assets.
Leveraged Portfolio - Portfolio that includes high risk assets that were
purchased with borrowed funds.
Leveraged Recapitalization - Referring to risk arbitrage ,a strategy
involving the taking on of significant additional debt.
Leveraged Required Return - The required return on an investment that is
financed by debt.
Leveraged Structured Note - Structured note in which a rate is
multiplied to arrive at the final coupon or principal repayment.
Leveraged Swap - A swap agreement in which the swap payments are
expressed relative to a multiple of a notional amount, usually the
principal amount of the underlying or a multiple of a rate spread.
Leveraged-Capped Floater - A floating rate note with an embedded short
cap on a face amount greater than the face amount of the note. The
note's coupon declines as interest rates rise above the cap rate because
the loss on the cap grows faster than the gain on the underlying note
rate.
Liability - A financial obligation, any debt or money owed (as opposed
to an asset).
Liability Funding Strategy - A strategy that selects assets in order to
allow for cash flows that will exceed client obligations.
Liability Manager - An individual responsible for the management of
financial liabilities.
Liability Risk Management - The use of risk control strategies to the
debt payments of a corporation, pension plan, insurance company, or any
entity which is obligated to make payments to debtors or beneficiaries
over time.
Liability Swap - An interest rate swap for the purpose of improving the
match between liabilities and assets.
LIBOR - Abbreviation for the London Interbank Offered Rate.
LIBOR EuroDollar (LED) Spread - A narrow and stable yield curve spread.
LIBOR2 Swap - A fixed for floating rate swap with the floating rate
calculated by squaring LIBOR.
Lien - An interest in an asset that is granted to a lender in order to
secure debt financing.
Life Assurance and Unit Trust Regulatory Organization - A
self-regulatory organization in the United Kingdom responsible for the
regulation of life insurance and mutual fund products.
Lifetime - The term of a financial instrument.
LIFFE - Abbreviation for the London International Financial Futures
Exchange.
LIFO - Abbreviation for the phrase "Last in, first out."
Lifted - Referring to over-the-counter trading, situation when an offer
on a stock is made followed by a raise in offer price by a market-maker.
Lifting A Leg - Closing out either the long or the short side of an
arbitrage, prior to the other side being closed.
LIMEAN - The average of the London Inter-Bank Offered Rate and the
London Inter-Bank BID Rate in the same currency.
Limit Move - The maximum price change allowable by an exchange in a
single trading session.
Limit Order - An order where the customer specifies a price at which a
stock can be bought or sold.
Limit Order Book - A book or record of unexecuted limit orders.
Limit Up/Limit Down - A condition which halts trading on a futures
exchange when prices rise or fall by the daily price limit imposed by
the exchange.
Limitation On Asset Dispositions - A bond rule that does not allow, or
hinders, a firm’s selling of major assets.
Limitation On Conversion - Often referring to convertible securities,
delay on the convertibility of a security.
Limitation On Liens - A bond rule that restricts a company’s ability to
grant liens on its assets.
Limitation On Merger - A bond rule that restricts a company’s ability to
consolidate with another firm.
Limitation On Sale-And-Leaseback - A bond rule that restricts a
company’s ability to enter into sale and leaseback transactions.
Limitation on Subsidiary Borrowing - A bond rule that restricts a
company’s ability to borrow money at the subsidiary level.
Limited Liability - Limit on what can be lost to only what was initially
invested.
Limited Liability Company (LLC) - A company that has the limited
liability characteristics of a corporation and the tax pass-through
characteristics of a partnership.
Limited Partner - A partner in a firm who had a limited liability for
the obligations of the partnership.
Limited Partnership - A form of incorporation that involves at least one
limited partner.
Limited Price Order - Referring to general equities, a limit order.
Limited Two-Way Payment (LTP) Clause - An special clause in a swap
agreement that permits a party to avoid any net liabilities to a
defaulting party while claiming any net balance due from the defaulting
party.
Limited-Liability Instrument - A security with a limit on possible loss,
the limit being the owner’s initial investment.
Limited-Tax General Obligation Bond - An obligation bond that has
limited revenue sources.
Line Of Credit - An arrangement between a bank and its customer that
sets a maximum amount of money or credit, that the bank will allow the
customer to have.
Linear Programming - A technique for finding the maximum value of an
equation using specified linear constraints.
Linear Regression - A technique for putting a straight line to a set of
data points.
Linked Asset - An asset which is held for payment of liabilities.
Liquid Asset - Cash and short term securities, an asset that can easily
be turned into cash.
Liquid Yield Option Note - A zero coupon convertible bond.
Liquidating Dividend - A dividend (payment from a firm to its
shareholders) paid from capital as opposed to a dividend paid from
earnings.
Liquidation - The termination of a company when its assets are sold and
the proceeds from that sale are then first given to creditors and then
to stockholders; also a term referring to a transaction that closes out
a position.
Liquidation Rights - The rights of a company’s stockholders in the event
of a liquidation.
Liquidation Value - The amount that would be gained by selling a
company’s assets after its debts are paid.
Liquidator - A person who oversees the sale of a failed company’s assets
and the payment of its debts.
Liquidity - The degree to which a market is liquid, meaning how easily
trades are conducted in that market; how easy it is to convert a
security into cash.
Liquidity Diversification - Strategy involving investing in a variety of
maturities in an effort to reduce price risk.
Liquidity Preference Hypothesis - The thought that greater liquidity is
valuable.
Liquidity Premium - A projected future interest rate minus the expected
future short term interest rate.
Liquidity Ratios - Measure of a company’s ability to meet its financial
obligations in the short term.
Liquidity Risk - The possibility of loss as a result of time passing due
to the difficulty of selling an asset.
Liquidity Theory Of The Term Structure - A theory having to do with the
fact that the estimated forward rates will not be correct because they
embody a liquidity premium.
Listed Option - An option contract traded on a securities or futures
exchange.
Listed Security - Referring to equity securities, a stock or bond that
had been accepted by a registered securities exchange.
Listed Stock - A stock that is traded on an exchange. Stocks that are
traded over-the-counter, are considered unlisted.
Load - A sales charge for investing in a mutual fund or unit trust.
Load Fund - A mutual fund that carries a sales charge. The charge is
based on a percentage of the net asset value of the investment.
Load-To-Load - Arrangement whereby a customer pays for a prior delivery
upon receipt of the next delivery.
Loan - A debt extended from one entity to another, the temporary
exchange of money or securities in return for repayment and often
interest.
Loan Amortization Schedule - Schedule for the repayment of a loan’s
principal and interest.
Loan Equivalent - The transformation of swaps and other complicated
positions, into the credit equivalent exposure represented by a loan.
Loan Participation - A debt instrument created when a bank sells a share
in a loan with a life under one year to a non-bank investor.
Loan Syndication - A group of banks that acts jointly to extend a loan.
Loan Value - The amount that a whole life insurance allows to be
borrowed against it.
Loan-based Certificates - Asset-backed instruments with loan paper as
collateral.
LOC - Abbreviation for Letter of Credit.
Local - A floor trader on an futures exchange.
Local Expectations Theory - Idea that the returns generated by bonds of
varying maturities will be the same over the short term.
Local Return - The rate of return valued in the currency of an asset's
home country.
Lock - Referring to general equities, an investment technique of making
a market both biding and offering either on the bid price, the offering
price, or an in-between price only.
Lock In - Referring to general equities, when an individual does all his
or her business through one broker because of that broker’s superior
service; not a competitive situation.
Lock Up Option - Referring to risk arbitrage, an option presented to a
preferred acquirer by a target company in an effort to discourage
takeover by an undesired acquirer.
Lock-In Clause - A provision in a subordinated loan agreement preventing
payment of interest or principal if the payment would bring the issuer's
capital below regulated requirements.
Lock-In Effect - The trend of taxes on transactions to restrain an
investor from trading out of a position.
Lock-In Option - A binary option that pays off as long as the underlying
is within a designated range during the life of the option.
Lock-Limit - A halt in trading because of an imbalance in supply and
demand at a daily price limit of a futures.
Lock-Out - A period of time when a loan payment can not be made.
Lock-Out Option - A binary option that pays off as long as the
underlying touches or surpasses the ceiling or floor barrier at least
once during the life of the option.
Lock-Out Period - A time period in the life of a security, when a call,
conversion feature, or some other provision is not effective.
Lock-Up CDs - A Certificate of Deposit that may not be traded.
Lockbox - One of many boxes used to collect payments from customers.
Locked Market - A market where the bid price is the same as the ask
price.
Lognormal Distribution - A distribution utilized to review returns over
a year or longer.
Lombard Rate - Often referring to international equities, a German
interest rate used to establish a limit on the day-to-day money rate.
London Clearing House Ltd. (LCH) - The central clearing house for
exchange-traded futures and option contracts in the United Kingdom.
London Inter-Bank BID Rate (LIBID) - The interest rate accepted by banks
on short-term deposits.
London Inter-Bank Offered Rate (LIBOR) - The primary fixed income index
reference rates used in Euromarkets.
London International Financial Futures Exchange - Abbreviated as LIFFE,
an exchange in London where Eurodollar futures are traded.
Long - The opposite of short, a market position that has not yet been
closed out; also a term meaning ownership (If you are "long" 100 shares,
you own 100 shares.)
Long Bond Yield Decrease Warrants (Turbos) - Warrants that are struck at
the interest rate of 30-year T-bonds which act like put warrants on
rates or call warrants on the bond price.
Long Bonds - Bonds with a long maturity; bonds that mature in a period
of time over 10 years. These bonds usually have a high coupon rate and
yields, but are volatile.
Long Coupons - A bond that has a long current maturity.
Long Dated Forward - A forward contract that settles 1 year from the
current date.
Long Dated Option - An option with an initial life of more than a year.
Long Hedge - A strategy used to reduce risk by purchasing a futures
contract in anticipation of actual purchases in the cash market.
Long Position - Term used in both equities and options. In equities;
when an individual owns securities. In options; when an individual owns
options.
Long Run - A long period of time, the long-term.
Long Straddle - The sale or purchase of an equal number of puts and
calls with the same terms, taking a long position in both.
Long Term Assets - Assets such as equipment that have a useful life of
over one year, a category in financial reports for these assets.
Long Term Debt - A debt or financial obligation that has a maturity of
more than one year.
Long Term Debt Ratio - See Long Term Debt/Capitalization above.
Long Term Debt To Equity Ratio - A measurement that compares long-term
debt to equity.
Long Term Debt/Capitalization - Measure showing the proportion of
long-term debt to the capital of a firm.
Long Term Financial Plan - A financial plan that spans at least two
years in the future.
Long Term Gain Or Loss - A gain of loss as a result of the sale of an
asset that was held for more than one year.
Long Term Liabilities - Obligations that have a maturity after one year
from the time they are acquired.
Long the Basis - A hedged position consisting of holding a cash
instrument or actual and selling a future or forward in the holding.
Long-term Equity AnticiPation Securities (LEAPS) - Options with an
original life of two years or more.
Long-term Rate Risk - Exposure to negative changes in long-term interest
rates.
Look-Thru - A method used to calculate federal taxes owed on income from
foreign corporations.
Lookback Currency Option - An option which gives its holder the right to
buy or sell a foreign currency at the most favorable exchange rate
available during the life of the option.
Lookback Option - An option that allows the purchaser to set its strike
price at any price of the underlying asset that has previously occurred
during the option’s life.
Lookback Price Option - An option giving the holder the right to cash in
the contract at its most favorable value within the lookback period.
Lookback Step-Up Cap - A step-up cap structure in which the periodic
increase is based on the lowest level the reference index rate reaches
during a specific reset period.
Lookforward Option - An option giving the buyer the right to the
difference between the strike price at the beginning of a period and its
high (call) or low (put) over that period.
Looking For - Referring to general equities, an interest in buying a
stock involving a capital commitment.
Lorenz Curve - A graph used to illustrate income distribution or market
concentration.
Loss Aversion - The belief that investors are less likely to sell assets
at a loss than they are to sell assets that have gained in value.
Loss Limit - The maximum loss considered acceptable in the analysis of a
risk model.
Lot - A standard unit of trading.
Lots - Referring to general equities, a blocks of stocks.
Louvre Accord - An agreement in 1987 to maintain then current exchange
rate levels.
Low - Referring to general equities, low limit of an order.
Low Coupon Swap - An interest rate swap agreement with fixed rate
payments below current market rates.
Low Exercise Price Options (LEPOs) - A foreign option with a strike
price close to zero and provides investors all of the features of stock
ownership except voting rights and dividends.
Low Outlay Geared Option (LOGO) - A call option with a low premium in
which the payout rate decreases as the option hits and increases in the
money.
Low Price - The lowest price of a security for a particular trading day.
Low Price-Earnings Ratio Effect - The inclination of stocks with a low
price-to-earnings ratio to perform better than those with a high
price-to-earnings ratio.
Low-Coupon Bond Refund - The refund of a low coupon bond with a higher
coupon bond.
Lower of Cost or Market (LCM) - An accounting policy which appraises
assets at historic cost or market value, whichever is lower.
Lower Partial Moment - The average of the squared deviations below a
target return. |
