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M - When the fifth letter of a NASDAQ stock symbol is an
M, the represented stock is of the company’s fourth class of preferred
shares.
Maastricht Treaty - A treaty among western European countries to promote
employing a single European currency.
Macaulay Duration - A weighted average of the period of time to maturity
of a bond’s cash flows.
Macroeconomic (Macro) Swap or Option - A risk management instrument that
can offset some elements of quantity or business cycle risk by linking
one or both payments of a standard swap or a swap or spread option to
macroeconomic indexes.
Magic Of Diversification - Reducing portfolio risk without reducing
expected returns by utilizing a strategy of combining assets with low
and negative correlations.
Mail Float - Term that refers to the time period when checks are in the
US postal system.
Maintenance Margin Requirement - Lowest allowed amount in a customer’s
margin account that must be maintained at all times.
Majority Voting - A system of voting where each director is voted on
individually.
Make A Market - Phrase used to describe situation when a dealer quoted
bid and offered prices at which he stands ready to buy and sell.
Making Delivery - Refers to transfer of ownership of assets agreed upon
in a contract.
Mambo Combo - A combination of a long in-the-money call and a long
in-the-money put (or a short in-the-money call or a short in-the-money
put.
Managed Derivatives Fund (MDF) - A futures or hedge fund specializing in
derivative instruments.
Managed Float - Often called a "dirty float"; A floating exchange rate
system in which the government sometimes intervenes in order to change
the direction of the value of the country's currency.
Managed Futures Accounts - Managed accounts that have positions in
government securities, futures contracts, and options on futures
contracts in a portfolio.
Management Buyout - Abbreviated at MBO, a leveraged buyout in which the
acquiring firm is encouraged by the target firm’s management.
Management Company - A company who’s business is the management of
mutual funds and other types of investment trusts.
Management Fee - A fee charged by investment fund advisors for their
services, usually based on the size of the fund.
Management's Discussion - Name for a report issued by a company’s
management to its shareholders about that particular fiscal period’s
results.
Management/Closely Held Shares - Shares of a stock in a particular firm
that are owned by people closely related to that firm.
Managers of Managers (MOM) - An Investment Advisor who select and
monitors the performance of a group fund managers, who manage parts of
the funds controlled by the MOM.
Mandarin Collar - A collar structure with a better payout if the
underlying stays inside the collared range for the life of the
instrument.
Mandate - A agreement to grant a service in exchange for a fee.
Mandatory Convertible - An equity-like instrument which the holder must
convert into the underlying common stock at or before the conversion
date.
Mandatory Redemption Schedule - A schedule that must be followed in
regard to making sinking fund payments.
Manipulation - The fraudulent act of influencing the price of a security
Manipulation of a Market - Buying or selling to establish a market move
and then reversing the position to trade against the trend.
Manufactured Housing Securities - Loans issued for the purchase of
manufactured homes.
Margin - Amount a customer deposits with a broker when purchasing
securities by borrowing from the broker; also, the difference between a
company’s revenue and production costs.
Margin Account - An account that allows for the purchase of stock with a
combination of cash and a loan, using the stock to collateralize the
loan.
Margin Call - A demand for the deposit of additional cash and/or
securities in a customer’s account in order to satisfy a maintenance
margin requirement.
Margin of Solvency - Measure of profitability (loss). Measured as assets
minus liabilities.
Margin Requirement - A required amount of cash deposited and maintained
by an option writer in order to cover the intra-day price changes, and
the daily position valuation.
Marginal Tax Rate - Tax rate applied on additional dollars of taxable
income.
Marginal Utility - The increase in a portfolio's expected utility in
relation to with a small increase in exposure to one of its assets.
Margrabe Option - The right to exchange one asset for another. More
popularly known as an exchange option.
Mark-To-Market - The act of adjusting the book value of a security to
reflect current market value.
Mark-to-Market Swap - Any swap that is settled by payment of the
instrument's net value to the creditor counterparty on a periodic
schedule or whenever the net value exceeds an agreed threshold amount.
Mark-to-Model - Valuation of a position or portfolio at prices
determined by using a financial model to extract a value among the
market prices available.
Markdown - Often referring to over-the-counter stocks, amount that the
price of a security is reduced by when purchased in order to resell it.
Marked-To-Market - An agreement whereby the profits/losses on a futures
contract are settled at the end of each day.
Market - A place for the buying and selling of products.
Market Adjusted Debt (MAD) - The mark-to-market value of an venture's
debt.
Market Capitalization - Measure used to determine corporate size; the
total value of all outstanding company shares.
Market Capitalization Rate - An expected return on a certain security.
Market Clearing - When a market is in equilibrium, it is said to be
clear; the total demand equals the total supply.
Market Conversion Price - The price that is paid for a common stock that
had been a convertible security taking into consideration the price when
it was purchased (as a convertible security) and the amount paid for
exercising the conversion option.
Market Cycle - The time period between the two most recent highs or lows
of the Standard and Poor’s 500.
Market Impact - The manner in which positions bought or sold influences
the price paid or received for a security.
Market Index Deposits (MIDs) - Bank certificates of deposit or deposit
notes with it’s return related to the performance of an index.
Market Index Target-Term Security (MITTS) - An equity-linked note,
usually with a single payoff at maturity that is related to a market
index.
Market Maker - Referring to general equities, a person who stands ready
to trade in a given security.
Market Model - Model showing that a specified security’s return depends
on the return on the market portfolio along with the responsiveness of
that security.
Market Neutral Investment Strategy - An approach to portfolio management
which relies on the investment manager's ability to make money through
valuation analysis rather than through predicting the direction of the
market.
Market on Close Order (MOC) - An order to buy or sell an instrument on
the closing price for the day.
Market Order - Referring to general equities, an order for the buying or
selling of a security at the best price possible.
Market Overhang - A theory stating that a financial entity that wants to
sell their stock will sometimes postpone that sale because of market
conditions that could reduce the share price.
Market Penetration/Share - Referring to general equities, the trading
volume of a specific stock that a market maker trades.
Market Portfolio - A portfolio of assets that mirrors the total market
value of all assets in composition and in the percentage of each asset
represented.
Market Price - The amount that buyers will pay for a security on the
market; the value of an asset if it were to be sold.
Market Price Of Risk - The extra amount of return demanded by an
investor for bearing a risk.
Market Return - A change in the value on the market portfolio over a
specific time period.
Market Risk - A risk that can not be avoided by using diversification.
Market Sectors - Various segments or classifications of a market.
Market Timer - A trader who attempts to forecast stock prices and then
invests accordingly.
Market Timing - The practice of forecasting market changes and then
investing according to those forecasts.
Market Timing Costs - Costs incurred because of price movement of a
stock while a order is being implemented.
Market Value - The current price at which a security is being traded;
also when referring to a company, the number of shares outstanding
multiplied by the current price at which the stock is trading.
Market Value Ratios - Measurements of the proportional relationship
between a common stock and specified items on a financial statement.
Market Value-Weighted Index - An index of securities figured by
calculating a returns average on each security, weighted proportional to
outstanding market value.
Market-Book Ratio - The proportion of the market value (per share) of a
stock to the book value (per share) of a stock.
Market-If-Touched - An order that specifies a price at which is will be
executed.
Market-Linked CD - An equity-linked certificate of deposit.
Marketability - The ease at which a security can be sold.
Marketplace Price Efficiency - The degree of ease or efficiency that
security prices reflect current market information.
Markowitz Diversification - An approach taken in order to reduce
portfolio risk that involves the use of assets that have returns that
are not positively correlated.
Markowitz Efficient Portfolio - A portfolio structured so that it has
the highest expected return for its level of risk.
Markup - Often referring to over-the-counter stocks, the amount that the
price of a security is increased before being sold to a customer.
Married Put - A put option and shares of the underlying stock bought on
the same day.
Maruyu - A Japanese savings deposit system that consists of important
tax benefits.
Master Limited Partnership - A limited partnership that is publicly
traded.
Master Swap Agreement - Terms and conditions prepared by the
International Swap and Derivatives Association covering all swap
transactions between two counterparties.
Matador Market - Spain’s foreign market.
Match Fund - The act of a bank buying a deposit that has the same
maturity as a loan or other asset.
Matched Book - A term used when a bank’s distribution of maturities (of
liabilities and assets) are matched.
Matched Hedge - A hedge that uses a financial instrument based on the
same asset as the asset to be hedged in the underlying portfolio.
Matched Orders - Referring to equity securities, orders that are equal
in amount at a given price; illegal act of conspiring with another party
to enter identical buy and sell orders.
Matched Sale Transaction - Often refers to convertible securities,
reverse repurchase agreements between the Federal Reserve Bank and a
dealer.
Matched Swap - A swap covered on one side by an underlying bond or note
with terms similar to, but offsetting, that side of the swap.
Matching Concept - Principle calling for the recognition of all costs
associated with the generation of a company’s revenue.
Materiality - The standard under which information that is insignificant
or unimportant is excluded from financial reports.
Materials Requirement Planning - Scheduling for the purchasing and
delivery of materials in order to manage the required inventory levels.
Mathematical Programming - A technique used in solving problems in which
an optimal value is sought in conjunction with certain constraints.
Matrix Price - An estimated price or value for a fixed income security
that are based on quoted prices for securities with similar coupons,
ratings, and maturities rather than on the price for the designated
security.
Mature - To reach a pre-determined age; to expire.
Maturity - Referring to bonds, the date on which principal has to be
repaid.
Maturity Date - Often referring to bonds, the date a bond (or any other
debt security) expires and is paid off.
Maturity Factoring - The act of selling a company’s accounts receivable
to another company or institution for collection.
Maturity Gap - Measurement of the market values of rate sensitive assets
and rate sensitive liabilities with different maturities.
Maturity Mismatch Risk - The risk that long and short positions in a
cross hedge will fail to move in concert because of a difference in
maturity.
Maturity Phase - A developmental phase that a company eventually reaches
in which company earnings continue to grow at the same rate as the
general economy.
Maturity Spread - The difference, or spread, between any two maturity
segments of a bond market.
Maturity Value - The par value.
Maverick Risk - The risk of deviating too far from the norm in
implementing an investment or risk management policy.
Maximum Maturity Bonds - CMO tranches that will be repaid by minimal
required principal payments in a known time period.
Maximum Price Fluctuation - The most that a contract price an change in
either direction during one trading session.
May Expand - Referring to general equities, a notation on an order
stating that the size of the order may be increased.
MBS Servicing - A legal requirement of a mortgage servicer to maintain
payment of the due principal and interest regardless of whether or not
it is collected.
MBSCC - Abbreviation for Mortgage Backed Securities Clearing
Corporation.
Mean - A synonym for the word average.
Mean Of The Sample - The average of the sample, or item being studied;
the sum of the samples divided by the number of samples.
Mean Reversion - Process by which prices, rates, and volatilities tend
to return to the average value after reaching extremes.
Mean-Tracking Error Utility Function - Measures the degree of
satisfaction an investor receives compared to expected return and
realized return against a benchmark.
Mean-Variance Analysis - Assessment of the risk involved in various
investment prospects as well as the possible returns: study of the
average return of a type of investment and the degree to which, as well
as how often, that return varies.
Mean-Variance Criterion - Standard used to measure the means and
variances of a return.
Mean-Variance Efficient Portfolio - A portfolio constructed of
investments that have been evaluated and selected because of their
mean-variance analysis.
Mean-Variance-Tracking Error Utility Function - Measures the degree of
satisfaction an investor receives compared to expected return, varience
and realized return against a benchmark.
Mean-Variance-Utility Function - Measures the degree of satisfaction an
investor receives compared to expected return and varience.
Measurement Error - A mistake or error in analyzing a security
investment that could lead to a biased conclusion.
Median - The middle value in an ordered distribution.
Medium-Term Note - A note, or debt instrument, that is continuously
offered with varying maturity bands.
Member Firm - Referring to listed equity securities, a brokerage that
employs at least one stock exchange member.
Membership - A position in an exchange, a member is permitted to trade
on the exchange either for their own account or that of a customer.
Mental Accounting - Classification of items of value even though there
is no logical reason for the classification.
Menu - Referring to general equities, a list of choices or offerings
available to a customer.
Merc - "The Merc" is a nickname for the Chicago Mercantile Exchange.
Merchandise - Goods available or purchase.
Merchant Bank - A bank specializing in providing various services other
than lending money.
Merger - The coming together of two firms.
Mezzanine Financing - A stage in the process of financing.
Micro Hedge - Hedge used to offset portfolio risk on a position by
position basis.
Mid- Market Price - The average between the best bid and the best offer
quoted by market makers.
Mid-Cap Investment Manager - A portfolio manager who specializes in
mid-sized companies.
Mid-Cap SPRDs - A unit investment trust that tracks Standard and Poor’s
Mid-cap 400. Sometimes referred to mid-cap spiders.
Middle Office - Group that draws on the resources of the front office
(sales, finance, etc.) and the back office (settlements, clearances,
etc.) in order to manage the risk exposures of a financial organization.
Midwest Stock Exchange - "Third market" exchange with a limited number
of securities to be bought and sold.
Migration Analysis - Analysis used to estimate maximum credit losses
based on a move from an initial credit-rating service grade to lower
grades over a specified time period.
Milking - Illegally seizure of a corporation’s assets before an
ownership change or bankruptcy.
Mill - Measured as one-tenth of a cent.
Mini-Max Floater - A floating rate note with an embedded collar.
Mini-Max Strategy - An interest rate risk strategy that provides
participation and protection with a generally low option premium
payment.
Mini-Premium Option - Option in which no initial premium is paid but for
which the option purchaser agrees to pay set amounts if the underlying
price moves in-the-money to specific levels over the life of the option.
Minimum Price Fluctuation - The smallest amount of price movement that
is possible.
Minimum Purchases - The amount required to purchase, or open an account.
Minimum Variance Hedge Ratio - The ratio of futures contracts to a
specific spot position that minimizes the variance of the profit from
the overall hedged position and is invariant to the cost of the hedge.
Minimum-Variance Frontier - Graph of the minimum or least amount of
variance that is attainable for a portfolio’s expected return.
Minimum-Variance Portfolio - A portfolio that contains high risk assets
with the lease amount of variance possible.
Ministry of Finance (MOF) - The principal regulator of Japanese
financial markets.
Minority Interest - The ownership or interest of stockholders who own
less than 50% of the firm’s outstanding shares, therefore less than 50%
of the voting power.
Minus Tick - Also referred to as a "down tick"; A term used to describe
the situation when a security trades at a price that is lower than that
of the previous trade.
Mirror Swap - A swap designed to eliminate the market exposure of an
earlier swap position.
Mismatch Bond - A bond whose payments are set for intervals that are
more frequent than the time period that the interest rate is based on.
For example, a bond with monthly payments based on a year interest rate.
Mismatched Payment Swap - A swap agreement under which one or both
parties are exposed to settlement risk as a result of a difference in
the time of payment.
Miss The Price/Market - Referring to listed equity securities, situation
when one has an order in hand, but missed the opportunity to place it at
the desired price.
Mixed Bag - Referring to general equities, a group of stocks whose
prices are in varied states (i.e. up, down.)
MMDA - Abbreviation for money market demand account.
Mode - The most frequent value in a sample.
Modeling - Analysis tool whereby a simulation of reality is created.
Modeling Risk - An adverse variation return as a result of a failure of
a model to reflect the behavior of an instrument, index, price or rate
correctly.
Modern Portfolio Theory - Principals used for the analysis of various
securities, their risk level and possible returns in regard to creating
a diversified portfolio.
Modified And Combinable Remic (MACR) - A REMIC (Real Estate Mortgage
Investment Conduit) that lets investors mix and match cash-flow
combinations to create instruments.
Modified Duration - A measure comparing the weighted average maturity of
cash flows from a bond to the bond yield.
Modified Pass-Throughs - Agency pass throughs ensuring timely interest
and principal payments.
Modigliani and Miller Proposition I - Proposal stating that a company
cannot change the value of its outstanding stocks by changing its
capital structure.
Modigliani and Miller Proposition II - Statement saying that the cost of
equity is a linear function of the debt –to-equity ratio.
Momentum - Also referred to as Rate-of-change (ROC). An indicator of a
price trend calculated by subtracting the price of x periods ago from
the price now. A descending trend may be a sell signal, while a rise in
momentum may be considered an indicator of future gains.
Momentum Investor - Investor whose participation in the market is
dependent on whether the market is increasing or decreasing.
Monetary Gold - Government owned gold that is considered to be an asset.
Monetary Policy - Guidelines and actions taken by the Federal Reserve
System in order to influence the American money supply and interest
rates.
Monetary/Non-Monetary Method - Accounting method that considers monetary
items (such as cash, debts, etc) at the current rate while non-monetary
items (such as inventory, etc.) are expressed at historical rates.
Money Back Certificates - Instruments which promises the investors the
return of their original investment at a minimum.
Money Back Warrants - Warrants that refund part or the total investment
in the event of an adverse move in the underlying.
Money Base - The currency outside the banking system plus the
liabilities to the deposit money banks.
Money Center Banks - Banks that get most of their funds from the money
markets as opposed to getting it from deposits.
Money Market - Vehicle used to borrow money, or buy securities for a
period of three years or less (the short-term).
Money Market Basis - Measure of annual money market interest computed
daily as a fraction equal to actual days divided by 360 or 365.
Money Market Demand Account - Account paying interest based on
short-term interest rates.
Money Market Fund - A mutual fund invested in short-term securities.
Money Market Hedge - Borrowing and lending in foreign currencies in an
effort to lock in the domestic currency value.
Money Market Notes - Issues that are publicly traded and often
collateralized by mortgages.
Money Market Preferred Stock (MMPS) - Preferred stock with dividends
reset at a Dutch Auction.
Money Purchase Plan - An employee benefit plan in which the
participating employee contributes along with the firm. Firm
contributions may be either at the same rate or a different rate than
that of the employee contributions.
Money Rate Of Return - Money return calculated annually and as a
percentage of asset value.
Moneyness - When an instrument is as adequate as cash to be used in a
settlement of transactions.
Monitor - A tool used to get information about a particular agent.
Monte Carlo Simulation - A problem solving technique that entails the
use of many simulations and then inferring a solution from the results
of those simulations.
Monthly Income Preferred Security - Stock issued by a subsidiary that
has a more desirable tax situation than the parent company. The investor
money is then lent to the parent company by the subsidiary.
Monthly OverNight Average (MONA) Swap - A swap with a floating rate
determined by the average overnight lending rate over a period.
Moody’s Investors Service - Service that provides credit ratings and
analysis for securities.
Moral Hazard - Risk that one party in a contract will alter its behavior
due to the existence of the agreement. For example, taking less
precautions against accidents after an insurance policy is put in place.
Moral Obligation Bond - A municipal security backed by the issuer's
intention to repay, but not by its full faith and credit.
Moral Risk - Exposure to loss as a result of an improper or illegal act
by an agent or counterparty.
Mortality Tables - Tables showing the probabilities of people of various
ages dying at a given time.
Mortgage - Loan collateralized by real estate property which obligates
the borrower to make a series of payments of principal and interest.
Mortgage Bond - A bond collateralized by a specified asset through the
use of a lien.
Mortgage Duration - Duration calculated taking into account the impact
of changes in prepayment speed caused by changes in interest rates.
Mortgage Over Treasury Option (MOTO) - A cash-settled call on the spread
between a specific mortgage backed security and a selected Treasury
security yield.
Mortgage Pass-Through Security - A security that is created as a result
of mortgage-backed-securities being collected in a "pool". Shares of the
pool (or newly formed security) are then sold.
Mortgage Pipeline - The period of time that elapses between when a
potential borrower applies for a mortgage and the marketing of the loan.
Mortgage Prepayment Cap - An option contract that protects the holder of
the cap from a return loss if the prepayment rate in a mortgage pool
exceeds a strike expressed relative to a prepayment rate.
Mortgage Rate - The interest rate on a mortgage.
Mortgage Replication Swap - Swap in which the fixed rate side is based
on a mortgage rate and amortization schedule.
Mortgage-Backed securities - Often abbreviated as MBS, these are
securities that are backed by a pool of mortgage loans.
Mortgage-Backed Securities Clearing Corporation - A subsidiary of the
Midwest Stock Exchange that acts as a clearing service for
mortgage-backed-securities transacted for forward delivery.
Mortgage-Pipeline Risk - The risk that a potential mortgage borrower
will decide not to accept the quoted rate.
Mortgagee - The lender of a loan that is secured by real estate
property.
Mortgager - The borrower of a loan that is secured by real estate
property.
Most Distant Futures Contract - The futures contract that is settled
last among a group of futures contracts being settled.
Moving Average - The use of a chart or other device to analyze stock
price averages. The chart is continually being updated by the addition
of new information and the deletion of the oldest information.
Mule - Domestic currency bond with embedded derivatives that are related
to a foreign stock, bond or currency position that an investor could not
legally take directly.
Multi-Asset Option - Any option with a payout dependent on the
performance of more than one underlying asset.
Multi-Currency Swap Agreement - An exchange of payments among several
different currencies to be both paid and received.
Multi-Index Option - An call option with a payoff determined by the
difference in performance of two or more indexes.
Multi-Option Financing Facility - A credit line that has attached
options.
Multi-Period Option - Option with a payout determined by the value of
the underlying on several occasions.
Multi-Step-Up Callable Bond or Note - Note with multiple coupon
increases set over the life in order to pressure on the issuer to
refinance and call the note.
Multicurrency Clause - A clause in a Euro loan that allows for the
conversion from one currency to another at a specified date.
Multicurrency Loans - Loans that offer the borrower the option of
drawing a loan in varied currencies.
Multifactor CAPM - Capital asset pricing model that takes into account
sources of risk that are outside of the market.
Multifamily Loans - Loans used to finance the purchase of apartment
buildings.
Multinational Corporation - A company that operates in more than one
country.
Multinet - A currency transaction settlement and netting service that is
designed to prevent pre-settlement credit risk.
Multiperiod Immunization - The creation of a portfolio that will satisfy
more than one specified future liability.
Multiple Rates Of Return - The existence of more than one rate of return
from the same project,: varying project rates that together make the
project value equal to zero.
Multiple Regression - Relationship of a dependent variable and more than
one explanatory variable.
Multiple-Discriminant Analysis - Analysis distinguishing between two
groups based on their varying characteristics.
Multiple-Issuer Pools - Pools that are formed through the collection of
loan packages from individual issuers.
Multiples - Price-to-earnings ratios (P/E ratios).
Multiply-Traded Option - Exchange-traded option contracts on the same
underlying traded over different exchanges.
Multirule System - A trading strategy that combines mechanical rules.
Municipal Bond - Bonds issued by state or local governments in order to
raise money for projects such as highway expansion. The interest paid of
these bonds is generally tax-free.
Municipal Convertible - Note that pays zero-interest in the early years
and that becomes a coupon paying municipal bond later in life.
Municipal Derivative - Derivatives designed to aid the municipal issuers
and investors in their debt.
Municipal Embedded Derivative Security - Municipal note with an embedded
swap, cap or other structure.
Municipal Notes - Notes issued by a municipality for the short-term with
the knowledge that funds will be coming in to repay them.
Municipal Option Put Security (MOPS) - A municipal bond that can be sold
back to the issuer at specified dates prior to maturity.
Municipal Over Bond (MOB) Spread - The spread between the yields in a
municipal bond futures contract and a Treasury bond futures contract.
Mutual Fund - A fund operated by an investment company with the charter
to raise money to be invested in securities according to a specific
objective.
Mutual Fund Theorem - A theory stating that investors will invest the
whole of a high risk portfolio in a mutual fund or a market index fund.
Mutual Offset - Arrangement between exchanges allowing trading positions
established on one to be offset or transferred to the other exchange.
Mutually Exclusive Investment Decisions - Two or more investment
opportunities that when decided upon, eliminate the possibility for
acceptance of the other(s). |
